WORLD TRADE  
ORGANIZATION   
G/SG/N/6/BRA/5 
2 April 2012 
 (12-1705) 
Committee on Safeguards Original:   English 
  
 
NOTIFICATION UNDER ARTICLE 12.1(A) OF THE AGREEMENT  
ON SAFEGUARDS ON INITIATION OF AN INVESTIGATION  
AND THE REASONS FOR IT 
 
BRAZIL 
 
(Fine or table wine) 
  
The following communication, dated 29 March 2012, is being circulated at the request of the 
Delegation of Brazil. 
 
_______________ 
 
 
1. Specify the date when the investigation was initiated
 
 
The investigation was initiated on 15 March 2012 through the publishing in the Official 
Gazette of the Circular No. 9, of 14 March 2012, by the Foreign Trade Secretariat.  
 
2. Provide the precise description of the product involved  
 
The product concerned is fine or table wine , commonly classified under the item 2204.21.00 
of the MERCOSUR Common Nomenclature – NCM.  
 
3. Provide the reasons for the initiation of the investigation  
 
The investigation was initiated following a re quest filed on 1 July 2012 by the Brazilian 
Institute of Wine – IBRAVIN, the Brazilian Vini culture Union – UVIBRA, the Wine Cooperatives 
Federation – FECOVINHO and the Wine Industry of the State of Rio Grande do Sul Trade Union – 
SINDIVINHO, which together represent appr oximately 96% of the domestic production.  
 
A preliminary investigation by the Brazilia n authorities based on data submitted by the 
petitioners and on official statistics showed that th ere is evidence of such an increased import quantity 
as to cause or threaten to cause serious injury to the domestic producers of the concerned or directly 
competitive product. Evidence and preliminary conc lusions by the authoriti es are summarized as 
follows.  
 VARIATION IN IMPORTS (EXCLUDING MERCOSUR AND ISRAEL)
 
 
Unit: %  2006-2007  2007-2008  2008-2009  2009-2010  Total  
(2006-2010)
Variation in 
imports  16.1 -0.2 5.6 27.8 56.3 
 G/SG/N/6/BRA/5 
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  It has been identified a significant increase in imports during the analyzed period. The most 
significant increase took place soon after the 2008-09 global economic crisis, which gives support to 
the domestic industry's argument that the global wine producers, facing a plunge in demand in their traditional developed countries' markets and having to  bear high storage costs, chose to sell their 
product stocks to markets that have not been so  severely affected by the crisis, where demand 
continued to grow after the initial hit,  which was precisely the case in Brazil.
 
 
It was also found that the imports/production ratio soared to more than 100 percentage points, 
standing in 2010 at more than 200%.  
 
Unit: %  2006-2007  2007-2008  2008-2009  2009-2010  Total
(2006-2010)
Value of imports  26.7 10.4 7.5 24.9 87.9 
 
The price of imports rose during the period, although from 2009 to 2010 it experienced a 
slight decrease.  
 
Unit: %  2006 2007 2008 2009 2010
Market share of imports  67.1 67.9 75.4 74.8 78.7 
Market share of imports from 
MERCOSUR countries  AND 
ISRAEL  18 21 21 20 20 
Market share of imports not 
from MERCOSUR countries  
AND ISRAEL  49 47 54 55 58 
 
From 2006 to 2010 imports gained 11.6 percentage points – pp of the market share. Since the 
market share of imports from MERCOSUR and Is rael barely changed, staying around 20%, the 
market share of imports from other origins made up almost all of the total increase (9 percentage points – pp).
 
 ECONOMIC INDICATORS OF THE DOMESTIC INDUSTRY
 
 
The preliminary analysis and conclusions have been made on the basis of data submitted by 
six domestic producers (applicants) that constitute  a major proportion of the domestic production.  
 
(i)  Apparent Consumption  
 
Unit: %  2006-2007  2007-2008  2008-2009  2009-2010  Total
(2006-2010)
Variation of the 
Apparent Domestic 
Consumption  21.7 -14.2  3.5 20.6 30.4 
 
As stated above, consumption increased ev en during the global economic crisis. The 
accumulated growth of the period was 30.4%.  
  G/SG/N/6/BRA/5 
 Page 3 
 
 
  (ii)  Domestic Sales  
 
Unit: %  2006-2007  2007-2008  2008-2009  2009-2010  Total
(2006-2010)
Variation of Domestic 
Sales  0.2 -5.5 22.1 -3.7 11.4 
 
Sales by the domestic industry rose at an inferior  rate compared with consumption.  In 2010, 
when consumption and imports grew vigorously,  sales dropped 3.7%, ending the period with an 
11.4% increase overall.  
 
(iii)  Market Share  
 
Unit: %  2006 2007 2008 2009 2010
Market share of domestic 
sales 12.1 10.0 11.0 13.0 10.3 
 
Market share of the domestic industry showed a slight 1.8 percentage points – pp decrease. 
The biggest decrease took place in the period betw een 2009 and 2010 (2.7 pe rcentage points – pp).  
 
(iv)  Production, Capacity and Capacity Utilization Rate (CUR)  
 
Change  2006-2007  2007-2008  2008-2009  2009-2010  Total
(2006-2010)
Production (%)  17.2 15.2 1.3 -25.3  2.3 
Capacity (%)  -1.8 -5.5 6.5 8.0 6.7 
CUR  
(percentage points – pp)  6.6 9.0 -2.4 -14.6  -1.4 
 
There were capacity increases between 2008 and 2009 (6.5%) and between 2009 and 2010 
(8%). Production rose slightly in the period as a w hole, although it decreased significantly in the 
2009-2010 period. That caused a slight final CUR decrease of 1.4%.  
 
(v)  Product Stocks and Employment  
 
Change (%)  2006-2007  2007-2008  2008-2009  2009-2010  Total
(2006-2010)
Stocks of wine in tank  21.3 2.7 -41.5  14.0 -17.0  
Stocks of bottled wine  22.3 38.4 -12.3  9.4 62.3 
Employment (not related to 
wine production)  7.3 0.0 -14.9  14.7 3.0 
Employment (wine 
production related)  -3.3 32.2 -7.3 -7.8 9.3 
Worker Productivity  21.2 -12.8  9.2 -18.9  -6.4 
 
 G/SG/N/6/BRA/5 
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  Although stocks of wine in tank diminished in the period at a 17% rate, there was a 14% 
growth during the between 2009 a nd 2010. Stocks of bottled wine rose sharply at a 62.3% rate 
between 2006 and 2010.
 
 
Total employment experienced a raise,  but productivity went down at 6.4%.  
 
(vi)  Costs, Profits and Price  
 
Change (%)  2006-2007  2007-2008  2008-2009  2009-2010  Total
(2006-2010)
Gross Profits  -9.4 -25.7  15.8 -11.3  -30.8  
Gross Margin (pp)  0.0 -7.7 0.5 -5.6 -12.8  
Total costs (production and 
sale) -4.5 6.4 -15.1  1.0 -12.9  
Price of Domestic Industry 
Sales  -9.6 -9.3 -6.1 3.6 -20.3  
 
With the exception of total costs, every indicator  in this table shows evidence of damage as 
they all decreased during the period under analysis.  Furthermore, the price of domestic industry sales 
was reduced at a bigger rate than the reduction in  total costs. Gross profits and margins lowered 
during the between 2009 and 2010 (11.3% and 5.6%, respectively).  
 
SERIOUS PREJUDICE, CAUSAL LINK AND CONCLUSIONS  
 
During the analysed period, not only did the volume of imports significantly increase 
(56.3%), but the increase in domestic sales (11.4%) was not able to keep up with the rise in the 
apparent domestic consumption (30.4%). Notwithst anding, considering that Brazilian authorities 
found undercutting in import prices, a major reason for domestic sales to have increased at all was the 
reduction of about 20.3%  in prices practiced by domestic producers.  
 
As prices of domestic industry sales went down, gross profits decreased even further by an 
average of almost 31%, even though costs of pr oduction and sale fell by 12.9%. Furthermore, the 
newly expanded (2008-10) capacity could not be properly used, as shown by the reduction of the 
CUR between 2008 and 2010. Even though wine in ta nk inventories diminished, the bottled wine 
stocks accumulated, increasing at a 62.3% rate.  
 
There is also noteworthy evidence for the thesi s of the petitioners that a major inflow of 
foreign products was directed to  new markets as the traditional deve loped countries' markets suffered 
from a decrease in demand with the global ec onomic crisis.  Imports from non-MERCOSUR and 
Israel origins increased by 27.8% from 2009 to 2010, growing from a market share of 55.2% to 58.5%.  During the same period, the domestic i ndustry reduced its production by 25%, raised its 
capacity by only 8% and finished with a lower cap acity utilization rate (-14.6 percentage points). 
Domestic sales decreased by 3.7%, falling by 2.6 percentage points as regards the domestic market 
share. Also, employment decreased by 7.8% a nd productivity decreased even further, by 18.9%.
 
 
No other factors were alleged or found that could have caused the injury observed, as import 
tariffs for the product concerned we re kept unchanged for all origins,  except for Chile, whose rise in 
imports was higher due to the tariff degrav ation established by the ACE 35 (Economic 
Complementation Agreement signed between ME RCOSUR member countries and Chile). Imports 
originated from MERCOSUR were relatively constant during the whole analyzed period.  No changes  G/SG/N/6/BRA/5 
 Page 5 
 
 
  in consumption patterns, technology or trade pr actices were perceived that could justify the 
unexpected rise in imports.  
Therefore, Brazilian authorities found that there is enough evidence of injury to the domestic 
industry supposedly caused by a disproportionate rise in imports. The petitioners offered a viable 
adjustment plan that will be further discussed during the investigation.
 
 
4. Provide a point of contact for the invest igation and identify the preferred means for 
corresponding.  The point of contact would be av ailable to respond to enquiries relating to the 
procedures applicable to the investigation  
 
Felipe Hees  
Director of the Trade Defense Department  
Emails: vinho@mdic.gov.br  
 5. Provide the deadlines and procedures for importers, exporters and other interested 
parties to present evidence and their views, incl uding (i) deadlines and procedures for Members 
and exporters to identify themselves as interested  parties, if so required, to participate in the 
investigation and (ii) the date of an intende d public hearing as provided for in Article 3.1 
 
Interested parties have 40 days from the initiati on of the investigation to submit factual and 
proof elements and expose their arguments in written manner.
 
 
Within 60 days of the initiation of the investig ation, hearings can be requested in order to 
present factual and proof elements and to expose thei r arguments on the allegations of other parties.  
If this deadline ends, parties w ill be heard within 30 days.  
 
 
__________