WORLD TRADE  
ORGANIZATION  G/SG/N/8/IDN/4 
20 January 2011 
 (11-0328) 
Committee on Safeguards Original:   English 
  
 
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE AGREEMENT ON  
SAFEGUARDS ON FINDING A SERIOUS INJURY OR THREAT  
THEREOF CAUSED BY INCREASED IMPORTS  
 
INDONESIA 
 
(Cotton Yarn Other Than Sewing Thread
) 
   The following communication, dated 17 January 2 011, is being circulated at the request of the 
Delegation of Indonesia. 
 
_______________ 
 
  Pursuant to Article 12.1(b) of the WTO Ag reement on Safeguards, the Republic of Indonesia 
notifies on the findings of a serious injury thereof caused by increased imports of Cotton Yarn Other 
Than Sewing Thread.    
1. Background 
 On 22 June 2010, the Indonesian Textile Industries Association ( Asosiasi Pertekstilan 
Indonesia/API ) on behalf of the domestic industry f iled an application with The Indonesian 
Safeguards Committee ("the investigating author ity"), requesting the imposition of safeguard 
measures against imports into Indonesia of cotton yarn other than sewing thread.     The applicant claimed that  the domestic industry faced seri ous injury caused by increased 
quantities of imports. The claim is based on data a nd information covering in particular the period 
2007 to 2009, which showed that imports of cotton ya rn other than sewing thread, in terms of volume 
and trend, increased accordingly resulting in serious injury to domestic industry.  During this period 
several plant closures were witnessed.  Date of Initiation
 
 
 After examining the request made by the applicant, the investigating authority decided to initiate an investigation on 25 June 2010 (publis hed in Bisnis Indonesia daily newspaper) and, 
individual notices were sent to all known interested  parties and concerned agencies as well as private 
entities.  The Republic of Indonesia also notifie d Members of the WTO on 9 July 2010. The WTO 
Secretariat circulated the notification on the 16 July 2010 (G/SG/N/6/IDN/11).  
 Subject goods
 
 
 As notified by the Republic of Indonesia under Article 12.1(a) of the WTO Agreement on 
Safeguards (G/SG/N/6/IDN/11), the Product Subject to  Investigation is:  Cotton Yarn Other Than G/SG/N/8/IDN/4 
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  Sewing Thread which falls under HS Codes 5205.12.00.00, 5205.21.00.00, 5206.12.00.00 and 
5206.14.00.00.   
 During the course of the investigation, howev er, the investigating authority found that a 
number of producers were unable to effectively sep arate and link their key accounting data between 
different types of Cotton Yarn Other Than Se wing Thread produced under HS codes 5205 and 5206, 
with those falling under HS codes 5205.12.00.00, 5205.21.00.00, 5206.12.00.00, and 5206.14.00.00.  
 
 Based on the findings of the investigation, the investigating authority has established that the 
difficulties referred to reflect the fact that all products under HS codes 5205 and 5206 constitute like 
or directly competitive to the products produced by the domestic industry, using the same raw 
materials, production process and competing and sold in the same segment of the market. 
  In view of these findings, the investigating au thority decided to broaden the coverage of 
Product Subject to Investigation and to cove r cotton yarn under HS Codes 5205 and 5206.  
 
Table 1:  Description of Products Subject to Investigation
 
 
HS CODE DESCRIPTION 
5205 Cotton yarn (other than sewing thread), containing 85% or more by weight 
of cotton, not put up for retail sale. 
5206 Cotton yarn (other than sewing thread), containing less than 85% by 
weight of cotton, not put up for retail sale. 
 
 Source :  Indonesian Customs Tariff Book 
 
Period of investigation  
  The period of investigation covers calendar years of 2007, 2008 and 2009.   The domestic industry
 
 
 The investigating authority confirms that the domestic industry subject to investigation 
represents the majority of the subject  goods produced in Indonesia.   
 
2. Information on whether there is an absolu te increase in imports or an increase in 
imports relative to domestic production 
Increased level of imports  
  Although the period of investigation has been  determined to cover 2007, 2008 and 2009, the 
investigating authority has studied the volume a nd trend of imports during years of 2006, 2007, 2008 
and 2009.  The inclusion of year 2006 enables the inv estigating authority to illustrate the trend in the 
rate of the increase in the imports.   G/SG/N/8/IDN/4 
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  Table 2: Volume of import of the Product Subject to Investigation  
 
 Unit 2006 2007 2008 2009 
Imports  Ton 22.143 23.716 28.642 21.313 
Imports Index  100 107 96 
Relative to domestic 
production Index - 100 136 113 
 
 Source :  Statistics Indonesia  
 
 The above table reveals a gradual increase in imports over the period 2006, 2007 followed by 
a sharp increase in imports in 2008 and a decline in 2009.  The decline in 2009 reflects a combination 
of an attempt of the domestic industry to shore up  market share by reducing prices, and a temporary 
decline in demand. However, it is to be pointed out  that imports continued to increase relative to the 
production of the domestic industry in 2009.  Unforeseen development 
 
 
 The significant increase reflects the un foreseen slump in demand and excess capacity 
resulting from the impact of the financial crises in  2008.  Prior to the crises, the Cotton and Wool 
Situation and Outlook Year, published in 2007 had pred icted that capacity utilization of cotton mills 
would reach new heights in 2007/2008 based on continue d growth in the textile sectors.  This was not 
realized as subsequent editions of this repor t acknowledged the decline in line with the global 
economic slowdown. 
  The International Textile Manufacturers Federation  (ITMF), acknowledged this slump in 
demand for the Subject goods and the excess cap acity existing in major supplying countries. 
  Furthermore, prior to the financial crises, the Government of Indonesia had entered into a 
number of FTAs Agreement and the elimination of im port tariffs within these agreements, to include 
subject goods, were made on the assumption of c ontinued growth. Textiles would not have been 
included in these negotiations if the impact of the fi nancial crises in terms of the effect of the over 
capacity had been known.  3. Evidence of serious injury or threat thereof caused by increased imports 
Evidence of serious injury
 
  In order to make a determination of serious injury to the domestic industry of the subject 
goods,  the investigating authority  has made an evalua tion of all relevant factors of an objective and 
quantifiable nature having a bearing on the situa tion of the domestic industry. The following Table 
has been based upon data provided by the domestic  industry,  collected and verified by the 
investigating authority.  G/SG/N/8/IDN/4 
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  Table 3: Indicators of serious injury
 
 
Year Description  Unit  2007  2008  2009  
Volume of import Ton 23.716 28.642 21.313 
Market share of 
import Index 100 130 130 
Market share of the 
domestic industry Index 100 94 94 
Domestic sales Index 100 87 65 
Production Index 100 88 79 
Productivity Index 100 94 99 
Capacity utilization Index 100 87 79 
Profit and loss Index (100) (144) (208) 
Employment Index 100 93 80 
 
The following is noted:  
  (a) The market share of import had increased  from 2007 to 2009, while the market share 
of the domestic industry decreased during the same period.   
 
 (b) As the domestic industries' sales decreased with the loss of market share, this resulted 
in the decline in production and capacity witnessed. 
   (c) The data on employment level showed a decreased of 7 indexed points from 2007 to 
2008 and 13 indexed points from 2008 to 2009.  
 
 (d) Productivity declined in 2008 in line with lower output. The improvement in 2009 
does not reflect real productivity gains in  terms of increased production, but is 
attributable  to reduced employment levels.  
  (e) The domestic industry suffered from significant losses during the period of 
investigation, in which the biggest lo ss suffered was in 2009.  The losses in 2009 
were due to the attempt of the domestic i ndustry to shore up market share by reducing 
prices. 
  (f) While capacity utilization fell by 13 indexed points in 2008 from 2007, it further 
decreased by 8 indexed points in 2009.  The fall in capacity utilization, from 2007 
onwards reflects decreases in the production caused by the loss of market share to 
imports. 
  G/SG/N/8/IDN/4 
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  4. Causal link 
 The aforementioned data as analyzed and ve rified by the investigating authority has 
confirmed a negative development for capacity utiliza tion, production, domestic sales, market share, 
employment, and profitability during the corresponding period of investigation. 
 
 The investigating authority concludes that th ese negative developments result from the loss of 
market share to the increase in imports, which resulte d in reduced domestic sales in turn affecting all 
other factors referred to. The financial losses are attr ibutable not only to reduced domestic sales, but 
also to severely depressed selling prices due to the effect of the price undercutting of the imports 
throughout the period concerned.  5. Other factors that may contribute to injury 
 In order to ensure that injury is only caused  by increased imports, the investigating authority 
also analyzed the following factors:  
Captive market of domestic industry
 
  Although part of the domestic industry also supplies subject goods to downstream-fabric 
operations, the investigating authority has exclude d the production, sales volume and value concerned 
because they are not directly in competition with the importation of Product Subject to Investigation 
on the free market. 
 
Exports of domestic industry
 
  The investigating authority also analyzed whether exports of the subject goods contributed to the serious injury to the domestic industry.  Howeve r, it is to be noted that exports in 2008 and 2009 
increased at prices generally higher than the domestic market.  This largely reflects an effort by the 
domestic industry to compensate for the loss of mark et share by increasing exports.  The investigating 
authority concludes that the exportation of Products  Subject to Investigation is not a cause to the 
serious injury as suffered by domestic industry.      
Table 4: Export of the Domestic Industry (Indexed Points)
 
 
2007 2008 2009 
100 105 115 
 
 Source :  The Investigating Authority Verification 
 
Machinery  
  The technology applied by the domestic industry va ries, and, while there is a need to upgrade 
machines to restore long term competitiveness, which will form part of the restructuring program.  
The quality and type of subject goods produced by the domestic industry are comparable to and in 
competition with imports.     Based on findings on the above three factors, the investigating authority confirms that there is 
no other known factors than increased imports that have caused injury to the domestic industry. 
 G/SG/N/8/IDN/4 
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  6. Conclusion of the finding 
 As the result of the investigation, the inv estigating authority concludes that there is 
correlation between injury suffered by the domestic industry with the increased volume of imports of 
the subject goods.   
 
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