WORLD TRADE  
ORGANIZATION  G/ADP/Q2/PER/1 
5 October 2006 
 
 (06-4770) 
Committee on Anti-Dumping Practices Original:   English 
  
 
DEFINITIVE ANTI-DUMPING DUTY ON 
DENIM FABRICS IMPORTED FROM BRAZIL  
 
Questions to PERU from BRAZIL
 
 
 
 The following communication, dated 3 October 2006, is being circulated at the request of the Delegation of Brazil.  
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  On 22 August 2004, the Peruvian investigating authority (Comisión de Dumping y Subsidios del Instituto Nacional de Defensa a la Conpetencia  y de la Propiedad Intelectual) opened an anti-
dumping investigation against imports of denim fa brics from Brazil.  On 8 September 2005, the 
Comisión determined that the request for impositi on of anti-dumping measures against the Brazilian 
exports was unfounded, due to the absence of a causal link (Resolution 112-2005/CDS-INDECOPI).  
On 29 September, the Peruvian petitioners requested an administrative review of the decision, raising 
three main points: non-confidential summaries, definition of like product and causal link.  On 3 May 2006 (published on the official gazette on 19 June), the “Sala de Defensa de la Competencia” 
of the Instituto annulled Resolution 112-2005/CD S-INDECOPI and imposed definitive anti-dumping 
duties against the imports of denim fabrics from Brazil, ranging from 6-9 per cent (Resolution 0612-
2006/TDC-INDECOPI) 
 
Question 1
 
  In the administrative review, the “Sala” examined  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 ev en the definition of “like products” was altered 
significantly (the original investigation identified two models of “denim fabrics”, which were fused 
into one product during the review).  The fi nal conclusion was based on new criteria for the 
calculation of normal value and export price.  Evidence previously submitted by the Brazilian 
exporters was disregarded and arguments presented in the original investigation were ignored. 
 (a) Given that the Peruvian petitioners had not questioned in the review the normal value, the 
export price and the margin of dumping obtained during the original anti-dumping investigation, please explain the legal basis a nd describe the methodology used by the “Sala” 
to undertake a review of these elements.  
 (b) Please explain how the decision of ignore th e evidence presented by the Brazilian exporters 
complies with the paragraph 6 of the Annex II of 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.   
 G/ADP/Q2/PER/1 
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  Question 2
 
  As mentioned above, the final determina tion contained in Resolution 0612-2006/TDC-
INDECOPI, dated 3 May 2006, was made public in the official gazette on 19 June 2006, that is, 
10 months after the publication of request for the re view 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-dumping investig ation consistent with Article 11.1 of the Anti-
Dumping Agreement.  
 
Question 3
 
  Despite the breadth and scope of the review, tantamount to a completely new investigation 
procedure, Brazilian interested parties did not ha ve 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 deci sion to apply definitive measures.  The procedures 
adopted in the review raise some important con cerns on “due legal process”, “ample opportunity to 
the defence of a party’s interest” and “transparency”.   Taking into account that the “Sala” adopted a new definition of like product (Section III.2 in 
Resolution 0612-2006/TDC-INDECOPI) and undert ook a new estimation of normal value, export 
price and margin of dumping, during the administra tive review (Sections III.3.2, III.3.3 and III.3.4 in 
Resolution 0612-2006/TDC-INDECOPI) please explain how  the procedures adopted in the review are 
consistent with Articles 6.1, 6.2, 6.4 and 6.9 of the Anti-Dumping Agreement.  
 
Question 4
 
  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 th e 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 existence of the taxes were not in doubt.  Nor did it 
question the payment of the PIS and COFINS by the Brazilian exporters (Page 12 and 13, 
Section III.2.3 in Resolution 0612-2006/TDC-INDECO PI).  It argued, nonetheless, that it was not 
possible to verify that the value 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 transac tions during the period of investigation” (Page 12, 
Section III.2.3 in Resolution 0612-2006/TDC-INDECOPI).  (a) Taking into account that the allowance of Article 2.4 of the Anti-Dumping Agreement is 
mandatory and that the Brazilian exporters not onl y 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 whether the decision of  the “Sala”  to disregard those facts and 
refrain from making the allowance on the internal sales price of Brazilian exporters was a fair 
comparison, consistent with the mentioned Article 2.4.   G/ADP/Q2/PER/1 
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(b) Please explain how the procedures adopted by the “Sala” can be considered consistent with 
Article 6.1 of the Anti-Dumping Agreement.  It should be noted that th e exporters provided to 
the Comisión the requested information for the orig inal investigation.  Furthermore, there are 
no records that the “Sala” requested additiona l documentation and information regarding PIS 
and COFINS – or any other matter – from the Brazilian interested parties. 
 Question 5
 
  In the original investigation, the Comisión c onsidered that there w as insufficient basis to 
determine causal link between the dumped imports and th e 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 principally caused by imports from Brazil, rather 
it resulted from other causes, notably imports fro m 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 correlati on between the behaviour in the export price of 
the Brazilian denim fabric and the behaviour in the pr ice 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 im ports” (Page 31, Section III.4.2.1 in Resolution 0612-
2006/TDC-INDECOPI).  
  It appears that the “Sala” reversed the conclusions of the Comisión on causality based, 
essentially, on a correlation between two independent va riables 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 the Panel on 
EC - Bed Linen  (WT/DS141/R)  and similarly the Panel on Guatemala - Cement II  (WT/DS156/R), 
which stated that the evaluation of all the factors by  the investigating authorities must be apparent in 
the final determination, please explain how the fi nal 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.  Question 6
 
 
 The Resolución 052-2004/CDS-INDECOPI, published on August of 2004, indicates that the 
Peruvian domestic producers that filled the app lication represented 25 per cent of the Peruvian 
production.  Nonetheless, there is no comment 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 has complied with Article 5.4, since there was no mention on how the degree of support to the application was quantified.  Question 7
 
 
 On the reformed decision of INDECOPI (IN FORME Nº 017 – 2005/CDS), the Sala reached 
the conclusion that there was no price undercutting by Brazilian exports as compared with the price of 
the like product of Peru, nor did it analyze whether Brazilian exports to Peru had the effect to depress prices or prevent price increases. G/ADP/Q2/PER/1 
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 Please explain how the conclusion of the "Sala" was consistent with Article 3.2, since there was no price undercutting and no conclusion indica ting the existence of depression or price 
suppression.  
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