WORLD TRADE  
ORGANIZATION  G/SG/Q2/PAN/3 
7 May 2007 
 
 (07-1885) 
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 PERU in Relation to the Notification
 
Submitted by PANAMA1 
 
(Printed Film in Rolls) 
 
 
 The following communication, dated 23 April 2007,  is being circulated at the request of the 
delegation of Peru.  
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  1. Representativeness, major proportion and analysis of serious injury  
 The Agreement on Safeguards establishes that  a general safeguard measure may only be 
applied if imports have increased in such a wa y as to cause or threaten to cause serious injury
 to the 
domestic industry .  Pursuant to Article 4.1(c) of the Agre ement, "domestic industry" is understood to 
mean the producers as a whole operating within the territory of a Member, whose collective output 
constitutes a major proportion of the total domestic  production of the product under investigation. 
  In Resolution No. 002 of 6 February 2007, which supports the app lication of provisional 
measures, it is stated that the applicant accounted for at least 30 per cent of the output of BOPP film in 
2005.  However, the Technical Re port: Preliminary Determination ( Informe Técnico: Determinación 
Preliminar ) of 15 January 2007 indicates that this 30 per cent share is calculated in value
 (in millions 
of balboas).  The same report also indicates that in  terms of volume (MT), the applicant's share of the 
total amount produced in 2005 was 16 per cent.  Do es the Government of Panama believe that a 
safeguards investigation can be initiated with a representativeness of 16 per cent ? 
  
 The current investigation concerns a highly concentrated industry with a small number of 
clearly identified manufacturers from whom the authorities may request information.  Given the 
circumstances of this case, does th e Government of Panama consider the initiation of an investigation 
with the above-mentioned percentage of representa tiveness to be warranted, when all other producers 
of the like product in Panama are clearly identifie d?  What percentage of representativeness would 
Panama use if a fragmented industry, such as the clothing or footwear industry, were involved? 
   Article 4.1(a) also states that serious injury shall be understood to mean a significant overall impairment in the position of a domestic industry.  Does the Government of Panama believe that the 
impact on a producer accounting for 16 per cent of the domestic industry for the product in question constitutes a significant overall impairment in the total domestic industry pr oducing this product, as 
                                                     
 
1 G/SG/N/6/PAN/1. G/SG/Q2/PAN/3 
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  required under Article 4.1(a) of the Agreement?  Does the Government of  Panama believe that 
information concerning injury factors in respect of a single company
 accounting for 16 per cent of the 
domestic industry can provide an adequate statistic al basis for determining the position of the total 
domestic industry and the existence of an overall impa irment therein?  How is this consistent with 
Articles 4.1(a), 4.1(c) and 4.2(a)  of the Agreement on Safeguards? 
 
2. Analysis of serious injury 
 
 The Anti-Dumping Agreement provides that in or der to determine that an application has 
been made "by or on behalf of the domestic industry"  and that an investigation may be initiated, those 
who support the application must collectively account for at least 25 per cent of the total production of 
the product under investigation.  In other word s, according to the Anti-Dumping Agreement, an 
analysis of injury  must be carried out on the basis of in formation from producers accounting for at 
least 25 per cent of total domestic production.  Gi ven that the Agreement on Safeguards sets a higher 
standard, namely the existence of serious injury , why has the Panamanian investigating authority 
carried out an analysis of serious injury on th e basis of information from producers accounting for 
only 16 per cent  of total Panamanian production? 
  Moreover, Article 4.1(a) of the Agreement on Sa feguards provides that "serious injury" shall 
be understood to mean a significant overall impairment
 in the position of a domestic industry.  In the 
Government of Panama's opinion, can the impact on a single producer accounting for 16 per cent of 
the domestic industry  producing this product in Panama cons titute a significant overall impairment in 
the industry as a whole or in a major proportion of th is industry, as required under Article 4.1(a) of the 
Agreement?  
3. "Unforeseen developments" in respect of the increase in imports  
  Article XIX of the GATT provides that a signi ficant increase in imports entering under such 
conditions as to cause or threaten injury to domestic producers shall be a result of unforeseen 
developments.   The Technical Report: Preliminary Determination notes that imports reached a critical point 
in 2005.  In fact, from 2004 to 2005, imports increased  by 237.31 MT, the totality of which were 
imported by the company Productos Alimenticios Pascual S.A, the main importer, which until 
June 2005 had an exclusive supply contract with the company requesting the measure and is the only 
company in respect of which the investigating aut hority carried out its analysis of injury.  The 
contract's expiry date was clearly specified in the contract itself (five years).  This foreseeable
 date 
coincides with the increase in imports.  Why, then , does the Government of Panama state that the 
increase in imports is a result of an "unforeseen" de velopment, when the parties to the exclusive 
contract between the applicant and its main cust omer were aware of the exact date on which the 
contract was due to expire?  Can it be presumed that  a contract with a specific expiry date will be 
renewed if there is no evidence indicating that the parties have expressed an interest in renewing it ? 
 
 Moreover, Resolution No. 002 states that th e above-mentioned importing company accounted 
for 86 per cent of the volume of BOPP sheets imported in 2005 and 98 per cent of the volume imported in 2006.  In other words, the imports ef fected by the Pascual company clearly account for 
almost all imports in the final two years of the analysis period, and these imports were the result of the end of the exclusive contract between this company and the requesting company in mid-2005. 
 
 In Resolution No. 33 of 9 April 2007, however, the Panamanian authorities state that "nothing made it necessarily foreseeable ... that following the change to the existing contractual legal 
relationship ... the products would be  imported in such quantities as to supplant the supply chain of 
domestic producers".  Nevertheless, the price analysis submitted by the importing company (Pascual)  G/SG/Q2/PAN/3 
 Page 3 
 
 
  shows a difference of up to 35 per cent between the price Pascual was charged by the requesting 
company and the price that other Panamanian produ cers were charged.  Moreover, since June 2005, 
the export price of printed film in rolls has not exceeded 4.05, which means a difference of 50 per cent 
in relation to the maximum price charged by the requ esting company.  It was therefore to be expected 
that the importing company would, once the exclus ive contract had expired, choose the imported 
product as a substitute for the applicant's product.  B earing all this in mind, why does the Government 
of Panama claim that the increase in imports is the result of an "unforeseen" development?  Can the 
Government of Panama explain why it did not examin e the information in the record concerning the 
prices at which the requesting company sold its pr oducts to Pascual while under exclusive contract 
and the prices at which it sold like products to ot her independent customers in Panama, in order to 
determine whether Pascual had a reasonable incentive to continue its commercial relationship with 
this company?  Can the Panamanian authorities assume that other domestic manufacturers are capable of supplying the Pascual company, when there is no information in the record proving that other local 
manufacturers can meet this customer's quality, saf ety and security requirements, and the technical 
and commercial viability of the alternative local supply has not been demonstrated? 
 
4. Causal link and non-attribution analysis 
 
 As mentioned above, the end of the exclus ive supply contract between the importing 
company and the requesting company in mid-2005 account s for the increase in imports of printed film 
in rolls in Panama in 2005 and 2006.  Could the Government of Panama e xplain how it determined 
that the end of the exclusive contract was another in jury factor and how it can ensure that the impact 
of this factor on the injury is not attributed to in creased imports, in accordance with Article 4.2 of the 
Agreement on Safeguards?   Could the Government of Panama also explai n how it has fulfilled its obligation to evaluate 
whether the problems concerning the quality of the product and service, attributed to the requesting 
company by various foodstuff manufacturers which use the rolls of printed film and by former 
customers of the requesting company, constitute othe r injury factors, and how it can ensure that the 
impact of this factor on the injury is not also attributed to increased imports, as required under Article 4.2 of the Agreement on Safeguards?  5. Adjustment plan  
 Article 7 of the Agreement on Safeguards provides that a Member shall apply safeguard 
measures only for such a period of time as may be necess ary to prevent serious injury and to facilitate 
adjustment .  Resolution No. 002, however, does not examine whether the application of a safeguard 
measure could resolve the requesting company's struct ural problems, despite the fact that the main 
customers have indicated that they do not wish to  purchase this company's products for quality- and 
safety-related reasons.  Nor has the applicant been  required to present an adjustment plan showing 
that it could make structural adjustments that w ould enable it to adapt to  international competition 
once the safeguard was no longer in effect, whic h would justify the need for the measure. 
 
 In this respect, could the Government of Panama please explain how the investigation is 
consistent with Article 7 of the Agreement on Safeguards, insofar as nothing proves that the measure 
is necessary to facilitate the adjustment of the requesting company, which accounts for neither the 
total nor a major proportion of the Panamanian indus try?  Could the Government of Panama also 
explain whether such an adjustment is viable when  there is no certainty as to whether the requesting 
company will be able to overcome the structural  problems linked to small-scale production and to 
technology which presents a risk in terms of the co ntamination of foodstuffs and which is extremely 
costly for small-scale production, and whether the re questing company will be able to compete with 
the many manufacturers offering BOPP in the region  and the potential suppliers of the Panamanian G/SG/Q2/PAN/3 
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  market which are not affected by the safeguard, a nd handle the decision taken by the main customers 
in Panama not to obtain the pr oduct from the applicant because of problems relating to quality, etc.? 
 
6. Due process and duty to investigate 
  In Resolution No. 002, the information ta ken into consideration when examining the 
application of provisional measures was the in formation submitted up until 15 December 2006.  In 
other words, in deciding on the application of pr ovisional measures, only the replies to questionnaires 
and the initial submissions of the parties were considered, and not the evidence presented between 
January and March 2007 on key aspects of the pr oceedings, relating notably to other factors 
explaining the causal link. 
  Given that from January to March 2007, the evidence was examined and many parties 
responded to the presentations of their counterparts and based their arguments on aspects relevant to 
the analysis of serious injury and the causal link,  could the Government of Panama explain how the 
deadline set for the submission of information consid ered relevant to the decision to apply provisional 
measures is consistent with the obligation under Article 3.1 of the Agreement on Safeguards for the 
investigating authority to grant interested par ties the opportunity to express their views, present 
evidence and respond to the presentations and evid ence submitted by other parties?  Could the 
Government of Panama also explain how this is c onsistent with the obligation under Article 6 of the 
Agreement to adopt a preliminary determination on the basis of clear evidence
, when information 
submitted prior to the adoption of the provisional measure, which may be highly relevant for 
achieving greater clarity in the investigating auth ority's analysis, is dismissed from the analysis 
outright?  Lastly, could the Government of Panama  explain why, if the provisional measure was 
finally adopted on 12 April 2007, the preliminary dete rmination was based exclusively on information 
submitted at the initial stage of the proceedings and failed to take into account evidence presented 
between January and March 2007 on key aspects of the proceedings, notably on other factors 
explaining the causal link, and the extent to which this  is consistent with Articles 3.1, 4.2 and 6 of the 
Agreement?  
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