DOMINICAN REPUBLIC – SAFEGUARD MEASURES ON IMPORTS OF POLYPROPYLENE BAGS AND TUBULAR FABRIC
Document: Request for Consultations by Honduras
Date: 21 October 2010
Document codes: WT/DS417/1; G/L/932; G/SG/D39/1
Complainant: Honduras
Respondent: Dominican
Third parties: China, Colombia, Costa Rica, El Salvador, EU, Guatemala, Nicaragua, Panama, Turkey, U.S.
Dispute stage: Panel
Agreements cited: Art. 2.1, 3.1, 3.2, 4.1(a), 4.1(b), 4.1(c), 4.2(a), 4.2(b), 4.2(c), 6, 11.1(a), 5.1, 8.1, 9.1, 12.3  SafeguardsArt. XIX:1, XIX:2, II:1  GATT 1994

DOMINICAN REPUBLIC – SAFEGUARD MEASURES ON IMPORTS OF
POLYPROPYLENE BAGS AND TUBULAR FABRIC

Request for Consultations by Honduras

 The following communication, dated 18 October 2010, from the delegation of Honduras to
the delegation of the Dominican Republic and to the Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

 I have received instructions from the authorities of my country to request consultations with
the Dominican Republic pursuant to Article 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU), Artic le XXII of the General Agreement on Tariffs and
Trade 1994 (GATT 1994), and Article 14 of the Ag reement on Safeguards concerning the provisional
and definitive safeguard measures imposed by th e Dominican Republic on imports of polypropylene
bags and tubular fabric and the investigation that led to the imposition of those measures.

A. B
ACKGROUND AND MEASURES AT ISSUE
 The measures at issue were imposed pursuant to an investigation conducted by the Regulatory
Commission on Unfair Trade Practices and Safe guard Measures of the Dominican Republic
(hereinafter "the Commission").

1. Initiation of the safeguard investigation
 On 15 December 2009, at the request of the comp any Fersan S.A. (hereinafter "Fersan"), the
Commission declared the initiation of an investigati on with a view to the application of safeguard
measures on imports from all origins of polyprop ylene bags and tubular fabric classified under
subheadings 5407.20.20, 6305.33.10 and 6305.33.90 of the Tariff of the Dominican Republic
(hereinafter "the initiating resolution").
1 On 17 December 2009, the Commission published a notice
of initiation of an investigation.2

 In its initial technical report
3, the Commission indicated that during the initial phase of the
investigation it would examine the trends for polyp ropylene bags and tubular fabric jointly, since
according to the requesting company, the two produc ts constituted one and the same final product.
Moreover, the Commission pointed out that the domestic industry was made up solely of producers

1 Commission Resolution CDC-RD-SG-046-2009 of 15 December 2009.
2 Notice, general safeguard investigation concerning textiles of man-made filament yarn and bags of
polyethylene and polypropylene, dated 15 December 2009.
3 Initial technical report of the Commission dated 20 November 2009.

that manufactured both polypropylene bags and tubular fabric as part of the same production process.
The Commission also considered that the unforeseen development that led to the increased imports
was the cuts resulting from the Free Trade Agreem ent between Central America and the Dominican
Republic. As regards the analysis of serious in jury, understood as significant overall injury, the
Commission found that there had been a loss of profits and an increase in stocks. Finally, the
Commission pointed to the existence of factors othe r than imports (e.g. increased costs, investment,
and bank indebtedness) that apparently had a bearing on the state of the domestic industry.

2. Preliminary determination
 On 16 March 2010, the Commission decided to impose a provisional safeguard of 38 per cent
on imports of polypropylene bags and tubular fa bric classified under subheadings 5407.20.20 and
6305.33.90 of the Tariff of the Dominican Republic.
4 The duration of the provisional safeguard
measure is 200 days. On 25 March 2010, the Co mmission published a notice of application of
provisional measures on imports of polypr opylene bags and tubular fabric. 5 In that notice and in the
preliminary resolution, the Commission pointed out th at pursuant to Article 9.1 of the Agreement on
Safeguards, the provisional safeguard measures wo uld not apply to imports from Mexico, Panama,
Colombia and Indonesia.

 Honduras has several concerns with respect to the preliminary determination, including, but
not limited to, those set forth below. Based on the preliminary technical report
6, the Commission
decided that during the preliminary phase of the investigation, it would continue to examine the trends
for polypropylene bags and tubular fabrics jointly. The Commission also pointed out that Fersan
represented the entire domestic industry, since it w as the only company that covered all stages of the
manufacturing process of the product under investig ation. Moreover, the Commission appears to
have assumed that the unforeseen development that le d to the alleged increase in imports was the cuts
resulting from the Free Trade Agreement between Central America and the Dominican Republic and
the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA). As
regards the analysis of serious injury to the domestic industry, understood as significant overall injury,
the Commission found that there had been a loss of profits and an increase in stocks. Finally, the
preliminary determination identified certain factors that had a bearing on the state of the domestic
industry (e.g. increased costs and bank indebtedness).

3. Final determination
 On 5 October 2010, the Commission decided to impose a definitive safeguard of 38 per cent
on imports of polypropylene bags and tubular fa bric classified under subheadings 5407.20.20 and
6305.33.90 of the Tariff of the Dominican Republic.
7 The Commission then issued a notice of
application of the definitive measures on impor ts of polypropylene bags and tubular fabric. 8 In that
notice and in the final resolution, the Commission pointed out that pursuant to Article 9.1 of the

4 Resolution CDC-RD-SG-061-2010 of the Regulatory Commission on Unfair Trade Practices and
Safeguard Measures of the Dominican Republic, dated 16 March 2010 ("Preliminary Resolution").
5 Notice, general safeguard investigation concer ning tubular fabric and polypropylene bags,
25 March 2010.
6 Preliminary technical report of the Commission (without date).
7 Resolution CDC-RD-SG-089-2010 of the Regulatory Commission on Unfair Trade Practices and
Safeguard Measures of the Dominican Republic, dated 5 October 2010 ("Final Resolution").
8 Notice, general safeguard investigation concerning tubular fabric and polypropylene bags, dated
6 October 2010.

Agreement on Safeguards, the definitive safegua rd measures would not apply to imports from
Mexico, Panama, Colombia and Indonesia.

 Honduras has several concerns w ith respect to the final determination, including, but not
limited to, those set forth below. Based on the final technical report
9, the Commission assumed that
polypropylene bags and tubular fabric constitu ted a single product under investigation. The
Commission also reaffirmed its view that Fersan constituted the entire domestic industry, since it was
the only company manufacturing the product under investigation starting with the resin. 10
Furthermore, the Commission appears once again to have assumed that the unforeseen development
that led to the alleged increase in imports was the cuts resulting from the Free Trade Agreement
between Central America and the Dominican Repub lic and from DR-CAFTA. The Commission also
considered that the accession of China to the WT O was a development that "could not have been
foreseen by the domestic industry at the time wh en the Dominican Republic subscribed to the
measures contained in Article XIX of the GATT 1994". 11 Finally, as regards the analysis of serious
injury to the domestic industry, the Commission pointed out that the domestic industry "suffered
significant financial losses during the period under investigation, as eviden ced by the increase in
stocks, the decrease in cash flow, and the sharp decline in production."
12 At the same time, the
Commission refers to certain factors other than impor ts that apparently had an impact on the domestic
industry (e.g. increase in costs and bank indebtedness).

B. LEGAL BASIS FOR THE COMPLAINT
 According to Article 11.1(a) of the Agreemen t on Safeguards, a Member shall not take or
seek a safeguard action unless such action conforms with the provisions of Article XIX of the
GATT 1994 applied in accordance with the Agreement on Safeguards.

 Honduras is deeply concerned about certain aspects of the safeguard measures and the
underlying investigation, including, inter alia , the methodology, calculations, comparisons,
determinations, and procedures or practices used by the Dominican Republic in the framework of the
investigation and the imposition of the safeguards.

 In particular, Honduras considers that:

(a) The preliminary and final determinations do not contain reasoned and adequate
findings and conclusions with respect to the determinations relating to the product
under investigation, the domestic like-pr oduct, and the domestic industry. These
omissions appear to be inconsistent with Articles 2.1, 3.1, 4.1(a), 4.1(c), 4.2(a),
4.2(b), 4.2(c) and 6 of the Agreement on Safeguards, and Article XIX:1(a) of the
GATT 1994.
(b) The preliminary and final determinations do not contain reasoned and adequate
findings and conclusions to substantiate the alleged unforeseen developments and to
explain how those developments resulted in increased imports of the specific products
covered by the safeguard measure. These om issions appear to be inconsistent with
Articles 3.1, 4.2(a) 4.2(c), 6 and 11.1(a) of the Agreement on Safeguards and
Article XIX:1(a) of the GATT 1994.

9 Final technical report of the Commission, dated 13 July 2010.
10 Final technical report, page 47.
11 Final technical report, page 66.
12 Final Resolution, paragraph 38.

(c) Moreover, the preliminary and final dete rminations do not contain reasoned and
adequate findings and conclusions with respect to the alleged effect of the obligations
incurred under the GATT 1994, and how that effect would have resulted in increased
imports of the specific products covered by the safeguard measure. These omissions
appear to be inconsistent with Articl es 3.1, 4.2(a), 4.2(c), 6 and 11.1(a) of
the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994.
(d) Nor do the preliminary and final determin ations contain reasoned and adequate
findings and conclusions with respect to the alleged increase in imports of the specific
products under investigation, in absolute terms or relative to domestic production.
These omissions would appear to be contrary to Articles 2.1, 3.1, 4.2(a), 4.2(b),
4.2(c), and 6 of the Agreement on Sa feguards and Article XIX:1(a) of
the GATT 1994.
(e) Furthermore, although the state of the domes tic industry was found to be favourable,
the preliminary and final determinations do not contain reasoned and adequate
findings and conclusions as to the existence of the alleged serious injury, understood
as significant overall impairment of the domestic industry. Nor does the preliminary
determination contain any reasoned and ad equate findings and conclusions with
regard to the critical circumstances to justif y the provisional measure, or with regard
to all of the factors that are required to be examined for the determination of serious
injury. These omissions appear to be inc onsistent with Articles 2.1, 3.1, 4.1(a),
4.2(a), 4.2(b), 4.2(c) and 6 of the Agreem ent on Safeguards and Article XIX:1(a) of
the GATT 1994.
(f) Nor, at the same time, do the preliminary and final determinations contain reasoned
and adequate findings and c onclusions regarding the causal link between the alleged
increase in imports and the serious injury to th e domestic industry. In particular, they
contain no demonstration that the injury to the domestic industry caused by other
factors was not attributed to the imports of the products under investigation. These
omissions appear to be contrary to Articles 2.1, 3.1, 4.2(a), 4.2(b), 4.2(c) and 6 of
the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994.
(g) The measures at issue are applied only to products imported from certain countries of
origin and/or consignment. Moreov er, the required parallelism between the
substantive evaluation of the determinations on the one hand, and the coverage of the
measures at issue on the other, was not r espected. These omissions appear to be
inconsistent with Articles 2.1, 2.2, 4. 2, 5.1, 6 and 9.1 of the Agreement on
Safeguards, and Article XIX:1(a) of the GATT 1994.
(h) The preliminary and final determinations do not contain any reasoned and adequate
findings and conclusions as to the reasons wh y certain information was considered to
be confidential without requiring non-confidential summaries or why that information
could not be summarized in a non-confidential manner. These omissions appear to be
contrary to Articles 3.1 and 3.2 of the Agreement on Safeguards.
(i) It would appear that the resolutions and reports made public concerning the
preliminary and final determinations do not contain the reasoned and adequate
findings and conclusions on all issues of fact and law supporting the imposition of the
measures in question. This omission appears to be inconsistent with Articles 3.1 and
4.2(c) of the Agreement on Safeguards.

(j) Finally, the Dominican Republic failed to provide the Members having a substantial
interest as exporters of the products con cerned adequate opportunity for consultations
prior to the adoption of the definitive measure. This omission appears to be
inconsistent with Article 12.3 of the Ag reement on Safeguards and Article XIX:2 of
the GATT 1994.
 In addition to the above considerations, Honduras reserves its right to raise other matters that
may arise during the consultations in relation to th e measures at issue and their application under the
Agreement on Safeguards and the GATT 1994.

 In view of the above, I look forward to recei ving your reply to this request as soon as
possible. I propose that the date and venue of these consultations be agreed between our two
Missions.