BRAZIL - MEASURES CONCERNING THE IMPORTATION OF PET FILM FROM PERU AND IMPORTED PRODUCTS IN GENERAL REQUEST FOR CONSULTATIONS BY PERU
Document: REQUEST FOR CONSULTATIONS BY
Date: 15 July 2020
Document codes: WT/DS596/1; G/ADP/D134/1; G/L/1361
Complainant: Peru
Respondent: Brazil
Dispute stage: Consultation
Agreements cited: Art. 1, 2.1, 2.2, 2.2.2, 2.4, 3.1, 3.2, 3.4, 3.5, 5.2, 5.3, 5.8, 6.8, 18.1, Annex II  Anti-dumpingArt. III:2, III:4  GATT 1994

BRAZIL - MEASURES CONCERNING THE IMPORTATION OF PET FILM
FROM PERU AND IMPORTED PRODUCTS IN GENERAL
REQUEST FOR CONSULTATIONS BY PERU
The following communication, dated 10 July 2020, from the delegation of Peru to the delegation of
Brazil, is circulated to the Dispute Settlement Body in accordance with Article 4.4 of the DSU.

Pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU), Article 17 of the Agreement on Implementation of Article VI of the GATT 1994
(Anti-Dumping Agreement) and Article XXII of the General Agreement on Tariffs and Trade 1994
(GATT 1994), the authorities of Peru have instructed me to request consultations with the Federative
Republic of Brazil (Brazil) with respect to specific measures that affect the importation and marketing
in that country of biaxial ly oriented polyethylene terephthalate (PET) film products from Peru and
imported products in general.

These measures consist of definitive anti-dumping duties on the importation of PET film products,
including the various stages of the investigation carried out by the Under -Secretariat of Trade
Defence and Public Interest (SDCOM, the current title of the Department of Trade Defence at the
Secretariat of Foreign Trade), which resulted in the imposition of these measures, as well as the
differential tax treatment granted to imported products in general (including PET film products
specifically), compared with the treatment received by like products of national origin in the context
of the tax replacement scheme applicable to the industrial products tax (IPI).

The grounds for this request for consultations are set out below . Peru hopes to receive specific
explanations from Brazil relating to these grounds with a view to exploring concrete alternative
solutions to this dispute.

I. MEASURES AT ISSUE

The measures at issue are as follows:

• The d efinitive anti-dumping measures imposed pursuant to Ord inance No. 473 of
28 June 2019 of the Special Secretariat of Foreign Trade and International Affairs at the
Ministry of Economic Affairs, published on 1 July 2019 in the Official Gazette of Brazil,
and also the decision to initiate an investigation, cont ained in Circular No. 68 of
29 December 2017, published on 2 January 2018, of the Secretariat of Foreign Trade,
including, but not restricted to , the related supporting documentation , the relevant
determinations, the decisions regarding confidentiality of information, and other aspects
of the investigation linked to the imposition of anti-dumping measures.
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• The practice of the competent authority of Brazil not to require, in conjunction with the
request to initiate the investigation, the presentation of evidence relating to domest ic
sales in the country of o rigin or exportation but ra ther to accept at face value the
information provided by the applicant (including at a wider product level) regarding
exports to third countries or the construction of normal value without undertaking a
critical examination or questioning of that information in such a way as to guarantee its
accuracy and adequacy.1

• The tax treatment of products imported under the Brazilian IPI legislation, set forth in
Article 26 of Decree No. 7.212/2010 ( "IPI Regulations"), Article 35.II and §2 of
Law No. 4.502/64, which provide for a general tax replacement scheme
("Tax Replacement Scheme"), and Article 17 of Normative Instruction No. 1.081 of
2010 of the Brazilian Federal Revenue Department , which expressly prohibits the
application of the special IPI replacement scheme to customs clearance – all these
standards considered individually or in conjunction – in relation to imported products,
including PET film products.

This request is also being made against any other normative and/or administrative act, or practice,
that complements, supplements, amends or replaces the above-mentioned instruments or practice.

II. LEGAL CLAIMS

Peru holds the view that the measures in question appear to be inconsistent with Articles III and VI
of the GATT 1994 and with the Anti-Dumping Agreement for the following reasons:

A. ANTI-DUMPING MEASURES AND INVESTIGATION INTO PET FILM PRODUCTS FROM PERU

The anti -dumping measures relating to imports of PET film products from Peru appear to be
inconsistent with Articles 1 and 18.1 of the Anti -Dumping Agreement and Article VI of the
GATT 1994, given that:

(i) The measures were based on an investigation that was allegedly initiated in a manner
inconsistent with Articles 5.2, 5.3 and 5.8 of the Anti-Dumping Agreement inasmuch as:

• The competent authority initiated the investigation without the application having
sufficient evidence of the existence of dumping, and in particular of the normal value of
domestic sales in the Peruvian market . I t thus accepted without questioning the
information given by the applicant , without explaining the basis for not requiring
evidence of domestic sales in Peru – something that was relevant – and for making use
of the price of exportation to a third country.

• The competent authority did not adequately justify why Colombia was the "appropriate"
third country in that context, or why its price was "representative", especially when in
the same initial determination (regarding PET film products from Bahrain and Thailand)
the "appropriate" nature of the third country was determined on the basis of the
third country that was the destination of the greatest volume of exports. In the light of
this criterion, the export volume from Peru to Colombia was much less, and the export
price significantly higher, than that of exports to other third countries.

1 As examples of this practice, the following should be taken into consideration: the investigation into
alleged dumping in exports of BOPP film to Brazil from Argentina, Chile, China, Ecuador, Peru and the
United States (2009); the investigation into alleged dumping in exports of BOPP film to Brazil from Argentina,
Chile, China, Colombia, India and Peru (2013); and the investigation into alleged dumping in exports of
BOPET film (2015).
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• Moreover, despite its in -depth knowledge of the p roduct in question, the competent
authority did not take into account that the information on normal value contained
information on a product of a greater scope than the product strictly under investigation,
but it nevertheless compared that information with the export price, which was limited
to the product under investigation . The evidence consisted of price information from
TRADEMAP correspond ing to the six -digit tariff heading 3920.622, and not to the
headings on the basis of which the investigation was formally initiated (namely, the
eight-digit headings 3920.62.19, 3920.62.91 and 3920.62.99).

• Furthermore, even though this was not an ex officio investigation, the competent
authority gathered additional information to that submitted by the applicant in order to
supplement the information on the period selected for the dumping investigation and to
be able to make the respective calculations on this basis.

• Despite these evidentiary shortcomings and the explicit questioning of the exporter in
the context of the investigation procedure, the competent authority neither rejected the
application to initiate the investigation nor immediately terminated the investigation.

(ii) The measures were based on a final determination of dumping that appears inconsistent
with Articles 2.1, 2.2, 2.2.2, 2.4, 6.8 and Annex II of the Anti-Dumping Agreement, for the
following reasons:

• The competent authority evaluated the sufficiency of domestic sales on the basis of
codes for subproducts of the product under investigation, and reached the conclusion
that in view of the "insufficiency" of domestic sales in relation to two codes (and also
the non-existence of domestic sales in relation to a third code), use should be made of
the constructed value method for the three indicated codes . The competent authority
did not consider t he totality of the "product under investigation " in the analysis of
sufficiency, which diverges fr om the type of sufficiency analysis provided for in
Article 2.2 of the Anti -Dumping Agreement. Furthermore, Peru also observes that, in
constructing the normal value in relation to specific subproducts, the authority made
incorrect use of this method, which, according to Article 2.2 , is intended to establish
normal value in relation to the product under investigation in its entirety, and not in
relation to specific subproducts or models.

• In carrying out a sufficiency analysis for domestic sales that was limited to certain codes
and rejected domestic sales in relation to two codes on account of "insufficiency", the
competent authority rejected this information without having observed the guarantees
and the circumspection required by Article 6.8 an d Annex II of the
Anti-Dumping Agreement.

(iii) The measures were based on a final determination of material injury, which lacked any
reasoned and adequate explanation and appears to be inconsistent with Articles 3.1, 3.2
and 3.4 of the Anti-Dumping Agreement. In particular, but not exclusively3:

• The competent authority carried out an undercutting analysis on the bas is of unequal
tax conditions relating to the IPI, with different impacts on the prices of domestic and
imported products, and this had a distorting effect on the under cutting analysis, and
therefore appears to be inconsistent with Articles 3.1 and 3.2 of the
Anti-Dumping Agreement.

2 This wider range includes, for example, printed PET film, which by definition has a significantly higher
price and product characteristics different from the product strictly under investigation.
3 Peru reserves the right to raise other questions concerning the analysis of injury under Articles 3.1,
3.2 and 3.4 of the Anti-Dumping Agreement in the context of the consultations with Brazil.
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• Furthermore, the competent authority established the existence of material injury to
the domestic industry without having taken account of the fact th at most economic
indicators in this branch showed favourable performance, even substantial growth . In
addition, there was no adequate appreciation of the evidence in the construction of
capacity utilization indicators, or an adequate appreciation of cost-benefit indicators.
This appears to be inconsistent with Articles 3.1 and 3.4 of the Anti -Dumping
Agreement.

• Moreover, the competent authority made a finding of material injury on the basis of an
incomplete and biased appraisal of the investigation period, comparing P5 with P1 and
P4, without considering the distorting effect of the imposition of other trade defence
measures during those periods. This appears to be inconsistent with Articles 3.1 and
3.4 of the Anti-Dumping Agreement.

(iv) The measures were based on a final causal link determination that appears to be
inconsistent with Articles 3.1 and 3.5 of the Anti -Dumping Agreement because the
competent authority established the existence of a causal link without having an adequate
evidentiary basis. Moreover, it did not analyse or objectively quantify the effect of factors
other than imports that could have caused injury to the domestic industry. In particular,
but not exclusively4:

• To explain the loss of benefits, the competent authority did not attach any importance
to the effect of the imposition of other trade defence measures on the financial situation
of the domestic industry.

• As regards the explanation of the loss of market share, the competent authority did not
evaluate exhaustively the limitations on the production capacity of the domestic industry
to supply the national market (in the light of information from the parent company that
the applicant was operating at "full capacity") and it did not take account of the business
strategy, in which some 40% of production is intended for export.

• The competent authority did not consider that the undercutting margin in P5 was barely
5%, which could not have cause the alleged loss of market share. Nor did it consider
the applicant's decision to significantly increase its prices in P4 contrary to the trends in
the costs of raw materials, owing to the application of anti-dumping duties against other
origins. Lastly, the competent authority did not consider that Peru has tariff preferences
obtained through the Economic Complementarity Agreement between MERCOSUR and
the Government of the Republic of Peru (ACE No. 58), whereby the full 16% tariff does
not have to be applied to Peruvian imports of this kind of film.

(v) The investigation that gave rise to the anti -dumping measure appears to have been
conducted in a manner inconsistent with Articles 6 .5 and 6.5.1 of the
Anti-Dumping Agreement, in that the competent authority: (a) treated as confidential the
information provided by the applicants without showing good cause; (b) failed to require
the applicants to furnish a non -confidential summary thereof; a nd/or (c) where such
summaries were provided, they were not in sufficient detail to permit a reasonable
understanding of the substance of the information submitted in confidence.

(vi) The competen t authority acted in a manner inconsistent with Article 6.9 of the
Anti-Dumping Agreement in not duly notifying certain key facts that formed the basis of
the final determination.

4 Peru reserves the right to raise other questions concerning the analysis of injury under Articles 3.1 and
3.5 of the Anti-Dumping Agreement in the context of the consultations with Brazil.
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(vii) The competent authority did not indicate in sufficient detail the finding s and conclusions
reached on all issues of fact and law considered material by the investigating authority,
and all relevant information on the matters of fact and law and reasons which have led to
the imposition of measures, which is inconsistent with Article 12.2.2 of the
Anti-Dumping Agreement.

B. PRACTICE OF THE COMPETENT AUTHORITY TO INITIATE AN INVESTIGATION WITHOUT
QUESTIONING THE NORMAL VALUE INFORMATION PROVIDED BY THE APPLICANT TO GUARANTEE
ITS ACCURACY AND ADEQUACY

The apparent ongoing practice of the competent authority not to require , in connection with the
request to initiate an investigation, the submission of evidence relating to domestic sales in the
country of origin or exportation , and instead to accept information at face value on
non-representative prices from an inappropriate third country, despite specific information on the
product under investigation being available to the applicant, is contrary to Articles 2.1, 2.4, 5.2 and
5.3 of the Anti-Dumping Agreement.

C. DIFFERENTIAL TAX TREATMENT OF PRODUCTS IMPORTED IN THE CONTEXT OF THE IPI

The tax treatment established under the Brazilian IPI legislation – set forth in Article 26 of
Decree No. 7.212/2010 ("IPI Regulations"), Article 35.II and §2 of Act No. 4.502/64, and Article 17
of Normative Instruction No. 1.081 of 2010 of the Brazilian Federal Revenue Department (all these
standards considered individually or in conjunction ) – accorded in the context of IPI taxation to
imported products in general, including PET products specifically , appears to be inconsistent with
Articles III:2, first and second sentences, and III:4 of the GATT 1994 on the following grounds:

(i) With regard to Article III:2, first and second sentences, of the GATT 1994, the prohibition
of Article 17 of Normative Instruction No. 1.081 of 2010 of the Brazilian Federal Revenue
Department applicable to the tax replacement scheme for imports appears to result in a
greater financial burden for imported products (including PET f ilm products ) by
comparison with like products of national origin . The purchaser of imported products
must make the IPI payment at the time of importation . However, the same purchaser
(if authorized under the special tax replacement scheme) would not have to make the
same payment if purchasing a like product of national origin.

(ii) With regard to Article III:4 of the GATT 1994, the prohibition of Article 17 of Normative
Instruction No. 1.081 of 2010 of the Brazilian Federal Revenue Department applicable
to the tax replacement scheme for imports appears to result in less favourable treatment
for imported products (including PET film products) by comparison with like products of
national origin . This unequal treatment would affect conditions of competition to the
detriment of imported products.

The Government of Peru considers in any case that the measures in question would have eliminated
or undermined advantages resulting from the application of the GATT 1994 or would have
compromised the fulfilment of the objectives of that Agreement.

It also observes that these consultations might give rise to other matters of fact or having legal
implications that are not expressly stated in this request but relate to other obligations of Brazil
under the WTO Agreement , in particular obligations relating to the administration in a uniform,
impartial and reasonable manner of measures that affect international trade in goods , as set forth
in Article X:3(a) of the GATT 1994. With a view to facilitating a wide-ranging exchange of views, it
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should be understood that, if such were to be the case, these matters would also be covered by the
scope of this request for consultations.

The Government of Peru looks forward to receiving a reply to this request for consultations . The
Peruvian diplomatic mission will in due course contact the Permanent Mission of Brazil with a view
to liaising on the case in order to hold the consultations.