MEXICO – DEFINITIVE COUNTERV AILING MEASURES ON OLIVE OIL FROM THE EUROPEAN COMMUNITIES
Document: Report of the Panel
Date: 4 September 2008
Document codes: WT/DS341/R
Complainant: EU
Respondent: Mexico
Third parties: Canada, China, Japan, Norway, U.S.
Dispute stage: Panel
Agreements cited: Art. VI  GATT 1994Art. 1, 11, 12, 13, 14, 15, 16, 22  Subsidies and Countervailing Measures (SCM)Art. 13, 21.1  Agriculture

MEXICO – DEFINITIVE COUNTERV AILING
MEASURES ON OLIVE OIL FROM THE
EUROPEAN COMMUNITIES

Report of the Panel

I. INTRODUCTION
A.
COMPLAINT OF THE EUROPEAN COMMUNITIES
1.1 On 31 March 2006, the European Communities (" the EC") requested consultations with
Mexico pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the " DSU"), Article XXIII of the General Agreement on Tariffs and Trade
1994 ("GATT 1994"), Article 30 of the Agreement on Subsidies and Countervailing Measures ("SCM
Agreement") and Article 19 of the Agreement on Agriculture . The consultations concerned the
definitive countervailing measures imposed by Mexi co on imports of olive oil from the European
Communities by the "Final Resolution in the investig ation of price subsidization of imports of olive
oil" published in the Official Journal of the United Mexican States ("Official Journal") on
1 August 2005.1 The European Communities and Mexico he ld consultations on 5 May 2006. These
consultations failed to resolve the dispute.
1.2 On 7 December 2006, the European Communitie s requested the establishment of a panel
pursuant to Articles 4.7 and 6.2 of the DSU, Article XXIII of the GATT 1994, Articles 4 and 30 of the
SCM Agreement, and Article 19 of the Agreement on Agriculture.2
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL
1.3 At its meeting on 23 January 2007, the Di spute Settlement Body ("DSB") established the
Panel pursuant to the request of the European Communities in document , in accordance
with Article 6 of the DSU. At that meeting, the parties to the dispute also agreed that the Panel should
have standard terms of reference. The terms of reference are, therefore, the following:
To examine, in the light of the relevant pr ovisions of the covered agreements cited by
the European Communities in document WT/DS341/2, the matter referred to the DSB
by the European Communities in that docum ent, and to make such findings as will
assist the DSB in making the recommendations or in giving the rulings provided for
in those agreements.
1.4 On 13 February 2007, the European Commun ities requested the Director-General to
determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. On
21 February 2007, the Director-General composed the Panel as follows:
Chair: Ms Debra Steger
Members: Mr. Jan Heukelman
 Ms Gloria Peña

1.5 Canada, China, Japan, Norway, and the United Stat es have reserved their rights to participate
in the Panel proceedings as third parties.
3
1.6 The Panel met with the parties on 26-27 June 2 007 and 3-4 October 2007, and with the third
parties on 26 June 2007.

1 WT/DS341/1.
2 WT/DS341/2.
3 WT/DS341/3.

II. FACTUAL ASPECTS
2.1 This dispute concerns the imposition by Mexico of countervailing duties on imports of olive
oil from the European Communities.
2.2 On 12 March 2003, the Mexican company Fortuny de México, SA de CV ("Fortuny"), filed
an application for the imposition of countervailing du ties on olive oil originating in the European
Communities (mainly from Spain and Italy). Fortun y's application alleged that during the period
April-December 2002, subsidized imports of virg in and refined olive oil from the European
Communities materially retarded the establishmen t of a domestic industry producing identical or
similar products.
4
2.3 On 2 July 2003, the Minister of Economy si gned a resolution accepting the application and
initiating the investigation.
2.4 On 4 July 2003, Mexico invited the Europ ean Communities to consultations pursuant to
Article 13.1 of the SCM Agreement .5 On 11 July 2003, the Eur opean Communities sent a letter
accepting the invitation.6 The consultations took place in Mexico City on 17 July 2003.7
2.5 The Initiation Resolution was published in th e Official Journal on 16 July 2003. 8 T h e
investigation covered virgin olive oil, including the categories of extra virgin, fine virgin and ordinary
virgin; refined, including first-class refined and second-class refined; and blended oil, including first-
class blends and second-class blends. These goods were classified in tariff sub-headings 1509.10.01,
1509.10.99, 1509.90.01, 1509.90.02 and 1509.90.99 of the Mexican Tariff Schedule.9
2.6 The investigation covered the period April-December 2002 10 ("Period of Investigation" or
"POI"). The examination of "trends" in the context of the injury analysis covered the periods 1 April-
31 December of 2000, 2001 and 2002 11 ("Injury Investigation Period" or "Injury POI").
2.7 During the course of the investigation, there were numerous communications and exchanges,
including questionnaires, comments and submissions between the Mexican investigating authority,
the Ministry of Economy ("Economía") and the parties to the investigation: Fortuny, the European
Commission, the governments of the exporting EC Me mber States, importers, and exporters. Mexico
and the European Communities also held consultations on 17 November 2003 and
2 December 2004.12
2.8 On 10 June 2004, Economía published the Prelimin ary Resolution in the Official Journal.
The Resolution continued the investigation and imposed provisional countervailing duties on a per
kilogram basis. To determine the specific amount payable on each shipment, the maximum duty

4 Exhibit EC-13, para. 2.
5 Exhibit EC-22, para. 22.
6 Exhibit EC-14.
7 Exhibit EC-22, para. 23.
8 Exhibit EC-13.
9 The Initiation Resolution (Exhibit EC-13) refers to tariff sub-headings 1509.10.99 and 1509.90.02.
Subheadings 1509.10.01, 1509.90.01 and 1509.99.00 were added in the Preliminary Resolution (Exhibit EC-22,
paras. 6-20) and maintained in the Final Resolution (Exhibit EC-1, paras. 15-24).
10 Exhibit EC-1, para. 3.
11 Ibid.
12 Ibid., para. 65.

payable in respect of the individual exporter, calculated on an ad valorem basis, was added to the
customs value of the shipment, up to a maximum per kilogram reference price.13
2.9 On 1 August 2005, Mexico published the Final R esolution in the Official Journal, which
imposed definitive countervailing duties. Individua l rates of countervailing duties were imposed on
imports from eight Spanish and Italian olive oil ex porters and on "all other imports" from the EC.
The per exporter duty amounts, calculated on a per k ilogram basis, were added to the customs value
of the imports, up to a maximum per kilogram reference price.14
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. THE EUROPEAN COMMUNITIES
3.1 The European Communities request s the Panel to find that the initiation and conduct of the
investigation by Economía, as well as the impositi on of the definitive countervailing measures are
inconsistent with Mexico's obligations under, inter alia, Article VI of the GATT 1994, Articles 1, 11,
12, 13, 14, 15, 16 and 22 of the SCM Agreement and Articles 13 and 21 of the Agreement on
Agriculture. In particular, the European Communities in its request for establishment of the panel
requests the Panel find that Mexico violated:15
1. Articles 11.4 and 16 of the SCM Agreement by initiating the investigation in the absence a
determination that the application was made by or on behalf of the domestic industry;

2. Article 11.11 of the SCM Agreement by failing to conclude the investigation within one year,
and in no case more than 18 months, after its initiation;

3. Article 12.4.1 of the SCM Agreement by failing to require intere sted parties to provide non-
confidential summaries of confidential informati on in sufficient detail to permit a reasonable
understanding of the substance of the information;

4. Articles 12.8, 22.3, and 22.5 16 of the SCM Agreement by failing to properly inform the
interested parties and to a provide reasonable and adequate explanati on of the existence of
subsidisation, notably as regards pass-through of any benefit;

5. Article 13.1 of the SCM Agreement by failing to grant an oppor tunity for consultations
before the initiation of the investigation with th e aim of clarifying the situation as to matters
referred to in Article 11.2 of the SCM Agreement and arriving at a mutually agreed solution;

6. Articles 1.1 and 14 of the SCM Agreement by failing to calculate the benefit conferred on the
recipient pursuant to Article 1.1 of the SCM Agreement and to apply the method used to each
particular case in a transparent way which is adequately explained as required by Article 14
of the SCM Agreement;

7. Article VI:6 of the GATT 1994 and Articles 15.4, 15.5 and 16 of the SCM Agreement by
failing to correctly define the domestic industry;

13 Exhibit EC-22, paras. 346-360.
14 Exhibit EC-1, paras. 446-454.
15 WT/DS341/2.
16 In its First Written Submission, the European Communities alleges a violation only of Article 12.8,
and not Articles 22.3 or 22.5, of the SCM Agreement.

8. Article VI:6 of the GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement by failing
to make a determination of injury based on pos itive evidence involving an examination of all
relevant economic factors and indices having a bearing on the state of the industry and to
provide reasoned and adequate explanation;

9. Article 15.5 of the SCM Agreement by failing to examine any known factors other than the
allegedly subsidized imports which were causing injury to the domestic industry; and

10. Articles 13(b)(i) and 21.1 of the Agreement on Agriculture by initiating a countervailing duty
investigation on imports of an agricultural product (olive oil) outside the circumstances
contemplated in Article 13(b)(i) of the Agreement on Agriculture and in violation of
Article 21.1
17 of the Agreement on Agriculture.

3.2 The European Communities requests that the Pa nel, in accordance with Article 19.1 of the
DSU and WTO practice, recommend the Dispute Settlements Body to request that Mexico bring its
measure into conformity with the cited Agreements ; and, in the light of its authority pursuant to
Article 19.1 of the DSU, that the Panel accompany this recomme ndation with a suggestion to Mexico
that a complete repeal of the measure against EC olive oil would be the most appropriate and/or
effective way of bringing the measure into conformity.18
B. MEXICO
3.3 Mexico requests the Panel to reject all of the claims and arguments raised by the European
Communities in the proceeding. In particular, Mexico requests that the Panel find:
1. with regard to initiation, that Mexico acted in a manner consistent with Articles 11.4 and
16.1 of the SCM Agreement because Economía properly determined, based on sufficient facts
in the application, that Fortuny was the sole domestic producer and was representative of the
Mexican domestic industry19;

2. with regard to the duration of the investigati on, that Mexico acted consistently with the
provisions of Article 11.11 of the SCM Agreement because although the investigation lasted
more than 18 months, there were "exceptiona l circumstances": the delays resulted from
Economía's acceptance of requests for extensions by interested exporters, so the rights of
interested parties were not adversely affected20;

3. with regard to the non-confidential summaries of confidential information, that Mexico acted
in a manner consistent with Article 12.4.1 of the SCM Agreement because there were
sufficiently detailed public summaries of a ll confidential information, and because of
Mexico's regime for access to the confidential information on the record21;

4. with regard to the disclosure of the essential f acts that served as a basis for the decision to
apply definitive measures, that Mexico acted in a manner consistent with Article 12.8 of the
SCM Agreement because interested parties may be informed of the essential facts in a
number of ways. The essential facts were discl osed in the Preliminary Resolution, which

17 In its First Written Submission, the European Communities alleges a violation only of
Article 13(b)(i), and not Article 21.1, of the Agreement on Agriculture.
18 European Communities - First Written Submission, paras. 229-230.
19 Mexico - First Written Submission, paras. 19, 34 and 43-44.
20 Ibid., paras. 99, 105-106.
21 Ibid., paras. 80-90.

described in detail the treatment of informa tion, arguments and evidence furnished by the
parties, and the reasons for information having been taken into account or rejected22;

5. with regard to the invitation fo r consultations prior to initiation of the investigation, that
Mexico acted consistently with Article 13.1 of the SCM Agreement because Economía
invited the European Communities for consultations prior to the date of initiation23;

6. with regard to the alleged failure to calculate the benefit conferred on the recipient pursuant
to Article 1.1 of the SCM Agreement and to apply the method used to each particular case in
a transparent way which is adequately expl ained, in violation of Article 14 of the SCM
Agreement, that: (a) there is no provision in the SCM Agreement to indicate that a "pass-
through" analysis is required, (b) as Econom ía correctly found that the subsidy was
contingent on the production of olive oil, ther e was no need to analyze the transfer of the
subsidy from olive growers to the producers of the olive oil; and (c) the methodology to
calculate the subsidy margin used by Economía was correct
24;

7. with regard to Economía's definition of the domest ic industry, that Mexico acted consistently
with Article 16 of the SCM Agreement and did not violate Article VI:6 of the GATT 1994,
because the European Communities failed to present a prima facie case of violation; and that,
in any case, Economía made an exhaustive examin ation of all matters that might have been
relevant to the evaluation of injury to the domestic industry and all the evidence reviewed
pointed to the conclusion that the domestic industry was composed of Fortuny25;

8. with regard to Economía's dete rmination of injury, that Ec onomía undertook its analysis of
injury consistently with Article 15.1 and 15.4 of the SCM Agreement , and did not violate
Article VI:6 of the GATT 1994, because Economía complied with Article 15.1 and 15.2 of
the SCM Agreement by undertaking an objective examination based on positive evidence of
the effect of the subsidized imports on prices, and Economía did examine all of the relevant
factors listed in Article 15.4 of the SCM Agreement in its examination of the impact of the
subsidized imports on the domestic industry
26;

9. with regard to Economía's consideration of "other known factors", that the European
Communities has failed to present a prima facie case and that, in any event, Economía
properly considered, as required by Article 15.5 of the SCM Agreement, any known factors,
other than the allegedly subsidized imports , which were causing injury to the domestic
industry
27; and

10. with regard to the investigation on imports of an agricultural product outside the
circumstances contemplated in Article 13(b)(i) of the Agreement on Agriculture , that the
European Communities has not presented a prima facie case and, in any event, that
Economía exercised due restraint in the initiation of the investigation; that the obligation to
show "due restraint" did not apply to any acti on in the investigation other than the initiation,
and that the obligations contained in Article 13(b)(i) only applied to the initiation and not to
any other aspects of the investigation on olive oil given that the Article expired on
31 December 2003 and thus was not applicable after the initiation of the investigation.28

22 Ibid., paras. 93 and 94.
23 Ibid., paras. 2-12.
24 Ibid., paras. 116,120-123 and 130.
25 Ibid., paras. 157-158, 203-204.
26 Ibid., paras. 249-276.
27 Ibid., paras. 281 and 295.
28 Ibid., paras. 48-49, 60-62 and 66, 74.

IV. ARGUMENTS OF THE PARTIES
4.1 The arguments of the parties, as set forth in the executive summaries of their submissions
provided to the Panel, are attached to this Repor t in Annexes A, C and D (see List of Annexes,
pages iv-v).

V. ARGUMENTS OF THE THIRD PARTIES
5.1 The arguments of the third parties – Canada , China, Japan, Norway, and the United States –
as set forth in the executive summaries of their submissions provided to the Panel, are attached to this
Report in Annex B (see List of Annexes, pages iv-v).

VI. INTERIM REVIEW
6.1 Pursuant to Article 15.3 of the DSU, the findi ngs of the final panel report shall include a
discussion of the arguments made by the parties at the interim review stage. This section of the Panel
report provides such a discussion. As is clear from Article 15.3, this Section is part of the Panel's
findings.
6.2 The European Communities requested that we make a number of technical and substantive
changes to the interim report. These are described in Section B, infra. Mexico informed us that it had
no comments on the interim report. Mexico's react ions to the requests of the European Communities
are described in section B, infra.
29
6.3 The Panel issued its final report to the parties on a confidential basis on 26 August 2008.
A. TECHNICAL CORRECTIONS AND ADJUSTMENTS
6.4 We have made certain technical corrections and adjustments, including on the basis of
requests from the European Communities as referred to in section B, infra.
B. REQUESTS FROM THE EUROPEAN COMMUNITIES
6.5 With regard to paragraph 3.1, point 1, the Eu ropean Communities requests that we adjust the
drafting to better reflect the wording of this claim as set forth in the Request for Establishment of a
Panel. Mexico makes no comment on this request. We have made the requested adjustment.
6.6 With regard to paragraphs 4.1 and 5.1, the European Communities requests that we attach in
full all answers to questions from the Panel, and comments thereon, on the basis that these answers
and comments contain arguments that are importa nt to understand the case. Mexico makes no
comment on this request. We have not acceded to the request of the European Communities because
we consider it unnecessary given that we have quoted in extenso in the body of the report those
answers to which we refer in our findings. Our decision not to annex the full questions and answers
also is in the interest of conserving resources. As noted by the European Communities, these
questions and answers are part of the record of th e Panel proceeding and continue to be so regardless
of whether they are annexed to the report of the Panel.

29 We note that in their comments the European Communities and Mexico referred to the paragraph and
footnote numbers as they existed in the Interim Report. However, some of these numbers have changed as a
result to edits we have made in response to the interim comments. To assist in understanding the Interim
Review as well as the Findings we have used the paragraph and footnote numbers as they currently exist in
referring to the European Communities’ and Mexico’s comments on the Interim Report.

6.7 The European Communities request s that in paragraph 7.17 we add a new second sentence
including the dates it received the invitation for consultations and the timing of the fixing of the date
for consultations to more fully reflect its argument s as they were submitted to the Panel. Mexico
makes no comment on this request. We have not made the requested additions. We note that the
European Communities did provide additional chr onological information in response to Panel
question 101, however, the European Communities di d not provide any legal arguments with respect
to these dates in its written submissions or oral statements before us.
6.8 In respect of paragraph 7.31, second sentence, the European Communities requests that we
change our factual finding regarding the date of in itiation of the investigation from 17 July 2003, to
16 July 2003, on the basis that Mexico acknowledges th is date in certain of its submissions. Mexico
disagrees with this comment, stating that 17 July 2003 is the correct date of initiation, as referred to in
the interim report, and as indicated in Mexico's Second written submission. We have not made the
requested change, as our finding is based on our read ing of the relevant legi slation of Mexico. We
note as well that the European Communities, in subm issions before us, identified 17 July 2003 as the
date on which the initiation resolution came into effect. (See, e.g., European Communities – First oral
statement, para. 17; Second oral statement, para. 5.) Finally, as noted, in its reactions to the interim
review request of the European Communities, Mexico confirms the date of 17 July 2003 as the correct
date.
6.9 The European Communities requests that we replace "a bona fide one" in the penultimate
sentence of paragraph 7.35 with "a bona fides one" or "made in bona fide" . Mexico submits no
comment on this request. We have changed the reference to refer to "bona fides".
6.10 The European Communities requests that we de lete paragraphs 7.37 and 7.38, because its
arguments "are not limited to the aim (obj ect and purpose) of Article 13.1 of the SCM Agreement",
arguing that it also submitted arguments relating to th e context of that provision. Mexico submits no
comment regarding this request. We have not accepted this request, as we consider that the report
makes clear that we understood the European Comm unities to be making a textual argument based on
the language pertaining to the "aim" of the cons ultations, not only an argument based on the "aim"
(object and purpose) of Article 13.1. Additio nally, we address the European Communities other
arguments in the subsequent paragraphs. We ha ve introduced certain drafting changes to these
paragraphs to further clarify this point.
6.11 The European Communities further submits that pa ragraph 7.38 contains a denial of implicit
obligations under the WTO agreements as well as a denial of the concept of implicit obligations per
se. Mexico disagrees with this request, as in its view the paragraph in question does not deny the
existence of implicit obligations as such, but rather states that in the specific case it is not possible to
conclude that Article 13.1 of the Agreement contains the specific implicit obligation to hold
consultations asserted by the European Communities. We have introduced certain drafting changes to
this paragraph to clarify this point.
6.12 The European Communities requests that in para graph 7.42, last sentence, we replace the
term "4 July, the date of the invitation to consu ltations" with "8 July, the date of reception by the
European Communities of the invitation by Mexico to hold consultations, which was issued by
Mexico on 4 July", as "nobody is really invited be fore receiving the invitation". Mexico disagrees,
stating that even if one cannot consider oneself invited until an invitation is received, the obligation on
the importing Member cannot go to such an extrem e, as this would imply that Mexico had the
obligation to ensure that the specific office of the European Communities in charge of this matter in
fact received the invitation. Mexico also submits that the issue under dispute is whether the obligation
is to invite for consultations or to invite and hold consultations. We have not made the change
requested by the European Communities. We consid er that this does not reflect the arguments as
presented by the European Communities, which consis tently refer to the date on which the invitation

to consultations was sent (4 July 2003) ( see, e.g., European Communities – First written submission,
para. 87), and which focus on whether Mexico was oblig ed to hold consultations, or at least issue the
invitation in time that consultations could be held, before initiation.
6.13 Also concerning paragraph 7.42, the European Communities requests that in the last sentence
we change the reference from "17 July 2003" to "16 July 2003". Mexico disagrees, for the reasons as
outline in paragraph 6.8, supra, and we have declined to make the requested change for the same
reasons.
6.14 In respect of paragraph 7.58, the European Communities requests that we delete the term
"specifically", on the grounds that Mexico neve r disputed the conformity of the European
Communities domestic support measures with Article 6 of the Agreement on Agriculture . Mexico
submits no comment on this request. We have no t made the requested change, we believe the
language adequately reflects Mexico 's representations to the Panel with respect to this issue.
However, in light of the European Communities' request that we delete the term "apparent" in
paragraph 7.59, we have made certain drafting cha nges in that paragraph which we believe further
clarify the position Mexico took on the applicability of Article 13(b)(i) of the Agreement on
Agriculture during the conduct of the olive oil investigation.
6.15 With respect to paragraph 7.59, the European Communities also requests that we delete the
last sentence of this paragraph because it is redundant with what is already stated in paragraph 7.56.
Mexico submits no comment on this request. We ha ve not made the requested deletion, because we
consider that the reference in paragraph 7.59, whic h concludes a sub-section of our reasoning, is more
specific than the earlier reference which summarized the three steps that woul d be analyzed in the
following sub-sections, and is necessary for our reasoning in the sub-section to be complete.
6.16 Regarding paragraphs 7.61 through 7.64, the European Communities requests that we change
our findings and conclusions in respect of the Eu ropean Communities' claim under Article 13(b)(i) of
the Agreement on Agriculture . First, the European Communities argues, the language of the Peace
Clause refers to "injury or threat th ereof", and because footnote 45 of the SCM Agreement does not
foresee threat of material retardation, the reference to "injury" in the Peace Clause must refer only to
material injury (i.e., not to all the forms of injury referred to in footnote 45 of the SCM Agreement).
Second, according to the European Communities, if the obligation not to apply duties in the case of
material retardation does not extend to initiation, the result would be "absurd", in that an investigating
authority would be entitled to initiate on the basis of a form of injury in respect of which a duty could
not be imposed. Third, the European Commun ities submits, the Panel's remark that Economía
initiated the investigation on the basis of "injury" in the broad sense, would allow any investigating
authority to circumvent the application of the first clause of Article 13(b)(i) of the Agreement on
Agriculture, which runs counter to the principle of effective treaty interpretation. Fourth, the
European Communities considers that Economía's imposition of provisional and final measures on the
basis of material injury is irrelevant for the ai m of assessing the validity of the initiation. Mexico
disagrees with this request, because it does not believe that there is a problem in initiating on the basis
of injury in the general sense, especially where as in the present case the form of injury was not
completely clear at the outset. Mexico argues that to presume that the investigating authority has to
know before the investigation is initiated which form of injury h as to be investigated would be
equivalent to asking it to have evidence of the quant ity and quality sufficient for issuing a preliminary
or final determination. We have not accepted th e request from the European Communities to change
our findings in respect of this claim. We be lieve that the reasoning in the Report sufficiently
addresses the arguments of the European Communities.
6.17 Also in respect of paragraph 7.64, the Eur opean Communities requests, in case we do not
agree with its request described in the preceding paragraph, that we rephrase our finding to say that
"the EC has not established that Mexico acted inconsis tently with the first clause of Article 13(b)(i) of

the Agreement on Agriculture ", i.e., the same wording as in our conclusions in Section VIII of the
report. Mexico submits no comment on this request . We have changed the wording in paragraph
7.64 to reflect the wording in our conclusions in Section VIII.
6.18 Concerning paragraphs 7.72 to 7.80, the Europ ean Communities considers that our finding is
that in order to comply with the Peace Clause in the Agreement on Agriculture , it is enough to abide
by the legal requirements of the relevant provisions in the SCM Agreement, which interpretation gives
no added value to the Peace Clause and therefore is contrary to the principle of effective treaty
interpretation. The European Communities asks us, accordingly, to redraft our arguments and find
that Mexico acted inconsistently with Article 13(b)(i) of the Agreement on Agriculture . Mexico
submits no comment on this request. We disagree with the European Comm unities' characterization
of our finding. As set forth in paragraph 7.72, having ruled against the claim of the European
Communities under Article 13.1 of the SCM Agreement regarding the timing of the invitation to
consultations, we do not find that that same timing constitutes evidence of "haste" in the sense of
Article 13(b)(i) of the Agreement on Agriculture such that it would support a conclusion that Mexico
acted without due restraint in its initiation of the olive oil investigation.
6.19 Regarding footnote 112, the European Communitie s requests that we check the reference to
Mexico's exhibit cited in that footnote. Mexi co submits no comment on this request. We have
corrected the reference.
6.20 At the suggestion of the European Communiti es, we have corrected the punctuation in
paragraph 7.75.
6.21 Regarding paragraph 7.115, the European Communities contests the accuracy of our
statement that it was only in response to a dir ect question from the Panel that the European
Communities identified specific "essential facts". In this regard, the European Communities cites its
arguments in paragraphs 34 to 37 of its Second written submission. Mexico disagrees with this
request as in its view the European Communiti es has not identified any essential fact that was
dismissed by the investigating authority in its analys is, but rather has only made general statements in
which it indicated that it was difficult to imagine th at in certain procedural steps no essential fact had
been obtained. We note that paragraphs 34 to 37 of the European Communities Second written
submission were quoted in paragraph 7.111 (previ ously part of paragraph 7.110) and cited in
footnote 141 to that paragraph. We have adde d additional citations to more fully reflect the
arguments made by the European Communities in t hose paragraphs of its second written submission.
We have also modified paragraph 7.115 to clarif y our presentation of the arguments of the European
Communities.
6.22 In respect of footnote 175, the European Comm unities requests that we add to the description
of the Appellate Body finding in Softwood Lumber IV that that finding was limited to aggregated
investigations, and that a pass-through analysis might be required in determining individual
countervailing duty rates through a review procedure. Mexico makes no comment on this request.
We have not modified the drafting of our report, a nd note in this regard that paragraph 7.168 of the
report addresses the question of input products as it arose in the olive oil investigation.
6.23 Concerning paragraphs 7.145 th rough 7.154, the European Communities requests that we
merge sections VII.G.2(a)(ii) and (iii), because in its view we inappropriately analyzed its claims
under Articles 1 and 14 as separately claims. The European Communities asserts that it "never
presented two separate claims", but rather that its claim was that Economía violated both articles,
taken together, and that it had explained during th e proceedings that the question was whether the
olive oil imported into Mexico was a subsidized im port, and for that purpose, it was necessary for the
investigating authority to establish and explain ad equately a connection between the original subsidy
and the imported product, and that such a determinat ion has to be evaluated by applying both articles

at the same time. Mexico disagrees that the inte rim report specifies that there were two distinct
claims, and considers that the differentiation w as made only for purposes of the Panel's analysis,
noting that paragraph 7.148 of the report recognizes that there is a single argument: "The European
Communities declined to elaborate further its legal arguments regarding how, precisely, Articles 1 and
14 in themselves require a pass-through analysis, in spite of our specific invitations at both the first
and second meetings with the Panel to do so." We have not made the requested change as we
disagree with the European Commun ities' characterization of our findings. First, as Mexico points
out, we considered jointly the European Commun ities' arguments regarding the alleged obligation
under Articles 1 and 14 to conduct a pass-through analys is, in paragraphs 7.14 7 and 7.148. Second,
however, we note that the European Communities itself in presenting its arguments referred to distinct
obligations in Articles 1 and 14 of the SCM Agreement, starting with its Request for Establishment of
a Panel which reads, in relevant part:
"the failure to calculate the be nefit conferred on the recipient
pursuant to paragraph 1 of Article 1 of the SCM Agreement and to
apply the method used to each partic ular case in a transparent way
which is adequately explained, in violation of Article 14 of the
SCM Agreement;"
Furthermore, we asked specific questions to the European Communities as to the nature of its claim
under Article 14, and have described this exchan ge in paragraph 7.168 and footnote 196. The
European Communities made no objection to our questi on on the grounds that it imperfectly reflected
the nature of its claim. Finally, as a practical matter, in order to assess the merits of this claim, we had
no choice but to analyze the provisions separately to see whether either one contains an obligation to
conduct a pass-through analysis.

6.24 Also concerning paragraph 7.145, the Europ ean Communities requests that we delete the
phrase "For reasons not clear to us, and" from the beginning of the first sentence, as it considers that it
has submitted and explained to the Panel the lega l reasons why it decided to base its claim on
Articles 1 and 14 of the SCM Agreement. Mexico submits no comment on this request. We have not
accepted this request, as the language in question is a statement of the perspective of the Panel.
6.25 The European Communities objects to our refere nce in footnote 203 to a lack of factual
evidence, and refers to its reply to Panel question 45 in this respect. Mexico considers that the fact
that the European Communities "lis ted" its evidence in this regard does not imply that it presented
factual evidence, and notes that the Panel referred to this when it signalled that only arguments and
not evidence were submitted. We have not accep ted the request of the European Communities.
Footnote 203 indicates that the replies provided by certain interested parties to information requests
from Economía consisted of argumenta tion, rather than factual information. We have introduced
certain drafting clarifications to this footnote.
6.26 Regarding paragraph 7.171, the European Communities objects to our finding nothing
"unclear" about the explanation provided by Economía regarding the issue raised in the investigation
that certain olive oil exported from the European Communities to Mexico was not of European origin.
The European Communities states that it never alleged a lack of clarity. It also argues that we did not
take into account the fact that during the investig ation, the European Commission submitted certain
evidence related to this point, referred to in paragr aph 41(a) of the Final Resolution. Mexico submits
no comment on this request. We have introduced certain drafting changes into this paragraph to more
fully reflect the arguments of the European Communities.
6.27
 The European Communities argues that paragraphs 7.193 to 7.196 should be deleted. The
European Communities considers that US – Lamb is not relevant precedent for this case, given that
the issues were distinct from those before us, a nd further that because that was a safeguards case,

there was no issue as to the subsidy POI, but rather a single period for injury and imports. Mexico
submits no comment on this request. We have not made the requested change, as we consider that our
findings are clear in explaining our reasons for looking at the reasoning in that case, while recognizing
the differences in the nature of the two disputes and the fact that they concern two different
Agreements.
6.28 The European Communities suggests deleting footno te 237, or at least its first three lines,
because it addresses Article 15.2, while the statements and submissions of the European Communities
that are referenced do not concern that provision. The European Communities also considers that this
footnote conflicts with our exercise of judicial economy in respect of its claims under Articles 15.1
and 15.4. Mexico disagrees with this request, comme nting that the drafting in the interim report is
fully clear and adequate, and that the points refe rred to by the European Communities are related to
one another, such that the Panel's statement appears pertinent We have introduced some drafting
changes to clarify that the references to Article 15. 2 are by way of context in interpreting the term
"domestic industry", rather than on the basis of a claim or argument of th e European Communities.
With respect to our findings under Articles 15.1 a nd 15.4, we have made some drafting changes in
footnote 375.
6.29 Concerning paragraph 7.202, second sentence, th e European Communities considers that the
report misrepresents its arguments, because it did not argue that output is cumulatively required both
at the time of initiation and during the subsidy PO I. The European Communities requests that this
paragraph and paragraph 7. 181 be amended to take this into account. Mexico disagrees with this
request, stating that the distinction drawn by th e European Communities has no meaning. Mexico
recalls the reply of the European Communities to Panel question 102, which refers to data for a
particular period of time, as well as to "having curr ent output ... at all stages of the procedure,
including at initiation". We note that the European Communities' written submissions, particularly its
answers to Panel Questions 13,102, and 143 and its comment on Mexico's answer to 105 support our
conclusion that the European Communities is making an argument about output being required at the
time of application. Additionally, in its argume nts on Article VI and 16 the European Communities
refers to a necessity for production during the subs idy period of investigation. The European
Communities never stated that it was making these ar guments in the alternative. Therefore, we
concluded that these were "cumulative" arguments , i.e., that the European Communities was arguing
that production is required both at (o r near) the time of application and during the subsidy POI . We
have. however, modified the drafting of these paragrap hs to clarify how the two issues were raised in
the submissions of the European Communities.
6.30 Also concerning paragraph 7.202, the European Communities states that it "considers that
seasonal industries will produce by definition 'at some point' within one year and the subsidy POI
shall cover that period in order to allow the estab lishment of causal link. Similar arguments may be
used for industries producing goods on a 'just in time' or made-to-order basis or shutting down for
maintenance or upgrading." The European Comm unities therefore requests us to delete any
references to industries of this kind as examples of industries that would be disqualified under the EC
interpretation from being counted as domestic indus tries in countervailing duty investigations.
Mexico submits no comment on this request. We have not made the requested change. First, the
European Communities did not present this argument to us during the dispute. Second, the statement,
to which the European Communities objects, reflects our interpretation and re asoning concerning the
implications of the argument that a producer must have "output" at certain times in an investigation in
order to be considered a “domestic industry” within the meaning of Article 16.1 of the SCM
Agreement.
6.31 The European Communities request s that we correct the reference in footnotes 238 and 247
from "Panel question 14" to "Panel question 13". Mexico disagrees, indicatin g that the reference to

Panel question 14 is correct. We have reviewed the responses in question and made the requested
correction.
6.32 Also regarding footnote 238, the European Co mmunities requests that we insert at the end of
the footnote the phrase: ", because the Panel is not faced with a borderline issue, [because] Fortuny
has ceased production a whole year before its app lication was initiated, [and] it was clearly not
producing", to reflect its reply to Panel question 13 and its comments on Mexico's reply to Panel
question 105. Mexico submits no comment on this request. We have introduced certain drafting
changes to this footnote inter alia to more fully reflect these arguments of the European Communities.
6.33 The European Communities considers that paragr aph 7.203, first sentence misrepresents its
arguments when it states that "an industry may be so badly injured by subsidised imports as to be
forced to cease production for some period, but under the European Communities' interpretation, it
would be disqualified from obtaini ng the very remedy aimed at addressing such injury." The
European Communities maintains that all through these proceedings it has explained that the
complainant must have been producing at least at some point during the period preceding the lodging
of an application (arguably, the subsidy POI), re ferring here to its reply to Panel question 102.
Mexico submits no comment on this request. We have introduced certain drafting changes to
footnote 221 to more fully reflect the arguments of the European Communities. We also have
modified the drafting in paragraph 7.203 to clarify that the statement to which the European
Communities objects is our view as to the implications of its arguments.
6.34 The European Communities requests that we dele te the last sentence of footnote 247 because
it does not correspond to its arguments as presented in reply to Panel question 13. The European
Communities also considers that the statement in the footnote that the European Communities did not
provide any specific elaboration as to what constitu tes a "borderline" situation clashes with the case-
by-case approach followed by the panel in paragraph 7.206. Mexico considers that what is referred to
in this footnote corresponds to the answer of th e European Communities to Panel question 14, rather
than 13. We have clarified that we were refe rring to the European Communities' answer to Panel
question 13 and have made the requested deletion.
6.35 The European Communities requests that we correct footnote 2 54 to refer to its second oral
statement, paragraph 12. Mexico submits no comment on this request. We have made the requested
correction.
6.36 Regarding paragraph 7.233 the European Communities requests that we insert the dates of the
two letters from the Government of the State of Baja California, in order to clearly place them in the
chronology of the investigation. Regarding paragraph 7.234, the European Communities requests that
we insert the date of the Claridades article, which it identifies as June 2001, to place it in the
chronology of the investigation. Mexico objects to the date of the Claridades article referred to by the
European Communities, stating that the correct da te of publication was June 2002, such that this
source was one year more recent than indicated by th e European Communities. We have verified that
the date of the article was June 2001, and have introdu ced this date into the text of paragraph 7.230.
We also have inserted into the text of the same paragraph the dates of the letters from the Government
of the State of Baja California.
6.37 Regarding paragraph 7.236, the European Comm unities requests that we insert footnotes to
identify where, in the
Claridades article the references to production and marketing of olive oil by
Ybarra, to the experimental artisanal production, and the Ybarra (Fortuny) brand can be found.
Mexico does not comment on this request. We ha ve introduced the requested references, in new
footnote 269.

6.38 Concerning paragraph 7.238, the European Communities suggests modifying the drafting to
read, as in the Panel's conclusions, "we find that the European Communities has not established that
Mexico acted inconsistently with its obligations..." . Mexico does not comment on this request. We
have made the requested change.
6.39 Concerning paragraph 7.245, the European Comm unities requests that we insert the dates of
all of the correspondence referred to in subparagraphs (a) to (j), to clea rly identify those letters in the
chronology of the investigation. Mexico does not comment on this request. We have inserted the
dates as requested.
6.40 In paragraph 7.245, at the request of the European Communities, we have corrected the
spelling of Bufete Químico.
6.41 In footnote 395, the European Communities request s that we insert a reference to its first
written submission, paragraph 222, and correct the re ference to its second oral statement. Mexico
states that this footnote is not related to what is signalled by the European Communities. We have
adjusted the drafting of the footnote to properly re flect where the comments re ferenced in the main
text are found in the European Communities' submissions.
6.42 In footnotes 398 and 399, the European Commun ities requests that we insert a reference to
the Final Resolution (Exhibit EC-1), paragraph 437. Mexico does not comment on this request. We
have made the requested additions.
6.43 In paragraph 7.321, at the suggestion of th e European Communities, upon which Mexico did
not comment, we have changed the drafting to read "we find that the European Communities has not
established that Mexico acted inconsistently with its obligations..."
6.44 The European Communities reiterates the request, made in its first written submission and its
closing statement at the second meeting of the Pane l with the parties, that the Panel accompany its
recommendations with a suggestion to Mexico, pursuant to Article 19.1 of the DSU, that a complete
repeal of the measure challenged would be the most appropriate and/or effective way of bringing the
measure into conformity with its WTO obligations. In the view of the European Communities this
suggestion would help clarify Mexico's obligations in this respect and thus would contribute to
securing a positive solution to this dispute. Mexico does not comment on this request. We have
introduced new paragraph 8.6 referring to this request.
VII. FINDINGS
A.
GENERAL ISSUES
1. Standard of Review
7.1 The dispute before us is concerned with the conf ormity of an investigating authority's actions
in a countervailing duty investigati on with certain provisions of the GATT 1994 the SCM Agreement
and the Agreement on Agriculture. We are aware that, as a reviewer of those actions, we must apply
the correct standard of review.
7.2 We recall that Article 11 of the DSU sets out the applicable standard of review in proceedings
under the SCM Agreement, the Agreement on Agriculture, and the GATT 1994. Article 11 of the DSU
states, in relevant part, that:

[A] panel should make an objective assessment of the matter before it, including an
objective assessment of the facts of the cas e and the applicability of and conformity
with the relevant covered agreements... (emphasis added)
7.3 The Appellate Body has summarized the standard of review that panels are to apply under
Article 11 of the DSU in assessing whether the comp etent authorities complied with their obligations
in making their determinations as follows: panels must examine whether the competent authority has
evaluated all relevant factors; they must assess whether the competent authority has examined all the
pertinent facts and assess whether an adequate expl anation has been provided as to how those facts
support the determination; and they must also consider whether the competent authority's explanation
addresses fully the nature and complexities of the data and responds to other plausible interpretations
of the data. However, panels must not conduct a de novo review of the evidence nor substitute their
judgement for that of the competent authority.
30 On this last point, the Appellate Body has
emphasized that a "panel may not reject an agency's conclusions simply because the panel would have
arrived at a different outcome if it were making the determination itself." 31 Furthermore, specifically
with respect to disputes involving subsidy determ inations in countervailing duty investigations, the
Appellate Body recalled that a panel reviewing such a determination:
should bear in mind its role as reviewer of agency action, rather than as initial trier of
fact. Thus, a panel examining the evidentia ry basis for a subsidy determination
should, on the basis of the record eviden ce before the panel, inquire whether the
evidence and explanation relied on by the i nvestigating authority reasonably supports
its conclusions. ...(footnotes omitted) 32
7.4 In US – Softwood Lumber VI (Article 21.5 – Canada) the Appellate Body reiterated that "it is
well established that a panel must neither conduct a de novo review nor simply defer to the
conclusions of the national authority." 33 With respect to review of the factual components of the
findings made by investigating authorities the Appe llate Body has addressed the issue in numerous
cases.34 In US – Softwood Lumber VI (Article 21.5 – Canada) the Appellate Body explained that in a
panel's evaluation of factual findings:
A panel's examination of those conclusions must be critical and searching, and be
based on the information contained in the r ecord and the explanations given by the
authority in its published report. A panel must examine whether, in the light of the
evidence on the record, the conclusions r eached by the investigating authority are
reasoned and adequate. What is 'adequate ' will inevitably depend on the facts and
circumstances of the case and the particular claims made, but several general lines of
inquiry are likely to be relevant. The panel's scrutiny should test whether the
reasoning of the authority is coherent and internally consistent. The panel must
undertake an in-depth examination of whet her the explanations given disclose how
the investigating authority treated the fact s and evidence in the record and whether
there was positive evidence before it to s upport the inferences made and conclusions
reached by it. The panel must examine whether the explanations provided

30 See, e.g., Appellate Body Report, US – Cotton Yarn, para. 74.
31 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 187.
32 Ibid., para. 188.
33 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para 93.
34 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada ); Appellate Body Report,
Argentina – Footwear (EC) , paras. 119-121; Appellate Body Report, US – Cotton Yarn , paras. 74-78;
Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , paras. 183, and 186-188;
Appellate Body Report, US – Hot-Rolled Steel , para. 55; Appellate Body Report, US – Lamb, paras. 101 and
105-108; Appellate Body Report, US – Steel Safeguards, para. 299; and Appellate Body Report, US – Wheat
Gluten, paras. 160-161.

demonstrate that the investigating authority took proper account of the complexities
of the data before it, and that it explaine d why it rejected or discounted alternative
explanations and interpretations of the reco rd evidence. A panel must be open to the
possibility that the explanations given by the authority are not reasoned or adequate in
the light of other plausible alternative expl anations, and must take care not to assume
itself the role of initial trier of facts, nor to be passive by 'simply accept[ing] the
conclusions of the competent authorities'.35
7.5 We will conduct our assessment of the determina tions of Economía with these statements of
the Appellate Body in mind. In particular, in evaluating the claims of the European Communities
regarding the determinations made by Economía, we will consider whether, in the light of the
evidence on the record, the conclusions reached are reasoned and adequate.
2. Burden of Proof
7.6 We recall the general principles applicable to burden of proof in WTO dispute settlement, i.e.,
that a party claiming a violation of a provision of a covered agreement by another Member must assert
and prove its claim.36 In US – Wool Shirts and Blouses the Appellate Body stated that:
the party who asserts a fact, whether the claima nt or the respondent, is responsible for
providing proof thereof. Also, it is a generally-accepted canon of evidence in civil law,
common law, and, in fact, in most jurisdictions, that the burden of proof rests upon the
party, whether complaining or defending, who asserts the affirmative of a particular claim
or defence. If that party adduces evidence suffi cient to raise a presumption that what is
claimed is true, the burden then shifts to the other party, who will fail unless it adduces
sufficient evidence to rebut the presumption. (original footnote omitted).
37

7.7 Furthermore, in Canada – Dairy (Article 21.5 New Zealand and US II) the Appellate Body
stated explicitly that:
as a general matter, the burden of proof rests upon the complaining Member. That
Member must make out a prima facie case by presenting sufficient evidence to raise a
presumption in favour of its claim. If the complaining Member succeeds, the
responding Member may then seek to rebut this presumption. Therefore, under the
usual allocation of the burden of proof, a responding Member's measure will be
treated as WTO- consistent, until sufficient evidence is presented to prove the
contrary.
38
7.8 Moreover, the Appellate Body has stated that "[i]t is also well to remember that a prima facie
case is one which, in the absence of effective refu tation by the defending party, requires a panel, as a
matter of law, to rule in favour of the complaining party presenting the prima facie case." 39 T h e
Appellate Body also has said that "[a] prima facie case must be based on 'evidence and legal
argument' put forward by the complaining party in relation to each of the elements of the claim. A
complaining party may not simply submit evidence a nd expect the panel to divine from it a claim of

35 [footnote original] Appellate Body Report, US – Lamb, para. 106. (original emphasis)
36 Appellate Body Report, US – Wool Shirts and Blouses, p. 16.
37 Appellate Body Report, US – Wool Shirts and Blouses, p. 14
38 Appellate Body Report on Canada – Dairy (Article 21.5 New Zealand and US II), para. 66.
39 Appellate Body Report on EC – Hormones, para. 104.

WTO-inconsistency. Nor may a complaining party si mply allege facts without relating them to its
legal arguments."
40
7.9 The Appellate Body has also explained that "[i]n the context of the GATT 1994 and the WTO
Agreement, precisely how much and precisely what kind of evidence will be required to establish such
a presumption will necessarily vary from measure to measure, provision to provision, and case to
case."41
7.10 In addition, the Appellate Body in EC – Hormones established that "when that prima facie
case is made, the burden of proof moves to the defendi ng party, which must in turn counter or refute
the claimed inconsistency." 42 As the Appellate Body explained in Japan – Apples , the complaining
party is not responsible for providing proof of all f acts raised in relation to the issue of determining
whether a measure is consistent with a given provision of a covered agreement. Although the
complaining party bears the burden of proving its case, the responding party must prove the case it
seeks to make in response.
43
7.11 In this dispute, the European Communiti es, which has claimed that Mexico acted
inconsistently with provisions of the SCM Agreement, the Agreement on Agriculture , and the GATT
1994, thus bears the burden of demonstrating that Me xico acted inconsistently with the relevant
provisions of those agreements.
3. Treaty Interpretation
7.12 Article 3.2 of the DSU directs panels to clarify the existing provisions of the covered
agreements "in accordance with customary rules of in terpretation of public international law". It is
well settled in WTO case law that the principles codified in Articles 31, 32 and 33 of the Vienna
Convention on the Law of Treaties ("Vienna Convention") are such customary rules. 44 These
provisions read as follows:
Article 31: General rule of interpretation

1. A treaty shall be interpreted in goo d faith in accordance with the ordinary
meaning to be given to the terms of the trea ty in their context and in the light of its
object and purpose.

2. The context for the purpose of the inte rpretation of a treaty shall comprise, in
addition to the text, including its preamble and annexes:

(a) any agreement relating to the tr eaty which was made between all the
parties in connection with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connection
with the conclusion of the treaty and accepted by the other parties as
an instrument related to the treaty.

3. There shall be taken into account, together with the context:

40 Appellate Body Report on US – Gambling, para. 140.
41 Appellate Body Report on US – Wool Shirts and Blouses, p. 14.
42 Appellate Body Report on EC – Hormones, para. 98.
43 Appellate Body Report on Japan – Apples, para. 154.
44 See, inter alia, Appellate Body Report on US – Gasoline, p. 17; Appellate Body Report on India –
Patents (US), para. 45; and Appellate Body Report on US – Shrimp, para. 114.

(a) any subsequent agreement between the parties regarding the
interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which
establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of internati onal law applicable in the relations
between the parties.

4. A special meaning shall be given to a te rm if it is established that the parties
so intended.

Article 32: Supplementary means of interpretation

Recourse may be had to supplementary me ans of interpretation, including the
preparatory work of the treaty and the circumstances of its conclusion, in order to
confirm the meaning resulting from the application of article 31, or to determine the
meaning when the interpretation according to article 31:

(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is ma nifestly absurd or unreasonable.

Article 33: Interpretation of treaties authenticated in two or more languages

1. When a treaty has been authenticated in two or more languages, the text is
equally authoritative in each language, unless the treaty provides or the parties agree
that, in case of divergence, a particular text shall prevail.

2. A version of the treaty in a language other than one of those in which the text
was authenticated shall be considered an au thentic text only if the treaty so provides
or the parties so agree.

3. The terms of the treaty are presumed to have the same meaning in each
authentic text.

4. Except where a particular text prevails in accordance with paragraph 1, when
a comparison of the authentic texts discloses a difference of meaning which the
application of articles 31 and 32 does not remove, the meaning which best reconciles
the texts, having regard to the object and purpose of the treaty, shall be adopted.

7.13 We shall apply these principles in interpreti ng the relevant provisions of the covered
agreements.
B.
ARTICLE 13.1 OF THE SCM AGREEMENT
7.14 The European Communities claims that Mexico failed to invite the European Communities to
consultations and failed to hold consultations, or failed at least to provide a sufficient time interval for
consultations to take place, before the initiation of th e olive oil investigation, contrary to Article 13.1
of the SCM Agreement.

1. Arguments of the Parties
7.15 The European Communities asserts that Economía initiated its investigation on 2 July 2003
45,
that Mexico only invited the European Communities for consultations on 4 July 2003, and that the
first consultations were held only on 17 July 2003. According to the European Communities, because
of its failure to hold consultations before the initiation, Mexico is "in outright breach of its obligations
under Article 13.1".46
7.16 Mexico argues that the date of initiation was not 2 July 2003, but 16 July 2003, as this was the
date on which the Initiation Resolution w as published in its Official Journal. 47 Mexico states that
under Mexican law, the Initiation Resolution had no le gal effect until the day after its publication in
the Official Journal, and that the administrative timelines relevant in the investigation were set relative
to that date.48 On this basis, Mexico maintains that it complied with its obligations under Article 13.1
because it issued the invitation for consultations prior to the date of initiation.49
7.17 The European Communities also argues that ev en if Mexico's argument were accepted that
the date of initiation was 16 July 2003, Mexico s till violated Article 13.1 because the invitation for
consultations was not issued sufficiently before the initiation of the investigation to allow for a
meaningful opportunity for consultati ons to be held prior to initiation. 50 The European Communities
relies upon Articles 13.2 and 13.3 and footnote 37 to Article 10 as contextual support for its
interpretation of Article 13.1. In particular, the European Communities argues that there is an implicit
requirement that, whether or not the consultations actually take place before initiation, the invitation
must be issued sufficiently prior to initiation that consultations could be held before initiation, i.e.,
"more broadly" that investigating authorities should "make themselves available for consultations at a
stage when those consultations could influence the d ecision to initiate the inv estigation", i.e., before
initiation.51 If this were not the case, the European Communities argues, the consultations would be
pointless, given that their "aim" according to Article 13.1, is to "clarify[ ] the situation as to matters
referred to in paragraph 2 of Artic le 11 [the content of the application] and arriv[e] at a mutually
agreed solution."52
7.18 In Mexico's view, the obligation in Article 13.1 is to issue the invitation to consultations prior
to initiation, rather than to hold the consultations prior to initiation. 53 Furthermore, Mexico argues
that there is no requirement that the invitation to consultations be issued in sufficient time that
consultations could be held prior to initiation.54
2. Reasoning of the Panel
7.19 The claim of the Eur opean Communities under Article 13.1 of the SCM Agreement has two
parts. First, the European Communities alleges that Economía did not send the invitation to
consultations prior to initiation as required by Article 13.1 of the SCM Agreement. This part of the
European Communities' claim presents issues of both law and fact. As a matter of law, we must
decide what action constitutes "initia tion" within the meaning of the SCM Agreement. As a matter of

45 The date on which the Minister signed the Initiation Resolution.
46 European Communities - First written submission, para. 88.
48 Ibid., paras. 4-10; Mexico – Second written submission, paras. 5-6.
49 Mexico – First written submission, paras. 11-12.
50 European Communities - Second written submission, paras. 8-11.
51 European Communities - Response to Panel question 99; European Communities – Second written
submission, para. 10.
52 European Communities - Second written submission, para. 9.
53 Mexico – Second written submission, para. 14; Mexico – Response to Panel question 98.
54 Mexico – Response to Panel question 98.

fact, we must then decide on the date Economía initiated the countervailing duty investigation into
olive oil from the European Communities.
7.20 Second, the European Communities' claim raises que stions about the nature of the obligations
in Article 13.1. Specifically, the issues are: (1 ) whether Article 13.1 contains an obligation to hold
consultations prior to initiation, and, (2) whether this provision requires that a sufficient amount of
time be allowed, between the inv itation for consultations and the in itiation, for consultations to be
held.
(a) Did Economía Send the Invitation to Consultations After Initiation
7.21 The parties disagree on the actual date of initiatio n of the olive oil investigation, and thus on
whether the invitation to consultations was issued by Mexico prior to that date as required by
Article 13.1.55 The European Communities contends that the investigation was initiated on
2 July 2003, the date on which the Minister si gned the Initiation Resolution, and that Mexico only
issued the invitation to consultations thereafter, on 4 July 2003, thereby breaching Article 13.1 of the
SCM Agreement.56 Mexico counters that the investigati on was initiated on 16 July 2003, the day the
Initiation Resolution was published in the Official Journal of Mexico.57 This disagreement raises two
questions. First, what does the term "initiation" mean for the purposes of the SCM Agreement ?
Second, applying the definition of "initiation" in the SCM Agreement, what is the date on which
Economía initiated the counterva iling duty investigation into olive oil from the European
Communities? Once both questions are resolved, we can examine whether Economía's 4 July 2003
invitation to consultations occurred prior to or after initiation.
(i) "Initiation" Within the Meaning of the SCM Agreement
7.22 The term "initiated" is defined in footnote 37 to Article 10 of the SCM Agreement , which
reads:
The term 'initiated' as used hereinafter means procedural action by which a Member
formally commences an investigation as provided in Article 11.
7.23 According to the European Communities, the signature by the Minister of the Initiation
Resolution was the "procedural action" that "formally" commenced the investigation, as referred to in
this definition, because signature of a resolution is a formal act, and the focus of the particular
resolution in question was the commencement of the investigation, the publication of which followed
automatically after the Minister had signed. 58 Mexico counters that the SCM Agreement leaves to
individual Members how, procedurally, to initiate an investigation. Mexico states that under Mexican
law, it is publication in the Official Journal that constitutes initiation, as it is this publication that
gives legal effect to initiation resolutions. In pa rticular, Mexico argues, a resolution signed by a
Minister, but never published in the Official Journal, would be entirely without legal effect in
Mexico. Thus, while signature by the Minister is necessary, a resolution only enters legally into
force, and the deadlines in the investigation only st art running, when the resolution is published. For
this reason, according to Mexico, the date of initiation is the date of publication in the Official
Journal.59

55 See, e.g., European Communities – First oral statement, para. 14.
56 European Communities – First written submission, para. 88.
58 European Communities – First oral statement, paras. 15-29.
59 Mexico – Second written submission, paras. 5-6.

7.24 We begin by examining the definition of "initiated" in footnote 37 of the SCM Agreement. It
is important to note that the definition describes a "procedural action by which a Member formally
commences an investigation" [emphasis added], w ithout specifying any particular action, or any
particular procedure, that a Member must undert ake in this regard. The European Communities
admits that "the particular steps to be taken [in re gard to initiation] are largely left to Members", and
that while "[i]t can be inferred from Footnote 37 that the process will involve one element of
formality ... precisely what this should consist of is not specified".
60
7.25 The heart of this dispute is not over what constitutes a "procedural action" as many steps
within an investigation may qualify as such, but rather which procedural action "formally
commences" an investigation. Th e Shorter Oxford English Dicti onary defines "formally" as "In
prescribed or customary form; with the formalities required to make an act ion valid or definite." 61
The Shorter Oxford English Dictionary also defin es "commence" as "make a start or beginning; come
into operation." 62 As footnote 37 states, we are concer ned with "a Member's" initiation of an
investigation. Because the SCM Agreement does not contain any specific standards for determining
the validity of an action meant to start a counter vailing duty investigation, the date of "formal
commencement" must be in reference to the internal regime of the importing Member.
7.26 Other articles of the SCM Agreement that refer to initiation provide context for interpreting
the term "initiated" in footnote 37. For example, Article 11 of the SCM Agreement contains a number
of substantive requirements that must be satis fied before an importing Member may initiate a
countervailing duty investigation. Article 11 demonstrates that when the drafters intended to
prescribe that Members satisfy particular standards, they were perfectly able to do so. 63 Additionally,
Article 22.2 requires investigating authorities to give public notice of the initiation. Article 22.2 (ii)
requires that the investigating authority include in the published notice the "date of initiation". In our
view, this confirms a reading of footnote 37 that leaves it up to the investigating authority to
determine on what date it "formally commenced" an investigation and to then make the public aware
of that date through the notice.
64
7.27 Finally, in terms of the object and purpose of the SCM Agreement, we note that the deadline
for completing an investigation in Article 11.11; the requirement to rele ase the application to
interested exporters in Article 12.1.3; and th e timeframes for imposing provisional measures in
Article 17.3 all flow from the date of initiation. We view a reading whereby the date of initiation is
based on the internal law of the importing Member as ensuring predictability for the interested parties
in the investigation under the domestic system of each Member. If WTO dispute settlement
proceedings taking place considerably after the term ination of an investigation could revisit these
procedural steps in the absence of any specific requirements in the SCM Agreement, this predictability
would be substantially reduced.
7.28 Based on the foregoing analysis, we find that wh at constitutes "initiation" within the meaning
of the SCM Agreement will vary based on the procedural acti ons defined in each Member's individual
regime. Therefore, to determine the date on wh ich Economía initiated the investigation and whether

60 European Communities – First oral statement, para. 22.
61 Shorter Oxford English Dictionary Fifth Edition, p. 1015.
62 Ibid., p. 458.
63 We also note that other provisions in the SCM Agreement leave considerable discretion to Members
to define their own procedures; e.g. Articles 12, 14 and 23. This leads us to believe that, in general, unless a
specific procedure is set forth in the Agreement the precise procedures for how investigating authorities will
implement those obligations are left to the Members to decide.
64 We note that in response to Panel question 2 the European Communities, indicated that under its
system "initiation" takes place when a Notice of Initiation is published. "The Notice of Initiation published in
the Official Journal clearly indicates that the inves tigation is 'hereby initiated', i.e., the initiation of the
proceeding takes place with the publication of the notice of initiation (Article 10.4 of the EC CVD Regulation)".

Mexico sent the invitation to consultations prior to initiation, as required by Article 13.1 of the SCM
Agreement, we must examine what constitutes the pro cedural act by which an investigation is
formally commenced in the Mexican system.
(ii) The Date on Which Economía Initiated the Olive Oil Investigation
7.29 As noted above, we see the issue of what date Economía initiated the olive oil investigation as
one of municipal law, which is a matter of fact. Mexico provided information indicating that, by
virtue of the interaction between Article 85 of the Mexican Foreign Trade Law and Article 7 of the
Mexican Federal Tax Code, the Initiation Resolution "will enter into effect on the day following its
publication".65 This same language is repeated at the end of the Initiation Resolution itself. 66
Furthermore, as noted above, Mexico indicated th at the time limits imposed upon the interested
parties and on Economía in respect of the investigati on ran from the date of publication, and this also
is reflected in the Resolution.67
7.30 We therefore find, as a matter of fact, that under Mexican law, the procedural act by which an
investigation is formally commenced in the Me xican system is the publication of the Initiation
Resolution, which takes legal effect the following day.
7.31 The Initiation Resolution was published on 16 July 2003. Therefore, on the basis of the
evidence provided by Mexico on its domestic law, we find, as a matter of fact, that the date of
initiation of the olive oil investigation, in the sense of the SCM Agreement, was 17 July 2003, the day
after the Initiation Resolution was published, and not 2 July, the date of the Minister's signature, as
argued by the European Communities. Given this finding, there is no basis for the European
Communities' allegation that the invitati on to consultations was only issued after initiation, contrary
to Mexico's obligations under Article 13.1 of the SCM Agreement.

65 Mexico first written submission at paras. 6-10. In particular Mexico quotes Article 85 of the
Mexican Foreign Trade Law (FTL ), and Article 7 of the Mexican Federal Tax Code (FTC) as follows:
"Article 85 [FTL].- In the ab sence of an express provision in this Law concerning the
administrative proceedings relating to unfair international trade practices and safeguard
measures, the Federal Tax Code shall be alternatively applied, insofar as consistent with the
nature of these proceedings. This provision sh all not apply to notifications and verification
visits.
"Article 7 [FTC]. - Tax laws, their regulati ons and general administrative provisions shall
enter into force throughout the Republic on the day following their publication in the Diario
Oficial de la Federación [Official Journal], unless a later date is stipulated therein."

66 Exhibit EC-13, para. 130. "This Resolution shall enter into force on the day following its publication
in the Official Journal of the Federation." In this regard, we specifically reject the European Communities'
argument that because para. 122 of th e Initiation Resolution stated that "t he Ministry accepts the request from
Fortuny de Mexico, S.A. de C.V. and declares the initiation of an investigation. . ." the Minister's signing of that
document constitutes the "formal commencement" of the olive oil investigation. (see European Communities –
First oral statement, paras. 27-29). The Minister signed a document which included specific language delaying
its effectiveness until after its publi cation. Therefore, the European Communities cannot demonstrate that by
signing the Initiation Resolution the Minister was "commencing" the investigation.
67 See in particular paragraphs 124-129 of the Initiation Resolution (Exhibit EC-13) establishing
deadlines and procedural requirements pertaining to the investigation, including, in paragraph 124, a 30-
working-day deadline, running from the date of publication of the Resolution, for importers, exporters and
foreign legal entities or any other persons that considered that they had an interest in the outcome of the
investigation to present themselves to Economía.

(b) The nature of the obligations in Article 13.1
7.32 The European Communities makes an additional argument that even if Economía sent the
invitation to consultations prior to the initiation as required by Article 13.1, Mexico nevertheless acted
inconsistently with Article 13.1, because it did not hold consultations, or provide sufficient time to
hold the consultations, between the date it sent the inv itation and the date of initiation. This argument
focuses on the nature of the obligation contained in Article 13.1 of the SCM Agreement.
7.33 We start our analysis with the ordinary meani ng of the terms of Article 13.1 which read as
follows:
13.1 As soon as possible after an applica tion under Article 11 is accepted, and in
any event before the initiation of any inv estigation, Members the products of which
may be subject to such investigation shall be invited for consultations with the aim of
clarifying the situation as to the matters re ferred to in paragraph 2 of Article 11 and
arriving at a mutually agreed solution.
7.34 Beginning with the action that is the subject of this provision, namely that the Member the
products of which may be subject to the investigation "shall be invited
 for consultations", we note that
the provision makes no explicit reference to consultations being held, referring instead to an invitation
to consult. The dictionary definition of the word "invite" confirms that to invite someone to do
something is simply to ask that person to do so if he or she wishes. For example, the New Shorter
Oxford Dictionary defines "invite" as to "ask (a person) to come with one's permission to or into a
place or to an event."68 Thus, the ordinary meaning of the obligation on the importing Member that is
considering initiating a countervailing duty investigation is to ask th e Member, the products of which
may be subject to that investigation (the exporting Member), to consultations. It then falls to the latter
Member to decide whether or not to accept the invitation.
7.35 We do not see a requirement in the text of Article 13.1 that the Members involved must
actually hold the referenced consultations. Indeed, if under Article 13.1, the Member considering
whether to initiate an investigation were obligated to hold consultations with the exporting Member
before it could initiate an investigation, the exporting Member could effectively block initiation
simply by declining to consult. We find relevant contextual support in the language of Article 13.3 of
the SCM Agreement, which reads: "...these provisions regard ing consultations are not intended to
prevent the authorities of a Member from proceeding expeditiously with regard to initiating the
investigation..." This passage supports the view that Article 13.1 requires the Member considering
whether to initiate to "invite" the exporting Member for consultations, but does not require that those
consultations be held. We emphasize, however, that the invitation must be a bona fides one. That is,
assuming that the exporting Member accepts the inv itation, the Member considering whether to
initiate an investigation cannot then refuse to participate in the consultations.
7.36 We now turn to the second, related line of argument by the European Communities,
concerning the timing of the invitation to consultatio ns. We start by recalling that the obligation in
Article 13.1 that forms the basis of the claim of the European Communities is that the invitation be
issued " in any event before the initiation of an investigation " (emphasis added). The claim of the
European Communities is that Article 13.1 requires that the invitation to consultations be issued
sufficiently "before" initiation that consultations could meaningfully be held prior to initiation.
7.37 We note that in respect of this claim, the European Communities argues that the obligation
that it asserts is not explicit, but is " implicit", flowing from the stated "aim" of the consultations in the
text of Article 13.1, i.e., clarifying the situation as to the contents of the application and arriving at a

68 The New Shorter Oxford Dictionary, 1993.

mutually agreed solution. The argument of the European Communities is that this "aim" and the
consultations themselves would be deprived of " effet utile" if the referenced consultations only took
place after initiation.69
7.38 Before considering the merits of this argument, we wish to emphasize that we are not
convinced by the European Comm unities' theory that there is an "implicit" obligation in the SCM
Agreement to hold consultations. We recall that pursuant to Articles 3.2 and 19.2 of the DSU, panels
and the Appellate Body cannot add to or diminish the rights and obligations of Members. The
obligations on Members, therefore, are those negotia ted by Members and identified in the treaty text
through the application of the appropriate prin ciples of treaty interpretation, as discussed in
section VII.A.3, supra. This is the standard to which we must adhere.
7.39 Returning now to the language of Article 13.1 that is at issue in this claim, we see no
requirement that a sufficient interval must be a llowed after issuance of the invitation and before
initiation that consultations could be held. Rather, the requirement in that provision is that the
invitation must be issued "in any event before" initiation, with no indication of any specific time
interval. Nor does the remaining language of Article 13.1 lead to a different conclusion. First, while
the opening clause of Article 13.1 – "[a]s soon as po ssible after an application under Article 11 is
accepted and in any event before the initiation of an y investigation" – establishes a window of time
for the issuance of the invitation to consultations, this window is expressed not in absolute terms but
in relation to the system of the individual Member , and thus falls short of establishing any minimum
timeframes for the holding of such consultations.70 In particular, we do not see in the phrase "as soon
as possible after an application ... is accepted", either by itself, or in conjunction with the requirement
to issue the invitation to consultations "in any ev ent before the initiation", an obligation to allow
sufficient time prior to initiation for consultations to be held. Second, the last clause of Article 13.1
defines the "aim" of the consultations – "clarifyin g the situation as to the matters referred to in
paragraph 2 of Article 11 [the conten ts of the application] and arrivi ng at a mutually agreed solution"
– and says nothing about the timing of such consultations.
7.40 Other provisions of Article 13 provide further support for our view that there is no
requirement in Article 13.1 to allow sufficient time for consultations to be held before initiation.
First, as noted above, Article 13.3 states explicitly th at the provisions on consultation – which include
Article 13.1 – "are not intended to prevent the auth orities of a Member from proceeding expeditiously
with regard to initiating...". Not only does this language not indicate that some minimum time
interval must be allowed prior to initiatio n, in fact, it makes explicit that the SCM Agreement strikes a
balance between an exporting Member's need to be consulted, on the one hand, and an importing
Member's need to proceed exped itiously, on the other hand. Nor does the obligation, referred to in
Articles 13.2 and 13.3, to "afford reasonable opport unity for consultation" provide a requirement to
allow a sufficient time interval that consultations could be held before initiation. Rather, we view this
rather generally worded requirement to mean th at the importing Member considering initiation or
conducting an investigation has an ongoing obligation to be available for consultations. In this regard,
we consider footnote 44 to be of particular releva nce. This footnote reads: "It is particularly
important ... that no affirmativ e determination whether prelimin ary or final be made without

69 We note that the European Communities does not identify any specific amount of time that should be
allowed for pre-initiation consultations, and instead refers to a list of considerations that should be taken into
account by an investigating authority in setting this timeframe. See, e.g., European Communities - Second
written submission, paras. 8-12, and response to Panel question 99.
70 We note that the claim of the European Communities under Article 13.1 is based exclusively on the
argument that Article 13.1 requires sufficient time before initiation that consultations could be held. The
European Communities has presented no evidence or argumentation concerning the requirement in the first
clause of Article 13.1 that the invitation to consultatio ns is to be extended "as soon as possible after an
application ... is accepted". This issue therefore is not before us, and we do not address it further.

reasonable opportunity for consultations having been given ". In this footnote, the SCM Agreement
puts particular emphasis on the importance of the prior opportunity for consultations in relation to two
specific stages of an investigation, namely before issuance of affirmative preliminary or final
determinations. The fact that footnote 44 omits entirely any mention of the pre-initiation stage further
confirms our view that the SCM Agreement does not require a sufficient time interval before initiation
that consultations could be held.
7.41 Turning, finally, to the object and purpose of the SCM Agreement , we first recall that
according to Article 13.1, the aim of the consultations referred to is "clarifying the situation as to the
matters referred in para graph 2 of Article 11 [the contents of the application] and arriving at a
mutually agreed solution". While we consider that , given their aims, consultations, as referred to in
Article 13.1, would have the greatest potential to in fluence the initiation decision if they were held
before initiation, we do not consider that such c onsultations would be wholly devoid of purpose, as
argued by the European Communities, if they did not occur until after an investigation was initiated.
In particular, if, during consultations held after initia tion, it became clear that the factual basis of the
initiation decision was erroneous (because, for exampl e, the alleged subsidy programmes either were
not subsidies or were not specific), th en pursuant to Article 11.9 of the SCM Agreement , the
investigating authority would be obligated to termin ate the investigation immediately. We note that
the European Communities acknowledges this, stating th at "a solution can be reached at any stage of
the investigation (as Article 13.2 makes clear)".
71 Indeed, this is in keeping with the object and
purpose of the countervailing duty provisions of the SCM Agreement , namely to provide the legal
framework for Members to take countervailing action where subsidized imports are causing injury to
domestic producers. While the consultation provi sions create a mechanism that can be used to
facilitate an agreed solution, they explicitly "are not intended to prevent" Members from "proceeding
expeditiously" with their investigations and the application of measures.
7.42 For the foregoing reasons, we find that Article 13.1 does not require a Member considering
whether to initiate an investigation to allow a sufficient time interval after its invitation to
consultations is issued and before initiation, so th at consultations could be held. Given our finding,
we do not further consider the argument of the European Communities that, even accepting Mexico's
contention as to the date of initiation, Mexico still acted in breach of Article 13.1, as there was not
sufficient time between 4 July, the date of the i nvitation to consultations, and 17 July, the date of
initiation, for consultations to have been held.
7.43 Therefore, we find that the European Commun ities has not established that Mexico acted
inconsistently with its obligations under Article 13.1 of the SCM Agreement.
C. ARTICLE 13(b)(i) OF THE AGREEMENT ON AGRICULTURE
7.44 The European Communities claims that Me xico violated Article 13(b)(i) of the Agreement on
Agriculture by initiating a countervailing duty investiga tion on imports of an agricultural product
(olive oil) inconsistently with the provisions of Article 13(b)(i) of the Agreement on Agriculture.
1. Arguments of the Parties
7.45 The European Communities asserts that the pro duction aids provided to olive growers by the
European Communities that are the basis for Mexi co's imposition of countervailing duties constitute
"domestic support measures that conform fully to the provisions of Article 6 of the Agreement." 72
The European Communities argues that Article 13(b)(i) imposes a double restriction on
countervailing duty actions. First, duties must not be imposed unless there is a determination of

71 European Communities - Second written submission, para. 12.
72 European Communities – First written submission, para. 97.

"injury or threat thereof." In the European Comm unities' view, this means that "no action could be
taken in respect of claims based on ‘material retardation'". 73 Second, the Mexican authorities were
required to exercise "due restraint" in the initiation of the investigation on olive oil. The European
Communities alleges that Mexico failed to comply with both of these requirements.74
7.46 The European Communities argues th at Mexico failed to comply with the first restriction by
initiating the investigation and impos ing countervailing duties even thou gh the appli cant's claim was
based on "material retardation".75 Specifically, the European Communities argues that Mexico should
not have initiated an investigation based on an a pplication alleging "materia l retardation" and should
have rejected Fortuny's application.76
7.47 The European Communities also argues that Mexi co failed to exercise due restraint in the
initiation of the countervailing duty investigation on olive oil. Specifically, the European
Communities argues that contrary to any notion of due restraint, Mexico embarked on the
investigation with exceptional haste,77 in that it did not hold consultations prior to initiation, it did not
spend adequate time investigating the full extent of the domestic industry, and it "converted" an
application based on "material retardation" into one of "material injury".78
7.48 The European Communities contends moreover that the obligation to exercise "due restraint"
must mean something more than the normal initiation standard in the SCM Agreement , because
otherwise, Article 13(b)(i) of the Agreement on Agriculture would have no meaning.79 There must be
some circumstances in which "due restraint" could have the effect of preventing an investigation that
might otherwise have been initiated.80
7.49 Mexico argues with respect to the obligati on to show "due restraint" in initiating a
countervailing duty investigation on an agricultural product, that "due restraint" should not be
interpreted as a prohibition on initiation, but rather as adopting an appropriate and reasonable standard
for allowing an investigation to be initiated. 81 Mexico also argues that the obligation to exercise due
restraint contained in Article 13(b)(i) of the Agreement on Agriculture relates only to the period
preceding the initiation of the investigation, and that thus to the extent that the European Communities
is arguing that the due restraint provisions were violated by imposing countervailing duties, such an
argument would has no merit.82
7.50 With respect to the European Communities' argu ment that Article 13(b)(i) prohibited Mexico
from imposing countervailing duties in response to an application based on material retardation,
Mexico notes that there is no provision in the SCM Agreement that requires an investigating authority

73 Ibid., para. 99.
74 Ibid., para. 100.
75 Ibid., para. 99.
76 European Communities – First oral statement, para. 48.
77 European Communities – First written submission, para. 101.
78 Id.; European Communities – first oral statement, para. 52. The Panel notes that in its response to
Panel question 101 the European Communities stated that:
"In speaking of 'exceptional haste' the EC was referring not to the whole length of Economía's
consideration of the application but to the fina l phase between the internal finalisation of the
notice of initiation and its publication on 16 July. As the EC has explained in regard to its
claim under Article 13, this haste was such as to deny the EC its right to consultations."
79 European Communities – Second written submission, para. 24.
80 European Communities – Second oral statement, para. 24.
81 Mexico – First written submission, paras. 48, 52; Me xico – First oral statement, para. 9; Mexico –
Response to Panel Question 22; Mexico – Second written submission, para. 55.
82 Mexico – First written submission, paras. 46-49.

to accept all of the conclusions in an application.
83 Mexico points out that the investigation was
initiated on the basis of "injury" in the broad sense of that term. 84 Additionally, Mexico notes that, in
any case, the duties were imposed after the inves tigating authority had ma de a determination of
"material injury," not "material retardation" .85
2. Reasoning of the Panel
7.51 Article 13(b)(i) of the Agreement on Agriculture reads as follows:
 Due Restraint

During the implementation period, notwithstanding the provisions of GATT 1994 and the
Agreement on Subsidies and Countervailing Measu res (referred to in this Article as the
"Subsidies Agreement"):

(b) domestic support measures that conform fully to the provisions of Article 6 of this
Agreement including direct payments that conform to the requirements of
paragraph 5 thereof, as reflected in each Member's Schedule, as well as domestic
support within de minimis levels and in conformity w ith paragraph 2 of Article 6,
shall be:
(i) exempt from the imposition of countervailing duties unless a
determination of injury or threat thereof is made in accordance with
Article VI of GATT 1994 and Part V of the Subsidies Agreement,
and due restraint shall be shown in initiating any countervailing duty
investigations; . . .
(a) Applicability of the Provision
7.52 The first issue we must address is whether Article 13(b)(i) of the Agreement on Agriculture
applies to the Mexican measures in this case. By its own terms, Article 13 of the Agreement on
Agriculture applied only "[d]uring the implementation peri od," which is defined in Article 1(f) of that
Agreement as follows:
. . . the six-year period commencing in the year 1995, except that, for the purposes of
Article 13, it means the nine-year period commencing in 1995;
7.53 Both parties agree that the "implementati on period" ran at least until the end of 2003.
86 The
European Communities indicated, in response to a question from the Panel, that depending on
whether 'years' are defined as financial or marketing years, the date of expiry of the implementation
period might have been some point during 2004.87
7.54 Although the parties do not agree on the actua l date on which the implementation period
expired, the claims raised by the Eu ropean Communities relate to Mexico's initiation of the olive oil

83 Mexico – First written submission, paras. 55-56.
84 Ibid., para. 56.
86 European Communities – First written submission, para. 47; Mexico – First written submission,
para. 49.
87 European Communities – Response to Panel question 20.

investigation.88 As we have found in paragraph 7.31 above, the investigation was initiated on
17 July 2003. This date was well within the impl ementation period and before Article 13 expired.
Therefore, we do not need to decide, for the purpo ses of this case, precisely when Article 13 expired.
It is clear that Article 13 was in force and applicable at the time Economía initiated the countervailing
duty investigation on olive oil imports from the European Communities. 89 Therefore, we hold that
Article 13 applies to the initiation of the countervailing duty investigation by Mexico in this case.
(b) Article 13(b)(i) of the Agreement on Agriculture
7.55 There are three legal elements in Article 13(b )(i). First, the chapeau of paragraph (b)
provides that the obligations and exemptions set fo rth in the succeeding subparagraphs only apply to
"domestic support measures" which conform fully to the provisions of Article 6 of the Agreement on
Agriculture. Second, subparagraph (i) exempts such products from the imposi tion of countervailing
duties, unless a determination of injury or threat thereof is made in accordance with Part V of the
SCM Agreement. Third, subparagraph (i) also requires that "due restraint shall be shown in initiating
any countervailing duty investigations" in relation to those measures.
7.56 The European Communities, as the complainant, bears the burden of proving that the
provisions of Article 13(b)(i) are applicable to the measures at issue and that Mexico has acted
inconsistently with its oblig ations under those provisions. 90 Therefore, the European Communities
must first demonstrate that its domestic support me asures satisfy the requirement in the chapeau of
paragraph (b), namely that they conform fully to Article 6 of the Agreement on Agriculture. Then, the
European Communities must demonstrate that Me xico has not complied with the provisions of
subparagraph (i) of paragraph (b).
(i) Domestic Support Measures which Fully Conf orm with Article 6 of the Agreement on
Agriculture
7.57 In its first written submission, the European Communities asserts that the production aid
provided to olive growers by the European Commun ities, which are the basis for the imposition of
countervailing duties, conform fully to Article 6 of the Agreement on Agriculture.91
7.58 Mexico did not specifically dispute this asser tion and, in fact, c onducted its countervailing
duty investigation as if the European Communities' domestic support measures were in conformity
with Article 6 of the Agreement on Agriculture.92
7.59 As Mexico conducted the olive oil investigation as if Article 13(b) of the Agreement on
Agriculture applied to that investigation, we will pr oceed on the basis of the same assumption,
arguendo, for the purposes of this dispute. 93 We note, however, that had this issue been contested
between the parties, it would have been incumb ent upon the European Communities in the first
instance to demonstrate that the provision was applicable.

88 European Communities – First written submission, paras. 99, 100; European Communities – First
oral statement, paras. 48-49; European Communities – Response to Panel question 20; European Communities
– Second oral statement, para. 19.
89 Panel Report, US – Upland Cotton, para.7.345 and footnote 469.
90 See Appellate Body Report, US – Wool Shirts and Blouses , p. 14: Panel Report, US – Upland
Cotton, para. 7.285.
91 European Communities – First written submission, para. 97.
92 Mexico - Response to Panel question 111
93 Preliminary Resolution (Exhibit EC-22), para. 74 where Economía explained how it exercised due
restraint in initiating the countervailing duty investigation.

(ii) Exempt from Imposition of Countervailing Duties Unless a Determination of Injury or Threat
Thereof is Made
7.60 The European Communities argues that Mexico acted inconsistently with Article 13(b)(i)
because it accepted an application on the basis of an allegation of material re tardation, which is not
referred to in that provision, rather than an allegati on of injury or threat thereof, which are referred to
therein.
94 In particular, the first part of subparagr aph (i) provides that products covered by the
chapeau of paragraph (b) are "exempt from the imposition of countervailing duties unless a
determination of injury or threat thereof is ma de in accordance with Article VI of GATT 1994 and
Part V of the Subsidies Agreement."
7.61 We note that the first clause of Article 13(b)(i) refers inter alia to "injury or threat thereof…
in accordance with …Part V of the Subsidies Agreement." The paragraph does not refer to "material
injury", but rather to "injury". "Injury", in turn, is defined in footnote 45 of the SCM Agreement as
"material injury to a domestic industry, threat of material injury to a domestic industry or material
retardation of the establishment of such an industry" (emphasis added.) In other words, the definition
of the term "injury" for purposes of the SCM Agreement encompasses the concept of material
retardation. We therefore do not find that the fi rst clause of subparagraph (i) prohibits the imposition
of duties on the basis of a determination of mate rial retardation as opposed to determinations of
material injury or threat of material injury.
7.62 Furthermore, and in any case, we note that the claim of the European Communities focuses on
the basis of Economía's initiation of the olive oil investigation, and not on the basis for the imposition
of the measures. In particular, the argument of the European Communities is that no investigation
should have been initiated on the basis of a form of injury (material retardation) that was not
permitted as a basis for the imposition of measures. Even assuming arguendo that the European
Communities were correct that the first clause of Ar ticle 13(b)(i) excluded determinations of material
retardation, we disagree that this clause is relevant to initiation. Instead, the plain language at issue is
expressly limited to the "imposition of countervailing duties". Here, we are mindful of the guidance
of the Appellate Body not to impute into a treaty wo rds that are not there or to import concepts that
were not intended.
95 We also recognize that our duty is to interpret the words actually used in the
agreement under examination, not the words the inte rpreter (or one of the parties) may feel should
have been used.96
7.63 Finally, even if the Europ ean Communities were correct bot h that the first clause of
Article 13(b)(i) is relevant to initiation, and that it precludes initiation based on claims of material
retardation, we note as a factual matter that Economía initiated the olive oil in vestigation on the basis
of "injury", in the broad sense of the term as defined in footnote 45 of the SCM Agreement, and that it
imposed provisional and final countervailing duties on the basis of "material injury" 97, not material
retardation.
7.64 For these reasons, assuming arguendo that Article 13(b)(i) of the Agreement on Agriculture
applied to the olive oil investigation, we find that the European Communities has not established that
Mexico failed to comply with the re quirement in Article 13(b)(i) of the Agreement on Agriculture to
exempt olive oil from imposition of countervailing duti es “unless a determination of injury or threat

94 European Communities – First written submission, para. 99. We note that the European
Communities has provided no argumentation based on the text, context, or object and purpose of Article 13(b)(i)
to support its contention.
95 Appellate Body Report, India – Patents (US), paras. 45-46; See also Appellate Body Report, India –
Quantitative Restrictions, footnote 23, para. 94.
96 Appellate Body Report, EC – Hormones, para. 181.

thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies
Agreement.”
(iii) Due Restraint Shall be Shown in Initiating Any Countervailing Duty Investigation
7.65 The European Communities argues th at Mexico acted inconsistently with Article 13(b)(i) by
failing to show "due restraint" in initiating the countervailing duty investigation on imports of olive
oil from the European Communities. The European Communities defines the verb "to restrain" as to
"hold back or prevent from some course of action" or "restrict, limit."98
7.66 Mexico argues that "due restraint" simply means adopting an appr opriate and reasonable
standard for allowing an investigation to be in itiated, and that it does not involve doing anything
differently in cases of agricultural, as compared with non-agricultural, products.99
7.67 The term "due restraint" has not been interprete d by panels or the Appellate Body to date. To
assist in determining the ordinary meaning of th e terms "due" and "restraint", we look first to
dictionary definitions. Black's Law Dictionary defines "due" as "just, proper, regular, and
reasonable."100 The definition in Webster's New Encyclope dic Dictionary is similar, referring to
"appropriate", "adequa te" and "regular". 101 The New Shorter Oxford English Dictionary defines
"restraint" as "(self-) control; the ability to restrain oneself; reserve; absence of excess or
extravagance." 102 The review of the French and Spanish texts, which are equally authentic,103 suggests
similar interpretations. In the French version the relevant term to be interpreted is the word
"modération". The dictionary Le Grand Robert de la langue française 104 defines "modération" as
"circonspection, pondération, reser ve" and "retenue", which shows that all of these words express
reserve, caution and balancing. Regarding the Spanish terms "debida moderación", the Diccionario de
la lengua española 105 provides for the word "debida" the definition "como corresponde o es lícito"
and "a causa de, en virtud de". 106 "Moderación" is defined as "cordura, sensatez, templanza en las
palabras o acciones" 107 Therefore, considered on the basi s of all three authentic texts of
Article 13(b)(i) the ordinary meaning of "due re straint" is "a proper, regular, and reasonable
demonstration of self-control, caution, prudence and reserve".
7.68 We consider this definition to be consistent with the context of Article 13 as a whole, as well
as with the object and purpose of the provision, which is to provide a "peace clause", during the
implementation period, for Members taking actions permitted under the SCM Agreement against
subsidies that are provided consistent with the provisions of the Agreement on Agriculture.

98 European Communities – Second oral statement, para. 23 citing The New Shorter Oxford English
Dictionary, volume 2, N-Z, p. 2569. Clarendon Press, Oxford 1993. Exhibit EC-39.
99 Mexico – First written submission, paras. 48, 52; Mexico – First oral statement, para. 9; Mexico
response to Panel question 22; Mexico – Second written submission, para. 55.
100 Black's Law Dictionary, 7th Edition, abridged. (2000), p. 405.
101 Webster's New Encyclopedic Dictionary, 2000, p. 310.
102 The New Shorter OED.
103 See the final clause of the WTO Agr eement. See also the Panel Report on EC – Trademarks and
Geographical Indications (US), para. 7.607.
105 Diccionario de la lengua española (segunda edición, 2001).
106 Diccionario de la lengua española (segunda edición, 2001), p. 493.
107 Diccionario de la lengua española (segunda edición, 2001), p. 1030. According to the Collins
Spanish Dictionary (1985) these terms can be translated in En glish with "prudence, wisdom" ("cordura") or
"good sense, sensibleness" ("sensatez") or "restraint, moderation" ("templanza").

7.69 Having determined what the obligation to show "due restraint" requires, we now apply that
standard to the facts of this case to determine whether the European Communities has demonstrated
that Mexico did not comply with this obligation in initiating the countervailing duty investigation.
7.70 The European Communities provides three reas ons why, in its view, Economía failed to
exercise "due restraint" within the meaning of Article 13(b)(i).
108 These are that: (1) Economía did
not wait to hold consultations with the European Co mmunities prior to initiation, but plunged into the
investigation at the first possible moment109; (2) Economía did not spend adequate time investigating,
prior to initiation, whether there were domestic produ cers other than Fortuny, but paused only to take
account of Fortuny's position; and (3) Economía accep ted an application which was clearly based on
"material retardation" and converted it into one of "material injury."110
7.71 We will examine each of these specific circ umstances to determine whether Economía's
actions in the olive oil investigation evince such a lack of restraint as to fall short of the "due restraint"
obligation of Article 13(b)(i) of the Agreement on Agriculture as interpreted above, again assuming
arguendo that that obligation applied to the investigation.
7.72 With respect to Economía 's initiating the c ountervailing duty investigation prior to holding
consultations, we note that Article 13(b)(i) of the Agreement on Agriculture requires investigating
authorities to show "due restraint" in initiating any countervailing duty i nvestigation on products
covered by the chapeau of paragraph (b). As noted in our findings relating to the European
Communities' claim under Article 13.1 of the SCM Agreement, a Member is not required to hold the
consultations referred to in that provision prior to initiation. Therefore, we do not see how the failure
to take an action that is not required for initiation can be considered evidence of a lack of due restraint
in initiating the countervailing duty investigation. We also note that we have found that Mexico did
not infringe its obligations under Article 13.1 of the SCM Agreement to invite the European
Communities to consultations prior to initiation ( see, para. 7.42, supra). Having made this finding,
we do not see how the timing of this invitation is evidence of "haste" or of a lack of self-control or
reserve, as alleged by the European Communities.
7.73 With respect to the lack of investigation into other possible domestic producers besides
Fortuny we note, as described in Section VII.I, that in its application Fortuny asserted that it
accounted for 100 per cent of the olive oil production on the commercial market in Mexico and that
there were no other domestic producers other than those operating on a "local" or "experimental"
basis.
111 Fortuny also provided a table of monthly production for 2000, 2001, and 2002. 112 Economía
sent a "prevención" or supplemental questionnaire to Fortuny asking for, inter alia, additional data on
injury indicators, annual capacity and capacity utilization as well as information on any government
support programmes that may have been affected by the increase of subsidized imports, information
on the world olive oil market, including European production and exports, and audited financial
statements for 2000, for the 2001 separation of Formex-Ybarra, and for 2002 for Fortuny and an

108 European Communities – First written submission, para. 101; European Communities – First oral
Response to Panel question 22.
109 The European Communities clarified in response to Panel question 108 that its reference to
"exceptional haste" in paragraph 101 of its first wr itten submission was only referring to the "final phase
between the internal finalisation of the notice of initia tion and its publication on 16 July. As the EC has
explained in regard to its claim under Article 13, this was such as to deny the EC its right to consultations."
110 Cf. European Communities – Second oral statement, para. 20 (arguing that Mexico "must therefore
be taken to have initiated the investigation on what ever basis it was requested, which in this case [ sic] material
retardation.").
111 Exhibit MEX-41A, Fortuny's response to question 17.
112 Exhibit MEX-51A, Annex 5.

income statement for the like product for 2000-2002.113 Fortuny responded with additional data, some
based on simple worksheets that were in its possession rather than audited financial records that were
in the possession of Distribuidora Ybarra.114
7.74 Economía compared the data provided by Fortuny to information from other sources, namely
the government of Baja Californi a and the article published in Claridades Agropecuarias about the
olive oil industry in Mexico, which were also provided in the application. Economía found that these
other sources corroborated Fortuny's statement that it comprised the entire domestic industry.
7.75 The evidence before us shows that Economía received an application from Fortuny.
Economía, seeking to ensure that it had all the necessary information for initiation, sent additional
questions to Fortuny and awaited a reply. Economía also checked the assertions of Fortuny against
information from independent sources, the govern ment of Baja California and the magazine
Claridades Agropecuarias , which were provided by Fortuny as attachments to its application.
Through this process, which took approximately fo ur months, Economía satisfied itself that it had
information sufficient to meet the requirements for initiating a countervailing duty investigation.
7.76 We find nothing in this behaviour that exhibits a lack of self-control or reserve. Therefore,
we find that Economía did not fail to exercise due r estraint by neglecting to investigate the extent of
the domestic industry prior to initiation.
7.77 The European Communities also alleges that Economía's "conversion" of an application based
on material retardation into one of material injury evinces a lack of due restraint within the meaning
of Article 13(b)(i) of the Agreement on Agriculture.
7.78 In this regard, Mexico argues that Econom ía, upon reviewing Fortuny's application,
concluded that it was not possible in principle to init iate an investigation for material retardation in
respect of an enterprise that had be en producing olive oil since the 1940s. 115 Because of this,
Economía sent additional questions to Fortuny with respect to the history of olive oil production in
Mexico and the production history of Form ex-Ybarra (Fortuny's predecessor company). 116 Economía
concluded that it would be best to initiate an inves tigation in respect of injury in general and then,
during the course of the investigation, determine the specific nature of an y injury caused to the
domestic industry by subsidized imports. 117 Consequently, Economía initiated the investigation on
the basis of "injury" in the broad sense of the term within the meaning of footnote 45 of the SCM
Agreement.118
7.79 We consider Economía's decision to delay initiatio n in order to gather more information from
the applicant and to avoid initiating on a basis not s upported by the evidence in the application to be
indicative of self-control and reserve rather than th e lack thereof. Therefore, we find that the
European Communities has not established that Economía failed to exercise due restraint by
"converting" Fortuny's application from one of material retardation into an investigation of injury.
7.80 In sum, we find that none of the reasons presented by the European Communities
demonstrates a lack of due restraint on the pa rt of Economía. To the contrary, based on our
examination of the facts before us, Economía app ears to have proceeded with prudence and caution,
indicating self-restraint rather than a lack thereof. Therefore, we conclude that the European

113 Exhibit MEX-45.
114 Exhibit MEX-46.
115 Mexico – First written submission, paras. 58-60.
116 Exhibit MEX-45.
117 Mexico – First written submission, paras. 58-60.
118 Mexico – First written submission, paras. 59-60; see also Initiation Resolution (Exhibit EC-13),
para. 54.

Communities has not established as a factual matter th at Economía failed to show due restraint in
initiating the countervailing duty investigation on olive oil.
7.81 Assuming arguendo that Article 13(b)(i) of the Agreement on Agriculture was applicable to
the olive oil investigation, we find that the Eur opean Communities has not demonstrated that Mexico
failed to comply with the requirement in that provision to exempt olive oil from imposition of
countervailing duties "unless a determination of injury or threat thereof is made in accordance with
Article VI of GATT 1994 and Part V of the S ubsidies Agreement". Nor has the European
Communities demonstrated that Mexico failed to show due restraint in initiating the countervailing
duty investigation on olive oil. Therefore, we find that the European Communities has not established
that Mexico acted inconsistently with Article 13(b)(i) of the Agreement on Agriculture.
D.
ARTICLE 12.4.1 OF THE SCM AGREEMENT
7.82 The European Communities asserts that Mexico fa iled to require interested parties to provide
non-confidential summaries of confidential information and that Mexico therefore acted
inconsistently with its obligations under Article 12.4.1 of the SCM Agreement.
1. Arguments of the Parties
7.83 The European Communities asserts that Mexico fa iled to require interested parties to provide
non-confidential summaries of the confidential inform ation that they submitted to Economía and that
such interested parties did not justify their failu re to provide non-confidential summaries by invoking
"exceptional circumstances" within the meaning of Article 12.4.1 of the SCM Agreement.
7.84 Mexico asserts that the interested parti es did furnish non-confidential summaries of
confidential information in compliance with Article 12.4.1. It also argues that the Mexican legal
system allows representatives of interested parties to access confidential information, so that even if
the investigation file did not contain public summaries of information provided by an interested party,
the obligations and objectives in Article 12.4.1 of the SCM Agreement would have been met.
2. Reasoning of the Panel
7.85 Article 12.4.1 of the SCM Agreement reads as follows:
12.4.1 The authorities shall require interested Members or interested parties providing
confidential information to furnish non-c onfidential summaries thereof. These
summaries shall be in sufficient detail to permit a reasonable understanding of the
substance of the information submitted in confidence. In exceptional circumstances,
such Members or parties may indicate that such information is not susceptible of
summary. In such exceptional circumst ances, a statement of the reasons why
summarization is not possible must be provided.
7.86 Article 12.4.1 provides that an investigating au thority shall require interested Members or
interested parties submitting confidential informa tion also to supply non-confidential summaries of
that information for the reco rd. These summaries shall be "in sufficient detail to permit a reasonable
understanding of the substance of the information submitted in confidence".
7.87 Where confidentiality is claimed with respect to a specific document, we consider that the
provision of a public version of that document, from which confidential information has simply been
removed, may not necessarily satisfy the requirements of Ar ticle 12.4.1. This is because what is
required to be summarized pursuant to Article 12.4.1 is the confidential information. The remaining
non-confidential parts of the document may not, by th emselves, be sufficient to convey a "reasonable

understanding" of the substance of the confidentia l information that has been removed so as to
constitute an adequate summarization of that information.
7.88 There may be circumstances in which the information remaining in the public version of a
document may be sufficient, in itself, to pr ovide the required summary of the confidential
information. In such circumstances, no additiona l summary would be required. Such circumstances
are likely to be limited, however, given that what the SCM Agreement requires is that the summary
conveys a reasonable understanding of the substance of the confidential information. In any event,
the sufficiency of a public version of a docum ent from which confidentia l information has been
removed as a "summary" of the removed information clearly must be determined on a case-by-case
basis.
7.89 Article 12.4.1 recognises that there may be "e xceptional circumstances" in which certain
information may not be "susceptible of summary". In such "exceptional circumstances", a statement
of the reasons why summarization "is not possible must be provided" (emphasis added). While this
provision imposes an obligation on the interested pa rty claiming confidentiality, in our view it also
imposes an obligation on the investigating authority to require that such a statement be provided. This
is consistent with the findings of various panels that have consider ed the equivalent provision in the
Anti-dumping Agreement (Article 6.5.1).
119 We find the reasoning applied in respect of Article 6.5.1
of that Agreement persuasive and applicable to Article 12.4.1 of the SCM Agreement.120
7.90 We also note that, pursuant to Article 12.4.1, such a statement of reasons can substitute for a
non-confidential summary only in "exceptional" circum stances. The use of the word "exceptional"
signifies that the drafters considered that confiden tial information should usua lly be capable of being
summarized. In fact, summarization of confidential information is expected to be the norm, as it is
only in "exceptional circumstances" that summariza tion of the confidential information will not be
possible. In such circumstanc es, the interested Member or party concerned must provide an
explanation of why the summarization is not possible.
7.91 The panel in Mexico – Steel Pipes and Tubes considered the obligations of an investigating
authority in assessing an assertion that summarization is not possible in the context of the equivalent

119 The panel in Guatemala – Cement II said:

"Although Article 6.5.1 does not explicitly prov ide that "the authorities shall require"
interested parties to provide a statement of the reasons why summarization is not possible, any
meaningful interpretation of Article 6.5.1 must impose such an obligation on the investigating
authorities. It is certainly not possible to conclude that the obligation concerning the need to
provide a statement of reasons is an obligation imposed exclusively on the interested party
submitting the information, and not the investigating authority, since the Anti-Dumping
Agreement is not addressed at interested parties. The Anti-Dumping Agreement imposes
obligations on WTO Members and their investiga ting authorities. Accordingly, in our view
Article 6.5.1 imposes an obligation on investigating authorities to require parties that indicate
that information is not susceptible of summary to provide a statement of the reasons why
summarization is not possible."

Panel Report, Guatemala – Cement II , para. 8.213. See also Panel Report, Mexico – Steel Pipes and
Tubes at para. 7.379 and Panel Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 –
Argentina), para. 7.135.
120 Consistent with previous panels (Panel Report, US – Countervailing Duty Investigation on DRAMs ,
para.7.351) as well as the Ministerial Decl aration on Dispute Settlement Pursuant to the Agreement on
Implementation of Article VI of the Gene ral Agreement on Tariffs and Trade 1994 or Part V of the Agreement
on Subsidies and Countervailing Measures , we will be guided by the Appellate Body and panel jurisprudence
on the obligations in Article 6.5.1 of the Anti-dumping Agreement, which is identical to Article 12.4.1 of the
SCM Agreement.

provision of the Anti-dumping Agreement (i.e. Article 6.5.1 of the Anti-dumping Agreement). There,
the panel concluded:
There is no express provision regulating what should occur in the circumstance where
an investigating authority considers that a request for confidentiality is warranted,
beyond the obligation to treat such information as confidential. Nor does the text of
the Article 6.5 or 6.5.1 contain any express obligation relating to how an investigating
authority should decide in respect of a party's assertion that summarization of
confidential information is not possible, nor how an investigating authority should or
must communicate any decision on this matter.
121 (footnotes omitted) (emphasis in
original)
7.92 We differ with the above reasoning in that, while Article 12.4.1 does not set out any specific
mechanism by which an investigating authority shal l evaluate an assertion that summarization is not
possible, the text of Article 12.4.1 nonetheless pr ovides a clear indication of the basis of this
evaluation: the investigating authority should examine the reasons given for not summarizing the
confidential information and determine whether, indeed, these reasons constitute "exceptional"
circumstances. By considering the extent to which an interested Member or party has shown
exceptional circumstances, an investigating authority can determine whether the interested Member or
party has substantiated that summarization is not possible.
7.93 Before turning to the facts of this case, we brie fly consider Mexico's argument that its system,
by providing certain representatives of interested parties with access to confidential information,
means that even if no public summaries were provi ded the "obligation and objective established in
Article 12 of the SCM Agreement would in any case be complied with".122
7.94 The panel in Mexico – Steel Pipes and Tubes rejected a similar argument that Mexico's
limited disclosure system excuses it from complyin g with the obligation in Article 6.5 of the Anti-
dumping Agreement to require summaries of confidential information. 123 We agree with that panel
and find no textual support in Article 12.4.1 of the SCM Agreement for the proposition advanced by
Mexico. We therefore adopt the following statement of the panel in Mexico – Steel Pipes and Tubes:
Notwithstanding the foregoing, while such a system of limited disclosure is certainly
envisaged by Article [12.4.1 of the SCM Agreement ], and may certainly act as a
supplement to a Member's fulfilment of its obligations under Article [12.4.1 of the
SCM Agreement], we find no textual basis in Article [12.4.1 of the SCM Agreement]
that would indicate to us that permitting limited access to the entire confidential
record to individuals fulfilling certain conditions, provides a derogation from, or
replaces, the obligations of an investigati ng authority under Artic le [12.4.1 of the
SCM Agreement] to require justification for treatment of information as confidential
and, if such treatment is justified, to require non-confidential summaries of the
confidential information, or, alternativel y, to require justification for the non-
summarization of certain information. (footnotes omitted)124
7.95 In its submissions before us, Mexico argued that the panel report in Mexico – Steel Pipes and
Tubes supports its position that Mexico's access regi me fulfils its obligations in Article 12.4.1. 125 On

121 Panel Report, Mexico – Steel Pipes and Tubes, para. 7.382.
123 Again, in the context of an examination of the equivalent provision of the Anti-dumping Agreement.
124 Panel Report, Mexico – Steel Pipes and Tubes, para. 7.398.
125 For example at paragraph 81(a) of its Second written submission Mexico says:

the basis of the above cited passage, we disagree with Mexico's characterization of that panel's
conclusions. While that panel ultimately found that Mexico had not acted inconsistently with
Article 6.5.1 of the Anti-dumping Agreement , it did not rely on Mexico's arguments relating to its
access regime.
7.96 We now consider whether, in this case, Me xico required non-confidential summaries
satisfying the requirements of Article 12.4.1 of the SCM Agreement . Although the entire
administrative record was not before us, we asked Mexico to provide us with certain documents,
which the European Communities specifically alle ged did not contain non-confidential summaries of
confidential information in the administrative record. 126 Mexico provided us and the European
Communities with the requested documents. 127 We find, in respect of the documents that we have
examined, that there is a "public version" of each submitted document that contained confidential
information. The public versions of all of these documents consist of the original documents from
which all of the confidential information was simply removed. None of these documents contains any
summary of the deleted confidential information.
7.97 We recall that Article 12.4.1 requires, in the fi rst instance, that the submitting party provide a
summary of the information that is claimed to be confidential. This summary must be sufficient to
permit a reasonable understanding of the substance of that information. Mexico does not dispute that
no stand-alone summaries of the confidential informati on were provided. Rather, its argument is that
the "public" versions of the documents in themse lves are the non-confidential summaries satisfying
the requirements of Article 12.4.1. In this regard, Mexico states:
[The] only thing missing is the content between square brackets, which is confined to
figures and a few words or sentences, so th at even if these figures and words cannot
be seen, the non-confidential summaries are in sufficient detail to permit a reasonable
understanding of the information submitted in confidence.128
7.98 We do not accept Mexico's characterisation of th e public versions in question. While in
certain instances it may be possible to glean a reaso nable understanding of the deleted information by
considering the non-confidential information surrounding it, this is often not the case. For example,
in responding to a request for additional information 129, Fortuny removed significant information
regarding: Fortuny's operations (including details in respect of equipment, purchasing and sourcing of
raw materials, yields, and distribution); the virgin olive oil production pro cess; the nature of the
alleged injury; and plans and attempts to restart production. No summaries were provided in respect
of the deleted information, and we do not find it possible to obtain a reasonable understanding of the
deleted information by reading the public version of the document. 130 Given the extensive deletions

"We repeat that, as indicated in the final panel report in Mexico – Steel Pipes and Tubes, even
if the summaries had not been in sufficient detail, there would not have been any violation on
Mexico's part because the system of access to confidential information perfectly supplements
the fulfilment of Mexico's obligations under Article 12.4 of the SCM Agreement."

126 European Communities – First written submission, paras. 105-106.
127 Fortuny Application (Public Version)(Exhibit MEX-41A); Questionnaire Response and Annex to
Fortuny Application (Public Version)(Exhibit MEX-41B); Letter from Fortuny dated 9 November 2004 (Public
Version)(Exhibit MEX-42A); Appendix 2 of Letter from Fortuny (Public Version) (Exhibit MEX-42B);
Submission of Distribuidora Ybarra (Public Versio n) (Exhibit MEX-43A); Notification of Initiation and
Sending of Application to European Communities (Exhibit MEX-44).
128 Mexico – Second written submission, para. 81(a).
129 Exhibit MEX-42 A.
130 Similar wholesale deletions without summarization are evident in other documents. including the
Fortuny Application (Public Version) Exhibit MEX-41A (see, for example, redactions to paragraphs 86 and 93)

from certain documents and the lack of specific summar ies of any of the deleted information, we find
that the investigating authority did not require th e interested Members and interested parties to
provide non-confidential summaries in sufficient deta il to permit "a reasona ble understanding of the
substance of the information submitted in confidence" consistent with Article 12.4.1.
7.99 We next consider whether any party submitting non-confidential documents from which
confidential information was deleted invoked "e xceptional circumstances" and provided an
explanation as to why summarization was not possible, as contemplated in the last sentence of Article
12.4.1. The European Communities' position in these proceedings is that no interested party invoked
"exceptional circumstances". However, our review of the documents on the record reveals that certain
interested parties, namely Fortuny and Ybarra, in cover letters accompanying information submissions
to Economía asserted that the information for wh ich confidentiality was claimed could not be
summarized.
7.100 For example, the cover letter to Fortuny's application contains the following statement:
It is necessary to clarify that it is not possible to prepare public summaries of the
information and documents that we classifi ed as confidential because of the nature of
such information and documents. Also, it is necessary to emphasize that consultation
of the public version of the presented documents gives a reasonable and integral
understanding of what is submitted.
131
7.101 We consider that general statements of this sort are not sufficient as they constitute an
unsupported assertion rather than a statement of reasons as required by Article 12.4.1. In this case,
none of the documents provided to us containing bl anket requests for confidential treatment make any
attempt to explain the existence of exceptional circumstances that made it impossible to summarize
the specific and varied information for which co nfidentiality was claimed. Consequently, these
documents contain no basis on which Economía could ha ve reached a conclusion as to whether or not
"exceptional circumstances" in fact existed.
7.102 Based on our reasoning above, we conclude that Mexico has acted inconsistently with its
obligations in Article 12.4.1 of the SCM Agreement.
E. ARTICLE 12.8 OF THE SCM AGREEMENT
7.103 The European Communities claims that Mexico failed to comply with its obligations in
Article 12.8 of the SCM Agreement because Economía failed to inform the interested Members and
interested parties of the "essential facts under cons ideration which form the basis for the decision
whether to apply definitive measures" as required by this provision.
1. Arguments of the Parties
7.104 The European Communities claims that Economía did not provide any written
communication to the interested Members and interested parties informing them of the "essential
facts under consideration which form the basis for the decision whether to apply definitive measures"

and Questionnaire Response and Annex to Fortuny Application (Public Version) where information contained in
paragraphs 19-26 is removed without summarization.
131 Fortuny Application (Public Version), Exhibit MEX-41A. Similar statements are made by Fortuny
in Fortuny's answer to the Prevencíon (Public Versio n), Exhibit MEX-46A and by Ybarra in Submission of
Distribuidora Ybarra (Public Version) , Exhibit MEX-43 A and Distribuidora Ybarra's response to Information
Request, Exhibit MEX-52C.

as required by Article 12.8 of the SCM Agreement, and that Mexico therefore has acted inconsistently
with its obligations under that provision.132
7.105 Mexico disagrees that no disclosure was made, and argues that Economía made the required
disclosure via the Preliminary Resolution. 133 Mexico maintains that no further disclosure was
necessary because no new essential facts were gathered between the issuance of the Preliminary and
Final Resolutions, the latter of which form ed the basis for th e definitive measures.134 In this context,
Mexico states that Economía conducted a verification of Fortuny after the Preliminary Resolution was
issued, and that this verification only confir med the information that Fortuny had submitted
previously, for which reason the verification did not generate any new essential facts. Mexico argues
that the panel report in Argentina – Ceramic Tiles supports its position, as that panel found that the
requirements of Article 12.8 can be met in a variety of ways depending upon the facts of the case,
including through the issuance of a preliminary determination.135
7.106 In response to Mexico's argument that Econom ía's Preliminary Resolution constituted the
disclosure of "essential facts" the European Commun ities argues that that Resolution was inadequate
for that purpose, inter alia, because it was not identified as performing that function.136
2. Reasoning of the Panel
7.107 Article 12.8 of the SCM Agreement provides as follows:
The authorities shall, before a final determ ination is made, inform all interested
Members and interested parties of the essen tial facts under consideration which form
the basis for the decision whether to appl y definitive measures. Such disclosure
should take place in sufficient time for the parties to defend their interests.
7.108 We recall that, as the party making the claim, the European Communities bears the burden of
establishing a prima facie case of the alleged inconsistency. From this standpoint, we note that the
main disagreement between the parties is factual, namely whether Economía's Preliminary Resolution
satisfied the requirement in Article 12.8 to disclose "essential facts". In particular, Mexico does not
assert that Economía provided the interested Members a nd interested parties with a specially prepared
"essential facts" document, but instead points to th e Preliminary Resolution as the means by which it
complied with its obligations unde r Article 12.8. The European Communities, for its part, does not
argue that there was no Preliminary Resolution, or that Article 12.8 imposes an obligation to produce
a separate "essential facts document". Instead the European Communities maintains that the
Preliminary Resolution did not satisfy the requireme nts of Article 12.8, in part because it was not
identified as performing this function, and in part because factual evidence was gathered after the
issuance of that Resolution, some of which must have constituted new "essential facts".
137
7.109 The European Communities argues that a prel iminary determination could "hardly ever"
provide adequate disclosure of essential facts, inter alia because confidential company-specific
information cannot be revealed in such a public document, and because a preliminary determination
provides the justification for provisional measures a nd there could be further factual investigations
following the preliminary determination that could produce "new or changed essential facts". 138 The

132 European Communities – First written submission, paras. 108-109.
133 Mexico – First written submission, paras. 92-94.
134 Mexico – Response to Panel question 35; Mexi co – Second written submission, para. 93 citing
Mexico – Response to Panel question 32.
135 Mexico – Response to Panel questions 32 and 35.
136 European Communities – First oral statement, para. 64.
137 Ibid., paras. 64-68; European Communities – Response to Panel question 33..
138 European Communities – Response to Panel question 33.

European Communities does not assert that a preliminary determination can never, as a legal matter,
satisfy the disclosure requirement in Article 12.8, but it argues that in the olive oil investigation,
Economía committed a legal error by not informing the parties that the Preliminary Resolution was
serving this purpose, thereby denying them the opport unity to "defend their interests" as required by
Article 12.8.
139 Mexico argues that previous panels, particularly the panel in Argentina – Ceramic
Tiles, have made clear that Article 12.8 disclosure ca n be made via prelimin ary determinations, and
that in the olive oil investigation this was su fficient because none of the essential facts changed
between the preliminary and final determinations. Thus, the precise question raised by this claim is
whether the European Communities has established th at the Preliminary Resolution in the olive oil
investigation did not satisfy the disclosure obligation in Article 12.8.
7.110 We start our analysis by considering the ordina ry meaning of the term "essential facts" in
Article 12.8, and in this regard , we agree with the panel in Guatemala – Cement II that the "essential
facts" are not just any facts of record.140 Rather, as the plain language of Article 12.8 makes clear, the
"essential facts" are the particular facts that "f orm the basis for the decision whether to apply
definitive measures". In other wo rds, these are the specific facts that underlie the investigating
authority's final findings and conclusions in respect of the three essential elements – subsidization,
injury and causation – that must be present for a pplication of definitive measures. Thus, while we
note the findings of the panel in Argentina – Ceramic Tiles that a preliminary determination is one
possible means of making the required disclosure, this will not necessarily be so in every case. In
particular, if new "essential facts", i.e., facts that bring about a change in the authority's findings
relating to subsidization, injury or causation, are in corporated into the record after the issuance of the
preliminary determination, then that determinati on by definition could not satisfy the disclosure
obligation in Article 12.8.
7.111 The allegation of the European Communiti es is along the same lines. The European
Communities does not challenge the possibility as such of making disclosure under Article 12.8 via a
preliminary determination, but rather argues that in the olive oil investigation, the preliminary
determination was not sufficient for this purpose based on the facts, namely that Economía obtained a
large volume of factual material after issuing the Preliminary Resolution, including at the verification
of Fortuny. Specifically, the European Communities references three documents, Exhibits MEX-42A,
51D, and 51E1, which it asserts were submitted after the Preliminary Resolution and include
substantial data regarding Fortuny.
141 However, the European Commun ities maintains that it is "not
in a position to state definitivel y whether these constituted essential fact s because in the versions of
the documents that Mexico has provided the c onfidential information has been blanked out" 142. The
European Communities, states, nevertheless, that "it can hardly be imagined" that among these "there
was not some information that would not qualify as 'essential facts'" 143, and further that the interested
parties were not informed that the Preliminary Resolution was performing the Article 12.8 disclosure
function.

139 European Communities – Second written submission, para. 33.
140 Panel Report, Guatemala – Cement II , para. 8.229. The Cement panel ruled on the counterpart
provision, Article 6.9, of the Anti-dumping Agreement . Given that that provision is worded identically to
Article 12.8 of the SCM Agreement, we consider that the Cement panel's reasoning is fully applicable to the
issue before us. The panel highlighted that the provision is concerned with the identification of the facts on the
record that are "important" to the authority's determination. The panel stated that "[a]n interested party will not
know whether a particular fact is 'important' or not un less the investigating authority has explicitly identified it
as one of the 'essential facts' which form the basis of the authority's decision whether to impose definitive
measures." Id. at para. 8.229.
141 European Communities – Second written submission, paras. 34-37.
142 Ibid., para. 35.
143 Ibid., para. 37.

7.112 Concerning this latter argument of the European Communities, that pursuant to Article 12.8
Economía should have informed the interested parties that the Preliminary Resolution was performing
the Article 12.8 disclosure function, the European Communities identifies the problem as one of due
process. In particular, the European Communities ass erts that because the interested parties did not
know that the Preliminary Resolution was performing th is function, they did not have the opportunity
to "defend their interests" in respect of the "essential facts" contained therein. 144 The record of the
investigation does not support this assertion, however. To the contrary, the Final Resolution identifies
a number of steps in the investigation following th e issuance of the preliminary determination during
which the parties had the opportunity to present their views, including specifically in respect of the
Preliminary Resolution. These steps, which ar e summarized at paragraphs 29-69 of the Final
Resolution, included technical meetings between Ec onomía and certain interested parties, a call by
Economía for written submissions of arguments a nd evidence in respect of the Preliminary
Resolution, consultations between the government s of the European Communities and Mexico, a
public hearing, and an opportunity following th e hearing to make further written submissions
concerning any aspect of the proceedings.
7.113 Indeed, the assertion of the European Communities is not that the interested parties had no
opportunity to present their views in respect of the Preliminary Resolution as such, but rather that they
did not have the opportunity to present their views in respect of that Resolution in the guise of a
document disclosing the "essential facts" pursuant to Article 12.8. Given that the Preliminary
Resolution indicated that the facts stated therein we re the basis of the preliminary determinations of
subsidization, injury, and causa tion and given the numerous opportun ities provided to the interested
parties following the issuance of the Preliminary Re solution to provide such evidence and arguments
as they wished, we do not consider that the Europ ean Communities has established that the interested
parties were denied the opportunity to defend their interests in respect of the "essential facts".
145
7.114 We now turn to the factual aspect of this claim, i.e., that new "essential facts" almost certainly
were obtained by Economía following its preliminar y determination but were not disclosed. Given
that the European Communities is the party asserti ng the claim it bears the burden of identifying any
particular facts of record in the olive oil case that were not disclosed in the Preliminary Resolution but
were nevertheless "essential facts" relied upon by Economía in making its final determinations in
respect of subsidization, injury, and/or causation. Any such undisclosed "essential facts" relied upon
by Economía should be evident in the Final Resolution.
7.115 In this regard, we note that in its sec ond written submission, the European Communities
identified several exhibits that were submitted to Economía after the Preliminary Resolution, which it
argued must have contained essential facts. However, the European Communities did not identify any
specific determination in the Final Resolution that relied upon the information in those exhibits. In
response to a direct question from the Panel aski ng the European Communitie s to identify specific
"essential facts" that were not included in the Prelim inary Resolution, but formed part of the basis of
the determination in the Final Resolution, the Eu ropean Communities' response, however, consists
only of brief and generally-worded assertions refe rring to large documents without referring to any
specific fact of record, nor does the European Co mmunities attempt to demonstrate that new facts
changed the basis for Economía's de terminations with respect to th e key elements – subsidization,
injury and/or causation – in the Final Resoluti on as compared with the Preliminary Resolution. 146 As

144 Ibid., para. 33.
145 We recall here that the basic questions addresse d by preliminary determinations are the same as
those addressed by final determinations, namely subsidization, injury and causation.
146 Panel Question 120 reads: "Please indicate which specific 'essential facts', were not included in the
Preliminary Resolution, but formed part of the basis of the determinations in the Final Resolution."

such, we do not find that the European Communities has established a prima facie case that Economía
failed to disclose the "essential facts" as required by Article 12.8 of the SCM Agreement.
7.116 For the foregoing reasons, we find that the European Communities h as not established that
Mexico acted inconsistently with its obligations under Article 12.8 of the SCM Agreement.
F.
ARTICLE 11.11 OF THE SCM AGREEMENT
7.117 The European Communities asserts that Mexico failed to conclude its investigation within
one year, and in no case more that 18 months after its initiation of the investigation in violation of
Article 11.11 of the SCM Agreement.
1. Arguments of the Parties
7.118 The European Communities asserts that Mexico h as acted inconsistently with its obligations
in Article 11.11 of the SCM Agreement , because the investigation lasted more than 24 months. In
particular, the European Communities argues that the investigation was initiated on 2 July 2003147 and
was concluded on 1 August 2005. It is the position of the European Communities that Article 11.11
contains an absolute limit (18 months) on the length of an investigation, an d that Mexico exceeded
this limit.148
7.119 Mexico does not deny that its investigation last ed more than 18 months. It argues that the
purpose of Article 11.11 is "to protect the interest ed parties from any unjustified delay or inaction"
and that delays were caused by requests for extens ions from the interested parties and requests that
Economía consider additional information at late stages in the investigation. Consequently, any delay
in the investigation did not subvert the purpose of Article 11.11.149
2. Reasoning of the Panel
7.120 Article 11.11 reads as follows:
Investigations shall, except in special circ umstances, be concluded within one year,
and in no case more than 18 months, after their initiation. (emphasis added)
7.121 We consider that the requirement set out in Article 11.11 is clear and unequivocal. This
provision starts with a general rule – that investig ations must be concluded within one year — and
then provides for a limited, conditional exception. In particular, in "special circumstances" an

The European Communities response states that "[b]y its nature, the preliminary resolution cannot
constitute disclosure of essential facts that had indeed arisen after the preliminary resolution, inter alia, on the
following issues:
- the basis for the changes after the Preliminary Resolution in the level and form of the duties and in the
methodology followed for the calculation of the subs idy margins and injury margins, as well as the
methodology for the establishment of the level of the duty;
- the results of the on-spot-investigations, in partic ular to the EC exporter Borges, which was found to
be not-integrated and which furthe r substantiated the EC request of a pass-through analysis, and to
Fortuny, which was not adequately investigated, and
- Distribuidora's comments on Fortuny's prices and costs."
147 We note our earlier finding in paragraph 7.31 that the investigation was initiated on 17 July 2003.
However, regardless of whether the date of initiation was 2 or 17 July 2003, the investigation still lasted longer
than 18 months, so this earlier finding has no substantive effect on the European Communities' substantive
claim under Article 11.11 of the SCM Agreement.
148 European Communities – First written submission, para. 113; European Communities – First oral
statement, para. 74.
149 Mexico – First written submission, paras. 101-106.

investigation may be prolonged, but "in no case" may the total period of investigation exceed
18 months. We see no basis in this provision (nor authority in any other part of the SCM Agreement)
to prolong an investigation beyond 18 months for any reason, including requests from interested
parties.
7.122 Concerning the facts of the case, while Mexi co disagrees with the European Communities
about the exact date of initiation (see section VII.B, supra), it does not deny that the olive oil
investigation lasted longer than the 18-month maxi mum provided for in Article 11.11. We recall our
finding, above, that the date of initiation was 17 July 2003. As such, the total length of the
investigation was more than 24 months, i.e., well in excess of the 18-month absolute maximum.
7.123 We find that Mexico's investigation in this case was concluded more than 18 months after the
date of its initiation, and that Article 11. 11 does not permit such prolongation under any
circumstances. For that reason, we conclude that Mexico has acted inconsistently with its obligation
under Article 11.11 of the SCM Agreement.
G. ARTICLES 1 AND 14 OF THE SCM AGREEMENT
7.124 The European Communities claims that Mexico has acted inconsistently with Articles 1 and
14 of the SCM Agreement by failing "to calculate the benefit conferred on the recipient pursuant to
paragraph 1 of Article 1 of the SCM Agreement and to apply the method used to each particular case
in a transparent way which is adequately explained, in violation of Article 14 of the SCM Agreement."
1. Arguments of the parties
7.125 The European Communities claims that Mexico has acted inconsistently with Articles 1 and
14 of the SCM Agreement by failing "to calculate the benefit conferred on the recipient pursuant to
paragraph 1 of Article 1 of the SCM Agreement and to apply the method used to each particular case
in a transparent way which is adequately e xplained, in violation of Article 14 of the SCM
Agreement."150 In its submissions before us in suppor t of this claim, the European Communities
argues that Mexico acted inconsistently with Ar ticles 1 and 14 because Economía failed to conduct a
"pass-through" analysis to determine the extent to which any benefits received by olive growers for
the production of olive oil were transmitted to the exporters of olive oil to Mexico. 151 In particular,
the European Communities argues th at a "pass-through" analysis was required because: (1) the oil
obtained by simple crushing of the olives was an input into the product finally exported; and (2) the
persons upon whom the counterva iling measures were imposed (identified by the European
Communities as the exporters) were not related to th e initial recipients of the subsidy, the olive
growers, and the product had been the subject of arms' length transactions while moving between
them.
152 According to the European Co mmunities, olives are an input into the production of olive oil,
and the olive oil obtained from extraction is an inpu t into the olive oil exported to Mexico, because
the extracted oil had to undergo further processing (refining, blending, bottling, packaging) before it
was exported.153 In response to questioning from us, the European Communities clarified that, in its
view, a "pass-through" analysis is required even when only the second of the two conditions is met,
i.e., when the exporters of olive oil are not related to the olive growers who receive the subsidies.154

150 WT/DS341/2, at tiret 6.
151 See, e.g., European Communities - First written submission, paras. 121, 128, and 135; Response to
Panel question 43.
152 European Communities - Response to Panel question 43.
153 Ibid.
154 European Communities - Response to Panel question 121.

7.126 Concerning its allegation of incons istency with Article 1.1 of the SCM Agreement , the
European Communities argues that th e crucial issue is whether the olive oil imported into Mexico
from the European Communities is "subsidized" in the sense of the SCM Agreement. According to
the European Communities, although the SCM Agreement says little about the relationship between
the subsidy and the product in relation to countervail, Article VI:3 of the GATT 1994 makes clear that
countervailing duties may only be imposed where there is a "'bounty or subsidy ... on the manufacture,
production or export of [an imported] product'", such that "the subsidy must be linked to some activity
concerning the product".
155 We note here, however, that the European Communities brings no claim
under Article VI:3 of the GATT 1994 in relation to the "pass-through" issue. As regards Articles 1
and 14, the European Communities argues that "the Agreement does have a lot to say about [...] the
notion of benefit", first, in Article 1 which exp licitly makes benefit an element of "the notion of
subsidy"156; and, second, in Article 14, which "addresses the 'calculation of the amount of a subsidy in
terms of the benefit to the recipient'." 157 The European Communities then states that what is to be
"offset" in the sense of Article VI:3 of the GATT 1994 is the benefit conferred by the subsidy. 158 The
European Communities elaborates that "ben efit is addressed by Article 1.1 of the Agreement, which
defines it as one of the basic constitu ents of the concept of subsidy" 159, and that "[b]enefit is also
addressed by Article 14" which, in "lay[ing] down e xplicit rules for the methods by which benefit is
to be calculated, does nothing to detract from the notion of pass through as elaborated by the EC". 160
The European Communities also ar gues that "Article 14 puts beyond doubt the principle that the
calculation of subsidy is one that is based absolute ly on commercial realities, and ... that it is on these
realities that the notion of pass-through is founded."161
7.127 The European Communities argues that because the subsidy was given to the olive producers,
while other persons exported the product, olive oil, to the Member applying the countervailing
measure, the investigating authorities needed to est ablish that the subsidy was passed through to the
other persons. 162 The European Communities cites the panel report in US – Canadian Pork which
arose under the GATT 1947, as indicating that the existence of pass-through of the subsidy from live
swine to pork producers would need to be determined by examining the degree to which the prices of
the subsidized input product (live swine) were belo w market levels when the input was sold to the
producers of the investigated processed product ( pork). The European Communities further argues
that the criterion of arms'-length sales has been estab lished by the Appellate Body in the context of
privatization of subsidized state-owned companies. In that context, according to the EC, "the criterion
of arm's-length sale was coupled with that of sale for 'fair market value'".163
7.128 Mexico argues that no pass-through analysis was necessary in the olive oil investigation.
According to Mexico, the subsidy programme at i ssue was a direct subsidy on the production of the
imported product, olive oil, and had been notified as such by the European Communities to the WTO
Committee on Agriculture.
164 Mexico asserts that since the investigation was not related to an input
product (olives) but to olive oil, which was the sa me product exported to Mexico, the investigating
authority was not bound to conduct a pass-through analysis. 165 Mexico submits that the product that

155 European Communities - First written submission, paras. 123-124.
156 Ibid., para. 125.
157 Ibid.
158 Ibid., para. 127.
159 European Communities - Response to Panel question 46.
160 Ibid.
161 Ibid.
162 European Communities - First written submission, para. 128.
163 Ibid. paras. 130-131, citing Panel report in US – Canadian Pork and Appellate Body report in US –
Countervailing Measures on Certain EC Products.
164 Mexico - First written submission, paras. 119 et. seq .; Mexico - Second written submission,
paras. 105 et seq.
165 Mexico - Response to Panel question 43.

was subject to the investigation was olive oil in all its forms, from first crushed to blended and
refined.166 Mexico argues that the EC Regulation est ablishing the programme, and the amendments
thereto, make clear that the programme concer ned a subsidy for olive oil and not for olives. 167
Mexico argues that for these reasons, th e jurisprudence on pass-through in the US – Canadian Pork
and US – Softwood Lumber IV disputes is not applicable in this case.168
7.129 Concerning the provisions of the SCM Agreement cited by the European Communities,
Mexico argues that neither Article 1 nor Article 14 contains obligations to conduct a pass-through
analysis as claimed by the European Communities. Re garding Article 1, Mexico submits that its text
contains no requirement to provide a reasoned explana tion of the existence of a subsidy or the need to
undertake a pass-through analysis of the benefit. Ra ther, Article 1 only establishes, in a conceptual
way, which elements must be present in order to determine that a subsidy exists. 169 Mexico recalls
that the European Communities is not arguing before the Panel that the aid scheme for olive oil was
not a subsidy. 170 Regarding Article 14, Mexico argues th at this provision neither contains nor
envisages any obligation to conduct a pass-through analys is of the benefit of a subsidy, and instead
only provides guidelines applicable to the calculation of a benefit.171
2. Reasoning of the Panel
(a) "Pass-through" of Subsidy Benefits
(i) "Pass-through" Analysis in WTO Law
7.130 We start our analysis by examining the basis in WTO law for the obligation to conduct a pass-
through analysis in a countervailing duty investigation. This issue h as been addressed specifically in
two prior disputes, notably in US – Canadian Pork , a case under the GATT 1947, and more recently
by the Appellate Body in US – Softwood Lumber IV .172 Both of these disputes have established that
Article VI:3 of the GATT requires an investigating authority in a countervailing duty investigation to
conduct a pass-through analysis in certain circumstances, and in Softwood Lumber IV , the panel and
the Appellate Body found the same requirement in footnote 36 of Article 10 of the SCM Agreement.
7.131 US – Canadian Pork was brought by Canada, under Article VI of the GATT 1947. In that
case, the United States had applied countervailing measures on imports from Canada of fresh, chilled
and frozen pork, while the subsidies that were the s ubject of the investigation had been provided to
Canadian producers of live swine. The United Stat es had effectively concluded that 100 per cent of
the subsidies to swine producers had "passed through" to the producers of pork, although the subsidies
were provided to the swine producers, not the por k producers, and the swine and pork producers were
not vertically integrated, but rather were two separ ate industries composed of unrelated firms. Under
US law at the time, subsidies provided to the pro ducers of a raw agricultural product were deemed to
be provided in respect of production of processed pr oducts made from the raw products if the demand
for the raw product was "substantially dependent" on the demand for the processed product and the
processing operation added only limited value to the raw product.

166 Mexico - Response to Panel questions 122 and 123.
167 Ibid.
168 Mexico - Response to Panel question 57.
170 Ibid., citing the response of the European Communities to Panel question 47.
172 Panel Report, US - Softwood Lumber III (not appealed) , which concerned the United States'
preliminary countervailing duty determinations, came to esse ntially the same conclusion in respect of the pass-
through analysis.

7.132 Canada complained that the US measures were inconsistent with Article VI:3 of the GATT
1947 because the approach under US law did not correc tly establish the amount of subsidization in
respect of the imported product, pork. Canada's ar gument was that the US approach did not ensure
that the countervailing measures were not applied "in excess" of the amount of subsidization of the
product, contrary to the provisions of Article VI:3 of the GATT 1947 requiring that:
No countervailing duty shall be levied on an y product of the territory of a Member
imported into the territory of another Me mber in excess of an amount equal to the
estimated bounty or subsidy determined to have been granted, directly or indirectly,
on the manufacture, production or export of such product in the country of origin or
exportation…..
7.133 The panel in US-Canadian Pork noted that Article VI:3 of the GATT 1947 limited the amount
of countervailing duties to the amount of the subsid y "granted directly or indirectly on the production
of 'such product'"
173, (i.e., the imported product), and found that the United States could apply
countervailing measures on imports of pork only if a s ubsidy had been determined to be bestowed on
the production of pork. In this regard, the panel f ound that application of the two-part test under US
law did not result in such a "determination", because it did not take into account "all facts necessary to
meet the requirements of Article VI:3". The reasoning of the panel was that the pork and swine
industries were separate, and operate d at arms' length, such that th e subsidies granted to the swine
producers could only be considered to have been "bestowed on the production" of pork (as required
by Article VI:3 of the GATT 1947 ) if they had led to a decrease in the level of prices that pork
producers paid for live swine to below the level th ey would have had to pay for swine from other
commercially available sources. Because the US two-part test did not address this issue, the panel
found that it did not meet the requirements of Article VI:3 of the GATT 1947.
174
7.134 The dispute in US - Softwood Lumber IV addressed a similar issue. In that case, the
United States applied countervailing duties on imports of softwood lumber, including remanufactured
lumber, from Canada on the basis of subsidies to th e harvesting of timber, i.e., the production of raw
logs, the input into the production of primary lumber . In particular, the subsidies arose from the fact
that timber harvesters paid "less than adequate remuneration" for a gove rnment-provided good,
standing timber. When the timber was harvested, some of the raw logs were converted to lumber by
sawmills, and some of that lumber was then furt her processed into remanufactured lumber. The
United States applied countervailing measures on the imported lumber, including remanufactured
lumber, to offset the stumpage subsidies.
7.135 Canada claimed that the United States had improperly assumed, rather than analyzing and
determining, that the stumpage subsidies had passed through to producers of the primary and
remanufactured lumber products that were subject to the countervailing measures, and that the
United States thus had acted inconsiste ntly with Articles 10, 19 and 32 of the SCM Agreement and
Article VI:3 of the GATT 1994.
7.136 The panel found in favour of Canada's claims under Article 10, and consequentially Article 32
of the SCM Agreement, as well as Article VI:3 of the GATT 1994, in respect of the situations in which
producers of logs were unrelated to the sawmills th at processed the logs into primary lumber and in
which producers of remanufactured lumber were un related to the lumber manufacturers (sawmills)
from which the remanufacturers obtained their lumber inputs. The panel found that no pass-through
analysis was required where the producer of the input s was related to the lumber producer (i.e., where
the production was vertically integrated). The panel exercised judicial economy in respect of
Canada's Article 19 claim.

173 Panel Report, US – Canadian Pork, para. 4.6
174 Panel Report, US – Canadian Pork, paras. 4.8-4.10.

7.137 The Appellate Body upheld the panel's findings that Article 10 of the SCM Agreement and
Article VI:3 of the GATT 1994 require a pass-through analysis in circumstances in which a subsidy is
received by a producer of an input product, a nd the imported product subject to the countervailing
duty investigation is a different, downstream produc t produced by an unrelated producer using the
subsidized input.
7.138 The Appellate Body began its analysis with Artic le VI:3, noting that this provision "prohibits
levying countervailing duties on an imported product 'in excess of an amount equal to the estimated ...
subsidy determined to have been granted, directly or indirectly , on the manufacture, production or
export of any merchandise'".175 On this basis, the Appellate Body held that it would not be possible to
determine whether countervailing duties were imposed in excess of the amount of the total subsidy
accruing to a processed product without establishing whether, and in what amount, the subsidies
bestowed on the input product flowed through to the downstream, imported product. The Appellate
Body noted that this interpretation was supported by the definition of a "countervailing duty" in
footnote 36 to Article 10 of the SCM Agreement, that is, that a countervailing duty is a special duty
levied for the purpose of "offsetting" a subsidy best owed directly or indirectly upon the manufacture,
production or export of any merchandise. 176
7.139 More specifically, the Appellate Body found that if a subsidy is conferred on the production
of an input product used to produce the imported product, and the producer of the input product is
unrelated to the producer of the imported product, it would not be possible to establish that the
countervailing duties on the imported pr oduct were not in excess of the amount of the subsidy if no
analysis was performed to determine the extent to which the subsidy on the input product was
transferred to the imported product. In the absen ce of a pass-through analysis, the Appellate Body
emphasized, "it cannot be shown that the essential el ements of the subsidy de finition in Article 1 are
present in respect of the processed product", such that "the right to impose a countervailing duty on
the processed product for the purpose of offsetting an input subsidy [...] would not have been
established in accordance with Article VI:3 of the GATT 1994 , and, consequently, would also not
have been in accordance with Articles 10 and 32.1 of the SCM Agreement."
177 Here, the Appellate
Body quoted the panel's finding in US – Canadian Pork that the United States could apply
countervailing measures on imports of pork "only if a subsidy had b een determined to have been
bestowed on the production of pork", and the Appellate Body's ruling in United States –
Countervailing Measures on Certain EC Products that Article VI:3 of the GATT 1994, in conjunction
with Article 10 of the SCM Agreement , require that "investigating authorities, before imposing
countervailing duties, must ascertain the precise am ount of a subsidy attributed to the imported
products under investigation."178
7.140 In US - Softwood Lumber IV , The Appellate Body emphasized that not every situation in
which a subsidy provided on the production of an input product gives rise to an obligation to conduct
a pass-through analysis. This also depends on th e relationship between the producer of the input
product and the producer of the imported, processed product. In that case, the panel's finding that
where the input producer (the timber harvester) its elf also was a lumber producer (i.e., owned a
sawmill), no pass-through analysis was required. Regarding the situation in which the timber
harvester either did not own its own sawmill, or sold some of its raw logs to unrelated sawmills, the
Appellate Body upheld the panel's finding that a pass-through analysis was required to establish the
amount, if any, of the stumpage subsidies that ha d flowed through to the further processed product,
i.e., lumber.179 Finally, the Appellate Body overturned the panel's finding that a pass-through analysis

175 Appellate Body Report, US - Softwood Lumber IV, para. 141.
176 Ibid.
177 Ibid., para. 143.
178 Ibid., para. 145.
179 Ibid., paras. 140-147; 156-159.

was required where inputs in the form of lumber were sold by sawmills to unrelated lumber
remanufacturers, because both the lumber inputs and the remanufactured lumber products were
imported products covered by the co untervailing duty investigation. Thus, the fact that the sawmills
and the remanufacturers were unrelated was not, in th e Appellate Body's view, sufficient in itself to
require a pass-through analysis. Because the lumber, produced by the sawmills, and the
remanufactured lumber, produced by the remanufac turers, were both importe d products covered by
the countervailing duty investigation, the Appellate Body found that a pass-through analysis was not
required.
180
7.141 The disputes in US – Lead and Bismuth II and US – Countervailing Measures on Certain EC
Products addressed a different question concerning tr ansmission of subsidy benefits between
unrelated parties, based on entirely different fact situations those in US – Canadian Pork and US –
Softwood Lumber IV .181 The issue in those cases related to th e effect of the privatization of state-
owned firms on the continued existence of benefits from non-recurring subsidies that those firms had
received in the past. In both of those cases, inconsistencies were found with Articles 10, 19.1, and
19.4 of the SCM Agreement, as well as, in the case of US-Lead and Bismuth II , Article 21.2 of the
SCM Agreement and Article VI:3 of the GATT 1994 , and in the case of US – Countervailing
Measures on Certain EC Products , with Article 14 of the SCM Agreement. All of these provisions
were found to have been violated because the i nvestigating authorities had presumed, instead of
analyzing and determining, that the benefits from the past non-recurring subsidies continued to exist
and had been fully transferred to the firms' new ow ners after the privatizations had taken place, in
spite of the fact that the new owners had paid fair market value for the firms. The United States was
found therefore to have improperly continued to ap ply countervailing duties to imports produced by
the privatized firms, without having established whether any subsidies continued to exist.
7.142 To summarize, the US - Softwood Lumber IV and US – Canadian Pork cases have established
that a pass-through analysis is required in circumstances in which both of the following conditions are
present: (1) a subsidy is provided in respect of a product that is an input into the processed, imported
product that is the subject of the countervail investigation; and (2) the producer of the input product
and the producer of the imported product subject to the countervail investigation are unrelated. This
obligation to conduct a pass-through analys is arises under Article VI:3 of the GATT and Article 10 of
the SCM Agreement . As the Appellate Body stated in US - Softwood Lumber IV , "because
Article VI:3 permits offsetting, through countervailing duties, no more than the 'subsidy determined to
have been granted ... on the manufacture [or] production ... of such product', it follows that Members
must not impose duties to offset an amount of the input subsidy that has not passed through to the
countervailed processed products."182 There is also jurisprudence that in cases in which non-recurring
subsidies were provided to state-owned enterprises that were later privatized at fair market values, the
investigating authorities must conduct examinations to determine whether any of those past subsidies
continued to exist following the privatization. We do not find this latter jurisprudence to be relevant
in the case before us, and therefore we will focus on the cases relating to subsidies provided on input
products.
7.143 The US - Softwood Lumber IV and US – Canadian Pork jurisprudence does not support the
European Communities' argument that whenever there is any arms'-length transaction between
unrelated companies in the chain of the production of an imported product subject to a countervail
investigation, a pass-through analysis must be c onducted. To the contrary, as discussed above, in US

180 Ibid., para. 163. We recall that the situation in that investigation, as in the one that is the subject of
the present dispute, was that the per unit subsidy amount was established on an aggregate, country-wide basis.
181 While the basic question in those cases has someti mes been referred to as "pass-through", it has to
do with the continued existence of benefits from past certain subsidies, and thus is legally and factually distinct
from the situation in US – Canadian Pork and US – Softwood Lumber IV.
182 Appellate Body Report, US - Softwood Lumber IV, para. 141.

– Softwood Lumber IV, the Appellate Body found that wh ere an input product and a further
manufactured product both are covered by the definition of the product subject to the countervailing
duty investigation, a p ass-through analysis is not required even if the producers of the respective
products are unrelated and operating at arms' length.183 If this is the case for certain arms'-length sales
of inputs between unrelated firms, then a fortiori the mere existence of an arms'-length transaction
between firms involving the product under investig ation somewhere between the receipt of the
subsidy and the export of the merchandise should not, by itself, give rise to an obligation to conduct a
pass-through analysis under Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement.
7.144 In this respect, we recall that the SCM Agreement and Article VI:3 of the GATT 1994 both
explicitly permit the application of countervailing measures to "offset" subsidies "bestowed upon [...]
the manufacture, production or export " of a product (emphasis a dded). Taking the simplest
hypothetical example, where a subsidy is provided directly to a producer of a product coming within
the scope of a countervailing duty investigation, we do not see how that company's eventual sale of
the product to an unrelated firm (e.g., a distributor) would have a bearing on the fact that a subsidy
has been bestowed in respect of th e "production" of that product. Ta ken to its logical conclusion, the
argument by the European Communities, that a pass-through analysis must be conducted in every case
in which there are transactions between unrelated firms relating to the product under investigation,
would mean that a pass-through analysis would be re quired in almost every countervail investigation,
even when the subsidy was provided directly on the investigated product. We now turn to examine
the claims of the European Communities in relation to this issue.
(ii) Claim of the European Communities pursuant to Article 1.1 of the SCM Agreement
7.145 For reasons not clear to us, and in spite of the fact that the legal bases for a "pass-through"
obligation in the past jurisprudence were found in Article VI:3 of the GATT 1994 and Article 10 of
the SCM Agreement , the European Communities has based its "pass-through" claims in this case
solely on the basis of Articles 1 and 14 of the SCM Agreement. The Request for Establishment of a
Panel makes no reference in this cont ext to either Article VI:3 of the GATT 1994 or to Article 10 of
the SCM Agreement. In its written submissions and in res ponse to questions from the Panel, the EC
based its "pass-through" claims on Articles 1 and 14 of the SCM Agreement. We are therefore obliged
to consider the European Communities' "pass-thr ough" claims exclusively under the provisions it has
cited.
184 This requires us to consider an entirely nove l legal argument: that an obligation to conduct a

183 Ibid., para. 163.
184 We recall here various rulings of the Appellate Body concerning the duty of panels not to exceed
their terms of reference by ruling on claims not before them. See, e.g., Appellate Body Report, Mexico – Corn
Syrup (Article 21.5 – US) , para. 36 (finding that a failure to scrutinize the request for establishment of a panel
for consistency with Article 6.2 of the DSU could result in the panel exceeding its terms of reference as set forth
under Article 7.1 of the DSU and ultimately result in the panel failing to carry out its functions in accordance
with Article 11 of the DSU); Appellate Body Report, Korea – Dairy , para. 123-24 (confirming that the
identification of the treaty provisions claimed to have been violated by the respondent is "a minimum
prerequisite if the legal basis of the complaint is to be presented at all."); and Appellate Body Report, India –
Patents (US), para. 89 (holding that "a claim must be included in the request for establishment of a panel in
order to come within a panel's terms of reference in a given case"). Concerning pass-through, the European
Communities' Request for Establishment of a Panel makes no reference to either Article VI:3 of the GATT 1994
or Article 10 of the SCM Agreement. Paragraph 6 of that Request refers to "the failure to calculate the benefit
conferred on the recipient pursuant to paragraph 1 of Article 1 of the SCM Agreement and to apply the method
used to each particular case in a transparent way which is adequately explained, in violation of Article 14 of the
SCM Agreement". In its arguments before us, the European Communities pursues this claim based on the issue
of pass-through. Paragraph 4 of that Request alleges "the failure of the Mexican authorities to properly inform
the interested parties and to provide reasonable and adequate explanation on the existence of subsidisation,
notably as regards pass-through of any benefit, in violation of Articles 12.8, 22.3 and 22.5 of the
SCM Agreement. Before us, however, the European Communities did not pursue the claims in paragraph 4 as

"pass-through" analysis in a countervail inves tigation exists in Articles 1 and 14 of the SCM
Agreement.
185
7.146 Turning first to the Europ ean Communities' claim pursuan t to Article 1.1 of the SCM
Agreement, it is well established that the definition of "subs idy" set forth in that provision applies to
the entire SCM Agreement186 as well as to the relevant provisions of Article VI of the GATT 1994.
This definition provides, in relevant part:
Article 1

Definition of a Subsidy

1.1 For the purpose of this Ag reement, a subsidy shall be
deemed to exist if:
 (a)(1) there is a financial contribution by a government or
any public body within the territory of a Member (referred to
in this Agreement as "government") ...
and
 (b) a benefit is thereby conferred.
7.147 The European Communities' "pass-through" claim appears to be based on the definition of a
subsidy in Article 1.1 and, in particular, on the element of "benefit" in subparagraph (b) of that
provision. The European Communities' argument is that Mexico did not conduct a pass-through
analysis, that it should have done so in the circumst ances of this investigation, and that this failure
was inconsistent with the "benefit" requirement of Article 1.1, because "the element of the definition
of subsidy with which the notion of pass through is most closely linked is that of 'benefit'".
187 The
European Communities also cites Article 14 in the c ontext of "benefit", stating that this provision
addresses the calculation of benefit in terms of bene fit to the recipient, an d establishes that such
calculation must be based on "commercial realitie s", which are the basis for the notion of pass-
through.188
7.148 The European Communities declined to elaborat e further its legal arguments regarding how,
precisely, Articles 1 and 14 in themselves require a pass-through analysis, in spite of our specific
invitations at both the first and second meetings with the Panel to do so.189 In particular, we asked the
European Communities to provide a legal analysis of the provisions it cited and to explain its legal
arguments in detail, on the basis of the texts of those provisions, the Vienna Convention, and past case
law, as to precisely how the obligation to conduct a pass-through analysis lies in Articles 1 and 14.

regards pass-through. See section VII.E, supra for our discussion of the Eu ropean Communities' claim under
Article 12.8 (essential facts) as raised in its submissions before us.
185 We questioned the European Communities concerning why it had not cited the provisions in which,
in past disputes, the requirement to conduct a pass-through analysis had been found. As described at
paragraph 7.147, infra, the essence of the European Communities' answers was that the provisions it cites refer
to the concept of "benefit".
186 See, for example, the Panel report in US – Softwood Lumber IV , para. 7.104: "The chapeau of
Article 1.1 SCM Agreement explicitly states that the concept and definition of what constitutes a 'subsidy', as set
forth in that Article, applies to the entire Agreement. T hus, it is clear that this most basic definition of the
Agreement informs every other reference to 'subsidy' in the Agreement." (footnote omitted.)
187 European Communities - Response to Panel question 46.
188 Ibid.
189 European Communities - Responses to Panel questions 46 and 126.

The European Communities responded that the requirement is implicit, not explicit, and that the
Vienna Convention is of limited use in respect of implicit requirements. 190 Concerning past cases, the
European Communities stated that the claims in the US - Softwood Lumber IV dispute were based on
other provisions than Articles 1 and 14 because that was how the complaining party chose to frame its
claims in that case, and that the claim in US- Canadian Pork was necessarily based on the GATT 1947
(given that the case predated the SCM Agreement ). The European Communities cited US –
Countervailing Measures on Certain EC Products , acknowledging that it concerned a different fact
situation, but stating that it was relevant nevert heless because it stands for the proposition that the
benefit must be conferred on the producer of the product concerned, and a violation of Article 14 was
found in that case.191
7.149 Turning to the analysis of Article 1.1 specifically, we note that as a general rule under the
SCM Agreement , if a measure under investigation in a c ountervailing duty investigation involves a
financial contribution in the sense of Article 1.1(a)(1 ), but no benefit is conferred thereby in the sense
of Article 1.1(b), then no subsidy exists, and no countervailing duty can be applied in respect of that
measure. In such a circumstance, the investig ated measure would not constitute a subsidy, and
application of a countervailing duty would be inconsistent with Article 1.1 of the SCM Agreement.192
7.150 However, in this case, th e European Communities is not arguing that a benefit was not
provided, and that therefore a subsidy did not exist w ithin the meaning of Article 1.1. Indeed, in its
submissions before us, the European Communiti es maintains that this is not its argument. 193 Rather,
its allegation is that Mexico did not properly calculate the amount of the benefit from the subsidy that
was directly attached to the exporters of olive oil.
7.151 As Article 1.1 contains a definition of th e term "subsidy" for the purposes of the SCM
Agreement, the issue in the cases interpreting that provision has been whether or not a "benefit"
existed, and therefore whether or not there was a subsidy. We do not see in Article 1.1 any language
specifically relating to how the amount of the be nefit is to be calculated in a countervail
investigation.194
7.152 We find, therefore, that Article 1.1(b) in itself does not establish a requirement to calculate
precisely the amount of the benefit accruing to a particular recipient in a countervail investigation.
We find support for our view in the findings of the Appellate Body in US – Countervailing Measures
on Certain EC Products that under Article 1.1(b), a benefit might be received by different recipients,
that the recipient of the benefit might be different from the recipient of the financial contribution, and
that a subsidy can be bestowed directly or indirectly, and in respect of production, manufacture or
export of a product.
195 In other words, it is not necessary to identify the particular recipient or
recipients of the benefit and the particular manne r in which a subsidy is bestowed in order to

190 European Communities - Response to Panel question 126.
191 Ibid.
192 Panel Report, EC – Countervailing Measures on DRAM Chips, para. 7.186 inter alia.
193 European Communities – Response to Panel question 47; European Communities – First written
submission, para. 77.
194 We recall here the Appellate Body's ruling in Canada – Aircraft that to determine whether a benefit
exists for the purpose of Article 1.1(b), the question to be answered is whether the recipient has received the
government financial contribution on terms more favourable than those available to the recipient on the market,
and that Article 14 provides contextual guidance for making this determination. We note, for example, that to
determine whether a government-provided loan confers a benefit, and thus whether a subsidy exists, it will be
necessary to evaluate whether the terms on which the government loan is provided are better than the terms on
which the recipient could obtain the same loan from a commercial lender. If yes, then a benefit exists. It is not
necessary to know the precise amount of the benefit, if any, to answer this question.
195 Appellate Body Report, United States – Countervailing Measures on Certain EC Products ,
paras. 110-113.

determine that a benefit has been conferred, and that therefore a subsidy exists, within the meaning of
Article 1.1(b).
7.153 On the basis of the foregoing analysis, we conclude that Article 1.1 of the SCM Agreement
does not contain a requirement as to how the am ount of the benefit must be calculated for the
purposes of imposing countervailing duties. We therefore find that the European Communities has
not established that Mexico acted inconsistently with its obligations under Article 1.1 of the SCM
Agreement by failing to conduct a pass-through analysis in the olive oil investigation.
(iii) Claim of the European Communities pursuant to Article 14 of the SCM Agreement
7.154 We now turn to the European Communities' claim under Article 14 of the SCM Agreement.
This claim, as set forth in the Request for Establishment of a Panel, is that Economía "fail[ed] to apply
the method used [to calculate the benefit conferre d on the recipient] to each particular case in a
transparent way which is adequately explai ned, in violation of Article 14 of the SCM Agreement. "
During the course of the dispute, the European Communities elaborated on the basis for this claim. In
respect of the issue of pass-through, the European Communities states, inter alia, that the claim is that
"Economía failed to explain how it calculated the bene fit conferred on the recipient, contrary to the
obligation in Article 14", but that "in accordance with the practice of WTO dispute bodies where an
allegation of substantive infringeme nt is coupled with one of failing to explain or publicize the point
in question, the EC has concentrated on the substantive infringement, which is the failure to examine
the issue of pass-through when calculating the amount (if any) by which the imported olive oil is
subsidized."
196 From this we understand that the Europ ean Communities' argument is that because
Economía failed to conduct a pass-through analysis wh ere one was required, its explanation of how it
calculated the amount of subsidization of the investigated product was not reasoned and adequate.
7.155 Article 14 reads, in relevant part:
Article 14
Calculation of the Amount of a Subsidy in Terms
of the Benefit to the Recipient

For the purpose of Part V, any method used by the investigating authority to calculate
the benefit to the recipient conferred pursu ant to paragraph 1 of Article 1 shall be
provided for in the national legislation or implementing regulations of the Member

196 WT/DS341/2, tiret 6. See also, European Communities – First written submission, para. 157 which
states: "[T]he Mexican authorities acted inconsistently with Articles 1 and 14 of the SCM Agreement by failing
to give a reasoned and adequate explanation of ... why they concluded that the benefit of the subsidy was passed
through to the exporters of olive oil...".

To ensure that we fully understood the nature of this claim, we asked the European Communities
(Panel question 53) to clarify whether the basis for its claim under Article 14 was that Mexico's application of
its method in this case was not transparent or adequa tely explained. The Euro pean Communities answered
affirmatively, stating that its claim was that Mexico "failed to provide a transparent and adequate explanation
 of
the method used to calculate the amount of subsidy in this particular case" (emphasis in original). The European
Communities also addressed this issue at the second substantive meeting of the Panel (at paragraph 42 of its oral
statement), stating that "[s]ince Mexi co appears to have doubts on the matter let us make it clear that, as stated
in tiret 6 of its Panel Request, the EC claims that Economía failed to explain how it calculated the benefit
conferred on the recipient, contrary to the obligation in Article 14. However, in accordance with the practice of
WTO dispute bodies where an allegation of substantive infringement is coupled with one of failing to explain or
publicize the point in question, the EC has concentrated on the substantive infringement, which is the failure to
examine the issue of pass-through when calculating the amount (if any) by which the imported olive oil is
subsidized."

concerned and its application to each pa rticular case shall be transparent and
adequately explained. Furthermore, any such method shall be consistent with the
following guidelines…
7.156 By its own terms, Article 14 concerns the "method" to be used in a countervailing duty
investigation to calculate the amount of benefit to a recipient, and sets forth three basic requirements
in this regard. The first has to do with the legislative framework, the second has to do with the
application of the law to particular cases, and th e third has to do with the general guidelines for how
to determine the benefit to the recipient from four basic forms of government financial contributions:
equity infusions, loans, loan guarantees, and government provision of goods or services or
government purchase of goods.
7.157 The first requirement, that any method used to calculate the "benefit to the recipient" must be
set forth in the importing Member's national legisla tion or implementing regulations, is not cited in
the European Communities' claim. We thus do not consider it further.
7.158 The third requirement, that any method used to calculate "benefit to the recipient" must be
consistent with certain specified guidelines relates only to the four types of financial contribution
listed in that provision. We find that this requirement is not rele vant in this dispute because the
financial contribution of the measure at issue was in the form of recurring grants, in respect of which
Article 14 contains no provision. We also note that the European Communities did not cite this
requirement as one it alleges Mexico violated. Fo r both of the above reasons, therefore, we do not
need to consider this requirement further.
7.159 The second requirement, which is cited by the European Commun ities, is that the application
of the method for calculating the benefit to the reci pient in particular cases "shall be transparent and
adequately explained". We see nothing in this pr ovision that requires a Member to conduct a pass-
through analysis. As noted above, we understand th e allegation of the European Communities to be
that the failure by Economía to conduct a pass- through analysis when one was required necessarily
meant that its application of th e calculation methodology in the oliv e oil case was not transparent or
adequately explained.
7.160 In support of this claim, the European Commun ities refers to certain passages concerning the
economic effects of the investigated subsidies on prices and supply in the market, in particular vis-à-
vis exporters, in paragra phs 117-118 of Economía's Final Resoluti on, which appear at the end of a
section entitled "Pass-through Mechanism". As th ese are the only specific parts of the Final
Resolution referred to by the European Communities in the context of this transparency claim, the
implication of the European Communities is that th ese passages constitute th e entirety of Economía's
analysis and examination of the pass-through issue in the olive oil investigation. According to the
European Communities, these passages fail to expl ain, transparently and adequately, the benefit
calculation methodology in respect of the issue of pass-through, as they are "mere assertions", and
even if they were true, they could not explai n how a subsidy could have passed through to the
exporters.197
7.161 We begin our analysis of this claim by noting that the Final Resolution contains considerably
more information as to the nature of the inves tigated subsidy programme and Economía's analysis
thereof than the few passages cited by the Europ ean Communities. We will consider these issues in
detail, with a view to determining whether, as claimed by the Europ ean Communities, Economía
failed to explain, transparently and adequately, its calculation of benef it to the recipient in respect of
the pass-through issue raised by interested parties in the investigation.

197 European Communities - First written submission, paras. 132-148.

7.162 We start by reviewing the portions of the Fi nal Resolution which address the nature of the
subsidy programme at issue in this case. Accord ing to the Final Resolution, the subsidy programme
was provided under Regulation 136/66/EEC of Se ptember 1966 of the Council of the European
Economic Community, establishing a common market in the oils and fats sector and describing the
programme of aid to olive oil, which regulation had been amended on numerous occasions.
198
7.163 The Final Resolution also describes the operati on of the subsidy programme as presented to
Economía by interested parties in the investigation. 199 According to that description, in each
marketing year, the grower presented to the na tional administrators of the programme a crop
declaration specifying data concerning the farm and the number of olive trees. The olives were
harvested and taken to mills for crushing into oil during the period November through March. The oil
mill provided the grower with a certificate attesting to the amount of oil obtained from that grower's
olives, which the grower transmitted along with its aid application to the national programme
administration. The national administration then cal culated the national total quantity of olive oil for
which the aid was requested, and transmitted this request to the EC Commission. The total per
country aid amount was then divided by the number of kilograms of oil produced to determine the per
kilogram amount of aid to be paid. The EC Commission, published these figures.
7.164 The Final Resolution presents the factual findi ngs of Economía concerning the olive oil aid
programme, in paragraphs 100-104, as follows:
"100. In this stage of the investigation, the Ministry confirms its preliminary
determination that the subsidy provided by the European Community is olive oil and
only a small proportion is destined to olives. From a reading of Regulation
136/66/EEC the purpose and the benefited pr oduct are clear. We cite the following
paragraphs (the underlining is ours):
'Whereas olive growing and the production of olive oil are
particularly important to the economies of certain regions of the
Community ... that for many consumers, olive oil
 is the most
important source of oils and fats ... it is necessary to support this
productions through appropriate actions.
'Whereas, to this end, the marketing of the crops must assure fair
remuneration to Community producers, the level of which can be
defined by a production target price for olive oil

Title II
Olive Oil
Article 4.
1. A production target price shall be set for the Community.
This price shall be fixed at the wholesale marketing stage for
ordinary virgin olive oil
with a free fatty acid content expressed as
oleic acid of 3.3g / 100g.

199 Ibid., para. 84, referring to representations on this issue made by the trade associations ASOLIVA
and ASSITOL, the exporters, and the EC Commission.

2. For the 1998/99 to 2003/04 marketing years, the target production
prices referred to in part 1 shall be fixed at 383.77 ecus/100 kg.
3. Except as otherwise decided by the Council by qualified majority
pursuant to a proposal by the Commission, the marketing year for
olive oil
 shall run from 1 November to 31 October of the following
year.
Article 5
1. Aid for the production of olive oil
 shall be established. This aid is
designed to contribute to the establis hment of a fair income for the
producers.
The aid shall be provided to th e oil growers on the basis of the
quantity of olive oil they actually produce.

7. With a view to establishing guidance for checks on the
determination of the quantity of oil eligible
 for the aid, yields will be
established for olives and oil per homogeneous production zones.

9. A percentage of the production aid provided to all or a part of the
producers in each producing Member State shall be used to finance
regional measures to improve the qua lity of the production of olive
oil and table olives, and their environmental impact.

20. When olive oil is exported to third countries and the world prices
are higher than the Community price, a regulatory levy may be
collected to compensate for these price differences.'
101. The cited regulation establishes, in Artic le 1, that the aid is to be applied to
certain products including olive oil classified in code NC 1509 which refers to olive
oil and its fractions, whether or not refine d, but without chemical modification, and
code NC 1510 00 for the other oils obtained exclusively from olives, and their
fractions, including refined oils, but without chemical modification, and blends of
those oils or fractions of heading 1509.
102. Furthermore, the EC has notified th e Committee on Agriculture of the WTO of
its internal aid programme for different products. It should be emphasized that
among the listed products, olive oil is identified as a "designated product".
103. As mentioned in the Preliminary Resolution, the Ministry is of the opinion that
if a producer of olives brings its product to a mill to obtain olive oil, and in the
extreme case obtains nothing, it is clear that this producer would not benefit under the
aid programme. That is, the only way in which an olive producer would have access
to the subsidy would be on the basis of th e olive oil actually produced, which is the
product referred to in Regulation 136/66/EEC.

104. On the basis of what is stated in paragraphs 100 to 103 of this Resolution, the
Ministry considers that it is unquestionable that the subsidy provided by the European
Community is to olive oil, that is, to the product that is subject to the investigation,
and that this is not an incorrect interpretation or a problem of translation. At the same
time, the Ministry accepts that, as menti oned in Regulation 136/66/EEC, there is a
part of the aid that can be applied to s upport table olives, which are not part of the
present investigation."
7.165 The Final Resolution then, in the section entitled "Pass-Through Mechanism" (from which the
excerpts presented by the European Communities were taken), discusses the arguments of the
interested parties and the findings of Economía in relation to the precise question of whether a pass-
through analysis was required under the facts of the case. This discussion is found at paragraphs 105-
118 of the Final Resolution. Economía's conclusion, as set forth in that sec tion, was that no pass-
through analysis of the type required in US-Softwood Lumber IV was necessary because, unlike in that
case, the olive oil investigation did not involve a su bsidy to an input into the final processed product
exported to Mexico:
… this is not an investigation of a subsidy to an input (olives) but rather to olive oil,
which is itself the product exported to Me xico, for which reason the investigating
authority is not obligated to conduct a p ass-through analysis of the subsidy because,
as provided for in point 100 of the present Resolution, it is unquestionable that
Regulation 136/66/EEC and its amendments establish that the aid programme is for
olive oil.
200
7.166 Finally, the Final Resolution sets forth, at paragraphs 119-180, the procedural and analytical
steps undertaken by Economía in calculating the per unit subsidy amounts. In this context, the
representations of the interested parties and the related conclusions of Economía are described.
7.167 We recall that the claim of th e European Communities is that Economía failed to fulfil the
transparency requirement in the chapeau of Article 14, i.e., that the method used by Economía to
calculate the benefit to the recipient was not transparent and was not adequately explained. We do not
agree with the European Commun ities' characterization of the relevant portions of the Final
Resolution. To the contrary, we consider that th e Final Resolution contains detailed descriptions of
the nature and operation of the subsidy programme , the representations of the interested parties
regarding the subsidy programme and the pass- through question, and Economía's reasons for
concluding that a pass-through analysis was not re quired, as well as the calculations performed. We
fail to see how the Final Resolution either lacks tran sparency as to the method used to calculate the
benefit to the recipient or fails to adequately explain that method.
7.168 We further recall that we see no obligation in r espect of pass-through analysis in the cited
language of Article 14. Even if there were such an obligation, moreover, we would find no basis on
which to conclude that Economía ha d acted inconsistently with it. In particular, bearing in mind the
standard of review, we have considered carefully the evidence on the record made available to us as to
the nature and operation of the subsidy progra mme, and have examined the conclusions that
Economía drew on the basis of that evidence as presented in the Final Resolution. We consider that
Economía's conclusion that the subsidy programme under investigation in this case consisted of aid to
olive growers for the production of olive oil was one that could be reasonably reached on the basis of
the record evidence. In this regard, we note, first, the language of the Regulation itself, which
stipulates that the olive grower receives aid only to th e extent that it can prove that it has converted its
olives into olive oil
201, and is paid only for the actual kilograms of olive oil that its olives produce.

201 Except for the small fraction provided for as aid to the production of table olives.

The Final Resolution makes clear that the respondent interested parties in the investigation described
the operation of the programme in the same way. 202 We also take note of the reference in the Final
Resolution to the fact that the European Co mmunities' notifications to the WTO refer to olive oil as a
"designated product" for the purposes of its domestic support measures. In addition, the Final
Resolution indicates that the respondent parties argue d that the subsidized product was olives, not
olive oil, but provides no indication that those parties submitted any factual evidence in support of this
assertion.203 In fact, it appears from the Final Resolution that the principal argument of the respondent
parties in respect of the pass-through issue w as that the transactions and processing operations
intervening between the production of olive oil (b y crushing olives) and its exportation to Mexico
were what purportedly "disconnected" the subsidy benefits from the product as exported, giving rise
to the alleged need for a pass-through analysis. 204 As discussed above, there is no support in the
jurisprudence for this legal argument. On the basi s of the foregoing, we co nsider that the record
evidence supports Economía's finding that the subsidized product was olive oil. Because the evidence
indicates that the only basis on which the subsidy could be obtained was the conversion by the
growers of olives into olive oil, we consider that the evidence on the record reasonably supports
Economía's conclusion that the programme provided a subsidy to the production of olive oil.
Furthermore, olive oil in all its forms, from firs t-crushed to refined and blended oil, was the product
covered by the investigation. Therefore, the evidence before Economía reasonably supported its
conclusion that the subsidy was not provided on an input product, but rather was provided on the
product that was the subject of the investigation, and that as such, no pass-through analysis was
necessary.205
7.169 For these reasons, we find that the European Communities has not demonstrated that,
concerning the question of pass-through, Mexico failed to comply with the requirement in Article 14
to provide a transparent and adequate explanation of its method to calculate benefit in respect of the
subsidy programme in this case.
(b) Article 14 – Other Calculation Issues
7.170 The European Communities raises three additiona l claims under Article 14, as alternatives to
its Article 14 claim addressed above related to pass- through. These claims have to do with certain
aspects of Economía's calculation of subsidy benefits. 206 The first of these claims is that Economía
"refused, without giving a reasoned and adequate explanation, to make any adjustment for the fact

202 Final Resolution (Exhibit EC-1), paras. 84 et seq.
203 Ibid., paras. 93-104. In this context, we note that Economía sent a number of requests for
information related to the structure of the olive oil industry to the respondent parties ( see Mexico's response to
Panel question 60, and the documents referred to therein). We have reviewed the replies to those information
requests, and find that they contain only argumentation, and not factual information. Indeed, these documents
suggest that Economía conduct certain investigations an d gather certain information and samples, rather than
offering any concrete evidence themselves. In its submissions to the Panel the European Communities points
exclusively to these documents, and to no other r ecord evidence in the context of this argument. See European
Communities response to Panel question 45, which refers to the same documents as Mexico's reply to Panel
question 60.
204 Ibid., paras. 106-108.
205 We recall here the point made by Economía in the Final Resolution (Exhibit EC-1, para. 116) that
this was the key difference between the situation in the olive oil investigation and that in the Softwood Lumber
dispute. See our discussion of this legal issue at section VII.G.2(a)(i), supra.
206 The European Communities also alleges inconsistencies with Article 1.1(b) of the SCM Agreement
in respect of these calculation issues. None of these allegations goes to the existence of the benefit as such,
however. We thus consider that our finding, above, that Article 1.1 contains no requirement as to how the
amount of the benefit must be calculated in a counterv ailing duty investigation, resolves these claims of
inconsistency. We therefore restrict our analysis in this section to the claims of in consistency with the chapeau
of Article 14 of the SCM Agreement.

that a proportion of the exports from the EC to Mexico consisted of oil that had not been in any way
subject to the EC aid scheme."
207 According to the European Comm unities, the respondent interested
parties presented arguments that certain olive oil exported from the European Communities to Mexico
originated in non-EC countries (e.g., Tunisia), and was brought into the European Communities under
an inward processing scheme and then re-exported, some to Mexico. The European Communities
argues that the subsidy amount should have been adjusted downward to take these non-EC-origin
imports into account. According to the European Communities, although the respondent interested
parties presented certain information related to this point, Economía did not make the necessary
adjustments and failed to provide a reasoned and adequate explanation for its decision.208
7.171 Mexico takes issue with the Article 14 claim as referred to by the European Communities,
namely as the failure of Mexico to provide a transp arent and adequate explanation of the method used
to calculate the amount of the subsidy. Mexico argues that the obligation in Article 14 is to explain
the method used to calculate the amount of benefit conferred by the subsidy. 209 In addition, Mexico
points to passages in the Preliminary and Final Resolutions which indicate that the respondent
interested parties that raised this issue failed to provide factual evid ence to enable a calculation of the
level of the adjustments they sought, and that for that reason, Economía did not make the
adjustments.210 The European Communities has pointed to no specific aspect s in which this
explanation is either non-transparent or inadequate (e.g., incomplete, unclear, etc.), and we find none.
Furthermore, on the substance, we consider th at it was not unreasonable for Economía to have
declined to make the requested adjustments given that the interested parties that requested them failed
to provide any supporting factual evidence in spite of Economía's specific requests for such evidence.
7.172 A second issue raised by the European Communitie s relates to adjustments for certain costs
incurred by exporting companies. The European Communities' complaint is that although Economía
made requested adjustments for companies that pr ovided it with the necessary data, it did not make
them for companies that did not, and it unjustifia bly requested the former companies to provide
information relating to the latter. The European Communities argues that by thus failing to exercise
properly its responsibilities to investigate the effect of costs on the level of benefit, Economía also
failed to give a reasoned and adequate explanation for its determination.211
7.173 Mexico's response, quoting the Final Resolution, is that Economía received no response to its
request, made to the companies that provided cost data on their own operations, to suggest alternative
methodologies that Economía could use to estimat e the adjustments for th e other companies.
Nevertheless, the Final Resolution indicates th at Economía made an adjustment for the non-
responding companies by averaging the adjust ments for those that had provided data. 212 We fail to
understand the specific nature of the European Communitie s' complaint with respect to this issue. As
is evident in the Final Resolution, certain interest ed parties requested, and obtained, an adjustment
from Economía, and Economía made a comparable ad justment for non-respondent companies. We
can find no factual basis to support the European Communities' argument on th is point, and thus can
find no basis on which to conclude that Economía committed a substantive error under Article 14.
Nor do we see anything unclear about the explana tion presented in the Final Resolution. Thus, we
find that the European Communities has failed to estab lish that Mexico acted inconsistently with its
Article 14 obligations in its treatment of the adjustments for exporters' costs.

207 European Communities - First written submission, para. 150.
208 European Communities - First written submission, paras. 150.-151.
209 Ibid., paras. 122-123.
210 Mexico - First written submission, paras. 131-136, citing relevant excerpts from the Resolutions.
(Preliminary Resolution (Exhibit EC-22), paras. 120-121; Final Resolution (Exhibit EC-1), paras. 131-134).
211 European Communities - First written submission, paras. 154-156.
212 Mexico - First written submission, paras. 147-15 2, quoting the Final Resolution (Exhibit EC-1) at
paras. 138-141.

7.174 Finally, the European Commun ities claims that Economía's calculation of the margin of
subsidy was artificially high due to the fact that it was calculated by comparing the amount of the
subsidy with the exporter's sales pr ices adjusted to an ex-factory level. The European Communities
argues specifically that because duties were imposed on the basis of the CIF price, it is on this basis
that the margin of subsidy should have been dete rmined. According to the European Communities,
by comparing the subsidy to the ex-factory pri ce (necessarily a lower figure than the CIF price),
Mexico has produced inflated figures.213
7.175 Mexico responds that because the subsidies were calculated as specific per kilogram amounts,
rather than on an ad valorem basis, the fact that the calculations were performed at the ex-factory,
rather than the CIF, level made no difference to the calculation of the subsidy margins. Mexico
provides a numerical example to illustrate its argument.214
7.176 We have reviewed the Final Resolution, as we ll as the explanation provided by Mexico, and
we find, as a matter of fact, that the European Communities has not established that the subsidy
margins were artificially inflated by having been calcu lated at the ex-factory level. In particular, the
European Communities has not explained specifically how inflation of the figures allegedly occurred,
and we find this difficult to envisage given that th e margins were, as Mexico points out, calculated on
a per kilogram rather than on an ad valorem basis. Nor has the European Communities indicated how
the explanation in the Final Resolution lacked clarity. We therefore find that the European
Communities has failed to establish that Economía's calculation of the subsidy margins on an ex-
factory basis was inconsistent with Mexico's obligations under Article 14 of the SCM Agreement.
H. DEFINITION OF "DOMESTIC INDUSTRY"
7.177 The European Communities clai ms that Mexico improperly imposed countervailing duties
because it initiated:
an investigation in the absence of a determ ination by the Mexican authorities that the
application was made by or on behalf of the domestic industry, in violation of
Articles 11.4 and 16 of the SCM Agreement215
7.178 The European Communities also alleges that Ec onomía's injury determination is invalid
because Fortuny did not constitute a domestic produ cer, and thus the domestic industry, within the
meaning of Article 16.1 of the SCM Agreement. The European Communities further argues that even
if Fortuny could be considered the domestic industr y, Economía failed to adequately investigate the
possibility that domestic producers of the like product s other than Fortuny existed, and that therefore
any consideration of the injury suffered by that industry would be purely speculative.216 As a result of
this alleged failure, the European Communities clai ms that Mexico "failed to give a reasoned and
adequate explanation of its findings and was th erefore inconsistent with Article 16 of the SCM
Agreement. As a consequence, the findings rega rding injury were in breach of the [ sic] Article VI:6
of GATT 1994."217
7.179 This claim thus has two elements, one based on the interpretation of the term "domestic
industry" in Article 16.1 of the SCM Agreement, and the other based on the alleged inadequacy of
Economía's efforts to determine whether there we re Mexican producers of olive oil other than
Fortuny. We will address these two elements separately.

213 European Communities - First written submission, para. 152.
214 Mexico – First written submission, paras. 137-146.
215 WT/DS341/2, tiret 1.
216 European Communities – First written submission, para. 188.
217 Ibid., para.189.

7.180 Before turning to the specific issues raised , however, we note that in its Request for
Establishment of a Panel, the European Communities also referred to allege d inconsistencies with
Articles 15.4 and 15.5 of the SCM Agreement in the context of this claim. However, it did not provide
any argumentation in its written or oral submissions w ith respect to these provisions in relation to this
claim. Instead, in its first written submission, the European Communities explicitly referred to these
provisions only as context for its interpretation of Article 16.1 of the SCM Agreement.
218 As a result
of questioning from the Panel regarding the articles on which the European Communities was alleging
an inconsistency, it became apparent that the European Communities was not pursuing specific claims
of inconsistency with Articles 15.4 or 15.5 with respect to the definition of the domestic industry. 219
Therefore, we will not make any findings on Articles 15.4 or 15.5 with respect to this claim.220.
1. Arguments of the Parties
7.181 The European Communities argues that in order to constitute a "producer" for the purposes
of the SCM Agreement , and thus to constitute part of the domestic industry or the entire domestic
industry, as defined in Article 16.1 of that Agreement, an enterprise must actually produce "output" of
the domestic like product at two specified times: at th e time of presentation of the application for the
purpose of initiation, and during the subsidy POI for the purpose of the injury investigation. With
respect to initiation, the European Communities argues that if an applicant is not producing output at
the time it presents its application, it is not a "produ cer" and thus cannot form part of or constitute the
"domestic industry" within the meaning of Article 16. 1. As a result, the requirements of Article 11.4
of the SCM Agreement will not be met, as that provision requir es that applications be made "by or on
behalf of the domestic industry".221

218 European Communities – First written submission, para. 177.
219 European Communities – Response to Panel question 63.
Question 63 from the Panel asked:
In paragraph 158 of your First Written Submission, you claim that Mexico acted
inconsistently with Article VI:6 of the GATT 1994 and Articles 15.4, 15.5, and 16 of the SCM
Agreement. However, in paragraph 173 of the same submission, you reference Article 15.1 of
the SCM Agreement and claim that Article VI:6 of GATT 1994 has been infringed.
Furthermore, in paragraph 189 of that same submission, you conclude that Mexico has acted
inconsistently with Article 16 of the SCM Agreement and as a consequence is in breach of
Article VI:6 of the GATT 1994. Could you please clarify under which provisions your claims
are based?

The European Communities responded:
The European Communities has identified in Article VI:6(a) of GATT 1994 the clearest
expression of the obligation imposed on Members in respect of injury findings in anti-
dumping and countervailing duty proceedings. Infringements of this obligation can arise from
behaviour by national investigating authorities th at is inconsistent with individual provisions
of the SCM Agreement.

In its contentions in support of its claim under this heading the EC has sought to identify
particular provisions in Articles 15 and 16 with which the actions of Economía was
inconsistent. In each case where the EC has alleged inconsistency it has identified the
particular provision in Article 15 or 16 where that inconsistency arises. The EC believes that it
has also made clear that the inconsistencies are linked to the obligation in Article VI:6.
Usually this link is stated explicitly, as reflected in the terms of the Panel’s Question.
220 We do note that the European Communities makes other specific claims with respect to Mexico's
consistency with Articles 15.4 and 15.5. These claims will be addressed in sections VII.K and VII.L
221 European Communities – First written submission, pa ras. 90-91; and response to Panel question 13.
In particular, the European Communities argues that that "p roduction is relevant only if it is taking place at the
time of the application". The European Communities goes on to say that it does not mean that no account could

7.182 With respect to the injury determination, the European Communities' argues that "if there is
no production, there is no industry, and if there is no industry there can be no material injury". 222 The
European Communities focuses on the subsidy POI becau se, in its view, "the only verified evidence
of subsidization available to the investigating aut hority will be that from the investigation period and
unless the domestic companies concerned have output in that period, no injury can be
demonstrated."223 Accordingly, to the Eur opean Communities, Economía's alleged failure to comply
with the definition of "domestic industry" in Article 16.1 of the SCM Agreement also gives rise to a
violation of Article VI:6(a) of the GATT 1994.
7.183 Mexico disagrees with this analysis, which it recalls was raised during the course of the
investigation and addressed by Economía in the Fi nal Resolution. Mexico points to Economía's
reasoning at paragraph 218 of that Resolution, that if the European Commun ities' interpretation were
correct, the concept of material retardation of th e establishment of an industry would not make sense;
cases in which production was suspended due to planned or unforeseen reasons would be
inadmissible; it would be impossible to prove produc tion and material injury in the case of producers
of agricultural goods, which by definition produ ce according to natural cycles; and countervailing
duties would be unavailable to industries that had been forced to suspend production due to
competition from subsidized imports.224
2. Reasoning of the Panel
(a) Introduction
7.184 The European Communities claims that by defini ng the domestic industry inconsistently with
Article 16.1 of the SCM Agreement , Mexico acted inconsistently with that provision as well as,
consequentially, with Article 11.4 of the SCM Agreement and Article VI:6(a) of the GATT 1994 .
Specifically, the European Commun ities argues that if an investigating authority does not properly
identify the correct domestic industry consistent w ith Article 16.1, and impos es countervailing duties,
it also acts inconsistently with Article VI:6(a) of the GATT 1994 , which permits the imposition of
countervailing duties only in the event that an in vestigating authority makes a determination of
material injury or threat ther eof to an established domestic indus try. Likewise, the European
Communities argues that because Fortuny was not the "domestic industry" as defined by Article 16.1,
its application was not made "by or on behalf of the domestic industry" as required by Article 11.4.225
7.185 In particular, the European Communities advanc es an interpretation of Article 16.1 that,
because Fortuny was not producing output of olive oil e ither at the time it presented its application or
during the period analyzed to determine the existen ce of subsidization (the "subsidy POI"), it could
not be considered a "producer" in the sense of Article 16.1, and as a consequence it could not
constitute the "domestic industry" within the meaning of Article 16.1 of the SCM Agreement. As a
result, the European Communities claims, Economía' s decision to initiate the investigation and its
injury determination were fundamentally flawed . The European Communities argues that these

be taken of producers that operate on a seasonal basis or are for some other reason not producing regularly, and
also states (in its response to Panel question 102) that it was not suggesting that the issue should depend on
whether domestic companies were producing on the particular day that the complaint was lodged. Nevertheless,
it argues that "the general requirement of having current output applies at all stages of the procedure, including
at initiation".
222 European Communities – First written submission, para. 213.
223 European Communities – First oral statement, para. 57.
224 Mexico, First written submission, para. 209; Mexico – Second written submission, para. 167; see
also Japan – Third party submission, paras. 23-24.
225 WT/DS341/2, tiret 1.

alleged inconsistencies with Article 16.1 of the SCM Agreement also give rise to violations of
Article VI:6(a)
226 of the GATT 1994 and Article 11.4 of the SCM Agreement.
7.186 As noted above, the claims under Article VI:6(a) of the GATT 1994 and Article 11.4 of the
SCM Agreement both rest upon the central premise that Mexi co acted inconsistently with Article 16.1
of the SCM Agreement because the applicant in the olive o il investigation, Fortuny, could not
constitute the "domestic industry" within the meaning of that provision. We view these claims as
consequential to the claim under Article 16.1 of the SCM Agreement, because they require us, first, to
accept the European Communities' interpretation of Article 16.1 of the SCM Agreement as a pre-
condition for finding that Mexico acted inc onsistently with Article VI:6(a) of the GATT 1994 and
Article 11.4 of the SCM Agreement. Therefore, we turn first to the interpretation of Article 16.1 of
the SCM Agreement before examining whether as a consequence of any inconsistency with that
provision Mexico also acted inconsistently with Article VI:6(a) of the GATT 1994 and Article 11.4 of
the SCM Agreement.
7.187 We note that the European Communities also ma kes additional claims, in the context of both
the initiation of the investigation and the determinat ion of injury, that Economía has not provided a
reasoned and adequate explanation of its determin ation that Fortuny represented the entire domestic
industry. In this respect, the European Comm unities challenges the factual basis of Economía's
determination that Fortuny was the sole Mexican producer of olive oil, thus constituting the entire
Mexican domestic industry producing olive oil. These allegations are addressed in sections VII.I and
VII.J, infra.
(b) Definition of "domestic industry"
7.188 The basic interpretive issue we must consider is whether the definition of "domestic industry"
in Article 16.1 of the SCM Agreement requires an enterprise or a group of enterprises to be producing
actual output of the like product at the points in time referred to by the European Communities in
order to be considered "producers" for the purpose of that provision. Put another way, the legal
question is whether an enterprise or group of en terprises may not be considered to constitute a
domestic industry if, at the time of application is f iled and/or during the subsidy POI, it or they were
not actually producing output.
7.189 Article 16.1 reads as follows:

226 We note that there was some confusion during these proceedings as to whether the European
Communities was alleging that Mexico's in consistency with Article VI:6(a) of the GATT 1994 arose from an
inconsistency with Article 16.1 or with Article 15.1 of the SCM Agreement. Specifically, in paragraph 173 of its
First written submission, in the section that deals with the claims under tiret 7 of its Request for Establishment
of a Panel, the European Communities asserts that Economía 's alleged failure to properly investigate the extent
of the domestic industry also meant that Economía "could not possibly comply with the requirement in
Article 15.1 [of the SCM Agreement] that a determination of injury for the purposes of Article VI of GATT 1994
must involve an objective examination of the impact of the subsidized imports on the domestic producers of the
product". The Panel asked the European Communities to clarify the meaning of this statement. In its response
to Panel question 64, the European Communities stated that "this reference was made to illustrate the
consequences of the non-existence of the domestic industry, rather than as an attempt to claim an inadequate
inquiry into the extent of the domestic industry." Given this clarif ication by the European Communities, we do
not consider that the European Communities has made a sp ecific claim of inconsistency with Article 15.1 of the
SCM Agreement in relation to Economía's findings on the domes tic industry in this ca se. We will consider
Article 15.1 in the context of the claim concerning the injury investigation in tiret 8 of the Request for
Establishment of a Panel, which specifically refers to Artic le 15.1. This additional injury claim is addressed in
section VII.K, infra.

16.1 For the purposes of this Agreement, th e term 'domestic industry' shall, except
as provided in paragraph 2, be interprete d as referring to the domestic producers as a
whole of the like products or to those of them whose collective output of the products
constitutes a major proportion of the tota l domestic production of those products,
except that when producers are related to th e exporters or importers or are themselves
importers of the allegedly subsidized pr oduct or a like product from other countries,
the term 'domestic industry' may be interpreted as referring to the rest of the
producers. (footnote omitted)

7.190 By its own terms, Article 16.1 provides a defin ition of the term "domestic industry" "for the
purposes of this Agreement", i.e., the definition applies to the entire SCM Agreement.227 As such, this
term must be given a consistent meaning throughout the SCM Agreement including for the purposes
of the term "domestic industr y" as used in Article 11.4. 228 With respect to Article VI:6(a) of the
GATT 1994 , the Appellate Body and prior panels have found that the SCM Agreement provides
context for the interpretation of Article VI of the GATT 1994, 229 Indeed, the panel in Brazil –
Desiccated Coconut emphasized that "the meaning of Article VI of GATT 1994 cannot be established
without reference to the provisions of the SCM Agreement."230 The definition in Article 16.1, therefore
also informs the meaning of the term "domestic industry" as used in Article VI:6(a) of the GATT
1994,and an enterprise or group of enterprises that qualifies as a "domestic industry" within the
meaning of Article 16.1 of the SCM Agreement will also constitute the domestic industry for the
purposes of Article VI:6(a) of the GATT 1994.
7.191 Turning to the specific language of Article 16. 1, "domestic industry" is defined as referring
either to "the domestic producers as a whole of the like products" (emphasis added) or "to those of
them whose collective output of the products c onstitutes a major proportion of the total domestic
production of those products…". The first part of the definition, "domestic producers as a whole",
we take to mean all of the domestic producers . The second part, "those of them", clearly refers to a
subset of all of the domestic producers. The word "producers" is obviously central to the definition of
"domestic industry". In particular, the question we must ask ourselves is whether an enterprise is a
"producer", and therefore whether it constitutes all or part of the domestic industry, if it is not
producing "output" of the like product at the time of submission of the application and/or during the
subsidy POI.
7.192 Consistent with the requirements of Article 31 of the Vienna Convention, we begin our
analysis of the term "producer" by considering its ordinary meaning. The New Shorter Oxford
English Dictionary defines the term, "producer", inter alia as "a person who or thing which produces
something or someone", and the term, "produce", as "bring (a thing) into existence, bring about, ....
make."
231 Other established dictionaries contain similar definitions. 232 We consider that the central

 227 Although Mexico has not raised the issue before us, we recall that the panel in Argentina – Poultry
Anti-Dumping Duties addressed the legal question whether it was possible to violate the counterpart provision in
the Anti-dumping Agreement (Article 4.1) because it is a definition. The panel co ncluded that a violation was
possible, because the language of the definition itself contains an express obligation on Members: "...the term
'domestic industry' shall be interpreted..." (emphasis added). (Panel Report, Argentina – Poultry Anti-Dumping
Duties, para. 7.338.) We agree with this conclusion, and proceed here on the same basis in our analysis of
Article 16.1 of the SCM Agreement.
228 We note that any interpretation of domestic industry under Article 16.1 would also be relevant to the
provisions governing the injury determination set forth in Article 15 of the SCM Agreement.
229 Appellate Body Report, Brazil – Desiccated Coconut, p. 15; Panel Report, India – Quantitative
Restrictions, paras. 5.18-5.19; Panel Report, US – 1916 Act (EC), para. 6.195.
 230 Panel Report, Brazil – Desiccated Coconut, para. 238.
231 New Shorter Oxford English Dictionary, 1993 edition.
232 For example, the Merriam-Webster dictionary (online edition) defines "producer" as, inter alia, "one
that produces; especially: one that grows agricultural products or manufactures crude materials into articles of

element in these definitions is their focus on the nature of the activity undertaken – the bringing into
existence or making of something. There is no s uggestion in any of these definitions that being a
producer is something that changes from one moment to the next depending on whether or not there is
actual production of output at that moment. Rather, the definitions indicate to us that the essence of
being a "producer" of something is to have, as an activ ity or a business, the bringing into existence or
making of a thing.
7.193 The interpretive question before us in this case is novel and has not been examined previously
in cases under the SCM Agreement, the Anti-dumping Agreement, or the GATT. We recall that the
panel and the Appellate Body in US-Lamb considered similar language in Article 4.1 of the
Agreement on Safeguards, namely that:
'domestic industry' shall be understood to mean the producers as a whole of the like
or directly competitive products operating with in the territory of a Member, or those
whose collective output of the like or di rectly competitive products constitutes a
major proportion of the total domestic production of those products.
233
While the legal question and the agreement at issue in that case were different from those before us,
and thus are not directly applicable to the present dispute, the language in the Agreement on
Safeguards nevertheless is sufficiently similar to the language in the SCM Agreement that we consider
the reasoning in US – Lamb to be useful to our inquiry into the meaning of the word "producer" in
Article 16.1 of the SCM Agreement.
7.194 The panel in US – Lamb, in interpreting the term "producer" referred to dictionary definitions
noting that:
a "producer" is variously defined as "a person or a thing which produces something",
or "one that produces, especially one that grows agricultural products or
manufactures articles". To "produce" means to "bring a thing into existence, bring
about, effect or cause an action or result", or "to give being, form or shape to, make,
or manufacture". ...
The Appellate Body, in reviewing the panel's interp retation, approved of the use of these definitions,
stating that "[a]s the Panel indicated, 'producers' are those who grow or manufacture an article;
'producers' are those who bring a thing into existence."
234
7.195 The specific legal issue in US-Lamb was whether enterprises whose activities or businesses
did not include the production of the like product itself (in that case, they produced inputs into the like
product) could be considered "producers" of the like product. The panel and the Appellate Body ruled
in the negative, focusing on the nature of the r espective business activities of the input producers (the
growers of live lambs) and the producers of the like product (the packers and br eakers of lamb meat).
In particular, the conclusions of the panel and the Appellate Body were that because the growers of
live lambs did not themselves engage in the processi ng of live lambs into lamb meat, and because the
like product was lamb meat only (and did not include live lambs), the producers of live lambs could
not be considered to be producers of the like produc t, and thus did not form part of the "domestic
industry" producing lamb meat.

use". This dictionary defines "produce" as "to cause to have existence or to happen : bring about; to give being,
form, or shape to: make; especially : manufacture".
233 Article 4.1(c) of the Agreement on Safeguards.
234 We recognize that the Appellate Body in US – Lamb was interpreting somewhat different language
in a different agreement from that before us. Nevertheless, we consider informative the discussion of dictionary
definitions in that case of the same terms as appear in the SCM Agreement.

7.196 The temporal question underlying the claim of the European Communities in the present
dispute did not arise in US – Lamb. Nevertheless, we agree with, and consider relevant to the dispute
before us, the approach taken in US – Lamb , i.e., the focus on the essential nature of the business
activities of a given enterprise as determinative of whether that enterprise could be considered a
producer of the like product and thus be included in the domestic industry for that product. We
further consider that the temporal approach adva nced by the European Communities, of excluding
enterprises as domestic "producers" of the like product solely on the basis that they lack actual output
at particular, defined moments, and regardless of the essential nature of thei r business activities, is
fundamentally incompatible with what we believe to be the correct, substantive approach taken in US
– Lamb.
7.197 A number of provisions of the SCM Agreement, including Article 15, which sets forth how
investigating authorities should conduct investigations into whether a domestic industry is injured as a
result of subsidized imports, provide relevant context for interpreting the word "producer" in
Article 16.1. First, Article 15.1 pr ovides that the overarching obligations 235 pertaining to the
determination of injury to a "domestic industry" 236 involve (a) an examination of the volume of the
subsidized imports and their impact on prices in the domestic market for like products, and (b) an
examination of the impact the subsidized imports on the "domestic producers" of those products. We
note here that Article 15.1 refers to "domestic pr oducers" without mentioning the existence of output
at any specified points in time. Articles 15.2 or 15.4 which respectively provide the obligations for
the examinations of the volume of the subsidized imports and their impact on domestic prices, and of
the impact of the subsidized imports on the domest ic producers, referred to in Article 15.1 provide
further context for our interpretation of the term s "domestic industry" and "producer" as used in
Article 16.1 of the SCM Agreement.
7.198 Article 15.2 requires an examination of the volume of the subsidized imports and of the effect
of those imports on domestic prices for the like pro duct. Concerning the volume of the subsidized
imports, the specific obligation on the investigating aut hority is to consider "whether there has been a
significant increase" in the imports "either in absolute terms or relative to production or
consumption". Notable here is that this provi sion stipulates that a valid determination of a relative
increase in imports can be made in relation to either production or consumption. In particular, given
that the text of Article 15.2 permits a relative incr ease in imports to be established on the basis of a
comparison with consumption, we do not see any basis on which to conclude that the absence of
production of actual output at certain specific points in time, such as during the subsidy POI would,
by itself, mean that there were no producers, thus no industry, and no valid basis on which to perform
the injury analysis required by Articles 15.1 and 15.2.

235 See, Appellate Body report, Thailand – H-beams , para. 106, referring to the identical counterpart
provision, Article 3.1, of the Anti-dumping Agreement. The Appellate Body stated that:

Article 3.1 is an overarching pr ovision that sets forth a Memb er's fundamental, substantive
obligation in [respect of the determination of injury]. Article 3.1 informs the more detailed
obligations in succeeding paragraphs. These obligations concern the determination of the
volume of dumped imports, and their effect on prices (Article 3.2), investigations of imports
from more than one country (Article 3.3), the impact of dumped imports on the domestic
industry (Article 3.4), causality between dumped imports and injury (Article 3.5), the
assessment of the domestic production of the lik e product (Article 3.6), and the determination
of the threat of material injury (Articles 3.7 and 3.8)...

236 In particular, Article 15.1 establishes the examinations that must be carried out as the basis for "a
determination of injury", and footnote 45 indicates that "inj ury" consists of material injury or threat of material
injury to, or material retardation of the establishment of, a "domestic industry".

7.199 Concerning the examination of the effect of the subsidized imports on domestic prices for the
like product (also required by Article 15.1 and ela borated in Article 15.2), we note first that
Article 15.2 provides for a variety of bases for this examination: whether there has been significant
price undercutting by the subsidized imports in rela tion to the price of the like product, whether those
imports have depressed the price of the like product, or whether those imports have prevented to a
significant degree price increases that otherwise woul d have occurred. Nothi ng in the description of
the required analysis of the price effects of the s ubsidized imports implies that actual output must be
occurring at certain specific points in time, such as dur ing the subsidy POI, in order for the results of
the price analysis to be valid.
237 Indeed, price analysis is undertaken on the basis of sales data, not
production data, and it is apparent to us that the tw o may be entirely de-linked in time. That is, a
producer could produce, for a certain period, invent ory all of the resulting production, and then later
sell from that inventory, with potentially no overlap of the periods of production and sales. In our
view, nothing in Article 15.2 indicates that such a factual situation would render the domestic
enterprise in question ineligible to be considered a "producer" of the like product, and thus part of or
the entire "domestic industry" during the period when it was only selling, and not producing.
7.200 Article 15.4 of the SCM Agreement , governing the examination of the impact of the
subsidized imports on the domestic industry, provi des additional context for the appropriate definition
of "producer". In particular, the long and varied list of factors in Article 15.4 demonstrates that a
variety of factors in addition to production are re levant in an examination of the condition of the
domestic industry. Article 15.4 envisions a multifacet ed approach to examining the condition of the
enterprises involved, requiring the consideration of actual and potential declines in output, sales,
market share, profits productivity, return on invest ments, or utilization of capacity; factors affecting
domestic prices; actual and potential negative effects on cash flow, inventories, employment, wages,
growth, ability to raise capital or investments; and in the case of agricultural products, an increased
burden on government support programmes.
7.201 The factors in this list describe the types of ac tivities that "producers" could be engaged in.
Indeed, while the list includes actual and potential dec lines in output, this is only one element in the
long list of mandatory factors that must be examined in every case. Artic le 15.4 states explicitly that
no one or several of the listed factors can necess arily give "decisive guidance". In our view, the
inclusion of output as one among many factors, which must be considered in an investigation of the
condition of the industry, demonstrates that bei ng a "producer" means more than simply producing
output at the time of filing the application and during th e subsidy POI. In particular, we consider that
the non-prescriptive way in which Article 15.4 is drafted is aimed precisely at accommodating a wide
range of potential factual situations that can pres ent themselves in countervailing duty investigations.
Indeed, we can conceive of several examples of industries which might not be producing output at the
time of filing the application and/or during the subs idy POI due to the seasonal nature of the product,
technological innovations, distribution cycles, force majeure, and other reasons.
7.202 We also consider that the interpretation adva nced by the European Communities runs counter
to the object and purpose of the countervail provisions of the SCM Agreement, which is to provide for
application of trade remedies where subsidized import s cause material injury or threat thereof to an
established domestic industry or the material retarda tion of the establishment of a domestic industry.

237 The European Communities maintains, however, that if there is no output during the subsidy POI
"no injury can be demonstrated" (see European Communities – Second oral statement, para. 57; also European
Communities – Response to Panel question 135). We are not convinced. Considering Article 15.2 as context,
we note that in addition to its plain language, previous panels have found that this provision contains no
"specific rule as to the time periods to be covered by the injury or dumping investigations, nor any relationship
between or overlap of those time periods." (Panel Report, EC – Tube or Pipe Fittings , para. 7.320; and Panel
Report Egypt – Steel Rebar, para. 7.130 on the identical provision in the Anti-Dumping Agreement; see also US
– Countervailing Duty Investigation on DRAMS, para. 7.245.)

If the terms "producer", and by extension "domestic industry", were defined in such a way that, for the
purposes of initiation, output was always required at or very near the date of the application, and for
the purposes of the injury investigation, output was always required during the subsidy POI, this could
have the effect of per se excluding certain kinds of industries from being able to seek countervailing
measures, and we see no indication in the text of the Agreement of any such intention on the part of
the drafters. For example, many agricultural and f ood industries, such as the olive oil industry, are
seasonal in nature and only produce output at certain times of the year. Firms in these industries may
be involved in planting, equipment maintenanc e, harvesting, processing, selling, maintaining
inventory, marketing and distribution at different times of the year. Also, some industries produce
goods on a "just in time" or made-to-order basis. In other industries, production facilities may be shut
down during certain periods for maintenance or upgrading. We consider that the European
Communities' interpretation woul d exclude these industries from obt aining countervailing remedies
during such periods because they, by their very natu re, do not produce output at all relevant times in a
countervail investigation.238
7.203 Most importantly, in our view, the European Communities' interpretation could lead to the
result that an industry may be so badly injured by subsidized imports as to be forced to cease
production for some period, but would be disqua lified from obtaining the very remedy aimed at
addressing such injury.239 We believe that this outcome would be absurd and contrary to the intention
of the drafters of the SCM Agreement. In this context, we are not persuaded by the European
Communities' argument that the provisions on ex officio initiation in Article 11.6 address this
problem.240 In particular, we do not see how this form of initiation could resolve the substantive
question at issue, as Article 11.6 itself indicates that ex officio initiations require the same evidentiary
basis as application-based initiations. 241 Thus, if the European Communities is correct that, for the
purposes of initiation, an applicant must have act ual output at or near the time it presents an
application, Article 11.6 would likewise indicate that "output" would be required at the time of
initiation even if it was undertaken ex officio . In addition, as the European Communities
recognizes242, all investigations require the same eviden tiary basis, whatever the basis of their
initiations. Thus, we fail to see how, if we were to follow the European Co mmunities' interpretation
of Article 16.1, initia ting an investigation ex officio could provide a solution for an industry that had
been forced to cease production – and thus was not producing at or near the time of initiation or
during the subsidy POI – due to competition from s ubsidized imports. We see no indication in the

238 The European Communities, in response to Panel question 13, stated that this principle should not
be applied rigidly and that there were borderline situations, but that, in its view, Fortuny did not present such a
situation because it had ceased production one year before its application was filed and 16 months before the
investigation was initiated.
239 We recall in this context that, due to this situation, the application was presented on the basis of
material retardation, but that in the light of Fortuny's long history as a producer of olive oil, Economía
concluded that this would not be appropriate, and instead initiated the investigation on the basis of "injury".
240 European Communities - Response to Panel question 16: "During the First Substantive Meeting the
European Communities made reference to the possibility of an ex officio initiation for situations in which there
is no domestic production. The reason is that an in itiation upon a written application does require the existence
of an industry that, accordin g to the EC's interpretation, also require s production. Indeed, Article 11.1 of the
SCM Agreement, refers to a written application "by or on behalf of the domestic industry", and Article 11.4 lays
down that an investigation based upon a request by th e domestic industry shall not be initiated unless there is
sufficient support of the domestic industry. On the other hand, Article 11.6 does not make a direct reference to
the existence of a domestic industry. However, even in that case, during the investigation the investigating
authority must adhere to the definitions of injury and domestic industry provided in Articles 15 and 16 of the
SCM Agreement, which require the existence of actual production." See also, European Communities – Second
oral statement, paras. 16-17.
241 Article 11.6 provides in relevant part that in respect of initiations ex officio, the authorities "shall
proceed only if they have sufficient evidence of the existence of a subsidy, injury and causal link, as described
in paragraph 2, to justify the initiation of an investigation."
242 European Communities - Response to Panel question 16.

SCM Agreement that its drafters intended to preclude su ch situations from the application of
countervailing measures.
7.204 With respect to the object and purpose of the SCM Agreement, Mexico has argued that the
material retardation provisions of the SCM Agreement and Article VI:6(a) of the GATT 1994 would be
rendered inutile if the European Communities' interpretation of Article 16.1 were adopted.
243 The
European Communities responds that some producti on would be required even in the case of the
"establishment of a domestic industry." 244 The European Commun ities bases its argument on a
dictionary definition of the term English term "establish" which it argues means to "set up on a
permanent or secure basis", and asserts that this definition indicates that "the term [establishment]
does not refer to the point of starting up a business, but to the achievement of a level of maturity" .245
However, the European Communities provides only an excerpt of the cited definition. We note that
the complete definition does, in fact, refer explicitl y to starting up a business. The definition reads in
full: "Set up on a permanent or secure basis; br ing into being, found (a government, institution,
business, etc.)." (Emphasis added.) This view is further confirmed by the corresponding provisions in
the Spanish and French texts of the SCM Agreement, which are equally authentic, in which the term
"establishment" appears as "creación" and "création" , respectively. The definitions of these Spanish
and French terms also refer to the f ounding or starting up of a business.
246 This broader definition
supports the view that the ordinary meaning of the term "establishment" in the context of material
retardation includes the starting up, or bringing into being or founding, of an industry, which means
that an applicant in such a situation may not yet be a domestic industry. Based on our understanding
of the term "establishment of a domestic industry" we are not certain of the exact relevance of the
definition in Article 16.1 to a material retardation case. Given that this case does not involve injury in
the form of material retardation, we will not address this argument further.
7.205 Based on the ordinary meaning of Article 16.1 read in light of its context and object and
purpose, we find that Article 16.1 does not require that an enterprise or group of enterprises seeking
countervail remedies must actually produce output ar ound the date of filing of an application or
during the subsidy POI to be considered a "producer" or "producers" and therefore part of or the entire
"domestic industry" within the meaning of that Article.
(c) Was Fortuny a "Producer" Within the Meaning of Article 16.1 of the SCM Agreement
7.206 The determination of whether an enterprise or group of enterprises constitutes a domestic
industry must be made on a case-by-case basis, de pending upon the particularities and peculiarities of
the enterprise or group of enterprises being considered. 247 The question before us is whether a real

243 Mexico - First written submission, para. 209; Mexico – Second written submission, para. 167; see
also Japan – Third party submission, paras. 23-24.
244 European Communities – First oral statement, para. 33.
245 European Communities – Response to Panel question 14 citing New Shorter Oxford English
Dictionary (Emphasis added.)
246 For example, the Dictionary of the Real Academia Español (online version) provides the following
definition for "crear" (create) as: "establecer, fundar, introducir por v ez primera algo; hacerlo nacer o darle
introduce something for the first time; cause to be born or give life to, in the figurative sense. Create an
industry, a literary genre, a philosophical system…"). The Dictionary of the Académie Française (online
version) defines "création" as, inter alia , "3. Action de fonder, d'instituer officiellement... La création d'une
entreprise industrielle, ..." ("Action of founding, officially instituting...The creation of an industrial
enterprise...").
247 In response to a specific question from the Panel, the European Communities stated that it "does not
mean to imply that no account could be taken of producers that operate on a seasonal basis or are for some other
reason not producing regularly. The principle should not be applied rigidly, and no doubt in applying it
problems could arise because of borderline situations." European Communities - Response to Panel question

applicant, Fortuny in this countervailing duty investigation, could be considered a "producer" and thus
constitutes the "domestic producers as a whole" within the meaning of Article 16.1 of the SCM
Agreement. Therefore, we now turn to examining wh ether Economía made a reasoned and adequate
determination that Fortuny itself constituted a producer within the meaning of Article 16.1 of the SCM
Agreement.
7.207 The European Communities contends that Fortuny248 had ceased production for the entirety of
the investigation period and for that reason "n o reasonable investigating authority could have
determined that it was an existing industry".249
7.208 Mexico argues that Economía relied upon extens ive information in reaching its conclusion
that Fortuny was a producer of olive oil, incl uding that Fortuny was the legal and business successor
of Formex Ybarra, which had produced olive oil uni nterruptedly since the 1940s; that Fortuny had the
necessary installations and personnel to produce olive oil; that Fortuny did produce the like product to
the investigated imported olive oil during the period of investigation for injury; and that Fortuny was
an ongoing business that had never been involved in any liquidation or insolvency proceedings.250
7.209 The record of the investigation demonstrat es that during the investigation, Economía
examined the questions of whether Fortuny could be considered a producer in spite of having ceased
production in March 2002 a nd whether it had resumed production. As discussed in detail below,
starting with Fortuny's application and response to the pre-initiation prevención, Economía obtained
information concerning Fortuny's (and its predecessor’s) history of olive oil pr oduction, monthly data
for a number of economic indicators (capacity, production, sales, employment, etc.) for the three prior
calendar years, information about the state of its production facilities, and information about its
business plan for resuming operations. During the course of the investigation, Economía received
additional information from Fortuny, including that it had resumed olive oil production after the
imposition of provisional measures. The record of the investigation also indicates that Economía
conducted a verification visit to Fortuny's premises, which confirmed the information that had been
submitted by Fortuny relating to its plans for r esuming operations and its actual resumption of
operations.
7.210 Turning in more detail to Economía's examina tion, we note that the question of whether
Fortuny was a "producer" is addressed in the Final Resolution inter alia at paragraphs 5 and 58,
describing Fortuny's arguments and the information it submitted in this regard ; at paragraphs 224,
226, 227 and 400, relating to Fortuny's physical cap ability to produce olive oil and its resumption of
these activities in late 2004; at paragraphs 328-367, concerning the indicators of Fortuny's condition
and performance during the period 2000-2002; at paragraphs 368-414, in terms of Economía's
assessment of the viability of Fortuny's business plan for restarting operations; and at paragraph 330,
in terms of the verification of the information that Fortuny had submitted.
7.211 Paragraph 5 of the Final Resolution describes the information submitted by Fortuny with the
application "proving the existence of the applican t's production plant, its production capacity and the
availability of raw materials to begin production a nd the technical feasibility of that production".
Paragraph 58 refers to submissi ons made by Fortuny detailing, inter alia , the condition and

13. However, the European Communities declines to provide any specific elaboration as to what constitutes a
"borderline" situation or how such situations should or could be differentiated from the one in which Fortuny
found itself.
248 We will assume, for the purposes of this section, that Fortuny was the sole domestic producer of
olive oil in Mexico, in which case it would have constituted the entire domestic industry for purposes of
Article 16.1 of the SCM Agreement . We examine the question of whethe r, in fact, Fortuny was the sole
producer in section VII.J.2 infra.
249 European Communities - Response to Panel question 143.
250 Mexico - First written submission, paras. 25-28 and 213.

availability of the company's production facilities, the resumption of production, the feasibility of
olive oil production, the supply of olives, financi ng for the purchase of raw materials, activities for
marketing and distributing olive oil, volumes and pr ices of sales, as well as production and financial
data for 2004 (i.e., after production was resumed) . Paragraph 224 indicates that the information
contained in the administrative file showed not only that under certain circumstances it would be
viable for Fortuny to resume production, but also that in fact Fortuny did resume production after the
provisional countervailing measures were imposed. Paragraphs 226 and 227 indicate that from the
outset, Economía had considered Fortuny to have the necessary legal standing to bring the case,
because the company was incorporated under the laws of Mexico, and its main activities were the
production and transformation of the products of the o live tree, including olive oil. In this regard,
Fortuny had submitted documents from Mexican government agencies containing evidence of the
existence of its production plant, its production capac ity, and the availability of raw materials to start
production, and the technical feasibility of that pr oduction. Paragraph 400 indicates that during the
verification visit, Economía confirmed the nature and condition of Fo rtuny's production equipment as
well as the fact that production was taking place at that time. Paragraphs 328-368 contain a detailed
discussion of Economía's analysis of the effects of the investigated imports on Fortuny's condition
during the period 2000-2002, i.e., prior to its ceasing operations. Finally, paragraph 330 indicates that
as a result of the verification visit, only adjust ments of "minor importance" were made to the
information submitted by Fortuny.
7.212 Concerning Economía's assessment of th e viability of Fortuny's business plan,
paragraphs 368-414 of the Final Resolution indicate that Economía questioned and tested a number of
the assumptions that Fortuny had presented, and that it also tested the viability of the plan against
various arguments and objections raised by the res pondent interested parties. These paragraphs also
indicate that in respect of a number of variables, Economía substituted more conservative estimates
than had been presented by Fortuny, and that dur ing the verification visit to Fortuny, Economía
confirmed and adjusted, as necessa ry, the information that had been submitted by Fortuny.
Economía's conclusion at paragraph 414, which was based on its own simulations of various scenarios
under Fortuny's business plan, was that "the project to resume production would be financially viable
if countervailing duties were imposed on the subsidi zed imports and financially non-viable if they
were not."
7.213 We note that the record of the investigation sh ows that the olive oil business is, by its nature,
a seasonal one. This point was not contested, either in the investigati on or in the present dispute. In
the case of Fortuny, the record indicates that the picking of olives and the production of olive oil
normally took place between December and April (with some variability depending on weather
conditions).
251 Given that Fortuny halted production in March 2002, it had only missed one
production season at the time it filed its application, a nd it produced olive oil in two of the three years
under analysis for the determination of injury. Additionally, during the time it was not producing
output of olive oil, Fortuny had maintained its olive groves and production facilities, as well as
developed a business plan for resuming operations, creat ed a new brand name and label, and prepared
its application for countervailing duties. We, therefore, consider that the evidence relied upon and the
explanation supplied by Economía reasonably and adequately supports the conclusion that Fortuny
was a "producer" during the period of investigation for injury, i.e., that the essential nature of its
business, despite a cessation of production for one season, was still the production, distribution, and
sale of olive oil.
7.214 We have examined the facts surrounding Fortuny' s particular circumstances and have found
that Economía reached a reasoned a nd adequate determination, based on the evidence before it on the

251 Exhibit MEX48A (showing a production season of January – June in 1999, January – April in 2000,
January – June in 2001, and January – March in 2002); see also Mexico – Response to Panel question 17; Final
Resolution (Exhibit EC-1), para. 9.

record, and consistent with Article 16.1 of the SCM Agreement, that Fortuny was in fact a producer of
the domestic like product.
7.215 Given these conclusions, we find that the Eu ropean Communities has not established that
solely because Fortuny, which had been continuous ly producing olive oil for many years, was not
producing output of olive oil at the time it presente d its application or during the subsidy POI, it was
not a "domestic producer" within the meaning of Article 16.1 of the SCM Agreement.
7.216 For the same reasons, we also find that th e European Communities has not established its
consequential claims under Article 11.4 of the SCM Agreement and Article VI:6(a) of the GATT 1994,
respectively,252 that because Fortuny was not a producer, a nd thus could not constitute the domestic
industry, both Economía's decision to initiate and its injury determination we re inconsistent with
Mexico's obligations
7.217 We recall that the European Communities' claims under these provisions relating to the
definition of the domestic industry do not end here , but have a second major component, to which we
now turn. In particular, the European Communities a lleges that even if Fortuny could be considered a
producer of the like product, Economía's explanation of its determination that Fortuny constituted the
sole producer of the like product, such that Fortun y by itself constituted the entire Mexican domestic
industry producing olive oil, could not possibly be reasoned and adequate because Economía had an
insufficient factual basis for that determination both at the initiation stage and in the injury
investigation. We will address this claim of the European Communities in respect of the initiation of
the investigation, under Article 11.4 of the SCM Agreement , in section VII.I, below; and we will
address this claim in respect of the injury investigation, under Article VI:6(a) of the GATT 1994 in
section VII.J below. In this context, the Europ ean Communities cites statements by the Appellate
Body that the review by panels of the "factual components" of findings by investigating authorities
should focus on whether, in the light of the evid ence on the record, the conclusions are "reasoned and
adequate".253
I. ARTICLE 11.4 OF THE SCM AGREEMENT
7.218 As noted, in addition to the above-discussed claims based on the legal interpretation of
Article 16.1 of the SCM Agreement , the European Communities argues that even if Fortuny could
have been considered a producer of the like product, Mexico nevertheless acted inconsistently with its
obligations under Article 11.4 of the SCM Agreement because Economía initiated the investigation
without a proper examination of whether there were other Mexican producers of olive oil than
Fortuny, and thus without a proper examination of the degree of support for the application. For this
reason, the European Communities argues, Economía's determination that the application by Fortuny
was made "by or on behalf of the domestic indus try" was inconsistent with Article 11.4 of the SCM
Agreement.
1. Arguments of the Parties
7.219 The European Communities asserts that Economía failed to properly determine that Fortuny
had filed the application "by or on behalf of the domestic industr y" because it did not adequately
investigate the possible existence of domestic producer s other than Fortuny prior to the initiation; i.e.,
that Economía's examination of the degree of support for the application was inadequate and that the
initiation therefore was inconsistent with Article 11.4 of the SCM Agreement . According to the
European Communities, "the investigating authority cannot solely rely on information provided in the

252 See, para. 7.184, supra.
253 European Communities – First written submission, paras. 75 et seq.

application of the domestic industry".
254 In addition, the European Communities argues that as a
factual matter, the material provided by Fortuny either does not support the conclusion that there were
no other producers or amounts to mere assertion rather than evidence.255
7.220 Mexico argues that Fortuny was, at the time of its application, the sole domestic producer of
olive oil. With respect to the possible existence of olive oil producers other than Fortuny, Mexico
argues that the evidence examined by Economía at the time of initiation supports the conclusion that
there were no other domestic producers of olive oil.256
2. Reasoning of the Panel
7.221 Article 11.4 reads as follows:
11.4 An investigation shall not be in itiated pursuant to paragraph 1 unless the
authorities have determined, on the basis of an examination of the degree of support
for, or opposition to, the application expressed by domestic producers of the like
product, that the application has been made by or on behalf of the domestic industry.
The application shall be considered to ha ve been made "by or on behalf of the
domestic industry" if it is supported by those domestic producers whose collective
output constitutes more than 50 per cent of the total production of the like product
produced by that portion of the domestic industry expressing either support for or
opposition to the application. However, no investigation shall be initiated when
domestic producers expressly supporting th e application account for less than 25 per
cent of total production of the like product produced by the domestic industry.
7.222 We note, first, that Article 11.4 is a standing provision designed to ensure that applicants for
countervailing duty investigations are sufficiently representative of the domestic industry producing
the like product. As such, this provision requires an investigating authority to make a determination
as to whether "the application has been made by or on behalf of the domestic industry." This
determination is to be undertaken "on the basis of an examination of the degree of support for, or
opposition to, the application expressed by domestic producers of the like product".
7.223 As noted above, Article 16.1 provides for two distinct bases on which to identify the domestic
industry: the domestic producers as a whole of the like products or those of them whose collective
output of those products constitutes a major propor tion of the total domestic production of those
products. In circumstances in whic h, as in the case before us, an a pplicant claims to constitute the
entire domestic industry, two questions are raised for the investigating authority: (1) whether the
applicant is a domestic "producer" of the like produc ts; and (2) assuming that the answer to the first
question is "yes", whether it constitutes the domestic producers as a whole, in which case it would
constitute the entire domestic industry. Where an investigating authority has reached the conclusion
that an applicant constitutes the entire domestic industry producing the like product, that authority will
not, in practice, need to undertake the measureme nt and weighing exercise contemplated by the
second and third sentences of Article 11.4. Rather, in such a situati on, the criteria in those sentences
necessarily will be satisfied. Factually, this is what occurred in the case before us: Economía
concluded on the basis of the evidence before it th at Fortuny constituted the domestic producers as a

254 European Communities - Second oral statement, para 12.
255 Ibid., paras 37-45; European Communities - Second written submission, paras. 17-22.
256 Mexico – First written submission, paras. 38-44.

whole of the like products and, as a result, did not engage in further measurement of the degree of
support for the application.257
7.224 The questions underlying this claim of the Eu ropean Communities relate to the quality and
reliability of the evidence on which Economía relie d. The European Communities makes essentially
two arguments: first, that as a legal matter, i nvestigating authorities are precluded from basing their
standing determinations pursuant to Article 11.4 of the SCM Agreement solely on the information
provided in the application; and second, that the fa ctual information provided by Fortuny in the olive
oil investigation was an insufficient basis for th e conclusion that Fortuny was the sole Mexican
producer of olive oil.
7.225 Concerning the first of these arguments, we see no language in Article 11.4, or in the SCM
Agreement generally, prohibiting an investigating author ity from basing its determination that an
application has been made "by or on behalf of th e domestic industry" solely on evidence provided by
the applicant. In fact, there is no reference at all in Article 11.4, or elsewhere in the SCM Agreement,
to particular sources of information that must or must not be used as the basis for this determination.
The only stipulations concerning the quality of the evidence provided in an application are the general
requirements in Articles 11.2 and 11.3 of the SCM Agreement (neither of which the European
Communities has cited in its claims), that "simple assertions, unsubstantiated by relevant evidence,
cannot be considered sufficient" for purposes of an application, and that the authority must "review
the accuracy and adequacy of the evidence provide d in the application". The focus of these
provisions is on the quality and credibility of the evidence, rather than on its exact source.
7.226 Concerning the quality of the evidence to be used for standing determinations generally, we
recognize that depending upon the specific nature of th e information provided by an applicant in a
particular case, an investigating authority mi ght need to obtain additional supplementary or
corroborating information in order to have a suffici ent basis for its determination. If, however, the
application itself contains factual evidence that co rroborates the assertions of the applicant, no further
information may be required. We consider pertin ent the findings in past disputes that while an
applicant need only provide in an application such information as is "reasonably available" to it, and
such information need not be of the quantity and qu ality that would be required in order to make a
preliminary or final determination, the information nevertheless may not constitute sufficient evidence
to justify initiation, and an investigating authority, may, but is not required to , seek additional
information to supplement that contained in the application.258
7.227 In this context, we disagree with the Europ ean Communities that the evidentiary standard
applicable to a determination of standing is higher than the standards applicable to determinations of
subsidization, injury and cau sation for the purposes of initiation. 259 In particular, we see no textual
basis for such a distinction, and consider that all of the information in an application, which pursuant

257 In its application Fortuny stated that "Fortuny constitutes 100 per cent of the domestic industry"
Exhibit MEX-41A (proprietary version Exhibit MEX-51A ) and Economía, in the Initiation Resolution (Exhibit
EC-13), accepted this assertion. In particular, the Initiation Resolution contains two statements to this effect. In
paragraph 22 under the heading "Standing" (" Legitimación"), the Resolution states "On the basis of written
communications from the Department of Agriculture of the Government of the Free and Sovereign State of Baja
California, Fortuny represents 100 per cent of the domestic industry, because it is the only company with the
necessary economic and financial conditions and investments needed to establish a domestic industry in the
United Mexican States in the product investigated, thus fulfilling the conditions in Article 11.4 and 16.1 of the
SCM Agreement, Articles 40 and 50 of the Foreign Trade Law, and Articles 60 and 75 of the Foreign Trade
Regulation." At paragraph 48, under the heading "Domestic Market", the Initiation Resolution states:
"Therefore, in terms of capacity and facilities for producing the product most closely resembling or similar
(virtually identical) to the one imported, Fortuny constitutes 100 per cent of the domestic industry".
258 See, e.g., Panel report in Mexico – Corn Syrup, para. 7.74.
259 European Communities - First oral statement, para. 36.

to Article 11.2(i) of the SCM Agreement includes information specifically pertaining to the standing
determination of Article 11.4, is subject to the sam e qualitative "sufficiency" standard referred to in
Article 11.3 of the SCM Agreement.
7.228 For these reasons, we consider that whether or not an investigating au thority needs to obtain
information beyond that contained in the application regarding the standing of an applicant is a matter
to be decided on a case-by-case basis. Moreover, we see nothing in Article 11.4, the only provision
cited by the European Communities, which requires an investigating authority in every case to seek
additional information over and above the information provided by the applicant pertaining to its
standing to request the investigation.
7.229 Moving to the second argument of the European Communities, concerning the evidence relied
upon by Economía, Mexico confirmed to us that Economía relied solely on information provided by
Fortuny in reaching its determination for the purpo ses of initiation that Fortuny was the only Mexican
producer of olive oil.
260 What Economía considered, in partic ular, was the information provided in,
and attached to, Fortuny's application of 12 Marc h 2003 and the additional information provided by
Fortuny on 9 May 2003 in response to Economía's pre-initiation prevención.
7.230 Mexico identified the information provided by Fortuny, and examined by Economía, as the
following:
(a) statements made by Fortuny concerning the state of the domestic industry;
(b) letters dated 3 October 2002, and 27 a nd 28 January 2003, from the state of Baja
California in respect of Fortuny's produc tive capacity (these were attached to the
application); and
(c) information contained in the article "El Olivo, Eco del Mediterraneo" in the journal
Claridades Agropecuarias (" Claridades article"), published June 2001 by the
Government Agency the "Agricultu ral Marketing Support and Services"
("ASERCA") of the Federal Ministry of Agriculture, Livestock, Rural Development
and Food (this article was also attached to the application).
The statements of Fortuny, the lette rs from Baja California, and the Claridades article are all referred
to in the Initiation Resolution.
261
7.231 We note, and consider significant, that a lthough all of this information was provided by
Fortuny, much of it was from sources other than Fortuny, in particular, from government sources.
The substance of this evidence is discussed below.
7.232 In its application, Fortuny stated that it cons tituted 100 per cent of the domestic industry. In
making this statement Fortuny acknowledged that th ere was a "small cottage industry consisting of
estates that produce hand pressed oil". 262 It did not, however, consider that those estates constituted
part of the domestic olive oil industry as Fortuny w as "the only firm in Mexico able to market its
products through the same channels as the products under investigation".263 In its reply to Economía's
prevención, Fortuny supplied information in respect of production and installed capacity both for
Fortuny and for Mexican producers as a whole. That information indicated that Fortuny's historic
production and current installed capacity were the same as national production and installed capacity

260 Mexico – Response to Panel question 103.
261 Initiation Resolution (Exhibit EC-13), paras. 4, 19.
262 Exhibit MEX – 41A (proprietary version at Exhibit MEX – 51A), para. 30.
263 Ibid.

(i.e., that there were no other domestic producers of olive oil, such that Fo rtuny constituted the entire
domestic industry in respect of both production and installed capacity). 264 No source is indicated in
respect of this information, and we assume that it was based on Fortuny's records of its production and
knowledge of its own capacity.
7.233 Fortuny attached to its application two letters from the Government of the State of Baja
California.265 While the letters do not state that there we re no other olive oil producers in Mexico or
Baja California, they also do not mention or imply the existence of any producers other than Fortuny.
The letters indicate that Fortuny maintained a pr oduction facility in good repair and that olives were
available in the region to supply that facility should Fortuny make a decision to re-start production.
7.234 The Claridades article was published by the ASERCA programme of Mexico's Federal
Ministry of Agriculture, Livestock, Rural Developm ent and Food. Mexico submits that this is an
authoritative body, and the European Communities does not contest this.
7.235 In submissions made before us, there was considerable discussion by the parties as to the
meaning of a sentence at page 12 of the Claridades article which, reads as follows:
The main companies established in Me xico that process olives for [table
consumption] are Ybarra and Bufalo and for oil only the former.266
Mexico considers that this statement indicates that there were two main companies in Mexico that
processed olives for table consumption, but only on e company that processed olives for oil, namely
Ybarra (predecessor to Fortuny). 267 The European Communities' position is that the adjective "main"
refers both to the companies producing table olives and the companies producing oil (i.e., that Ybarra
and Bufalo were the main companies producing table olives while Ybarra was the main company
producing olive oil). For the European Communities, the use of the term "main" as applied to the
production of olive oil implies that there were other entities producing olive oil, and it argues that on
this basis Mexico was obliged to conduct furthe r investigations to id entify such entities and,
presumably, to consider their production volume and support for the application in addressing
standing pursuant to Article 11.4 of the SCM Agreement.
268
7.236 Considered in isolation, it is unclear to us whether the term "main" in the quoted passage is
intended to apply to the production of olive oil or only to the production of table olives. We note,
however, that while elsewhere in the Claridades article there are references to production and
marketing of olive oil by Ybarra (predecessor to Fort uny), there are no references to the production of
olive oil by any other entity (with the limited ex ception of experimental artisanal production).
Furthermore, in respect of brands of olive oil mark eted in Mexico, the Ybarra (Fortuny) brand is the
only domestic brand identified in the Claridades article.
269 We consider that the Claridades article
taken as a whole supports the proposition that Fortun y was the only producer of olive oil operating in
Mexico.
7.237 We thus find, as a matter of fact, that there was no concrete evidence, in any of the
information that was before Economía at the time it took the decision to initiate, that there were

264 Exhibit MEX – 45 (proprietary version at Exhibit MEX – 51B1).
265 Exhibit MEX- 39 .
266 Claridades Agropecuarias (Exhibit EC – 30), p.12. The Spanish version of the text refers to olives
for "aderezo" which the European Communities explained to the Panel in response to Panel question 132 is "the
process to transform olives harvested from the olive tree into table olives."
267 Mexico – First written submission, paras. 39-40.
268 European Communities – First oral statement, para. 40.
269 Claridades Agropecuarias, p. 14, 15, and p.19 (where, in the table comparing prices of olive oil by
brand name, Ybarra is the only Mexican company listed, all others are from Spain and Italy) (Exhibit EC-30)

producers of olive oil other than Fortuny (except fo r small artisanal producers) operating in Mexico.
Furthermore, we consider that the information was cr edible. In particular, although all of the material
was provided by Fortuny, it included documents from external, government sources, in particular a
government publication dedicated to an examination of the Mexican olive and olive oil industry.
Upon examining the totality of the evidence that was before Economía at the time of initiation
270, we
find that Economía reasonably and adequately coul d have concluded, for purposes of the standing
determination, that there were no other domestic producers of olive oil and that Fortuny thus
constituted the entire domestic industry.
7.238 For the above reasons, we find that the Eu ropean Communities has not established that
Mexico acted inconsistently with its obligations under Article 11.4 of the SCM Agreement when it
determined that the application was made "by or on behalf of" the domestic industry.
J.
ARTICLE I6.1 OF THE SCM AGREEMENT AND ARTICLE VI:6(a) OF THE GATT 1994
7.239 In addition to its claim that Fortuny was not a producer within the meaning of Article 16.1 of
the SCM Agreement , the European Communities also cha llenges, assuming that Fortuny was a
producer, the factual basis of Economía's conclusions that there were no Mexican producers of olive
oil other than Fortuny, thus constituting the entire domestic industry. In particular, the European
Communities asserts that Economía's investigation into the possible existence of other olive oil
producers was inadequate and that, as a consequen ce, Economía's conclusions concerning the extent
of the domestic industry were not reasoned a nd adequate. For these reasons, the European
Communities maintains Mexico's injury analysis was purely speculative and that Economía did not
provide a reasoned and adequate expl anation of its findings, and was th erefore in contravention of its
obligations under Article 16.1 of the SCM Agreement, as a consequence of which its injury findings
also were in breach of Article VI:6(a) of the GATT 1994.271
1. Arguments of the Parties
7.240 On the question of whether there were Mexican producers of olive oil other than Fortuny, the
European Communities argues that the investigative record contained evidence (including the
Claridades article discussed above, as well as inform ation and arguments presented by respondent
interested parties in the investiga tion) demonstrating that other producers existed. According to the
European Communities, Economía's efforts to pursue this issue were inadequate, and the evidence on
the record did not support the conclusion that ther e were no olive oil producers other than Fortuny.
We understand the European Communities' argument to be that because of these alleged flaws in the
factual basis underlying Economía's conclusion that Fortuny constituted the entire domestic industry,
that conclusion was not reasoned and adequate, a nd thus Economía's injury determination was not
made with respect to "the domestic indus try" as required by Article 16.1 of the SCM Agreement and
was therefore also inconsistent with Article VI:6(a) of the GATT 1994.
7.241 Mexico disputes the European Communities' char acterization of Economía's analysis of the
possible existence of producers other than Fortuny, arguing that the European Communities has relied

270 We consider that the relevant question facing Economía was not whether any individual document
or statement was a sufficient basis for a conclusion that Fortuny was the sole domestic producer but, rather,
whether upon examining the evidence in its totality Econom ía could reasonably reach that conclusion. This is
consistent with the decision of the Panel in Mexico – Steel Pipes and Tubes (at para. 7.24) in respect of the
obligation of an investigating authority to consider the accuracy and adequacy of in formation provided in an
application pursuant to Article 5.3 of the Anti-Dumping Agreement (the counterpart to Article 11.3). There the
panel noted: "... a piece of evidence that on its own mi ght appear to be of little or no probative value could,
when placed beside other evidence of the same nature, form part of a body of evidence that, in totality, was
'sufficient'."
271 European Communities – First written submission, paras. 188-189.

on isolated sentences and paragraphs in the Final Resolution which can in no way be regarded as a
valid basis for its arguments, and has ignored other relevant facts with respect to the investigating
authority's enquiries into the possible existence of other producers. 272 Mexico also maintains that the
European Communities has not satisfied its burden to present a prima facie case. Mexico argues that
"even though the EC has indicated some other possible additional enquiries, these do not suffice to
disregard the authority's evaluation of the extent of the domestic industry." 273 Mexico contends
furthermore that the replies from other government agencies, while not unequivocal, indicated that
their records contained no indications that any other domestic producers existed. 274 Mexico also
maintains that the European Co mmunities advances an unreasonable and unacceptable standard that
would require an investigating authority to undertake enquiries ad infinitum even when it had
collected sufficient information to conclude that there were no other producers.275
2. Reasoning of the Panel
7.242 We consider that this claim of the European Communities raises two questions: first, whether
the efforts undertaken by Economía were ade quate and reasonable, and second, whether the
information before Economía in its investigation concerning the extent of the domestic olive oil
industry reasonably supported its conclusion that th ere were no olive oil producers in Mexico other
than Fortuny. We examine these on the basis of th e relevant facts from the investigation as reflected
in the Preliminary and Final Resolutions and other in formation contained in the investigative record.
In doing so, we are mindful that according to the applicable standard of review, our task is to consider
whether the evidence relied upon, and explanati on provided by, Economía reasonably supports its
conclusion that Fortuny was the only domestic producer of olive oil.276
7.243 We start our analysis by considering Economía 's efforts to determine whether there were
domestic olive oil producers other than Fortuny. The European Communities' characterizes those
efforts as follows:
First, Economía contacted a Mexican firm, Ma prinsa, alleged by the exporters to be
producing olive oil. Economía reported that Ma prinsa explained that it was engaged solely in
bottling and packaging olive oil, and not in pro ducing it. However, the Ministry apparently
made no attempt to discover from Maprinsa whethe r the oil that it bought was of Mexican or
foreign origin.

Second, Economía showed a simila r lack of initiative when investigating two other firms that
were revealed to be engaged in bottling only, an d in regard to yet two more firms that were
named as possible producers, Economía either relied on a third party's view or did nothing at
all to determine the nature of their activities.
277 In addition, Economía simply dismissed
artisanal production as irrelevant because it was not distributed through the same channels as
imports.

Third, Economía contacted a national association of oil and edible fat industries, but this
association merely confirmed that Fortuny was the only olive oil producer registered with it
and that it had no registrations of any domestic producer other than Fortuny. This carefully

272 Mexico – First written submission, para. 157-204, citing Final Resolution (Exhibit EC-1), paras. 212
– 255.
273Mexico – Second written submission, para. 136.
274 Ibid., para. 151.
275 Ibid., para. 154.
276 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 188.
277 (footnote original) Final Resolution (Exhibit EC-1), para. 241.

worded response, by avoiding the larger issu e of whether the association knew of any other
producers, does not inspire confidence.

Fourth, Economía contacted several governme nt organisations, but these proved unable to
provide relevant information. Despite this fa ilure, Economía made no further efforts to gain
information from government sources.
278

7.244 The European Communities asserts that these e nquiries were "limited" and argues that they
"produced answers that any serious body w ould regard as demanding follow up questions." 279
Additionally, the European Communities alleges that "in its enquiry about other national producers,
[Economía] never wrote to the authorities of the States of Baja California and Sonora, which are
regions where the Final Resolution declares that olive tree cultivation plays an important economic
role."280
7.245 We have reviewed the Preliminary and Final Resolutions, as well as the actual
correspondence from the record provided to us by Me xico, relating to Economía's enquiries as to the
possible existence of other domestic producers. We find that, as matters of fact, in response to
representations of respondent interested parties on this issue, Economía undertook the following steps
in conducting its examination of this question:
(a) Economía sent a letter to Maprinsa on 15 December 2003, asking inter alia whether it
knew of any other domestic producers of olive oil and whether the olives it used were
of Mexican origin and who its suppliers were. 281 Maprinsa's reply of 5 January 2004
indicated that it knew of three other domestic olive oil manufacturers (Olivos de
California, Olivarera Tulyehualco, and Conser vas Vermex). It also indicated that it
did not buy olives, but olive oil which it bottled. Maprinsa also provided the trade
names under which it sold its olive oil (San Lucas and El Olivo).282

(b) In response to assertions by Fortuny that Maprinsa's product was not olive oil,
Economía contacted on 8 December 2003 a la boratory company, Bufete Químico,
which had been provided a sample of Mapr insa's oil by Fortuny. Economía asked for
a copy of the laboratory report as well as assurances that the sample bore Maprinsa's
trade name and had not been tampered with.
283 Bufete Químico confirmed on _17
December 2003 that it had received a properly closed bottle with a label bearing
Maprinsa's trade name "San Lucas, Aceite de Oliva, Gourmet" which it determined
was not olive oil, but rather canola (rapeseed) oil.284
(c) Economía on 8 December 2003 sent a request to the Mexican Industrial Property
Institute ("IMPI") seeking information on Maprinsa's brand names and whether
IMPI's database indicated if Maprinsa's products were manufactured in Mexico or
only packaged there. Economía also requested information on the number of olive oil
brands registered with IMPI and if their nationality could be discerned. 285 I M P I
responded on 19 January 2004 that San Lucas w as registered to Maprinsa and that El
Olivo was registered in the name of C. Lu is Fernando Peniche Gallareta. IMPI also
noted that there were 13,915 marks in inte rnational class 29, which includes edible

278 European Communities – First written submission, paras. 168-171.
279 European Communities - First written submission, para. 172.
280 Ibid., para. 105.
281 Exhibit MEX-9
282 Exhibit MEX-10. See also, Preliminary Resolution (Exhibit EC-22), paras. 193-194.
283 Exhibit MEX-11.
284 Exhibit MEX-12.
285 Exhibit MEX-13

oils and fats as well as meat, fish, birds, meat extracts, preserved fruits and
vegetables, gelatines, marmalades, compotes, eggs, milk and milk products.286
(d) Economía also sent letters to Conservas Verm ex and Olivarera Tulyehualco, dated 15
October 2004, asking them to explain their products, whether they produced olive oil
or imported and bottled it or both. Economía also asked them to explain their brands
and distribution channels and to explain th e inputs utilized in the production of olive
oil and whether these inputs were of nationa l origin or imported. Economía also
asked them to indicate from where they acquired the inputs. 287 Both companies, in
replies dated 21 October 2004 and 1 November 2004 respectively, stated that they did
not produce olive oil, but only bottled it.288 Conservas Vermex explicitly stated that it
imported its olive oil from Spain and other Mediterranean countries which it
purchased in bulk at the port of Veracruz. 289 Olivarera Tulyehualco indicated that it
only bottled olive oil which it purchased from a supplier in Baja California Norte.
Additionally, Olivarera Tulyehualco provided labels for its oil products. One referred
to "Aceite Vegetal" the other to "Aceite Puro de Oliva". Both labels indicated that
the product was bottled by Olivarera Tuly ehualco which was a registered import
export company. There was no reference to the origin of the oil on either label.290
(e) Economía sent a letter on 8 December 2003 to the National Association of Oil and
Edible Fat Industries ("ANIAME") asking for information on domestic companies
that produced olive oil: their number, names, and addresses as well as the brands
under which they distributed. Economía also asked for information on the volume of
domestic production in the years 1998-2003 and whether ANIAME had information
on the current state of the olive oil industry. 291 ANIAME replied on 8 January 2004
that Fortuny was the sole olive oil producer registered with the association.292
(f) Economía sent a letter on 8 December 2003 to the National Association of Self-
Service and Department Stores ("ANTAD" ), a group of some of the major self-
service and commercial distribution stores in Mexico, requesting information on any
domestic olive oil producer known to them. 293 The ANTAD transmitted the request
to two of its associates, Grupo Gigante and Comercial Mexicana. 294 Grupo Gigante
did not respond, but Comercial Mexican a responded on 17 December 2003 that it
imported its olive oil from Italy and Spain and that it had not received any offers to
market oil from any Mexican company. 295 Economía also sent independent letters to
those two companies, on 4 October 2004.296
(g) Economía on 4 October 2004 sent requests for information to major self-service and
department stores who were not members of ANTAD. These included Nueva Wal
Mart, Grupo Corvi, Servicio Comercial Garis and La Europea Mexico.
297 La Europea
responded on 15 October 2004 that it purchased imported olive oil and that it had
received offers from Maprinsa.298 Grupo Corvi replied on 11 October 2004 that it had

286 Exhibit MEX-40.
287 Exhibits MEX-14, 15.
288 Exhibit MEX-16, 17.
289 Exhibit MEX-16.
290 Exhibit MEX-17.
291 Exhibit MEX-18.
292 Exhibit MEX-19.
293 Exhibit MEX-22.
294 Exhibit MEX-23.
295 Exhibit MEX-26.
296 Exhibits MEX-24, MEX-25
297 Exhibits MEX-27, 28, 29, and 30.
298 Exhibit MEX-31.

not purchased Spanish or Italian olive oil and that it had received an offer from a
Mexican company which was marketing "C arbonell" olive oil, a Spanish brand.
299
Servicio Comercial Garis replied on 14 October 2004 that it had purchased Spanish
olive oil and had not received any offers for domestically-produced olive oil.300
(h) Economía sent letters to the government of the state of Baja California Norte, to
SAGARPA (the federal authority for the agriculture and livestock sector), and to
ASERCA a sub-division of SAGARPA, on 8 December 2003 301 These letters asked
for information (1) about the harvest of olive trees in the years 2000 through 2003 as
well as the volume of table olives obtained and those destined for olive oil (as well as
the conversion factor of olives necessary to produce one litre of olive oil); (2)
information on olive tree plantations in Mexico; and (3) information, if possible
statistical, bibliographic and/or hemerographic explaining the situation of the national
productive industry for olive oil.
302 ASERCA responded to Economía on 19 January
2004 by indicating that the National System of Information for Rural Sustainable
Development would have any relevant sta tistics and geographic information of the
agriculture and fisheries sector.303
(i) Based on its request mentioned in para graph (h) above, Ec onomía engaged in
correspondence with the government of Baja California Norte. The Government of
Baja California responded on 15 December 2003 to the initial request with a letter
explaining the total available hectares in the Coastal Zone as well as the percentage of
the hectarage (40 per cent) that was destin ed for oil production. It also annexed a
table listing plantations in Baja by hectare, variety and capacity. 304 Fortuny is listed
in the table as having a plantation, but so are a variety of other companies. Economía
then sent an additional request on 18 Dece mber 2003 to the Government of Baja
California asking it about its specific knowledge of Fortuny as well as to indicate the
addresses of the companies listed in the table and which ones other than Fortuny were
then producing, had produced, or would produce olive oil.
305 The Government of
Baja California responded on 9 January 2004 with more information about Fortuny
and again attached the same table fro m its earlier letter, which was now titled
"Agroindustries of Olive Trees in Baja, CA". The third column, entitled "capacity"
now had indicators for specific companies separating "olives" and "oil".
306
(j) Economía on 8 December 2003 also requested information from the Office of the
Federal Attorney-General for Consumer Affairs and the Directorate General of
Standards.307 The Directorate General of Standards on 29 January 2004 provided a
copy of the Official Journal entry for the norm NMX-F-109-1982 Foods-Olive Oil,
which set quality specifications for olive o il, and noted that compliance with these
specifications was voluntary.
308

299 Exhibit MEX-32.
300 Exhibit MEX-33.
301 Exhibits MEX-49A, 49B, and 49C
302 Ibid.
303 Exhibit MEX-49G.
304 Exhibit MEX-49D.
305 Exhibit MEX-49E.
306 Exhibit MEX-49F.
307 Exhibits MEX-20, 21. See also Preliminary Resolution (Exhibit EC-22), paras. 193-195; Final
Resolution (Exhibit EC-1), paras. 231-232.
308 Exhibit MEX-49H

(k) Economía consulted the magazine Claridades Agropecuarias, which is published by
SAGARPA, for information about the company Llanos de San Francisco as well as
the possibility of olive oil production in the state of Sonora.
309
(l) The European Communities, on 9 January 20 04 submitted a letter, containing a table
comparing purported figures for Mexican olive oil production from the International
Olive Oil Council ("IOOC") and from the United Nations Food and Agriculture
Organization ("FAO"). The data from the IOOC listed Mexican production of olive
oil in 1999/2000 as 1,000 tons; 2000/2001 as 1,500 tons; and 2001/2002 as
2,000 tons. The figures from the FAO listed domestic production in all three years as
200 tons. This was consistent with Fortun y's production data set forth in Table 9 of
the Preliminary Resolution.
310
(m) Economía described the arguments and ev idence submitted by the parties to the
investigation in respect of this question, the efforts that it undertook and the evidence
it obtained thereby in pursuing this issue, and its reasoning and conclusions with
respect to the non-existence of other produ cers, at paragraphs 212-255 of the Final
Resolution.
7.246 In addition to the above-described steps undert aken by Economía, we note that during the
proceedings, no other Mexican company came fo rward presenting itself as a domestic producer, in
spite of the calls in the Initiation and Preliminary Resolutions to any such co mpanies that might have
an interest in the proceedings, and therefore that no producer objected to the investigation.311
7.247 We have carefully considered both the above -cited steps and the underlying evidence on the
record provided to us, as well as the descriptions in the Final Resolution of Economía's efforts, the
evidence it obtained, and the reasoning underlying its conclusion that there were no Mexican olive oil
producers other than Fortuny. We disagree with the European Communities' characterization that
Economía's efforts were cursory or superficial. To the contrary, the record indicates that Economía
went to considerable lengths to determine whether there were domestic producers other than Fortuny,
that Economía was responsive to representations made by respondent interested parties on this issue
during the investigation, and that it pursued this is sue with considerable vigour. We also do not see
any evidence in the investigative record demonstrating that there we re producers other than Fortuny.
To the contrary, there is no concrete indication in th e record evidence that we have reviewed or in the
Preliminary and Final Resolutions that there were any domestic producers other than Fortuny and,
none came forward during the course of the investig ation. We thus consider that the European
Communities has not established either that Economía's efforts to pursue this issue were inadequate or
that the relevant record eviden ce was insufficient to support a finding that there were no olive oil
producers other than Fortuny in Mexico. For tho se reasons, we find that the evidence relied upon and
the explanation provided by Economía reasonably support its conclusion that there were no domestic
olive oil producers other than Fortuny during the injury period of investigation.
7.248 On the basis of the foregoing, we find that Economía provided a reasoned and adequate
explanation in the Final Resolution on the basis of the evidence on the record as to why it determined
that Fortuny was the only domestic producer, of olive oil, and thus constituted the "domestic
producers as a whole" of the like product within the meaning of Article 16.1 of the SCM Agreement.
We also find that the European Communities has not demonstrated that the factual basis underlying
Economía's conclusion that Fortuny was the only Me xican producer of olive oil was insufficient and

309 Mexico – First written submission, para. 180; Mexico – Response to Panel question 73.
310 Exhibit MEX-36 and Exhibit EC-28. Neither study was actually provided by the European
Communities in its submissions to Economía during the investigation. Mexico notes that the IOOC data
presented by ASOLIVA and ASSITOL did not list Mexico as a producer of olive oil. See Exhibits MEX-34 and
MEX-35.

inadequate, and therefore has not demonstrated that Mexico acted inconsistently with its obligations
under Article 16.1 of the SCM Agreement and consequently with Article VI:6(a) of the GATT 1994 on
this basis.
K.
ARTICLES 15.1 AND 15.4 OF THE SCM AGREEMENT AND ARTICLE VI:6(a) OF THE GATT 1994
7.249 The European Communities claims that Mexico failed to make a determination of injury
based on positive evidence involving an examination of all relevant economic factors and indices
having a bearing on the state of the industry and to provide a reasoned and adequate explanation of its
injury determination, and thus h as acted inconsistently with its obl igations under Article VI:6 of the
GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement.
1. Arguments of the Parties
7.250 The European Communities makes a variety of ar guments with respect to the consistency of
Mexico's injury determination with Article VI:6 of the GATT 1994 and Articles 15.1 and 15.4 of the
SCM Agreement.
7.251 First, the European Communiti es argues that there was confusion as to whether Economía's
injury determination was based on a finding of mate rial retardation or material injury and that a
simultaneous finding of both types of injury was inconsistent with Article VI:6.312
7.252 Second, the European Communities argues that Mexico has acted inconsistently with
Article 15.1(a) in its analysis of the volume of s ubsidized imports and the effect of the subsidized
imports on prices in the domestic market for the like product. 313 In particular, the European
Communities claims that the lack of "actual" pric e data for 2002, the period of investigation for
subsidy, meant that Economía's determination of price undercutti ng was inconsistent with the
obligation in Article 15.1 to make a determina tion based on positive evidence and pursuant to an
objective examination.314 The European Communities argues that th e period of time when the injury
and subsidy investigations overlap is crucial. In the Europ ean Communities' view, "unless there is
output (allowing for temporary interruptions) duri ng that overlapping period no finding of the
existence of injury or domestic industry can be made." 315
7.253 Third, the European Communities raises various criticisms of the time frames used in
Economía's examination of the impact of the s ubsidized imports on the domestic industry. The
European Communities maintains that Economía's an alysis was "confused" and that the time frame
was repeatedly moved, sometimes focusing on wh at happened during the investigation period and
earlier, and sometimes on the future. 316 In particular, the European Communities takes issue with the
lack of production by Fortuny from April – Decemb er 2002, the period of investigation for subsidy,
which it claims is the "central and irreplaceable element of the concept of industry."317
7.254 Fourth, the European Communities argues th at Economía failed to properly identify a
domestic industry that suffered material injury, in th at, "if there is no production there is no industry,

312 European Communities – First written submi ssion, para. 194-200 citing, Panel Report, Korea –
Resins, para. 222.
313 European Communities – First written submission, paras. 201-207; European Communities – First
oral statement, para. 112.
314 European Communities – First written submission, paras. 204-207; European Communities – First
oral statement, para. 112; European Communities – Response to Panel question 82; European Communities –
Second written submission, paras. 55, 59.
315 European Communities – Second written submission, para. 59.
316 European Communities – First written submission, para. 211.
317 Ibid., para. 211-213.

and if there is no industry there can be no ma terial injury, as that term is used in the SCM
Agreement."318
7.255 Finally, the European Communities also alle ges that the use of successive nine-month
investigation periods constantly undermines the injury analysis, and that "the use of 9-month periods
for collecting data, overlapping with some data ex tending over 12 months, added a major element of
unreliability while at the same time introducing needless complexity." 319 The European Communities
maintains that the data from the three months excluded from each year could have significantly
affected the results of the investigation. 320 The European Communities ar gues that Economía's use of
the nine-month periods is inconsistent with the obl igation to conduct an "objective examination" in
Article 15.1 which governs all aspects of the injury determination including the analysis of relevant
economic factors having a bearing on the stat e of the industry pursuant to Article 15.4. 321 T h e
European Communities also notes that in two recent disputes, the same practice by Mexico was found
not to provide an accurate and unbiased picture of what was being examined.322
7.256 Mexico argues that its final determination was based on a finding of "material injury" to the
domestic industry, not material retardation. 323 With respect to the determination of the effect of
subsidized imports on prices of the domestic like product, Mexico argues that it made its price
undercutting analysis properly and that the data it used for Fortuny's prices during the time it was not
producing were consistent with the concept of "positive evidence" in Article 15.1.324
7.257 Concerning the argument that Economía failed to properly identify a domestic industry that
suffered material injury because Fortuny lacked production during the subsid y POI, and thus could
not constitute the domestic industry, Mexico disagrees, for the reasons set forth at para. 7.183, supra.
7.258 With respect to its obligations under Article 15.4, Mexico asserts that Economía properly
examined all relevant economic factors and that the evidence weighed in favour of making an
affirmative determination of material injury to Fortuny from subsidized imports from Spain and
Italy.325 Mexico argues that the European Comm unities is wrong that because there was no
production during the period of investigation, it was not possible to determine material injury, and
refers the Panel to Economía 's analysis in the Final Resolution. 326 Mexico also notes that Economía
found "material injury" on the basis that Fortuny was prevented from resuming operations.327
7.259 Finally, regarding the use of the successive nine-month periods for the injury analysis,
Mexico makes several arguments. First, Mexico states that Economía's analysis of trends and
performance relating to the relevant factors was not limited to comparable periods for the three years
(April-December 2000, 2001 an d 2002), but also took into account monthly or annual data with the
objective of gaining a more precise picture of the situation. 328 Second, Mexico argues that the

318 European Communities – Second oral statement, para. 63.
319 European Communities – Second written submission, para. 53.
320 European Communities – First oral statement, paras. 115 – 117; European Communities – Second
written submission, para. 53.
321 European Communities – First oral statement, para. 117 citing Appellate Body Report, US – Hot
Rolled Steel, para. 193.
322 Ibid., citing Appellate Body Report, Mexico – Rice , para. 180; Panel Report, Mexico – Steel Pipes
and Tubes, para. 7.252.
323 Mexico – First written submission, para. 219-223 citing Preliminary Resolution (Exhibit EC-22),
324 Mexico – First written submission, paras. 236-237.
325 Mexico – First written submission, paras. 248-277.
326 Ibid., at para. 260.
327 Ibid., at para. 261.
328 Ibid., para. 253.

European Communities' statement that the nine-m onth period undermined the objectivity of the
examination of injury is a mere assertion. Mexico also notes that the SCM Agreement does not lay
down any guidelines concerning the period of time th at should be considered in carrying out the
injury analysis, and that therefore it did not act inconsistently with the SCM Agreement.
329
2. Reasoning of the Panel
7.260 The European Communities claims that Economía's "failure to make a determination of injury
based on positive evidence involving an examination of all relevant economic factors and indices
having a bearing on the state of the industry and to provide reasoned and adequate explanation" is
inconsistent with Mexico's oblig ations under Article VI:6 of the GATT 1994 and Articles 15.1 and
15.4 of the SCM Agreement.330 The European Communities' claims raise issues of both law and fact.
We first consider the nature of the legal obligations under Articles 15.1 and 15.4 of the SCM
Agreement, and we then consider whether Economía's acti ons in the olive oil investigation were, as
alleged by the European Communities, inconsistent with those obligations.
7.261 Before turning to these arguments, we recall that the European Co mmunities claims that
Economía's injury determination failed because the domestic industry did not exist. In this regard, we
note our discussion on Article 16.1 of the SCM Agreement in section VII.H.2(c), supra and our
conclusion at paragraph 7.213 that the explanati on supplied by Economía reasonably and adequately
supported the conclusion that Fortuny was a "producer" during the period of investigation for injury.
We therefore see no need to address this argument further.
(a) Article 15 of the SCM Agreement
7.262 Article 15.1 reads as follows:
A determination of injury for purposes of Article VI of GATT 1994 shall be based on
positive evidence and an objective examinati on of (a) the volume of the subsidized
imports and the effect of the subsidized imports on prices in the domestic market for
like products and (b) the consequent im pact of these imports on the domestic
producers of such products.
7.263 Article 15.1 is an overarching provision that sets forth a Member's fundamental, substantive
obligation with respect to the determination of injury. Moreover, paragraph 1 informs the more
specific obligations in the succeeding paragraphs of Article 15.
331
7.264 With respect to the obligation to base a dete rmination of injury on "positive evidence", in US
– Hot-Rolled Steel, the Appellate Body explained that the term relates to the quality of the evidence
that investigating authorities must rely upon in making a determination. 332 In that case, the Appellate
Body clarified that the use of the word "positive" me ans that the evidence must be "of an affirmative,
objective and verifiable character, and that it must be credible."333
7.265 Also in that case, the Appellate Body examin ed the term "objective examination" and
emphasized that it is not concerned with the specific facts underpinning the injury determination, but
rather with the investigative process itself.
334 Specifically, the Appellate Body found that the word
"examination" relates to the way in which the evid ence is gathered, inquired into, and subsequently

329 Mexico – First oral statement (executive summary), para. 37.
330 European Communities – Request for establishment of a panel (WT/DS341/2).
331 Appellate Body Report, Thailand – H-Beams, para. 106.
332 Appellate Body Report, US – Hot-Rolled Steel, para. 192.
333 Ibid.
334 Appellate Body Report, US – Hot-Rolled Steel, para 193.

evaluated.335 The Appellate Body has also interpreted the word "objective," which qualifies the word
"examination", to indicate that the examination process must conform to the dictates of the basic
principles of good faith and fundamental fairness.
336 The panel in Mexico – Steel Pipes and Tubes
recalled the Appellate Body's reasoning as follows:
…the term 'objective examination' is concer ned with the investigative process itself.
An 'objective examination' requires that the domestic industry, and the effects of
dumped imports, be investigated in an unbiased manner, without favouring the
interests of any interested party, or group of interested parties, in the investigation.
The duty of the investigating authorities to conduct an 'objective examination'
recognizes that the determination will be influenced by the objectivity, or any lack
thereof, of the investigative process. Ther efore, the identification, investigation and
evaluation of the relevant factors must be 'even-handed'.
337
7.266 The panel in Mexico – Anti-dumping Measures on Rice held that the requirements to base a
determination of injury on positive evidence and pur suant to an objective examination impose certain
obligations on investigating author ities with regard to the completen ess of the data used as the basis
for their determinations.338 We agree with that panel that an ex amination can only be "objective" if it
is based on data "which provide an accurate and unbiased picture of what it is that one is
examining."
339
7.267 In our view, the selection by an investigating authority of the period of investigation is a
critical element in the countervailing duty investigative process. It determines the data that will form
the basis for the assessment of subsidization, inju ry and the causal relationship between subsidized
imports and the injury to the domestic industry. Although the SCM Agreement does not set forth an
express requirement regarding the selection of th e period of investigation for the purpose of
conducting an injury analysis, this does not mean that an investigating authority's discretion in this
respect is unlimited. In our view, the requirements in Article 15.1 to base a determination of injury on
positive evidence and pursuant to an objective ex amination impose certain constraints on an
investigating authority's discretion in selecting th e period of investigation necessary to ensure the
comprehensiveness and reliability of the data used as the basis for an injury determination.340
7.268 As noted above, Article 15.1 is an overa rching provision which requires an objective
examination, based on positive evidence, of the volume of subsidized imports, their effect on
domestic prices, and their impact on the domestic indus try. The specific obligations with respect to
the conduct of the examination of the impact of the subsidized imports on the domestic industry are
contained in Article 15.4.
7.269 Article 15.4 of the SCM Agreement reads as follows:
The examination of the impact of the subsidized imports on the domestic industry
shall include an evaluation of all rele vant economic factors and indices having a
bearing on the state of the industry, including actual and potential decline in output,
sales, market share, profits, productivity, return on investments, or utilization of
capacity; factors affecting domestic prices; actual and potential negative effects on

335 Ibid.
336 Ibid.
337 Panel Report, Mexico – Steel Pipes and Tubes, para. 7.214.
338 Panel Report, Mexico – Anti-Dumping Measures on Rice, para. 7.77.
339 Ibid., para. 7.79 upheld by Appellate Body Report, Mexico – Anti-Dumping Measures on Rice ,
para. 180.
340 Panel Report, Mexico – Steel Pipes and Tubes, para. 7.249.

cash flow, inventories, employment, wages, growth, ability to raise capital or
investments and, in the case of agricultu re, whether there has been an increased
burden on government support programmes. Th is list is not exhaustive, nor can one
or several of these factors necessarily give decisive guidance.
7.270 In conducting the analysis, an investigating authority must ex amine all of the listed factors
and must also evaluate any other relevant econom ic factors affecting the condition of the industry.
341
However, an investigating authority may conclude th at a particular factor is not probative in the
circumstances of the domestic industry in a particular case, and therefore is not relevant in the actual
determination.342 Additionally, there is no requirement that each and every injury factor, individually,
must be indicative of injury. 343 Furthermore, as noted by the Appellate Body, an investigating
authority conducting the examination required in Artic le 15.4 is obligated to do so objectively, and to
base its determinations on positive evidence, as set forth in Article 15.1.344
(b) Facts Regarding Economía's Injury Investigation and Determination
7.271 We now turn to factual aspects of Economía's injury investigation and determination that
pertain to the claims raised by th e European Communities. In this regard, we rely on the account of
those facts that appears in the Final Resolution, the accuracy of which is not contested by the
European Communities.
7.272 In paragraph 3 of the Final Resolution, Economía sets forth the following as its description of
the period investigated:
On the basis of articles 65, 76 and 77 of the Reglamento de la Ley de Comercio
Exterior [Regulations on the Foreign Trade Act], hereinafter referred to as the RLCE,
the period for investigation as proposed by the applicant was defined as the period
from April to December 2002. For the pur poses of evaluating in jury, comparable
periods of three years, including the period investigated were used, i.e. April to
December 2000, 2001 and 2002, though the evaluation was not confined solely to
these periods. However, monthly data re lating to domestic production figures from
January 1999 to March 2002 (production w as suspended after that month) were
analysed and, in the case of imports, figur es up to December 2002. Likewise, due to
the particular characteristics of the investig ation, projections were also carried out
and data was presented for the first three years of the investment project.
7.273 In its first written submission, Mexico clarifies that "the analysis of injury was conducted by
comparing the periods April to December in 2002, 2001, and 2000 and that the indices for April to
December for one year were thus compared with t hose for April to December in the other two years
and not with those for January to March each year, irrespective of whether during each nine-month
period the situation was worse or better than in the half-year January to June.
345
7.274 The analysis of the effects of subsidized impor ts on prices is contained in paragraphs 294 -
327 of the Final Resolution. First, Economía analy zed the prices of imports and then compared them
to domestic prices to determine whether there was price and cost undercutting. For both of these

341 Appellate Body Report, Thailand – H-Beams , paras. 121-128; Panel Report, EC – Bed Linen ,
paras. 6.154-6.159. See also Panel Report, Mexico – Corn Syrup , para. 7.128; Panel Report, Egypt – Steel
Rebar, para. 7.36.
342 Panel Report, Mexico – Corn Syrup, para. 7.128.
343 Panel Report, EC – Bed Linen (Article 21.5 – India), paras. 6.163, 6.213.
344 Appellate Body Report, US – Hot-Rolled Steel, para. 193.

analyses, Economía used data from April – December 2000, 2001, and 2002. 346 With respect to
import prices, Economía examined monthly data from January 2000 through November 2003, as well
as monthly data showing the percentage price differences compared with the same month of the
previous year.
347 With respect to domestic prices, Economía calculated a margin of price undercutting
using domestic prices from the period from Apr il – December 2000 as well as the same period in
2001, the results of which were displayed in Table 6 of the Final Resolution as follows:
Table 6. Undercutting

Undercutting/
price
April-Dec.
2000
April-Dec.
2001
April-Dec.
2002
European Union -40.1% -61.9% n.a.
Undercutting/
cost

European Union -24.0% -37.8% n.a.

 Source: SIC-FP and Fortuny.
7.275 Additionally, Economía compared the prices of im ports observed in the period investigated –
both with and without adding the cal culated subsidy margin – to Fortuny's prices and costs projected
over the three-year duration of Fortuny's business plan for restarting operations. 348 Economía
explained that:
[t]he data was in the form of projecti ons because, during the period from April to
December 2002, the domestic industry was prevented from carrying out operations
and consequently did not record any real figures for costs or prices. It may be pointed
out that the projected costs included the following items: olive oil production costs,
cardboard boxes, cans and tape, labour, indirect manufacturing costs and
depreciation, plus freight and insurance cost s. In other words, the total production
cost was taken into account.
349
7.276 The analysis of the effects on the state of the domestic industry was contained in
paragraphs 328 – 414 of the Final Resolution. As th e injury alleged was the prevention of Fortuny's
resumption of production, Economía also analyzed, in addition to data for the periods from April –
December in the years 2000, 2001, and 2002, the projections for production, sales, and other
indicators contained in Fortuny's Business Plan.350
7.277 Economía found that the data contained in the administrative record "shows a clear downward
trend throughout the period under analysis in the production and sales volumes for the domestic
industry until they reach zero." 351 Economía found that Fortuny's market share decreased by nine
points, during the period investigated, until Fortu ny disappeared from the market completely, when
the subsidized imports increased their share. Economía also found that in the periods investigated, the
domestic market was supplied almost entirely by subsidized imports (between 85 per cent - 94 per
cent).352 Economía discussed a variety of financial fa ctors relating to income from sales, operating

346 Final Resolution (Exhibit EC-1), paras. 305-306; 313 – 315.
347 Ibid., paras. 307-310.
348 Ibid., para. 324.
349 Ibid.
350 Ibid., paras. 335, 368-414.
351 Ibid., para. 333.
352 Ibid., paras. 339 -340.

expenses, and sales cost.
353 Specifically, Economía found that Fortuny experienced significant
operating losses, which ultimately resulted in an operating loss of 53 per cent in 2002. 354 Economía
found, with respect to Fortuny's productivity, that operating costs fell by 32 per cent in 2001 and the
operating margin recovered by 19 percentage points, rising from minus 15 per cent in 2000 to plus
4 per cent in 2001. However, in 2002 production was suspended.
355 With respect to return on
investment, Economía found that for 2000, it was minus 11 per cent; whereas for 2001, it was minus
0.5 per cent; and in 2002, it fell to minus 21 per cent. 356 With respect to Fortuny's utilization of
capacity, Economía found that the figures for use of installed capacity showed a close correlation
between the large share of the domestic market held by imports at subsidized prices and the
significant levels of underutilization of installe d capacity to the point where, according to the
applicant, it led to the closure of production. Ec onomía also found that utilization of capacity would
increase with the imposition of countervailing duties.357
7.278 Based on the analysis and findings in the Preliminary and Final Resolutions, as well as
Mexico's clarifications in its submissions 358, we find, as a matter of fact, that the period of
investigation for subsidy was April to December 2002, and that the period of investigation for injury
was the months from April to December in 2000, 2001, and 2002.
7.279 Before turning to the legal analysis of the cl aims raised by the European Communities, we
recall the European Communities' argument that there was "confusion" as to whether Economía's
injury determination was based on material retardation or material injury. In this regard, we find, as a
matter of fact, that the injury determinations in both the Preliminary and Final Resolutions are clearly
based on a finding of material injury, not on material retardation. In the Preliminary Resolution,
Economía "decided that there were sufficient elements providing evidence that the subsidized imports
of olive oil from the European Un ion were causing material injury to the domestic industry." 359
Likewise, in the Final Resolution, Economía affirmed that "sufficient evidence existed to prove that
subsidized olive oil imports originating from the European Union caused material injury to the
domestic industry."360 Therefore, we find no "confusion", as alleged by the European Communities,
regarding the basis of the injury finding. That fi nding was clearly based on material injury to the
domestic industry. We therefore see no need to consider this issue further.
(c) Application of Articles 15.1 and 15.4 to the Facts of this Case
7.280 The European Communities has made a number of arguments with respect to how, in its
view, Economía's analysis of the effect of subsidized imports on prices in the domestic market for like
products, and its examination of the consequent im pact of the subsidized imports on the domestic
producers of such products, were inconsistent with Mexico's obligations under Articles 15.1 and 15.4
of the SCM Agreement.
(i) The April – December Periods of Analysis for Injury
7.281 One argument made by the European Communities has broad implications for the entire
injury analysis conducted by Economía, precisely because it calls into question whether Economía has
made an objective examination, based on positive evid ence, of the effects of subsidized imports on

353 We note that it is not clear from the Final Resolution whether the periods referred to in the
discussion of financial indicators are calendar years or the April-December periods of the referenced years.
354 Final Resolution (Exhibit EC-1), paras. 345 – 360.
355 Ibid., para. 354.
356 Ibid., para 352
357 Ibid., paras. 341-342.
358 Mexico – First written submission, para. 271-273; Mexico – Response to Panel question 84.

domestic prices and on the state of the domestic in dustry. Specifically, the European Communities'
claim that the injury analysis was "constantly undermined" by Economía's decision to use data from
nine month periods in successive years presents a fundamental challenge to the validity of the entire
injury determination and should therefore be addressed before any of the other claims relating to the
injury determination in this case.
7.282 In the Final Resolution, Economía indicated that "for the purposes of evaluating injury,
comparable periods of three years, including the period investigated were used, i.e., April to
December 2000, 2001, and 2002, though the evalua tion was not confined solely to these periods." 361
We recall our factual finding made in paragraph 7.278 that the periods of investigation for injury were
the periods of April to December for the years 2000, 2001, and 2002.
7.283 The European Communities has alleged that the use of these April-December periods, rather
than the whole years, undermined the credibility of the injury determination.362 We therefore consider
whether Economía's use of subset s of data temporally limited to the periods April to December for
2000, 2001 and 2002 was capable of yielding an accura te and representative picture that would enable
Economía to make an objective examination, based on positive evidence, in reaching its affirmative
injury determination.
7.284 As a preliminary matter, we recall our conc lusion in paragraph 7.266 above, that an
examination or investigation can only be "objective" if it is based on data which provide an accurate
and unbiased picture of what it is that one is examining. 363 The requirement in Article 15.1 to base a
determination of injury on positive evidence and pursuant to an objective examination imposes certain
limitations on an investigating authority's discret ion with regard to the comprehensiveness and
reliability of the data used as the basis for an injury determination.364
7.285 As a factual matter, we recall that Economía found that the harvesting of black olives for the
extraction of oil typically begins in the autumn of a given year and continues into the first trimester of
the following year. 365 This was confirmed by the Government of the State of Baja California in its
responses to Economía's questions regardi ng the olive oil industry in that State. 366 We further recall
that the article in Claridades Agropecuarias indicates that olives have to be pressed within 24 hours
after harvesting.367 Finally, the production data that Fortuny provided on the administrative record of
the investigation confirm our understanding that, although maintenance of the olive groves and the
production facilities continues throughout the year, the pressing of olive oil from olives takes place
over the several month autumn-winter harvest period, typically ending not later than March of each
year, with the exact timing in a given year depending on relevant weather conditions.368 Based on this
analysis, the April-December periods of investiga tion chosen by Economía for the years 2000, 2001,
and 2002 therefore omitted some key months in which Fortuny was actually producing olive oil
during the years examined.
7.286 As noted by the panel in Mexico – Steel Pipes and Tubes, to justify a truncated analysis based
on discontinuous partial-year periods, an investig ating authority needs to provide a sufficient

361 Ibid., para. 3.
362 European Communities – First oral statement, para. 115.
363 Panel Report, Mexico – Anti-Dumping Measures on Rice , para. 7.79 upheld by Appellate Body
Report, Mexico – Anti-Dumping Measures on Rice, para. 180.
364 Panel Report, Mexico – Steel Pipes and Tubes, para. 7.249.
365 See, e.g., Final Resolution (Exhibit - EC 1), para. 9.
366 Exhibit – MEX 49D.
367 Exhibit – EC 30.
368 Exhibit – MEX 48A (showing a production season of January – June in 1999, January – April in
2000, January – June in 2001, and January – March in 2002); see also Mexico – Response to Panel question 17;

explanation that takes into consideration whethe r the developments within the temporal subsets
examined reflect developments throughout the entir ety of the multi-year period, and whether and why
those subsets are justified and not anomalous in the particular case at issue.
 369 Although Economía
did consider some data outside the April-Decemb er periods to "ensure that it had sufficient
information to reflect objective trends allowing an evaluation of the situation of both imports and the
domestic industry,"370 it did not provide any substantive justifi cation in either the Preliminary or Final
Resolutions for Economía having limited its injury analysis to the three nine-month periods.
7.287 Before us, Mexico explained that the period of investigation for subsidization of April –
December 2002 (which formed the basis for the period examined for purposes of the injury analysis),
was chosen because this was the period that Fort uny originally proposed in its application, and
Economía accepted this period as reasonable for determining the existence of subsidization. 371
Mexico also maintained that once the period of investigation for subsidization was chosen, the
investigating authority looked, for purposes of the injury analysis, at that same period and the
equivalent periods in the preceding two years b ecause they are "structurally the same" thereby
avoiding bias or fluctuations and eliminating any distortions that otherwise might occur. 372
7.288 It is not clear to us how the use of data re lating to the whole three-year period 2000-2002, as
opposed to the three nine-month periods within those years, would have caused "bias or fluctuations"
or "distortions" in the assessment of either the e ffect of subsidized imports on domestic prices or on
the state of the domestic industry. In general, ex amining data relating to entire years normally would
yield a more accurate picture of the "state of the domestic industry" than an examination of limited,
partial and discontinuous periods. 373 In the instant case, it seems to us, distortions were especially
likely to arise because the discontinuous nine-month periods of injury analysis excluded some of the
key months in each year in which this seasonal, agricultural domestic industry actually produced the
like product.
7.289 We find that with respect to Economía's inv estigation into imports of olive oil, an
examination of data relating to the entirety of the years analyzed would have produced a more
accurate and representative picture of the effect of the subsidized imports on domestic prices and the
consequent impact on the domestic producers of the like product than the temporally limited
examination conducted by Economía. Wh ile we do not believe that it would be impossible, as a legal
matter, to justify a truncated injury analysis period under any circumstances
374, in this case, given the
particular circumstances of the domestic olive oil industry, it is evident that Economía would have
had more reliable data and a fuller picture of the state of the industry if it had not excluded from its
analysis the periods in time when the industry was actually producing the product under investigation.
We note, in particular, that Mexico did not provi de any substantive rationale for having chosen to
limit its examination to the three nine-month periods, and instead simply indicated that April-
December 2002 was the period of investigation for subsidy proposed by the applicant, and that
Economía had analyzed the same periods in the injury analysis years to maintain structural symmetry.
We thus find that Mexico has not provided a su fficient justification for Economía's use of the
successive nine-month periods for its injury investigation in this case.
7.290 For the above reasons, we concl ude that Economía's limitation of its injury analysis to the
April-December periods of 2000, 2001 and 2002 is inconsistent with Mexico's obligations under

369 Panel Report, Mexico – Steel Pipes and Tubes, para. 7.252.
370 Mexico – Response to Panel question 78 (footnote 8); Final Resolution (Exhibit EC-1), paras. 307-
310.
371 Mexico – Response to Panel question 85.
372 Mexico – First written submission, paras. 272-273.
373 Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, para. 183.
374 We note that in some instances "seasonal" periods of investigation may indeed have utility.

Article 15.1 of the SCM Agreement to base its injury determination on positive evidence and pursuant
to an objective examination.
(ii) Other claims and arguments
7.291 Having found that Mexico acted inconsistently with its obligations under Article 15.1 of the
SCM Agreement , we see no reason to examine the European Communities' other claims relating to
Articles 15.1 and 15.4 of the SCM Agreement.375 We therefore exercise judicial economy with respect
to those other claims.
L. ARTICLE 15.5 OF THE SCM AGREEMENT
7.292 The European Communities claims that Mexico has failed to properly examine any known
factors other than the alleged subsidized imports which were causing injury to the domestic industry,
inconsistent with its obligations under Article 15.5 of the SCM Agreement.
1. Arguments of the Parties
7.293 The European Communities maintains that Mexico failed to comply with its obligations in
Article 15.5 of the SCM Agreement, in particular, the obligation to examine any known factors other
than the subsidized imports which at the same ti me are injuring the domestic industry and to ensure
that the injuries caused by these other factors are not attributed to the subsidized imports.376
7.294 The European Communities argues that Mexi co failed to properly identify a domestic
industry that suffered material injury with the consequence that Economía's conclusions regarding
causation, in general, and the effect of ‘other fact ors', in particular, were made in a vacuum and had
no significance. 377 The European Communities also main tains that Economía's examination was
marked by failures that were sufficient in them selves to render its causation analysis ineffective. 378
Specifically, the European Communitie s alleges that there were six factors known to Economía that
either were not adequately examined or not examin ed at all. These are: (1) Fortuny's loss of its
previous distribution network; (2) Fortuny's loss of the ability to use a leading Spanish brand name on
its olive oil; (3) the loss of the guaranty of supply that the market demanded; (4) the lack of a guaranty
of a product of the quality demanded by its purchasers; (5) the status, prior to 2002, of the relationship
between Fortuny's predecessor and its distribut or which was importing increasing amounts from the
European Communities; and (6) the high level of Fortuny's costs.
379
7.295 Mexico does not dispute the European Communities' interpretation of the requirements of
Article 15.5, but asserts that it fully complied with those requirements. 380 With respect to the specific
"other known factors" that the Eu ropean Communities cites in its first written submission, Mexico

375 Although we do not reach the substance of that the European Communities other claims under
Article 15.1 and 15.4, we note that if Economía had in cluded in its analysis the January-March 2002 period, it
would not have even been open to such criticisms.
376 European Communities - First written submission, para. 215; European Communities - Second oral
statement, para. 40: European Communities - Comments on Mexico's Response to Panel question 149.
377 European Communities - First written submission, para. 216.
378 Ibid., para. 217.
379 European Communities - First written submission, para. 221; European Communities - Response to
Panel question 90.
380 Mexico – First written submission, paras. 282-283.

maintains that Economía in fact examined those fact ors and provided an analysis with respect to each
of them in its Preliminary and Final Resolutions.
381
2. Reasoning of the Panel
7.296 Article 15.5 of the SCM Agreement states:
It must be demonstrated that the subsid ized imports are, through the effects of
subsidies, causing injury within the meani ng of this Agreement. The demonstration
of a causal relationship between the subsidized imports and the injury to the domestic
industry shall be based on an examination of all relevant evidence before the
authorities. The authorities shall also ex amine any known factors other than the
subsidized imports which at the same time are injuring the domestic industry, and the
injuries caused by these other factors must not be attributed to the subsidized imports.
Factors which may be relevant in this respect include, inter alia , the volumes and
prices of non-subsidized imports of the pr oduct in questions, contraction in demand
or changes in the patterns of consumption, trade restrictive practices of competition
between the foreign and domestic producers, developments in technology and the
export performance and productivity of the domestic industry. (emphasis added)
7.297 Article 15.5 requires that an investigating au thority conduct an examination in order to
demonstrate a "causal relationship" between the s ubsidized imports and the injury to the domestic
industry. In the course of demonstrating this cau sal relationship, investigating authorities are not
permitted to attribute to subsidized imports injuries caused by other factors. Critical to the effective
operation of the non-attribution obl igation, and indeed to the entire causality analysis, is the
requirement in Article 15.5 to "examine any known factors other than the subsidized imports which at
the same time are injuring the domestic industry", for it is the "injuries" caused by those "known
factors" that must not be attributed to subsidized imports. 382 The European Communities' claim
focuses on this requirement.
7.298 While this provision of the SCM Agreement has not previously been subject to dispute
settlement, the identical counterpart provision in the Anti-dumping Agreement (Article 3.5) has been
interpreted by the Appellate Body and a number of pa nels, and we consider those prior rulings to be
directly relevant to the claim before us under Article 15.5 of the SCM Agreement.
7.299 First, concerning the situations in which the no n-attribution language of Article 3.5 of the
Anti-dumping Agreement is to be applied, we recall that the Appellate Body in US – Hot-Rolled Steel
specified that this language applies "solely [to] situations where dumpe d imports and other known
factors are causing injury to the domestic industry at the same time".383
7.300 On the issue of what are "known factors" other than the dumped imports, the panel in
Thailand – H-Beams, in a finding not reviewed by the Appellate Body, held that:
other 'known' factors would include those causa l factors that are cl early raised before
the investigating authorities by interested parties in the course of an AD investigation.
We are of the view that there is no express requirement in Article 3.5 AD that
investigating authorities seek out and examine in each case on their own initiative the

381 Mexico – First written submission, paras. 284-295; Mexico – First oral statement, paras. 39-43;
Mexico - response to Panel question 96; Mexico – Second written submission, paras. 92-96; Mexico - Response
to Panel questions 148 and 149.
382 Appellate Body Report, EC – Tube or Pipe Fittings, para. 175.
383 Appellate Body Report, US – Hot-Rolled Steel, para. 223.

effects of all possible factors other than imports that may be causing injury to the
domestic industry under investigation.384 … We note that there may be cases where,
at the time of the investigation, a certain factor may be 'known' to the investigating
authorities without being known to the interest ed parties. In such a case, an issue
might arise as to whether the authorities would be compelled to examine such a
known factor that is affecting the state of the domestic industry. However, it has not
been argued that such factors are present in this case.385
7.301 Concerning the nature of the required examination of the "other known factors", the Appellate
Body in US – Hot Rolled Steel held that:
… to comply with the non-attribution language in that provision, investigating
authorities must make an appropriate assessme nt of the injury caused to the domestic
industry by the other known factors, and they must separate and distinguish the
injurious effects of the dumped imports from the injurious effects of those other
factors. This requires a satisfactory expl anation of the nature and extent of the
injurious effects of the other factors, as di stinguished from the injurious effects of the
dumped imports.
386
7.302 In that case, the Appellate Body also explaine d that an investigating authority should not
dismiss the other factors on the basis of qualitative assertions. 387 The Appellate Body acknowledged
in this context the practical difficulty of separating and distinguishing the injurious effects of different
causal factors, but indicated that "although this pr ocess may not be easy, this is precisely what is
envisaged by the non-attribution language. If the injurious effects of th e dumped imports and the
other known factors remain lumped together and i ndistinguishable, there is simply no means of
knowing whether injury ascribed to dumped imports was, in reality, caused by other factors." 388
Non-attribution therefore requires the effects of othe r causal factors to be separated and distinguished
from those of the dumped imports so that injuries caused by the dumped imports and those caused by
other factors are not "lumped together" and made "indistinguishable".389
7.303 In EC – Tube or Pipe Fittings, the Appellate Body explained that the non-attribution
obligation does not require investigating authorities to use any particular methodology. Specifically,
the Appellate Body found that as long as an investigating authority does not attribute the injuries from
other known causal factors to the dumped imports, it is free to choose the methodology it will use in
examining the causal relationship between the dum ped imports and the injury to the domestic
industry.
390
7.304 In the same appeal, the Appellate Body also considered whether the non-attribution provision
requires, in every case, an assessment of the collective effects of other causal factors. The Appellate
Body noted, in this regard, that there was no re quirement in every case to make such a collective
assessment, but that "there may be cases where beca use of the specific factual circumstances therein

384 (footnote original) The panel in US – Norwegian Salmon AD, para. 550 stated: "there is no express
requirement that investigating authorities examine in each case on their own initiative the effects of all other
possible factors other than imports under investigation." That panel was examining Article 3.4 of the Tokyo
Round Anti-Dumping Code, which contained different language than Article 3.5 of the WTO AD Agreement.
385 Panel Report, Thailand – H-Beams, para. 7.273.
386 Appellate Body Report, US – Hot-Rolled Steel , para. 226; followed by Panel Report, EC –
Countervailing Measures on DRAM Chips, paras. 7.404-7.405.
387 Appellate Body Report, US – Hot-Rolled Steel , paras. 223 et seq; See also Panel Report, US –
Softwood Lumber VI, para. 7.129.
388 Appellate Body Report, US – Hot-Rolled Steel, para. 228.
389 Appellate Body Report, EC – Tube or Pipe Fittings, para. 188.
390 Ibid., para. 189.

the failure to undertake an examination of the collect ive impact of other causal factors would result in
the investigating authority improperly attributi ng the effects of other causal factors to dumped
imports"
391 In that regard, the Appellate Body concurre d with the statement of the panel that there
might be "multiple 'insignificant factors'" that coll ectively were sufficiently significant as to break the
link between the dumped imports under investigation and the injury. 392 The Appellate Body did not
ultimately find that such an analysis was require d on the facts of that case, because there were a
number of factors that had made only an insignifican t contribution to the injury, and the complaining
party had not adduced any evidence demonstrating th at a collective analysis of those factors was
necessary.393 As a result, it did not elaborate further on the types of circumstances that might give rise
to such a requirement. We recall that in the dispute before us, the European Communities has not
made any allegation in relation to collective vers us individual consideration by Economía of the
"other known factors" that are the subject of this claim.
7.305 We find that the obligation in the th ird sentence of Article 15.5 in the SCM Agreement can be
synthesized into two basic components. First, Economía was required to consider other factors
known to it either as a result of its own investigatio n or because they were raised by the interested
parties. Second, Economía was required to analyze each of these factors separately and to explain the
nature and extent of the injurious effects of th ese other factors, separating and distinguishing them
from the injurious effects of the subsidized imports . If the facts of the case so warranted, Economía
might also have needed to consider the collective impact of the "other known factors".
7.306 With respect to the European Communities' claim that Economía's analysis under Article 15.5
suffered insuperable difficulties that negated its causation analysis because the domestic industry did
not exist, we refer to our finding in section VII.H. 2(c) that Economía made a reasoned and adequate
determination that Fortuny constituted the domestic industry within the meaning of Article 16.1 of the
SCM Agreement . Given our finding on that issue, we do not need to consider it further here.
However, the European Communities also argues th at Economía failed to adequately analyze other
known factors causing injury, contrary to the requirements of Article 15.5 of the SCM Agreement .
We will examine Economía's treatment of each of these alleged "other factors" in turn.
7.307 The six specific 'other factors' raised by the European Commun ities are: (1) the loss of the
previous distribution network; (2) the loss of the ability to use a leading Spanish brand name on its
olive oil; (3) the loss of the guaranty of supply that the market demanded; (4) the lack of a guaranty of
a product of the quality demanded by purchasers of o live oil; (5) the status, prior to 2002, of the
relationship between Fortuny's predecessor and its distributor which was importing increasing
amounts from the European Communities; and (6) the high level of Fortuny's costs.394
7.308 Economía addressed each of these factors in its Preliminary Resolution and Final Resolution,
and concluded that there were no injurious effects from any of them, as distinguished from the effects
of the subsidized imports. The European Commun ities argues that Economía's analysis and findings
were inadequate, with the result that the determination of causation infringed Article 15.5.
395 Because
the European Communities' claim focuses on the adequacy of Economía's causation analysis, we will
first examine, factually, the actual nature of that analysis. Second, we will determine whether
Economía 's analysis was consistent with the requirements of Article 15.5, of the SCM Agreement.

391 Ibid., para. 192.
392 Ibid., fn. 232 citing Panel Report, EC – Tube or Pipe Fittings, para. 7.369.
393 Ibid., paras. 193-194.
394 European Communities - First written submission, para. 221; European Communities – Response to
Panel question 90.
395 European Communities – First written submission, paras. 215-227; European Communities -
Second oral statement, para. 67.

7.309 Economía devoted specific sections in its Prelim inary and Final Resolutions to the discussion
of other injury factors (paragraphs 319 through 342 of the Preliminary Resolution and paragraphs 415
through 437 of the Final Resolution). In additi on, Economía noted, in paragraph 415 of the Final
Resolution, that "it is important to point out that an assessment of the possible effect of factors other
than those imports on the domestic industry's pe rformance has been carried out throughout this
Resolution, so that those factors may not necessarily be repeated in this section or else they may be
described in more detail." 396 In response to a specific questi on from the Panel, Mexico identified
other paragraphs in the Preliminary and Final Reso lutions that referred to the other injury factors
identified by the European Communities. Mexico provided the following table397:
Issue Preliminary
Resolution (relevant
paragraphs)
Final Resolution
(relevant
paragraphs)
Some of the documentary
evidence
Distribution
channels, and loss of
mark
¶57, ¶178 to ¶180,
¶189, ¶216, ¶323 to
327, ¶344(J).¶
¶197 to ¶199, ¶213,
¶294 to ¶327, ¶427,
¶434, ¶435, ¶437
(which refers to ¶323
to ¶327 of the
Preliminary
Resolution).
In the reply to the request for
information (MEX-55), Fortuny
stated that the distribution
network is a group of
independent companies that
handle various brands in the
corresponding St ates and are
dedicated to stocking, managing
and representing the brand or
brands with which they work.
The information on new Spanish
and Italian brands can be found
in Appendix 30 Consumer prices
VC to the investigation
application.
The market survey was
submitted by various importers,
MEX-47.
Supply of olives ¶54, ¶302, ¶318, ¶339
to ¶341.
¶42, ¶44, ¶58, ¶370 to
¶385, ¶391, ¶411,
¶427, ¶432
Reply of Government of Baja
California.
The information for calculating
the possibilities of producing
olives and oil was taken from the
tables on page 10 of Claridades
Agropecuarias on Harvested
Area (ha.) and Olive Yield
(tons/ha).
Buyers' guarantee of
quality, and quality
demanded by the
market.
¶54(L), ¶57, ¶178 to
¶180, ¶323, ¶324,
¶329.
(Paras on the quality
of the oil: ¶182 to
190); ¶197 to ¶199,
¶202, ¶434¶.
Reply to request for information
(page 7 of MEX- 51C).
Table: Prices of Olive Oil on
Retail Markets in Claridades
Agropecuarias, page 19.

397 Mexico – Response to Panel question 149.

Issue Preliminary
Resolution (relevant
paragraphs)
Final Resolution
(relevant
paragraphs)
Some of the documentary
evidence
Fortuny's production
costs.
¶213, ¶241, ¶242,
¶243, ¶244, ¶250,
¶252, ¶269, ¶275 to
¶278, ¶281, ¶287,
¶307, ¶308, ¶313,
¶314, ¶36, ¶317,
¶344(E).
¶58(D), ¶218( E),
¶244, ¶273, ¶275,
¶276, ¶302, ¶311,
¶313 to ¶316, ¶324,
¶325 to ¶327, ¶331,
¶345 to ¶351, ¶353,
¶354, ¶356, ¶362,
¶363, ¶389, ¶407,
¶408, ¶409, ¶411,
¶437, ¶439(D), ¶441,
¶442.
Prices of imports calculated from
information taken from SIC-VR:
Olive Oil Base 1993-2005.
The cost information was taken
from the applicant: Appendix 34
Costs, sales, profits VC. Cost of
goods sold. Domestic prices
were calculated on the basis of
sales information (value and
volume) from the applicant plus
freight charges for sales (MEX-
48A).

7.310 We have reviewed the paragraphs identified by Mexico in its response to our questions.
These passages of the Preliminary and Final Resolu tions indicate that Economía asked questions of
Fortuny, other interested parties, and independe nt sources on all of the points identified by the
European Communities as "other fact ors" causing injury. We also reca ll that the nature of the injury
that Economía found to exist was Fortuny's inability to resume operations. As described in the
paragraphs below, the cited passages indicate that Economía provided analys is of its reasons for
reaching the conclusions that it did.
7.311 First, with respect to the evidence presented by the exporters regarding the loss of the Ybarra
brand, Economía reviewed the market study that was submitted to it, and concluded, as a matter of
fact, that the study did not say that a significant portion of Mexican consumers preferred the Ybarra
brand, but rather that they were aware of the Ybarra brand. Economía also noted that other unknown
brands had been successful in penetrating the Me xican market. For those reasons, Economía did not
accept the argument by the exporters that Fortuny' s inability to use the Ybarra brand was causing it
injury398 in the sense of preventing Fortuny from resu ming operations. In other words, Economía
found that this factor made no contribution to the injury experienced by Fortuny.
7.312 With respect to the loss of the distribution network of Distribuidora Ybarra, Economía noted
that Fortuny had indicated that it had access to a di stribution network, which it planned to use when it
resumed operations.399 Economía asked further qu estions of Fortuny with respect to this issue, and
verified the information on its visit to Fortuny. 400 Additionally, Economía took into account the
freight and transportation costs of Fortuny when it calculated the price at which Fortuny's olive oil
could compete against the Spanish and Italian imports if Fortuny were to resume production. 401
Economía concluded that the loss of the distribut ion network was not contributing to Fortuny's
inability to resume operations, and, thus, was not contributing to the injury experienced by Fortuny.
7.313 The exporters also argued that Fortuny would not be able to obtain a sufficient supply of
olives in order to restart production as planned, b ecause most olive growers had begun to devote their
crops to table olives. Economía examined the info rmation from the Government of the State of Baja
California with respect to the quantities of olives that were available to Fortuny. Economía relied on
information from the State of Baja California ab out available hectares as well as the article in

Claridades Agropecuarias to determine that a reasonable assumption would be that 40 per cent of the
hectares of planted olive trees could be dedicated to olive oil production. 402 Economía therefore
reasonably found that Fortuny did not face a problem of insufficient olive supply, and concluded that
this was not a factor standing in the way of Fortuny resuming operations.
7.314 With respect to the issue of quality, Economía asked Fortuny specific questions about any
quality differences between the Mexican olive oil marketed under the Ybarra brand and the imported
olive oil marketed under the same brand. Fortun y responded that it was unlikely that the Spanish
holder of the mark would have let Formex-Ybarra market olive oil under the Ybarra brand if there
were significant differences in quality between th e Spanish and Mexican products. Economía also
asked ANTAD and some of its members if they we re aware of any segmentation in the olive oil
market based on quality. ASOLIVA and ASITOL c onfirmed that while various types of olive oil
were sold for different purposes, there was no clear segmentation in the market according to the type
of olive oil. Economía concluded that there were no objective data on which it could reasonably
conclude that there were any significant quality pr oblems with olive oil manufactured domestically
compared to imported oil of the Ybarra brand, a nd that, in fact, both had been marketed under the
same brand.403 Thus, Economía reasonably found that this factor also did not contribute to Fortuny's
inability to restart its operations.
7.315 Regarding Fortuny's relationship with Distribuidora Ybarra prior to 2002, Economía analyzed
the effects of the changes in that relationship on domestic production, including effects in the years
2000 and 2001, in paragraphs 328 -- 367 of the Final Resolution. Economía utilized data for 2000
and 2001 that it had received from Distribuidora Ybarra with respect to inventories, sales, operating
costs, etc. It observed from those data that Dist ribuidora Ybarra had steadily decreased the volume of
its purchases from Fortuny over the course of 200 1 and 2002, while nearly doubling its purchases
from foreign suppliers. Economía recognized that the relationship between Distribuidora Ybarra and
Fortuny was significant, and that the decision by Distribuidora Ybarra to replace purchases of olive
oil from Fortuny with purchases of imported oliv e oil caused considerable injury to Fortuny. 404
However, Economía reached the conclusion that this meant that the subsidized imported olive oil, the
product competing against Fortuny's olive oil for sa les, was causing injury to Fortuny. That is,
Economía's conclusion was that the change in the relationship of Distribuidora Ybarra and Fortuny
was not an "other factor", but, in fact, was a de monstration of how the subsidized imports were
injuring Fortuny.
7.316 Economía addressed Fortuny's production costs ex tensively throughout the Preliminary and
Final Resolutions. It concluded that, according to the premises established in Fortuny's business plan,
the project to resume production would be financia lly viable if countervailing duties were imposed on
the subsidised imports and financia lly non-viable if they were not. 405 That is, the business plan's
viability was not dependent on Fortuny's production costs, as these were already taken into account in
the plan. Thus, Fortuny's cost of production was found not to be a factor contributing to the injury it
was experiencing.
7.317 In sum, Economía made determinations based on an evaluation of the evidence before it that
none of the other known factors were causing injury, in fact, to Fortuny. Economía did not dismiss
these factors with qualitative assertions. Rather it carefully examined, separated and distinguished the
effects of each factor from the effects of the subs idized imports, and reasonably concluded that these
factors were not contributing to the injury suffered by Fortuny.

402 Preliminary Resolution (Exhibit EC-22), paras. 338-342; Final Resolution (Exhibit EC-1),
paras. 370-385.
403 Final Resolution (Exhibit EC-1), paras. 200-202.
404 Ibid., para. 360.
405 Ibid., para. 414.

7.318 Concerning any possible obligation on Economía also to examine the collective impact of the
factors identified by the European Communities in th is claim, we recall that the Appellate Body has
ruled that such a collective examination is not obligat ory in every case, but that there might be factual
circumstances in which this could be necessary in order to satisfy the non-attribution obligation of
Article 15.5. While the Appellate Body has not sp ecified what such circumstances might be, we note
that in the dispute on EC – Tube or Pipe Fittings, where this issue was first raised, the Appellate Body
found that the European Communities had not er red by not conducting an examination of the
collective impact of the "other known factors" that it examined. We recall that, in that case, the
European Communities had found that the other known factors had contributed to the injury, but that
their individual contributions were "insignificant", or in one case "not so much as to break the causal
link" between the dumped imports and the injury . In the present case, by contrast, Economía
reasonably concluded that none of the alleged "other factors" made any contribution to the injury
experienced by Fortuny. In such circumstances, we do not consider that a collective examination of
those factors could have led to any different conclu sion in respect of their impact. Thus, we do not
find that the facts in the olive oil investigation by Economía were such as to necessitate an assessment
of the collective impact of the "other factors" referred to by the European Communities in this claim.
7.319 We recall that our task is not to conduct a de novo review of the evidence on the record of the
investigation and reach our own c onclusions, or to substitute our judgment for Economía's. Instead,
pursuant to Article 11 of the DSU, our task is to examine whether Economía provided a reasoned and
adequate explanation as to how the evidence on the record supported its factual findings, and how
those factual findings supported its determination.
406
7.320 Based upon our review of the information on the record before Economía as well as its
examination of that evidence and its explanation of its conclusions in the Preliminary and Final
Resolutions, we find, that Economía provided reasone d and adequate explanati ons of its conclusions
with respect to causation, in particular that th e evidence relied upon and explanations provided by
Economía reasonably and adequately support its conclusions that the other known factors did not
contribute to injury experienced by Fortuny.407
7.321 On the basis of the foregoing, we find that Ec onomía considered the other known factors that
could be causing injury to the domestic industry, separated and distinguished each of these factors
from the effects of the subsidized imports, and determ ined that none of them was causing injury. It
also provided reasoned and adequate explanations of its conclusions. For these reasons, we find that
the European Communities has not established that Me xico acted inconsistently with its obligations
under Article 15.5 of the SCM Agreement.
VIII. CONCLUSIONS AND RECOMMENDATIONS
8.1 For the reasons set out above, we conclude th at Mexico's definitive countervailing measures
on olive oil from the European Communities are inconsistent with the requirements of the SCM
Agreement, in that:
(a) Mexico acted inconsistently with Article 11.11 of the SCM Agreement because
Economía's investigation in this case was c oncluded more than 18 months after the
date of its initiation, and Article 11.11 does not permit such prolongation under any
circumstances;
(b) Mexico acted inconsistently with Article 12.4.1 of the SCM Agreement because
Economía failed to require non-confidential summaries of confidential information in

406 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 186 - 187.
407 Ibid., para. 188.

sufficient detail to permit a reasonable unders tanding of the information submitted in
confidence, in the absence of sufficient expl anations of the existence of exceptional
circumstances and of the reasons why summarization was not possible; and
(c) Mexico acted inconsistently with the obligation in Article 15.1 of the SCM Agreement
to base the injury determination on pos itive evidence and pursuan t to an objective
examination because Economía limited its injury analysis to the periods from April to
December of 2000, 2001 and 2002.
8.2 For the reasons set out above, we further conclude that:
 (a) the European Communities did not establish that Mexico acted inconsistently with its
obligations in Article 13.1 of the SCM Agreement by failing to invite the European
Communities for consultations before the initiation of the investigation;

 (b) The European Communities did not establis h that Mexico failed to comply with the
requirement in Article 13(b)(i) of the Agreement on Agriculture to exempt olive oil
from imposition of counterva iling duties "unless a determination of injury or threat
thereof is made in accordance with Article VI of GATT 1994 and Part V of the
Subsidies Agreement", and did not estab lish that Economía failed to show due
restraint in initiating the countervailing duty investigation on olive oil;

 (c) the European Communities did not establish that Mexico acted inconsistently with its
obligations under Article 12.8 of the SCM Agreement by failing to inform the
interested Members and interested parties of the essential facts under consideration
which formed the basis for the decision to apply definitive measures;

 (d) the European Communities did not establish that Mexico acted inconsistently with its
obligations under Articles 1 and 14 of the SCM Agreement by failing to calculate the
benefit conferred on the recipient pursuan t to paragraph 1 of Article 1 of the SCM
Agreement and to apply the method used to each pa rticular case in a transparent way
which is adequately explained as required by Article 14 of the SCM Agreement;

 (e) the European Communities did not establish that Mexico acted inconsistently with its
obligation under Article 16.1 of the SCM Agreement by failing to properly define the
domestic industry during the countervailing duty investigation consequently the
European Communities also failed to establish that:

 (1) Mexico acted inconsistently with the obligation in Article VI:6(a) of the
GATT 1994 to not impose countervailing duties on a product unless a determination
had been made that there was material in jury or threat thereof to an established
domestic industry;

 (2) Mexico acted inconsistently with its obligations in Article 11.4 of the SCM
Agreement by failing to properly examine whether the application by Fortuny was
made "by or on behalf of the domestic industry"; and

 (3) Because there was no existing domestic industry the injury analysis
conducted pursuant to the obligations in Ar ticles 15.1, 15.4 and 15.5 was inconsistent
with the requirements of those provisions.

 (f) the European Communities did not establish th at Mexico acted inconsistently with its
obligations under Article 15.5 of the SCM Agreement by failing to properly examine

any known factors other than the alleged s ubsidized imports that were causing injury
to the domestic industry.

8.3 In the light of our fi ndings, it was not necessary for us to address, and we have exercised
judicial economy in respect of, the European Comm unities' claims under Articles 15.1 and 15.4 of the
SCM Agreement in respect of Economía's analysis of the volume of subsidized imports and the impact
of these imports on prices in the domestic market for the like product and on the domestic industry.
8.4 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie to constitute a case of nullification or
impairment of benefits under that agreement. A ccordingly, we conclude that to the extent that
Mexico has acted inconsistently with certain provisions of the SCM Agreement , it has nullified or
impaired benefits accruing to the European Communities under that Agreement.
8.5 Article 19.1 of the DSU reads:
Where a panel or the Appellate Body conclud es that a measure is inconsistent with a
covered agreement, it shall recommend that the Member concerned bring the measure
into conformity with that agreement. In addition to its recommendations, the panel or
Appellate Body may suggest ways in which the Member concerned could implement
the recommendations.
8.6 The European Communities has requested that we accompany our recommendation in this
case with a suggestion, pursuant to th e second sentence of Article 19.1 of the DSU, that a complete
repeal would be the most appropriate means of br inging the measures into conformity with Mexico's
WTO obligations. We decline to make a suggesti on as to how Mexico should bring its measures into
conformity with its obligations.
8.7 Pursuant to Article 19.1 of the DSU, having found that Mexico has acted inconsistently with
provisions of the SCM Agreement as set out above, we recommend th at Mexico bring its measures
into conformity with that Agreement.