RESTRICTEDWORLD TRADE
ORGANIZATIONG/SG/Q2/KOR/2
23 January 2001
(01-0356)
Committee on Safeguards Original:  English
NOTIFICATIONS PURSUANT TO ARTICLE 12.1(C) AND ARTICLE 9,
FOOTNOTE 2, OF THE AGREEMENT ON SAFEGUARDS ON TAKING A
DECISION TO APPLY A SAFEGUARD MEASURE
KOREA’s Response to the questions by the UNITED STATES1 regarding
the notifications on the safeguard measures on imported garlic
Q1. According to the notification made pursua nt to Article 12.1(a) of the WTO Safeguards
Agreement (G/SG/N/6/KOR/4, 20 October 1999), the imports of garlic amounted to 9,467 metric
tons in 1996; 18,389 metric tons in 1997; 35,996 metric tons in 1998; and, 22,899 metric tons forthe first six months of 1999.  However, the import  figures provided in the notification of the
application of a provisional (G/SG/N/7/KOR/4, 11 November 1999), which applies only to frozen
garlic, and prepared or preserved garlic, by Vinegar or Acetic Acid, only accounts for imports
of 2,944 metric tons in 1996, 5,401 metric tons in 1997, 9,943 metric tons in 1998, and 9,490
metric tons in the first half of 1999.
- Please explain the discrepancy in these im port figures.  Are the remaining imports of
6,523 metric tons in 1996, 12,988 metric tons in 1997, 26,053 metric tons in 1998, and
13,409 metric tons in the first half 1999 attributed to fresh garlic?  Given that these
amounts exceed the amount of imports for ch illed and prepared/preserved garlic during
the investigatory period, on what basis was the decision made to apply the provisional
safeguard measure only to frozen and prepared/preserved garlic?
Reply
The products subject to investigation as stated in paragraph 2 of Korea’s notification
G/SG/N/6/KOR/4 (20 October 1999) included fresh or chilled garlic, provisionally preserved garlic,dried garlic, frozen garlic, and prepared or preserved garlic by vinegar or acetic acid.  The import
figures in paragraph 3 therefore include all the items mentioned above.
On the other hand, the products subject to the provisional safeguard measure were frozen
garlic and prepared or preserved garlic by vinegar or acetic acid as stated in paragraph 1 of thenotification G/SG/N/7/KOR/4 (11 October 1999).  Im ports of fresh or chilled garlic, provisionally
preserved garlic and dried garlic were not included in the provisional safeguard measure.  The import
figures for frozen garlic and prepared/preserved garlic are stated in paragraph 5 of this notification.
Therefore, the difference in the import figures of the two notifications was the import figures
of fresh or chilled garlic, provisionally preserve d garlic, and dried garlic, which amounted to 6,553
metric tons in 1996
2, 12,988 metric tons in 1997, 26,053 in 1998, and 13,409 in Jan.-June 1999.
                                                     
1 G/SG/Q2/KOR/1, the responses are presented in the order in which the US questions were posed,
numbered by Korea for convenience.
2 The import figure for 1996, as notified in G/SG/N/6/KOR/4, was 9,497 metric tons, and not 9,467
metric tons as mentioned in the US questions.G/SG/Q2/KOR/2
Page 2
The imports of all forms of garlic products caused injury to the domestic garlic industry.
However, the provisional measures were imposed only on frozen garlic and prepared or preserved
garlic, which showed the greatest price difference between domestic and imported products, in order
to minimize trade impacts while taking appropriate measures against the increase of frozen garlic and
prepared or preserved garlic.
Therefore, the tariff equivalent to the difference between the domestic and imported price
levels during the last three years, from 1996 to 1998, was applied on frozen garlic and prepared or
preserved garlic by vinegar or acetic acid.
Q2. According to para 5.2 of G/SG/N/7/KOR/4, the domestic market share of imported
garlic increased from 3.3 per cent in 1996 to 6.2 per cent in 1997, and 11 per cent in 1998.
- Do these import market shares include imports of fresh garlic?  If yes, what percentages
of market share were taken by the products subject to provisional safeguard measure,
frozen garlic and prepared/preserved garlic?
Reply
The domestic market share of imports as stated in para 5.2 of G/SG/N/7/KOR/4 includes fresh
or chilled garlic.  The market share of frozen garlic and prepared or preserved garlic by vinegar or
acetic acid was 1.1 per cent in 1996, 2.1 per cent in 1997, and 3.4 per cent in 1998.
Q3. We note that the data provided in paragraph 5.2 of G/SG/N/7/KOR/4 provides
information concerning the share of the domestic market taken by imports of garlic.  However,
we are concerned that Korea may be imposing a provisional safeguard measure to protect its
domestic market from imports, at the same time as domestic production is increasing andexport sales are increasing.
- What were the volumes and values of domestic production of garlic, including fresh,
chilled and prepared/preserved for the years 1996, 1997, 1998 and first half 1999?
- What were the volumes and values of exports of garlic, in all forms, during those same
periods?
Reply
Domestic garlic production, as already stated in para 1(c) of G/SG/N/8/KOR/3, amounted to
455,955 metric tons in 1996, 393,834 metric tons in 1997, 393,903 metric tons in 1998, and483,778 metric tons in 1999.
3  The figure shows that production fell in 1997 and 1998, and increased
only in 1999 back to the level of 1996.  Thus, in terms of volume, there was no remarkable production
increase.
The values of garlic production, though not used as a relevant indicator in applying
provisional measures and rendering a finding, were W 746.7 billion in 1996, W 786 billion in 1997,
W 1070.9 billion in 1998 and W 735.2 billion in 1999.   
During the same period, the export volume and value of garlic were 6,857 metric tons
($1,933 thousand) in 1996, 392 metric tons($1,462 thousand) in 1997, 148 metric tons($400 thousand) in 1998 and 100 metric tons($174 thousand) in the first half of 1999.  The export
                                                     
3 Since garlic is produced from June to July, it was difficult to separate the volume produced in the first
half of 1999 from the volume produced in the second half of 1999.G/SG/Q2/KOR/2
Page 3
amount and value were insignificant compared to total domestic production, and they were not
important factors to be considered.
Q4. We note, in paragraph 5.3 of G/SG/N/7/KOR /4, that profits of the domestic garlic
industry in terms of Won per hectare in the first half of 1999 decreased 43 per cent of the profitsof the same period in the previous year.
- Was the Korean domestic garlic industry profitable in the first half of 1999?  If the
industry was operating profitably, even if at reduced levels of profitability, on what
basis do critical circumstances exist that damage would be caused that would be difficult
to repair?
- Was the Korean domestic garlic industry profitable in the years 1996-1998?
- Does the Government of Korea provide domestic supports to its garlic producers?  If so,
in what amounts for the years 1996, 1997, 1998 and first half 1999?  How was the
availability of domestic supports taken into account when the determination was madethat domestic producers were faced critic al circumstances from increased imports?
Reply
From 1996 to 1998, the Korean domestic garlic industry was profitable. In 1999, profits went
down sharply by 57.0 per cent.
Korean authorities have examined, as stated in para 5 and 6 of G/SG/N/7/KOR/4, all the
relevant factors, to determine whether critical circumstances existed, and found to be in the
affirmative.  However, profit was only one of the factors considered.   
Purchase loans are provided at low interest rates for domestic garlic purchases.  The
government support for garlic purchases, as notified to the WTO, was W 0.51 billion in 1996,
W 1.24 billion in 1997, and W 2.91 billion in 1998.  The support in the first half of 1999 was
W 4.21 billion.  The government support was not found to be significant enough to take into
consideration.
Q5. We note in paragraph 5.6 of G/SG/N/7/KOR/4 that there is a discussion about the causal
link between the increase in imports and the decrease in domestic prices.  However, it is stated
that the price of garlic is influenced by the production of the year, quality and consumption
level.
- Given the factors identified by Korea as affecting price, why were production, quality
and consumption levels not included in the information provided in G/SG/N/7/KOR/4?
- There does not appear to have been a preliminary determination that increased imports
have caused or are threatening to cause serious injury.  If such a preliminary
determination was made, was it based upon serious injury or threat of serious injury?
- The information provided in paragraph 5.6 only concerns changes in price levels, it does
not address the issue of “significant overall impairment of the domestic industry.”  Did
the competent authority consider the factors such as changes in the level of sales,
productivity, production, capacity utilization, and profits and losses when it made its
preliminary determination?  What “clear ev idence” was considered in evaluating these
factors?G/SG/Q2/KOR/2
Page 4
- Did the competent authority look at sales, productivity, production, capacity utilization
and profits and losses over a five-year period, or only for the first half of 1999?
Reply
When looking into the causal relationship between an increase in imports and a decrease in
price, Korean authorities had reviewed the fa ctors of production, quality and consumption, 4and found
that they were not the main cause of the injury to the domestic industry.
- As for product quality, the evidence was not strong enough to conclude that it was one of the
main factors causing the injury to the domestic industry.
- Garlic consumption increased by 12.2 per cent in 1998 and 20.1 per cent in the first part of
1999, each compared to the same period of the previous year.  Therefore, authorities decided
that it was not the main factor causing the injury to the domestic industry.
- Garlic production, as stated above, decreased by 13.6 per cent in 1997, maintained the same
level in 1998, and increased 22.8 per cent in the first part of 1999, each compared to the
previous year. Because the harvest season begins in June, the production increase in 1999 did
not cause the price decrease during the first five month of 1999.
Para 5 and 6 of G/SG/N/7/KOR/4 explain the contents of the preliminary determination, from
which Korean authorities determined that increased imports have caused serious injuries.
During the investigation, changes in the level of sales, production, productivity, capacity
utilization, profits and losses, and employment were all reviewed in addition to the changes in sale
prices, by examining the sales volumes and values, garlic yield per unit area, the profits of garlicproducers, and number of garlic producers.
For the investigation, the Korean authority looked over the period from 1996 to the time of
the decision.
Q6. Paragraph 5.6 of G/SG/N/7/KOR/4 seems to make much of the substitution of frozen
and prepared/preserved garlic for domestic fresh garlic.
- Did the competent authority find that th ere was a similar displacement of imported
fresh garlic by frozen and prepared/preserv ed garlic?  What were the quantities and
values of imported fresh garlic during the years 1996, 1997, 1998 and first half 1999?
It is probable that imported frozen and prepared/preserved garlic substituted imported fresh
garlic to some extent, for both the frozen and prepared/preserved garlic and fresh garlic could be used
as the ingredients for making Kimchi or other processed food.
Imports of fresh garlic reached 6,153 tons ($6.150 million) in 1996. They doubled in 1997 to
12,939 tons ($8.171 million), and again to 25,633 tons ($10.533 million) in 1998, and amounted
13,362 tons ($5.369 million) in the first half of 1999.
As explained in para 6 of G/SG/N/7/KOR/4, the tariff rate of 30 per cent for frozen garlic and
prepared or preserved garlic became substitutes for fresh garlic, which was imported at the in-quotatariff rate of 50 per cent and out-quota rate of 380 per cent (or W1,900 per kg) in 1999, and thus also
contributed to the sudden import surge of frozen garlic.
                                                     
4 The results however were not elaborated in the notification G/SG/N/7/KOR/4.G/SG/Q2/KOR/2
Page 5
Q7. We note in the notification, pursuant  to Article 12.1(b) of the WTO Safeguards
Agreement (G/SG/N/8/KOR/3, 21 February 2000), that garlic imports increased 93.6 per cent in
1997, 95.7 per cent in 1998, and 28.2 per cent during the period January to September 1999,
compared to the previous years.
- Did these import quantities include fresh,  as well as chilled and prepared/preserved
garlic?
- What were the import quantities and import values of garlic during the periods 1996,
1997, 1998 and January-September 1999?  What were the quantities and values of
domestic consumption of garlic during those same periods?
- On what basis did the competent authority de termine that production, productivity and
capacity utilization were not appropriate factors to evaluate injury due to the
characteristics of the garlic industry?  Did the competent authority gather information
on productivity and capacity utilization for the periods 1996, 1997, 1998 andJanuary-September 1999?  If so, please describe.
Reply
Please refer to para 3 of the same notification for the products involved.
- The import quantities and their increase rates in para 2 of the notification include fresh or
chilled garlic, frozen garlic, provisionally preserved garlic, dried garlic, and garlic prepared or
preserved by vinegar or acetic acid.
Please refer to para 2 for the volumes of garlic imports.
- The import volumes were 9,497 tons in 1996, 18,389 tons in 1997, 35,996 tons in 1998, and
28,330 tons in January – September 1999.  
- The values of garlic imports were $8.844 million in 1996, $11.637 million in 1997,
$15.451 million in 1998, and $11.735 million through January-September, 1999.
The volumes of domestic garlic consumption were 349,223 tons in 1996, 322,453 tons in
1997, 361,811 tons in 1998, and 262,256 tons in January-September 1999. The values of domestic
garlic consumption are not available since it is difficult to calculate the accurate amount consumed
according to the period and stage of distribution.
As for the reasons for determining that production, productivity and capacity utilization were
not appropriate factors, as well as the related information, read para 1-(c),(g),(h) of the notification
G/SG/N/8/KOR/3.
Q8. We note, from the footnote 1 information provided in G/SG/N/8/KOR/3, that the
Korean competent authority considers “farmgate pr ice” to be the most appropriate indicator of
the degree of injury to the domestic industry which is “just a group of garlic producers.”  Using
the farmgate prices of garlic times (at 1 ton=907.2 kilograms) the domestic production of garlic
in tons, the value of domestic production of garlic appears to have been approximately W677,616 million in 1996, W 715,110 million in 1997, W 971,604 million in 1998 and W 684,860
million in 1999.  (Note: these values appear to be consistent with the sales values, based upon
marketing year, provided in para (e) of G/SG/N/8/KOR/3.)G/SG/Q2/KOR/2
Page 6
- Given that the value of domestic production  actually increased steadily throughout the
period, with only a small fall-off, yet still above 1996 levels, in 1999, please explain how
imports have seriously injured domestic producers?  It appears that almost all of these
production increases went to sales, both domestic and overseas, because inventories
actually declined in quantities in 1996- 1998.  (Note:  The inventory level on
September 1999 is not relevant for this analysis, because it includes the domestic
harvest, but most sales do not occur until winter months.)
Reply
As for the calculation of domestic production, it is not clear which calculation method was
used in the US questionnaire.
- First, in Korea, 1 ton is 1000 kilograms, and not 907.2 kilograms.- Second, even if “1 ton=907.2 kilograms” is used, the farm gate prices, times the domestic
production volume in tons, do not yield the value suggested in the questionnaire.  Forexample, in 1996, the farm gate price was W 1,638, and production 455,955 tons.  The farm
gate price times production, times 1,000 kilograms is W 7 46,854.29 million.  The farm gate
price, times production, times 907.2 kilograms is W 677,546.2 million.  Neither figure yields
W 677,616 million
5
For the correct production value, please refer to Korea’s answer in # 3 of this paper.
In any case, the domestic sales value and production value show a steady increase from 1996
to 1998.  However, the sales value decreased by 38.3 per cent in Jan.-Sept. 1999, due to the surge of
cheap imported garlic that lowered domestic garlic prices.  In 1999, the net profit of an average garlicproducer was W 636,000 per hectare, only 84.9 per cent of that of 1996. If currency devaluation that
is caused by inflation is considered, the decrease in real profit becomes even greater, thereby seriously
injuring domestic producers.
In 1996-1998, inventory decreased because production also decreased during the same period.
It was only in 1999 that garlic production increased again.
Q9. We note that profits per hectare actually increased from W 7,490 thousand per hectare
in 1996 to W 14,790 per hectare in 1998.
- Do these profits per hectare include government support payments received by domestic
garlic producers?
- What were the amounts of government support payments received by Korean producers
during the years 1996, 1997, 1998 and January-September 1999?  What was the per
hectare value of those support payments for each of those periods?
                                                     
5 In addition, the production value of garlic cannot be accurately yielded from using the farm gate
price, for garlic for self-consumption and garlic seed plan ts are also included in the production value.  Note that
the production value and sales value in (e) of the notification are different.G/SG/Q2/KOR/2
Page 7
Reply
As mentioned earlier, the support is not provided directly to garlic producers, but to
purchasers, in the form of low-interest purchase loans.  Therefore, it is difficult to estimate how much
of the government support has been transferred to the producers’ profits.
As for the amounts of the government support, please see Korea’s answer to the question #4.
Q10. It was noted in the productivity section that it was not appropriate to evaluate the injury
to the domestic industry on the ground of year-to-year changes of garlic yields, because they are
heavily influenced by weather conditions.
- Did the competent authority co nsider the weather conditions for each of  years of the
investigation in order to determine whether weather in fact affected productivity?  Was
there an unusual weather year during the investigatory period?  (Note:  It appears that
the domestic production increased on a regular basis throughout, which would indicate
that weather was not much of a factor).  Were there any reasons other than weather thatthe Korean authorities iden tified in determining that they did not attach much
importance to productivity?
Reply
The investigating authority had reviewed changes in the weather conditions, and found that
there were no weather abnormalities during the target period of the investigation.  In any case, there
was no significant change in yield per unit area.  The labour productivity of the garlic industry was
not available because Korean garlic producers generally farm several items including garlic.
Q11. We note in G/SG/N/8/KOR/3 para 2 that th ere had been almost no international trade in
frozen garlic and prepared/preserved garlic.  It was noted that imports of these products
increased dramatically as exporters sought to esca pe the high level of tariffs on fresh and chilled
garlic.  This change in trade patterns was impo ssible to forecast at the time of the Uruguay
Round negotiations.
- Was the increase in import values for fresh garlic foreseen?  We note in
G/SG/N/10/KOR/2/Suppl.1 that tariff rates on fresh and chilled garlic have been
increased 60 per cent or W 300, whichever is greater, by the application of a safeguard
measure.  Won’t this create an even great er incentive for exporters to seek to export
frozen and prepared/preserved garlic?
- What is meant by “MMA” in paragraph 4 of G/SG/N/10/KOR/2/Suppl.1?  What is the
current value of MMA?
Reply
The import increase of frozen garlic and prepared/preserved garlic was not foreseen at the
time of the Uruguay Round negotiations. The increase in imports for fresh or chilled garlic was not
foreseen either. At the time of the UR negotiations , only whole, unpeeled garlic was traded in Korea.
Only in recent years did trade of peeled garlic increase, which also triggered imports of peeled garlic
to increase.
- The lower labour cost abroad for peeled garlic even further widened the price gap between
domestic peeled garlic and foreign peeled garlic.G/SG/Q2/KOR/2
Page 8
- In addition, under the same specific tariff rate, peeled garlic benefits 25 per cent in weight
than unpeeled garlic because because peel and rotten garlic is removed.
Therefore, it is unreasonable to expect the UR negotiations to have foreseen the changes in
the garlic market and their possible impact on the competition between domestic and imported goods.If such an impact had been forecasted, a higher tariff would have been imposed on peeled garlic.
That is why an additional tariff rate was imposed on peeled, fresh or chilled garlic as
safeguard measure.  Within the minimum market access (MMA) amount, the in-quota rate is applied
according to Korea’s country schedule.  The MMA for 2000 was 11,895 tons for fresh garlic.  For
imports exceeding the MMA, an additional tariff rate is applied as notified in
G/SG/N/10/KOR/2/Suppl.1 (7 August 2000).
Since the frozen and prepared/preserved garlic are also subject to safeguard measures as
notified in G/SG/N/10/KOR/2 (5 June 2000), there won’t be an incentive for exporters to seek to
export frozen and prepared/preserved garlic in substitute of fresh garlic.
Q12. We note that Korea has imposed a tariff rate quota on frozen garlic and
prepared/preserved garlic.  It is noted that the allocation of the quota is based on the
proportions of supply during the last three years in accordance with Article 5.2(a) of the
Safeguards Agreement.
- Please provide the tariff rate quota allocations by country for the period 1 June-
31 December 2000; 1 January 2001-31 December 2001; and 1 January 2001-
31 December 2002.
Reply
The full tariff rate quota was allocated to China, which was the sole foreign supplier of frozen
garlic and prepared/preserved garlic to Korea, during the period of 1996 to 1998.
Q13. The in-quota tariff amount is 20,105 MT  for the 8-month period 1 June-31 December
2000, but is only 22,267 MT for the 12-month period 1 January-31 December 2002.
- Please explain how a smaller in-quota tariff share in the year 2000 than in the year 2002
satisfies the progressive liberalization requirement of Article 7.4 of the Safeguards
Agreement, particularly given the prohibitive out of quota tariff rates that are being
applied.
Reply
Considering that the import of frozen garlic and prepared/preserved garlic was restricted by
the provisional measure for the first half of 2000, an in-quota amount of 20,105 tons was set for the
entire year of 2000, rather than for the period of 1 June to 31 December 2000.
Therefore, Korea’s safeguard measure on garlic satisfies the progressive liberalization
requirement of Article 7.4 of the Safeguards Agreement.
Q14. We note that the provisional safeguard measure was applied on 13 November 1999 and
the final safeguard is not scheduled to end until 31 December 2002.
- Since this total period exceeds 3 years, does  the Korea Government intend to review the
measure at the mid-term of the measure, pursuant to Article 7 paragraph 4?G/SG/Q2/KOR/2
Page 9
Reply
Please refer to para A.7 in the notification G/SG/N/10/KOR/2 for Korea’s plan for the mid-
term review.
Q15. We note that G/SG/N/11/KOR/2/Suppl.1, the notification on Article 9, footnote 2 of the
Agreement on Safeguards, failed to address th e Article 9, footnote 2 exclusion of developing
country Members.
- Please identify all developing country Members excluded from this safeguard measure.
- Please identify the developing countries that are subject to this safeguard measure.
Reply
Please refer to para B.3 of G/SG/N/10/KOR/2 for information on developing countries that
are excluded from or subject to the safeguard measure.  Please refer also to para 5.1 of
G/SG/N/7/KOR/4 for information on the share of imports by country.
China was the sole exporting country of garlic in 1996 and 1999.  Identification of developing
countries not subject to the safeguard measure is irrelevant in this case, for the imports of garlic fromcountries other than from China did not exceed 3 per cent individually and 9 per cent collectively.
- In 1997, garlic from Bangladesh accounted for 0.03 per cent of the total share and from the
US 0.01 per cent of the total share. In 1998, imports from Thailand accounted for 0.9 per cent.
__________