WORLD TRADE
ORGANIZATIONWT/DS303/1
G/L/663G/SG/D31/1
28 November 2003
(03-6337)
Original: Spanish
ECUADOR – DEFINITIVE SAFEGUARD MEASURE ON IMPORTS
OF MEDIUM DENSITY FIBREBOARD
Request for Consultations by Chile
The following communication, dated 24 November 2003, from the Delegation of Chile to the
Delegation of Ecuador and to the Chairman of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.
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I have been instructed by my Government to contact you in order to request consultations
with Ecuador pursuant to Article XXIII of the GATT 1994, Article 4 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes and Article 14 of the Agreement on Safeguards,in relation to the safeguard measures applied by the Government of Ecuador on imports of medium
density fireboard (MDF) classified under NANDINA subheading 4411 of the National Tariff.
On 20 February, Ecuador notified the WTO Committee on Safeguards of the adoption of a
provisional safeguard measure on imports of MDF (G/SG/N/10/ECU/2) consisting in the application
of an additional duty of 15 per cent ad valorem  on MDF imports for a duration of 180 days beginning
on 9 January 2003.  Subsequently, on 25 July 2003, Ecuador notified the Committee on Safeguards ofits finding of threat of serious injury or serious injury and its decision to apply a definitive safeguard
measure (G/SG/N/8/ECU/1 – G/SG/N /10/ECU/2/Suppl.1).  The definitive measure is a quantitative
restriction, consisting of an import quota equivalent to 5,401 MT per year starting on 16 July 2003,
for a duration of two years.  This notification also states that the safeguard measure is to be made
subject to progressive liberalization according to a timetable, and that at the end of the second year ofapplication, the import quota is to be completely eliminated.
The Government of Chile considers that the definitive safeguard measure at issue was
imposed and applied by Ecuador in a manner inconsistent with a number of obligations, both
substantive and procedural, set forth in Article XIX:1(a) of the GATT 1994 and in the Agreement onSafeguards, thereby seriously and severely undermining the competitiveness of the Chilean products
in question on the Ecuadorian market and causing nullification or impairment of benefits accruing
under the covered agreements.
This is true, in particular although not exclusively, in the following respects:(a) The measure does not meet the "unforeseen developments" condition in
Article XIX:1(a) of the GATT 1994.  Moreover, the report of the competent
authorities does not demonstrate, as a matter of fact, the existence of unforeseen
developments, nor does it provide a reasoned and adequate explanation in support ofWT/DS303/1
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its determination in this respect, as required under Article 3.1 of the Agreement on
Safeguards.
(b) Nor is it clear that the product has been imported in increased quantities, absolute or
relative, under the terms of Article XIX:1(a) of the GATT 1994 and Article 2.1 of the
Agreement on Safeguards, or under such conditions as to allegedly signify a "threat"
of serious injury.
(c) At the same time, the Ecuadorian investig ating authority failed to analyse separately
each one of the eight subheadings under NANDINA 4411 affected by the measure forthe purpose of determining whether they were like products or directly competitive
with the domestic industry that requested the imposition of the measure.  This, in its
turn, implies a failure to demonstrate objectively the alleged increased imports,
absolute or relative, the alleged threat of serious injury to the domestic industry, and
the causal link between the alleged increase in imports and the alleged threat.  This iscontrary to Article XIX:1(a) of the GATT 1994 and to Articles 2.1, 3.1 and 4 of the
Agreement on Safeguards.
(d) Regarding the determination of the existence of the alleged threat of serious injury,
the report of the competent authorities contains no reasoned and adequateexplanations of the objective and quantifiable factors listed as a minimum in
Article 4.2 of the Agreement on Safeguards, nor does it analyse other relevant factors
of the same kind that could clearly have a substantial influence on the situation
alleged by the domestic industry.
(e) As a direct result of this inconsistency, the report of the competent authorities fails to
provide objective evidence or to demonstrate the existence of a causal link between
the alleged increased imports and the alleged threat of serious injury.  Nor does it
comply with the principle of "non-attribution", since it does not analyse the possible
effect of, and relationship between, relevant objective and quantifiable factors other
than the alleged increased imports and the alleged threat of serious injury.  This is a
violation of Articles 4 and 3.1 of the Agreement on Safeguards.
(f) Similarly, if Ecuador failed to meet its obligations under Article 4 of the Agreement
on Safeguards, or more specifically, if it failed either to carry out or record the proper
analyses of the causal link between the alleged increased imports and the alleged
threat of serious injury, it follows that Ecuador violated Article 5 of the Agreement onSafeguards by failing to ensure that it was in a position to determine the level
necessary to prevent the alleged threat of serious injury and facilitate adjustment of
the domestic industry.
(g) Ecuador's notifications do not provide any details on how to administer and allocate
the import quotas among supplier countries.  This allocation system may be
inconsistent with Article 5.2 of the Agreement on Safeguards.
(h) Furthermore, the report of the competent authorities neither explains nor provides any
evidence of whether imports from countries excluded from the application of themeasure were excluded, in their turn, from the analysis of the alleged increase in
imports and the alleged threat of injury.  This implies that Ecuador acted
inconsistently with its obligations under Articles 2.1, 3.1 and 4 of the Agreement on
Safeguards.WT/DS303/1
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(i) Nor did Ecuador ever specify the critical circumstances justifying the imposition of
provisional measures as stipulated in Article 6 of the Agreement on Safeguards.
(j) Finally, by providing late notification of the provisional safeguard measure, Ecuador
obstructed and delayed the holding of consultations under Article 12 of the
Agreement on Safeguards.
For the reasons set forth above, the Government of Chile considers the definitive safeguard
measure imposed by Ecuador on imports of MDF to be inconsistent with various WTO provisions,inter alia  Articles 2, 3, 4, 5, 6, 7 and 12 of the Agreement on Safeguards and Article XIX:1(a) of the
GATT 1994.
The Government of Chile looks forward to a reply to this request for consultations in order to
establish a mutually convenient date and place for holding them.
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