RESTRICTED
WORLD TRADE G/ADP/W/65
G/SCM/W/74
27October 1995
ORGANIZATION(95-3299)
Committee onAnti-Dumping Practices Original: Spanish
Committee onSubsidies andCountervailing Measures
REPLIES TOQUESTIONS POSED BYHONG KONG1CONCERNING
THE NOTIFICATION OFMEXICAN LAWS AND REGULATIONS2
Thefollowing communication, dated 15September 1995, hasbeenreceived fromthePermanent
Mission ofMexico.
_______________
REPLIES TOQUESTIONS POSED BYHONG KONG CONCERNING
CONSIDERATION OFLEGISLATION ONANTI-DUMPING
AND COUNTERVAILING DUTIES
Reply toQuestion 1
Article 133ofthePolitical Constitution oftheUnited Mexican States establishes thatthe
Constitution andthelawsenacted bytheCongress oftheUnion, together withtreaties inkeeping
therewith, concluded bythePresident oftheRepublic, withtheapproval oftheSenate, willbethe
Supreme Lawofthewhole oftheUnion.
InMexico, treaties aredirectly applicable, inother words, theydonotstand inneedofa
legislative actaftertheyhavebeenpromulgated inorder forthemtoapply; theyaredirectly incorporated
intothedomestic legalsystem and,accordingly, the1994ADAgreement, which fulfils therequirements
indicated intheprevious paragraph, nowforms partofourlegislation onunfair practices; ithasthe
same status astheForeign Trade Act.
Reply toQuestion 2
InconformitywithArticle76.IofthePoliticalConstitutionoftheUnitedMexicanStates,treaties
must beapproved bytheSenate andtheywillbecome theSupreme Lawofthewhole oftheUnion
when theyareinkeeping withtheConstitution, under theterms ofArticle 133oftheConstitution
itself.
Similarly, inconformity withArticle 4oftheConclusion ofTreaties Act,treaties must, in
order tobemandatory inMexican territory, firstbepublished intheDiario Oficial delaFederación
(Official Journal).
1G/ADP/W/37-G/SCM/W/45.
2G/ADP/N/1/MEX/1 andG/SCM/N/1/MEX/1.G/ADP/W/65
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TheADAgreement waspublished on30December 1994intheDiario Oficial delaFederación,
andtherefore fulfils thepublication requirement stipulated intheConclusion ofTreaties Act.
Mexico 'slegalsystem
Reply toQuestion 3
Pursuant toArticle 133oftheConstitution, theADAgreement (aninternational treaty) and
theForeign Trade Act(adopted under theConstitution) havethesame status. However, intheevent
ofaconflict between thetwo,theADAgreement takes precedence, forArticle 2oftheActstates that
"theprovisions oftheActareamatter ofpublic policy andapplicable throughout theRepublic, without
prejudice totheprovisions ofinternational treaties oragreements towhich Mexico isaparty".
Accordingly, intheevent ofanydiscrepancy between theGATT 1994 Agreements andtheForeign
Trade Act,orifthelatter issilent, theinvestigating authority willobserve theprovisions ofthe
Agreements. TheRegulations under theForeign Trade Actarelower instatus thantheGATT 1994
Agreements, forwhich reason theprovisions oftheAgreements prevail overtheRegulations.
Direct application oftheWTO ADAgreement inMexico
Reply toQuestion 4
Asalready stated, pursuant toArticle 133ofthePolitical Constitution oftheUnited Mexican
States, thelawsoftheCongress oftheUnion adopted under theConstitution andinternational treaties
(ADAgreement) arethesupreme lawofthewhole ofthenation.
Consequently, since theADAgreement ispartofMexican legislation, theAgreement andthe
Foreign Trade Actmust beobserved bytheMexican authority ininvestigation proceedings and,in
theevent ofanyinconsistency, theADAgreement willprevail, inaccordance withtheprovisions of
Article 2oftheForeign Trade Act.
Reply toQuestion 5
Asmentioned earlier, theADAgreement forms partofMexican legislation andisbynature
theSupreme LawoftheUnion, forwhich reason itsprovisions must beobserved bythecompetent
authorities and,intheevent ofanyinconsistency, theprovisions ofArticle 2oftheForeign Trade
Actwillbefollowed. Accordingly, theinvestigating authority applies theGATT Agreements without
difficulty inproceedings onunfair international trade practices, together withtheprovisions ofthe
Foreign Trade ActandtheRegulations (seeresolutions issued bytheMinistry ofTrade andIndustrial
Development, inwhich theproceedings arebased bothontheADAgreement andontheForeign Trade
ActandtheRegulations).
Inconsistencies intheMexican ADlegislation
Reply toQuestion 6
Asexplainedearlier,intheeventofaninconsistency,theADAgreementwillprevail.However,
Mexico willbeamending theForeign Trade ActandtheRegulations inorder toremove anypossible
inconsistency.G/ADP/W/65
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Foreign Trade Act
TitleV
Article 29
Reply
Thecircumstances referred tointhisArticle relate toreciprocity, which means Mexico does
notgrant theinjury testtocountries thatdonotgrant ittoMexico ininvestigations ofMexican imports.
Inthecaseofinvestigations involving goods originating inanyWTO Member, Mexico isrequired
togrant theinjury test,since theother Members oftheWTO areunder anobligation togrant itto
Mexico.
Chapter II-Price Discrimination
Article 32
Reply
Under Article 2.2.1 oftheADAgreement, theauthority isentitled toexclude sales which,
forthepurposes ofcalculating normal value, itconsiders werenotmade intheordinary course oftrade;
consequently, inthiscase there isnoinconsistency between theForeign Trade Actandthe
ADAgreement.
Article 36
Reply
Yes,forinconformitywithArticle54oftheActtheinvestigatingauthorityrequirestheinterested
parties toproduce evidence, information anddatawhich theyconsider relevant, onforms issued for
thatpurpose, forms thatclearly indicate which information theparties mustsupply inorder toensure
afaircomparison.
Theapplication ofArticle 36oftheForeign Trade Actmust takeaccount oftheprinciple
established inArticle 2.4oftheADAgreement, which states thatanunreasonable burden ofproof
shallnotbeimposed ontheparties forthepurposes ofmaking afaircomparison.
TitleVII
Chapter I-Common Provisions Relating totheInitiation oftheProcedure
Article 53
Reply
Theperiod specified inArticle 53oftheActislonger thantheperiod provided forintheAD
Agreement, which refers tocalender days, whereas theForeign Trade Actrefers toworking days,
asstated inArticle 3oftheAct.G/ADP/W/65
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Chapter II-Procedure inRelation toUnfair International Trade Practices
Article 66
Reply toQuestion (i)
Yes,thecorresponding certificate oforigin ortheequivalent thereof isenough.
Reply toQuestion (ii)
No,thecertificate oforigin ortheequivalent thereof isonlyrequired inorder tocheck that
theidentical orlikeproducts come from acountry other thantheonewhose exports aresubject to
payment ofcountervailing duties.
Article 71
Reply
While thereisnoprovision relating totheinstruments thatformpartoftheFinalActEmbodying
theResults oftheUruguay Round ofMultilateral Trade Negotiations, neither isthere anyprovision
thatcontradicts orprohibits theterms ofArticle 71oftheActandArticle 96oftheRegulations. It
should bepointed outthatthismatter isstillpending intheWorld Trade Organization, forinaccordance
withtheDecision onAnti-Circumvention, itwasreferred totheCommittee onAnti-Dumping Practices
forresolution. Accordingly, onceithasbeenresolved, Mexico willabide bythedecision, asithas
donewithalltheother precepts oftheWorld Trade Organization.
Chapter IV-Other Common Provisions Relating totheProceedings
Article 82
Reply
Theterm"proceedings" refers toprocedural actsbytheinvestigating authority, carried out
exofficioinanyproceedingspertainingtounfairinternationaltradepractices(anti-dumpingandsubsidies)
provided forintheForeign Trade Actthatarenecessary todiscover thetruthabout thefactsindispute.
Thedecisions referred tointhelastparagraph ofArticle 82areopentoappeal aftercompletion
oftheinvestigation, bythemeans ofdefence provided forintheForeign Trade Act.
Article 83
Reply
Asstated earlier, theADAgreement ispartofMexican legislation onunfair international trade
practices; consequently, theauthority must, forallpurposes, observe theprovisions ofAnnex Iof
theADAgreement.G/ADP/W/65
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TitleIX
Chapter II-Appeal forReversal
Article 97
Reply
Article 97oftheForeign Trade Actaffords parties theopportunity toresort todispute settlement
mechanisms provided forininternational treaties thatreplace adomestic judicial review, suchas
Article 1904 oftheNorth American FreeTrade Agreement.
Thisisperfectly compatible withMexico 'sobligations under itsinternational commitments,
particularly those under theWTO Agreements, inconformity withtheprovisions ofArticle XXIV
oftheGeneral Agreement.
Itisalsoimportant toemphasize thatthedispute settlement mechanisms provided forinthe
WTO Agreements donotcorrespond tothose provided forinArticle 97oftheForeign Trade Act,
whichareintendednottoreplaceadomesticjudicialreviewbuttoensurecompliancewiththeobligations
under theAgreements, andthose whoareinvolved aretheMembers themselves.
Regulations under theForeign Trade Act
TitleIV
Chapter II-Imports under conditions ofprice discrimination
Article 41
Reply
Thepoint isobvious. Insome investigations, thedomestic salesofonesingle exporter may
amount toseveral thousand million dollars. Thisentails aheavy procedural burden inobtaining data,
since thesaleshavetobereported individually, inother words, onebyone.Under therulecontained
inArticle 41oftheRegulations, insuchcases theexporter mayrequest hismargin ofdumping tobe
determined onthebasis ofasample ofcertain types ofproducts, which would avoid himhaving to
collect thedataconcerning thecodes thatarenotincluded inthesample.
Although thisprovision mayalsobeinvoked bytheinvestigating authority, thisdoesnothappen
inpractice since themargins ofdumping arecalculated bymeans ofstatistical packages capable of
handling virtually anydatabank.
Could theHong Kong representative explain howthisruleisincompatible withtheprovisions
ofArticle 6.10oftheADAgreement?
Article 42
Reply
Theideabehind thisruleconcerning representativeness isclear: theconcept ofnormal value
istiedinwiththeprices atwhich theexporter normally, commonly orgenerally sells. Bydefinition,G/ADP/W/65
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apricecannot beregarded astheonenormally charged unless itisforalargequantity oftransactions.
Inturn,thiscannot bedefined interms oftheimporting country market, butinkeeping withthetotal
market. Thisissosimply because theimporting country market maybe,andfrequently is,tiny.
Article 42governs investigations initiated before theadoption oftheAgreement.
Ininvestigations initiated aftertheadoption oftheAgreement, representativeness hastobe
evaluated inconformity withtherulesetoutinfootnote 2toArticle 2.2oftheADAgreement. This
isbecause alloftheprovisions oftheAgreement formpartofMexican legislation. However, thetext
oftheruleinquestion permits exceptions byrecognizing thattheratioof5percentofthesales to
theimporting country willonlyapply normally. Consequently, inaccordance withfootnote 2itis
clearthat,inspecial situations, representativeness maybeestablished atratios other that5percent.
Article 43
Reply toQuestion (i)
Yes,inproceedings initiated aftertheentry intoforce oftheWTO ADAgreement.
Reply toQuestion (ii)
InthepracticefollowedbeforetheadoptionoftheUruguayRoundinstruments,itwasconsidered
thatdomestic salesdidnotallow avalid comparison withexport salestotheimporting country when
suchsaleswere notrepresentative (the"particular market situation" referred toinArticle 2.4ofthe
Tokyo Round ADAgreement). Representativeness wasestablished sequentially, first,toidentify the
relevant market fromamong alltheavailable markets (thedomestic market could notbetherelevant
market ifitwasnotrepresentative inrelation tototalsales), andafterwards, todetermine (inthecase
ofpleadings ofsalesataloss)theproportion ofsalesthatweredeemed representative onagiven market
(inotherwords, when exclusions forsalesatalossaccount formorethan90percentofthetotalvolume,
cantheremaining salesbedescribed asrepresentative oftherelevant market?). Thissecond percentage
ofrepresentativeness wassimilar tothe"second 10"inthe"10/90/10" ruleusedinanti-dumping cases
bytheUnited States Department ofCommerce.
Inanyevent, theWTO ADAgreement doesnotprovide forrepresentativeness tobeassessed
bytworules, butbyonealone. Asexplained earlier, theprovisions oftheADAgreement must be
observed bytheinvestigating authority, andtherefore, ininvestigations initiated aftertheentry into
force oftheAgreement, theauthority hastoevaluate representativeness inaccordance withtheterms
ofthatinstrument.
Article 46
Reply
Thecomment isnotcorrect. Allthemethods forestimating profit margin setoutinArticle 46
oftheRegulations refer totheactual datapertaining totheexporter himself, forwhich reason they
areconsistent withArticle 2.2.2 oftheADAgreement. Infact,allofthemmeetthesituation provided
forinArticle 2.2.2(i).
Onthispoint itisimportant torecognize that,incases ofconstructed value, theinvestigating
authority inMexico never established general costandprofit percentages inaccordance with
predetermined factors, andtherefore hasalmost adecade ofexperience indetermining suchpercentages
onthebasis ofinformation specific toeachexporter. Accordingly, therulescontained inArticle 46G/ADP/W/65
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oftheRegulations simply implement thegeneral principle ("using actual dataoftheexporter") contained
inArticle 2.2.2 oftheADAgreement.
Article 50
Reply
Yes,ifthesame situation arises (sales between related parties).
Article 55
Reply
Article 55oftheRegulations simply regulates thewayinwhich oneoftheadjustments provided
forinArticle 2.4oftheADCode should bemade inpractice.
ThetextofthisArticle isself-explanatory. However, tomake forabetter understanding, the
following explanation isprovided. Paragraph IoftheArticle establishes that,when there isapattern
ofprices thatdiffer onthebasis ofthevolume ofthepurchase, themargin ofprice discrimination
should beestablished bylevel (bycategories ofvolume), forexample, high-volume normal values
compared withhigh-volume export prices. Paragraph IIoftheArticle indicates that,incases inwhich
certain domestic sales arenotforvolumes similar toexport volumes, theprices ofsuchsales shall
beadjusted tothedomestic prices thatarecomparable, interms ofvolume toexternal sales. For
example, ifthere arenolow-volume export sales, theprices oflow-volume domestic salesmust be
adjusted totheprices ofhigh-volume domestic sales(assuming that,infact,allexport salesareatthis
level).
Paragraph IIIoftheArticle establishes certain rulesofverification. Paragraph III.Aconcerns
fictitious markets. Under paragraph III.B, thepattern ofprices differentiated byvolume mustapply
inaconsistent manner; inother words, ithastobeshown thattheprices ofhigh-volume salesare
always lower thantheprices oflow-volume sales. Acopy ofthefinalresolution concerning the
anti-dumping investigation ofbondpaper isattached. Thiscasefullyillustrates theapplication ofthe
various provisions contained inArticle 55oftheRegulations.
CouldtheHongKongrepresentativeexplainwheretheallegedinconsistencybetweenthisArticle
andtheADAgreement lies?
Chapter III-Injury andThreat ofInjury totheDomestic Industry
Article 59
Reply
Infact,theterm"minimum analysis" isofnogreatrelevance; itsimply refers tothefactthat,
indetermining injury orthreat ofinjury tothedomestic industry, atleastalltheelements referred
toinArticles 41and42oftheForeign Trade Actwillhavetobeanalysed.G/ADP/W/65
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Article 67
Reply toQuestion (i)
No,Article 67oftheRegulations relates toasituation different from theoneenvisaged by
theHong Kong representative.
Reply toQuestion (ii)
No,Article 67oftheRegulations relates toasituation different from theoneenvisaged by
theHong Kong representative.
Reply toQuestion (iii)
Owing totheentry intoforce oftheUruguay Round Agreements andthefactthattheyare
mandatory because theyform partofdomestic legislation, theinvestigating authority must observe
theterms ofArticle 5.8oftheADAgreement.
TitleVI
Chapter VII-Countervailing Duties
Article 89
Reply
Thisphrase refers tothefactthat,since exporters haveanopportunity totakepartinthe
investigationwhentheyhavebeenconvenedbypublicationintheDiarioOficialdelaFederación(Official
Journal) ofthenotification senttothem bytheinvestigating authority attheirdomicile andbythe
notification tothegovernment ofthecountry concerned, theymaydecide nottoappear tosubmit a
defence. Inthecaseofexporters whose domicile isunknown, itisnotenough forthenotice tobe
published intheDiario Oficial delaFederación; notification oftherepresentative ofthegovernment
oftheexporters isalsorequired, sothatthegovernment cannotify theexporters thattheymaybeaffected
bytheresult oftheinvestigation.
Chapter VII-Review ofFinal Countervailing Duties
Article 105
Reply
If,aftertheexofficio reviews referred toinArticle 105oftheRegulations under theForeign
Trade Act,nomargin ofprice discrimination isfound inanyofthethree years, thecountervailing
dutyisdefinitively annulled.G/ADP/W/65
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TitleVIII
Chapter VI-Searches forthepurpose ofverification
Article 173
Reply
Since theADAgreement remains silent onthispoint, theauthority considers thatfivedays
areenough fortheinterested parties toraiseaformal objection tothecontents ofthereport and,in
practice, nosituation ofthiskindhasarisen.
Article 174
Reply
Theauthority 'spowers under Article 174oftheRegulations aretaken tomean thatany
information asked ofthirdparties willhelptocorroborate theinformation supplied bytheenterprise
which hasbeenthesubject ofthesearch. Accordingly, iftheauthority isnotprovided withsuch
information, itwillbeobliged tocontinue theinvestigation withthebestinformation available, in
observance oftheterms ofAnnex IIoftheADAgreement.
Article 176
Reply
First, itshould bemade clear thatArticle 176oftheRegulations isaprovision thatrelates
solely toverification searches andnottotheinvestigation process ingeneral.
Inthissense, inkeeping withArticle 173.I oftheRegulations under theForeign Trade Act,
thepriornotice oftheverification search mustcontain thenames ofthepersons carrying outthesearch.
Iftheinvestigating authority requires special consultancy services inthecourse ofverification searches,
itwillinform theparty searched accordingly.