RESTRICTED
WORLD TRADE G/ADP/W/2
G/SCM/W/10
ORGANIZATION 7July1995
(95-1879)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
QUESTIONS CONCERNING THE NOTIFICATIONS
PROVIDED BYTHE GOVERNMENT OFMEXICO OF
LAWS AND REGULATIONS UNDER ARTICLES 18.5
AND 32.6OFTHE AGREEMENTS
Thefollowing communication, dated 3July1995, hasbeenreceived from theOffice ofthe
United States Trade Representative.
_______________
Asagreed intheCommittees onAnti-Dumping Practices andSubsidies andCountervailing
Measures, please findenclosed alistofquestions thatweintend toraiseatthejointlegislative review
session oftheCommittees during theweek of17July1995. Ishould notethatIhavebeenadvised
bymyauthorities thatwewillhaveadditional questions, particularly withrespect totheareaof"injury".
Every effort willbemade todeliver suchadditional questions toyouassoonaspossible.
General
1. What isthelegalbasisforMexico 'sstatement thattheWTO A-DandSCM Agreements apply
withtheforce oflawinMexico, overriding theForeign Trade ActandRegulations, totheextent that
theyareinconsistent?
2. Weunderstand thatMexico considers thattheUruguay Round Agreements, including theAnti-
Dumping andSubsidies Agreements, tobeself-executing, suchthattheyaredeemed partofMexican
domestic law-specifically, Mexico 'sForeign Trade Act.Assuming thistobethecase,willareviewing
court orNAFTA panel require consistency between theForeign Trade ActandtheAnti-Dumping and
Subsidies Agreements? What willacourt orpanel dointheevent ofadirect conflict?
Anti-Dumping
3. 50oftheRegulations provides that,where theexporter andimporter arerelated andthere is
acompensatory arrangement between them, theexport price shallbecalculated under 35oftheAct.
Insuchcases, "allcostincurred between export andresale, including profit margins onimport and
distribution" arededucted fromthestarting price. HowwillMexico calculate profit margins onimport
anddistribution? SeeADArticle 2.2.2.
4. 31oftheActappears togiveSECOFI discretion touseeither identical orsimilar merchandise
asthebasis fornormal value. How isthisconsistent withADArticles 2.2and2.6which establish
apreference forcomparing identical products?G/ADP/W/2
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5. 42oftheRegulations provides thatsales inthehome market ortoathird country are
representative iftheyaccount foratleast15percentofthetotalvolume ofthegoods subject to
investigation. Article 2.2.2 footnote 2oftheA-DAgreement, however, setsthehome market viability
testatonly5percent. Inlightofthisinconsistency, howdoesMexico ensure theconformity ofits
practice toA-DArticle 2.2.2 andfootnote 2?
6. 36oftheActprovides thattheMinistry shallmake the"necessary adjustments tocompare
normal value andexport price, specifically including allowances fordifferences interms andconditions
ofsale,quantities,physicalcharacteristicsandtaxcharges.WhatcriteriadoesMexicoapplytodetermine
whether anadjustment toprice is"necessary"? SeeA-DArticle 2.4.
7. Explain how58oftheRegulations isconsistent withA-DArticle 2.4.1 concerning conversion
ofcurrencies.
8. DoesMexicocomparethepricesofindividualsalesinMexicotoindividualsalesintheexporting
country market, theaverage price inMexico totheaverage price intheexporting country market,
ortheprice ofindividual saleinMexico totheaverage price intheexporting country market? See
A-DArticle 2.4.2. Isthesame methodology usedininvestigations andreviews?
9. 32oftheActalsoprovides that,when above-cost sales are"insufficient tobedescribed as
representative", constructed value maybeused. 43oftheRegulations provides that"Asageneral
rule,domestic salesforprofit ...shallbedeemed toberepresentative when theyaccount foratleast
30percentoftherelevant market". Article 2.2.1 oftheA-DAgreement doesnotinclude aminimum
quantity forabove costsalestobeconsidered "representative" andtherefore eligible forinclusion when
determining normal value. Inlightofthisinconsistency, howdoesMexico ensure theconformity of
itspractice withtheA-DAgreement?
10. Article 46.XI appears tobeinconsistent withArticle 2.2.2 oftheAgreement which provides
thatprofit istobebased onactual dataexcept when suchamounts cannot bedetermined. Inlightof
thisinconsistency, howdoesMexico ensure theconformity ofitspractice withtheA-DAgreement?
11. 47oftheRegulations provides thatthebuying costshallbeusedasthecostofproduction for
trading companies, unless thatbuying costisdetermined tobebelow theCOP (plus SG&A) ofthe
producer. Article 2.2.1 oftheA-DAgreement provides nobasis forinvestigating theproduction
costsofatrading company 'ssupplier, particularly when theproducer isnotaffiliated withthetrading
company. Inlightofthisinconsistency, howdoesMexico ensure theconformity ofitspractice with
theA-DAgreement?
12. 46.IX oftheRegulations onlyallows overhead expenses tobeallocated beyond thePOI(a)when
justified and(b)when information fromprioryears alsoallows allocation ofpriorexpenses tothePOI.
Does Mexico taketheposition thatthisprovision isconsistent withArticle 2.2.1.1 oftheA-D
Agreement, andifso,why?
13. Articles 45and46oftheRegulations suggest thatthecountry oforigin 'sGAAP isonly
considered validwhen itisnotinconflict withMexican tradelawprovisions. Suchalimitation would
beinconsistent withArticle 2.2.1.1 oftheA-DAgreement when thecountry oforigin GAAP otherwise
reasonably reflects thecostsassociate withtheproduction andsaleoftheproduct under consideration.
Inlightofthisinconsistency, howdoesMexico ensure theconformity ofitspractice withtheA-D
Agreement?G/ADP/W/2
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14. Please clarify howtheMexican authorities select surrogate economy countries innon-market
economy country investigations. SeeA-DArticle 2.7.
Subsidies
15. Thedefinition ofsubsidy in37oftheActdoesnotinclude theconcept of"financial contribution"
asthattermisdefined inArticle 1oftheSCM Agreement. Intheabsence ofsuchaprovision, how
would Mexico ensure theconformity ofitspractice withtheSCM Agreement?
16. Thenotified documents donotrefertotheconcept of"specificity" asthattermisdefined in
Article 2oftheSCM Agreement. Intheabsence ofsuchaprovision, howwould Mexico ensure the
conformity ofitspractice withtheSCM Agreement?
17. Article 19.4oftheSCM Agreement states thatsubsidization should becalculated interms of
theamount ofsubsidy perunitofthe"subsidized andexported product" andthatnocountervailing
dutyshallbelevied which exceeds thisamount. How isthisprovision implemented byMexico?
18. Article 14oftheSCM Agreement contains guidelines forcalculating theamount ofasubsidy
forthefollowing situations: provision ofequity capital, loans, loanguarantees, theprovision ofgoods
orservices, andthepurchase ofgoods. HowdoesMexico intend tocalculate thebenefit totherecipient
conferred bythesubsidies named above inaccordance withSCM Articles 1and14?
19. Article 8.2oftheSCM Agreement makes "green light" subsidies non-actionable withrespect
tocountervailingmeasures.Thenotifieddocumentsdonotincludeanexemptionforgreenlightsubsidies
fromcountervailing dutyinvestigations. Intheabsence ofsuchaprovision, howdoesMexico intend
toensure theconformity ofitspractice withSCM Article 8.2?
Procedures
20. 40oftheActprovides that,ifallthedomestic producers arerelated totheproducers orimporters
ofthesubject merchandise, thenthe"domestic industry" isthose parties whoproduce goods "during
theimmediate preceding stage inthesame continuous lineofproduction" ("upstream" petitioners).
Seealso62oftheRegulations. Howisthisdefinition ofthedomestic industry consistent withA-D
Article 4andSCM Article 16?Furthermore, howdoesMexico calculate industry support where the
domestic industry isupstream producers?
21. Thenotified documents donotappear torequire thatMexico provide notice tothegovernment
oftheexporting country thatapetition hasbeenreceived prior toinitiation ofaninvestigation. How
doesMexico ensure theconformity ofitspractice withA-DArticle 5.5andSCM Article 13.1?
22. 53oftheActgives interested parties 30daysfollowing thepublication ofthenotice ofinitiation
tosubmit therequested information. Explain howthisprovision isconsistent withA-DArticle 6.1
andSCM Article 12.1concerning notification ofrequested information, response toquestionnaires,
andtransmission ofthepetition tointerested parties?
23. Article 6.5.1 oftheA-DAgreement andArticle 12.4.1 oftheSCM Agreement require parties
tosubmitnon-confidentialsummarieswithconfidentialinformationexceptin"exceptionalcircumstances".
Mexico 'slawdoesnotappear tolimit theinstances inwhich nopublic summary isrequired to
"exceptionalcircumstances".Intheabsenceofsuchaprovision,howdoesMexicoensuretheconformity
ofitspractice withtheAgreements?G/ADP/W/2
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24. Alsowithrespect toconfidential information, thenotified documents donotinclude aprovision
forrejecting improperly designated information. Intheabsence ofsuchaprovision, howdoesMexico
ensure theconformity ofitspractice withA-DArticle 6.5.2 andSCM Article 12.4.2?
25. 57and59oftheActreferonlytoprovisional andfinal"countervailing duties". Isthispossibly
atranslation problem? [Ifso,thesame translation problem seems tooccur throughout thedocument
notified inG/ADP/N/MEX/1]. Ifnot,explain what thetimetables areforpreliminary andfinal
determinations inanti-dumping investigations andwhythese provisions arenotincluded intheAct?
SeeA-DArticle 5.10.
26. 57oftheActpermits Mexico toimpose provisional CVD measures asearly asday45after
initiation. Article 17.3oftheSCM Agreement doesnotpermit provisional measures tobeimposed
prior today60.Inlightofthisinconsistency, howdoesMexico ensure conformity ofitspractice
withtheSCM Agreement? Inaddition, howdoesMexico ensure conformity ofitspractice withSCM
Article 17.4which doesnotpermit theapplication ofprovisional measures foraperiod longer than
fourmonths?
27. HowdoesMexico ensure theconformity ofitspractice withA-DArticles 7.3and7.4which
require thatprovisional measures notbeapplied earlier than60days from theinitiation ofthe
investigation andmaynotbeapplied forlonger thanfourmonths?
28. What isthethreshold under 57oftheActfor"insufficient evidence ofprice discrimination
orsubsidization" which would trigger termination oftheinvestigation atthepreliminary stage?
29. Article 8.1oftheA-DAgreement andArticle 18.1oftheSCM Agreement require that
agreements onprice increases inundertakings "shall notbehigher thannecessary" toeliminate the
margin ofdumping, andthat"itisdesirable" fortheincreases tobenohigher thanneeded toremove
theinjury tothedomestic industry. How doesMexico ensure conformity ofitspractice withthe
Agreements?
30. Article 8.2oftheA-DAgreement andArticle 18.2 oftheSCM Agreement require the
investigating authority tomake anaffirmative preliminary determination before entering intoan
undertaking. How doesMexico ensure conformity ofitspractice withtheAgreements?
31. Article 8.4oftheA-DAgreement andArticle 18.4oftheSCM Agreement allow anexporter
torequest thatasuspended investigation becompleted, andtorequire termination oftheundertaking
ifthecompleted investigation results inanegative determination. HowdoesMexico ensure conformity
ofitspractice withtheAgreements?
32. Article 18.2oftheSCM Agreement prohibits theseeking oracceptance ofanundertaking from
exporters unless theexporting Member consents. HowdoesMexico ensure conformity ofitspractice
withtheAgreement?
33. 54and55oftheActdonotrequire theMinistry toinform theparties atthebeginning ofthe
investigation ofthetypeandformat oftheinformation theywillberequired toprovide. SeeA-D
Annex II,paragraph 1.Inaddition, theActdoesnotrequire theMinistry toinform theparties that
theMinistry mayresort tothefactsavailable ifinformation isnotsupplied within areasonable time.
SeeA-DAnnexII,paragraph1.Intheabsenceofsuchprovisions,howdoesMexicoensureconformity
ofitspractice withtheA-DAgreement?G/ADP/W/2
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34. 53,54and55oftheActdonotrequire theMinistry totakeintoaccount allinformation
submitted thatcanbeusedwithout undue difficulties, istimely supplied, andisverifiable. SeeA-D
Annex II,paragraph 3.Intheabsence ofthisprovision, howdoesMexico ensure conformity ofits
practice withtheA-DAgreement?
35. 54and55oftheActdonotrequire theMinistry toconsider anyofthefactors listed inAnnex II
oftheA-DAgreement, suchastherequirement ofparagraph 2thattheauthorities consider the
"reasonable ability oftheinterested party torespond". Intheabsence ofsuchprovisions, howdoes
Mexico ensure conformity ofitspractice withtheA-DAgreement?
36. 83oftheActand54,96and116oftheRegulations donotlimittheMinistry 'suseofadverse
information onlytocircumstances where theparty hasnotbeencooperative. SeeA-DAnnex II,
paragraph 7.Intheabsence ofsuchprovisions, howdoesMexico ensure conformity ofitspractice
withtheA-DAgreement.
37. Nordothese provisions require theMinistry tousespecial circumspection inemploying
secondary information and,where practicable, check theinformation against independent sources of
information. SeeA-DAnnex II,paragraph 7.Intheabsence ofsuchprovisions, howdoesMexico
ensure conformity ofitspractice withtheA-DAgreement?
38. Thenotified documents donotprohibit theMinistry fromdisregarding information where the
submitting party hasacted tothebestofitsability. SeeA-DAnnex II,paragraph 5.Intheabsence
ofsuchaprovision, howdoesMexico ensure conformity ofitspractice withtheA-DAgreement?
39. 100oftheRegulations callsforallreviews initiated exofficio tobesubject totheprocedural
rules governing theinvestigations which gaverisetotheduties subject tothereview. How isthis
consistent withA-DArticles 11.4and18.3concerning theapplication ofthenewWTO A-DAgreement
rulestonewproceedings initiated after1January 1995? SeealsoSCM Articles 21.4and32.3. Why
doestheprovision apply onlytoexofficio reviews.
40. What substantive standard doestheMinistry apply forinitiating achanged circumstances review
exofficio under 99oftheRegulations orbyrequest under 100oftheRegulations?
41. What isthelevelofevidentiary showing which aparty mustmake toobtain anannual review
under 101oftheRegulations?
42. 70oftheActprovides afiveyearsunset provision. 109oftheRegulations, however, states
thattheduties shallbeeliminated "provided thatthe[Ministry] notifies theinterested parties known
toit,thatthelegaltime-limit haselapsed". What happens iftheMinistry failstomake thenotification?
Under whatcircumstances would theMinistry failtonotify theinterested parties?
43. Does Mexico apply itssunset provision toundertakings asrequired byA-DArticle 11.5and
SCM Article 21.5?
44. 105oftheRegulations provides that,ifnomargin ofpricediscrimination isfound inanannual
review, thedutyis"annulled, andtheMinistry shall, exofficio ,review thematter eachyearforthree
years inthesame month". Willtheorder berevoked afterthethirdyearifnomargins arefound in
anyofthethree years? Does thisregulation alsoapply ifnomargin ofsubsidization isfound?
45. 82oftheActpermits theMinistry toagree atanytimetoextensions ofanyproceedings
considered necessary tothediscovery oftruth. Inlightofthisprovision, howdoesMexico ensureG/ADP/W/2
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thatthetimelinesforpreliminary andfinaldeterminations ininvestigations andallreview proceedings
provided intheAD/SCM Agreements areobserved?
46. Article 6.10oftheA-DAgreement requires thatindividual margins becalculated foreach
exporter andproducer under investigation. HowdoesMexico ensure conformity ofitspractice with
thisprovision?
47. Article 9.5oftheA-DAgreement requires thatnewshippers begiven anearlyandaccelerated
review during which review noduties willbe"levied". HowdoesMexico ensure conformity ofits
practice withthisprovision?
Judicial Review
48. What isthestandard ofreview which Mexico applies toanaction challenging anA-DorCVD
determination intheFederal TaxCourt?