RESTRICTED
WORLD TRADE G/ADP/W/68
G/SCM/W/77
17October 1995
ORGANIZATION(95-3123)
Original: Spanish Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
REPLIES TOQUESTIONS POSED BYCANADA1CONCERNING
THE NOTIFICATION OFMEXICAN LAWS AND REGULATIONS2
Thefollowing communication, dated 15September 1995, hasbeenreceived fromthePermanent
Mission ofMexico.
_______________
REPLIES TOQUESTIONS BYCANADA CONCERNING MEXICAN
LEGISLATION ONUNFAIR FOREIGN TRADE PRACTICES
1. Mexico hasnoted thatitslaws respecting unfair foreign trade include, inter alia,the
Agreement onImplementation ofArticle VIandtheAgreement onSubsidies andCountervailing
Measures oftheGATT 1994. Could Mexico clarify whether itsintention istorevert tothe
Agreements where itsother lawsaresilent, orincases where other lawsmaybeinterpreted in
conflict withprovisions oftheAgreements?
Reply
Thisisso,forArticle 133ofthePolitical Constitution oftheUnited Mexican States establishes
thattheConstitution 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, theAgreement onImplementation ofArticle VIand
theSCM Agreement 1994, which fulfil therequirements indicated intheprevious paragraph, now
form partofourlegislation onunfair practices; theyhavethesame status astheForeign Trade Act
andtheirprovisions must beobserved bytheMexican authorities.
1G/ADP/W/29-G/SCM/W/36.
2G/ADP/N/1/MEX/1 andG/SCM/N/1/MEX/1.G/ADP/W/68
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Conflicts between bothsystems areresolved bytheForeign Trade Actitself, which stipulates
inArticle 2thatitsprovisions areamatter ofpublic policy andapplicable throughout theRepublic,
without prejudice toprovisions oftreaties towhich Mexico isaparty. Accordingly, intheevent of
anydiscrepancy between theAgreements oftheGATT 1994andtheForeign Trade Act,orifthelatter
weresilent, theprovisions oftheAgreement would prevail. TheRegulations under theForeign Trade
Actarelower instatus thantheGATT 1994 Agreements, forwhich reason theprovisions ofthe
Agreements takeprecedence overthose contained intheRegulations.
2. What isthelegalmechanism inMexican lawfortheimplementation ofdecisions rendered
bytheWTO?
Reply
InthecaseofaWTO decision which, pursuant totheprovisions oftherespective agreements
mustbeobserved byMexico, theinvestigating authority willissuearesolution incorporating theWTO
decision sothatittakes effect inMexico.
3. Isthere anymeans bywhich domestic interests could useMexican lawsortheMexican
Constitution, including thepractice ofAMPARO, tochallenge orprevent thegovernment from
implementing aWTO Dispute Settlement Body (DSB) panel decision?
Reply
Theonlywaywould beanaction forwhich would befilediftheimplementation ofapanel
order wasinbreach oftheguarantees provided forintheConstitution.
Standing
1. Mexican lawandregulations donotappear tocontain references tothemanner inwhich
"anexamination todetermine thedegree ofsupport" (SCM Article 11.4; Agreement on
Implementation ofArticle VI,Article 5.4)foracomplaint willbemade. How willtheMexican
authorities determine whether acomplaint isexpressly supported bydomestic producers.
Reply
Pursuant toArticle 60oftheRegulations under theForeign Trade Act,applicants arerequired
todemonstrate thattheyrepresent atleast25percentofthedomestic production. Theinvestigating
authority verifies whether anapplicant accounts forsuchapercentage ofthedomestic production,
comparing itsinformation withvarious statistical sources, anditwillthennotify therepresentatives
oftherestofthedomestic industry inorder forthem toexpress theirinterest inoropposition tothe
initiation ofaninvestigation.
2. With respect toArticle 75.VI oftheRegulations, andforthepurposes ofdetermining
whether therequired levelofindustry support exists, where thecomplainant isamember ofan
industry organization (sic), isitassumed thattheother members oftheindustry organization
alsosupport therequest forinitiation ofaninvestigation?
Reply
No.When theapplicant isamember ofanorganization anditishewhosubmits theapplication,
itisassumed thatithasbeenpresented onhisownbehalf; conversely, when theapplication issubmitted
onbehalf ofanorganization, itisthenregarded ashaving thesupport [ofthemajority] ofitsmembers.G/ADP/W/68
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Injury
1. Article 29oftheForeign Trade Actprovides that"evidence ofinjury orthreat ofinjury
berequired whenever thecountry oforigin orsource ofthegoods inquestion observes reciprocity".
Could Mexico please clarify themeaning ofthisqualification asitrelates totherequirement in
theAgreements thatmaterial injury bedemonstrated tobecaused bysubsidized ordumped imports
before anydutymaybeimposed?
Reply
There isnoinconsistency whatsoever between theterms ofArticle 29oftheForeign Trade
ActandtheWTO Anti-Dumping andSubsidies Agreements, sinceanycountry, bysigning andaccepting
theAgreements,isboundtoevaluateinjurybeforeimposingcountervailingdutiesonimportsofproducts
from Mexico byanother Member State, thereby acting inconformity withthereciprocity required
bytheForeign Trade Act. Inother words, Mexico provides WTO Member countries withevidence
ofinjury orthreat ofinjury tothose countries.
2. Does theexpression "notsignificant" inArticle 67oftheRegulations mean "deminimis "?
Similarly, isthephrase "identifiable adverse effects ondomestic production" intended tomean
"negligible"?
Reply
No,theexpression "notsignificant" and"donothaveanyidentifiable adverse effect ondomestic
production" relate to"negligible".
3. Inaddition, howwilltheMexican authorities implement therequirement to"examine
anyknown factors other thanthedumped/subsidized imports which atthesame timeareinjuring
thedomestic industry, andtheinjuries caused bythese other factors must notbeattributed to
thedumped/subsidized imports" (SCM Agreement, Article 15.5; Agreement onImplementation
ofArticle VI,Article 3.5)?
Reply
Article 69oftheRegulations setsouttheobligation ontheinvestigating authority toexamine
other factors known toit,other thantheimports being investigated, which aresimultaneously affecting
domestic production, inorder todetermine whether thealleged injury orthreat ofinjury isdirectly
caused bysuchimports. Inaddition, theArticle includes thefactors thatmaybeevaluated, namely:
I. Thevolume andprices ofimports which arenotsubject toprice discrimination or
subsidy;
II. Contraction ofdemand orchanges inpatterns ofconsumption;
III. Trade-restrictive practices offoreign anddomestic producers, andcompetition between
them; and
IV. Technological developments, productivity andexport performance.G/ADP/W/68
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4. What types of"other elements" would theMinistry "deem appropriate" initsconsideration
ofthequestion ofinjury under Article 41.IV?
Reply
Anyelement insupport oftheevaluation oftheeconomic variables mentioned intheAct,for
example, thesituation ofthedomestic, international andexport markets, business cycles, competition
factors, development ofnewtechnologies, etc.
5. Thelastparagraph ofArticle 42requires theMinistry totakeintoaccount allfactors
"...which make itpossible toconclude ..."thatfuture imports willcause injury. WillMexico
alsoconsider factors thatdonotindicate injury?
Reply
Indeterminingtheexistenceofathreatofinjury,theinvestigatingauthoritywilltakeintoaccount
allthefactors enumerated inArticle 42which enable ittoconclude whether further imports inunfair
conditions would beimminent andwhether, unless countervailing duties wereapplied, injury would
occur. Itfollows thatonlyfactors indicating theexistence ofathreat ofinjury aretaken intoaccount.
Procedural time-limits
Clarification would beappreciated withrespect tothespecific procedural time-limits under
Mexican lawandregulations fortherendering ofpreliminary andfinalresolutions andrespecting
theimplementation andduration ofprovisional duties. Ofspecific interest isArticle 57.1of
Mexico 'sForeign Trade Act,which appears toallow forthefixing ofaprovisional duty45days
following thepublication oftheresolution toinitiate aninvestigation, rather thanthe60days
called forinArticle 7.3oftheAgreement onImplementation ofArticle VIandArticle 17.3of
theSCM Agreement.
Reply
TheForeign Trade Actitself establishes inArticle 3,thattheperiods specified indaysshall
betaken tomean working days, whereas theperiods under theAgreement areincalendar days.
Accordingly, bothperiods areinreality similar and,infact,thetime-limit established inMexican
legislation islonger thantheonespecified intheAgreements, forwhich reason bothareperfectly
compatible.
Thepreliminary resolution must, pursuant toArticle 57oftheForeign Trade Act,beissued
within aperiod of130working daysfrom thedayfollowing publication intheDiario Oficial dela
Federación oftheresolution toinitiate investigation, butnotbefore 45working daysifaprovisional
countervailing dutyisfixed, asprovided inparagraph IoftheArticle. Theperiod isequivalent to
60calendar days, asprovided forinArticle 7.3oftheADAgreement andArticle 17.3oftheSCM
Agreement. Forthatreason, there isnoinconsistency.
Article 59oftheActstates thatthefinalresolution shallbeissued within aperiod of260working
daysfromthedayfollowing publication intheDiario Oficial delaFederación oftheresolution initiating
theinvestigation.G/ADP/W/68
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Sunset provisions
1. Inregard toArticle 109oftheRegulations, istheintent thatthedeclaration ofelimination
canonlybemade after interested parties have beennotified? Ifso,should notthatnotification
bemade before thetime-limit elapses, andnotafter, asisstated?
Reply
Thedeclarationofeliminationmaybeissuedandpublishedonlyafternotificationtotheinterested
parties thatthelegaltime-limit haselapsed. Theintention ofthisArticle isnottowarn theparties
interested intheinvestigation thattheperiod offiveyears fortheelimination ofthecountervailing
dutyisdrawing toaclose, butsimply tonotify them thattheperiod haselapsed andthatthe
countervailing dutyimposed willbeeliminated.
2. CanMexico clarify whether undertakings willbesubject tothesame sunset provisions
asduties?
Reply
Article109oftheRegulationsrelatessolelytotheeliminationofcountervailingduties.However,
under Article 11.5oftheADAgreement andArticle 21.5oftheSCM Agreement, price undertakings
willbesubject tothese provisions, since, aspointed outinthereply toquestion 1,these provisions
must beobserved bytherelevant authority.
Anti-circumvention
Inlightofthespecific obligation inArticle 18.1oftheAgreement nottotakeactions against
thedumping ofexports from another Member except inaccordance with theprovisions of
GATT 1994asinterpreted bytheAgreement, could Mexico indicate thebasis intheAgreements
forthedefacto anti-circumvention provisions inArticle 71?
Reply
While there isnoprovision ontheinstruments thatformpartoftheFinal Actembodying the
results oftheUruguay Round ofMultilateral Trade Negotiations, there isnoprovision contradicting
orprohibiting theterms ofArticle 71oftheActandArticle 96oftheRegulations. Itshould bepointed
outthatregulation ofthismatter isstillpending intheWorld Trade Organization, forinkeeping with
theDecision onAnti-Circumvention, itwasreferred totheCommittee onAnti-Dumping Practices
forresolution. Accordingly, oncethesolution isreached, Mexico willabide byit,asithasdonewith
alltheother precepts oftheWorld Trade Organization.
Definition ofsubsidy
Howwillthedefinition ofsubsidy contained inArticle 37oftheForeign Trade Actoperate
inconjunction withArticles 1and2oftheSCM Agreement?
Reply
Asstated earlier, theSCM Agreement forms partofMexican legislation andthedefinition
ofasubsidy contained inArticle 1andtherequirement concerning specificity setoutinArticle 2will
beobserved bytheinvestigating authority, forthereasons explained inthereply toquestion 1.G/ADP/W/68
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Reference ismade totheMinistry issuing alistofexport subsidies. Hasthisbeendone,
andifso,willMexico notify thislisttotheCommittee? Ifnot,onwhat basis willthelistbe
prepared (i.e.Annex I,theIllustrative ListofExport Subsidies)?
Reply
Asstated, since theSCM Agreement forms partofMexican legislation, theIllustrative List
ofExport Subsidies contained inAnnex ItotheAgreement istheillustrative listreferred tointhe
second paragraph ofArticle 37oftheAct,which waspublished intheDiario Oficial delaFederación
on30December 1994.
Non-actionable subsidies
Isthereference to"except where suchpractices areregarded asinternationally acceptable"
(inArticle 37)intended tocover non-actionable subsidies within themeaning ofthe
SCM Agreement?
Reply
Yes.
Arenon-actionable subsidies deducted from calculation oftheamount ofsubsidy forthe
purposes ofcountervailing dutyinvestigations andenforcement ofdeterminations?
Reply
Yes.
Calculation oftheamount ofsubsidy
There donotappear tobeanyspecific guidelines inMexican laworregulations withrespect
tothemethodology forcalculating theamount ofsubsidy. How willtheMexican authorities do
thiscalculation?
Reply
Themethod forcalculating thebenefit conferred ontherecipient ofasubsidy hasalready been
dulyworked outbytheinvestigating authority, andinadministrative practice ithasbeenusedinvarious
proceedings. Basically, thebenefit consists ofatransfer ofresources under conditions different from
market conditions. Consequently, thebenefit ismeasured asthedifference between themarket price
andthepriceactuallypaidmultipliedbythequantityofthesubsidizedgoodconcerned(water,electricity,
etc.withregard tosubsidies oninputs). Seeforexample, thepreliminary resolutions onflat-rolled
steelpublished intheDiario Oficial delaFederación on14,17and18April 1995. However, this
method hasnotyetbeenincorporated intoMexican legislation. Theamendments andadditions tothe
Foreign Trade ActandtheRegulations nowbeing prepared include incorporation ofthismethodology,
which must beperfectly consistent withtheprovisions oftheSCM Agreement.G/ADP/W/68
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Developing-country Members
How willtheMexican authorities treat theexports ofdeveloping country Members ina
countervailing dutyinvestigation?
Reply
Inasubsidies investigation, theMexican authorities willpaydueregard toArticle 27ofthe
SMCAgreementandwillrespecttheexemptionsandprivilegesgrantedthereundertodevelopingcountry
Members andtotheleast-developed country Members.
Massive imports ofsubsidized goods
There appears tobenoexplicit requirement under Mexican laworregulations that
implements therequirement ofArticle 20.6that,incases ofmassive imports ofsubsidized goods,
countervailing duties mayonlybeapplied retroactively against prohibited subsidies. How will
Mexico administer thisrequirement?
Reply
Before responding tothisquestion, itmustbepointed outthatArticle 93.VoftheForeign Trade
Actcovers thecircumstances setoutinArticle 20.6oftheSCM Agreement.
Sincenoexpressdistinctionisdrawn,underMexicanlawcountervailingdutiesandanti-dumping
duties areregarded asthesame, forwhich reason theprovisions ofArticle 93.VoftheForeign Trade Act
apply insuchcircumstances.
Specific questions regarding Annex I:theForeign Trade Act
1. Isthereference to"general costs" in,among other places, Article 31,subparagraph II,
intended tomean administrative, selling andgeneral costs assetoutinArticle 2.2.2 ofthe
Agreement onImplementation ofArticle VI?Ifthisisnotthecase, could Mexico explain what
ismeant bytheterm "general costs"?
Reply
Inspeaking ofgeneral costs, Article 31.II oftheForeign Trade Actrefers togeneral
administrative andselling costs andallother corporate-type costs. Thisisclear from Article 46.II
oftheRegulations, which specifically states thatgeneral costs areadministration andsales, financial
andother notdirectly distributable costs, including costsofresearch anddevelopment anddepreciation
ofassets notintended forproduction.
2. Could Mexico indicate what thepossible outcome ofaconciliation meeting would be,and
what basis there isintheAgreements fortheprocess provided forinArticle 61?
Reply
Theoutcome ofaconciliation meeting could betoachieve formulas foranamicable settlement
andtermination oftheinvestigation, which, ifappropriate, willbeincorporated intheresolution that
willbefinal. Conciliation meetings arenotprovided forintheGATT Agreements. However, holding
them doesnotinanywayviolate theAgreements. Furthermore, conciliation meetings areavery
important mechanism whereby theinterested parties intheinvestigation canarrive atamutuallyG/ADP/W/68
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satisfactory agreement thatwillavoid disputes lateron.Itisworth noting thatArticle 5ofthe
Understanding onRules andProcedures Governing theSettlement ofDisputes isongood offices,
conciliation andmediation. Accordingly, theyaremechanisms provided forandrecommended by
theGATT Agreements forthepurposes ofsettling disputes.
3. Why doesthesecond paragraph ofArticle 62oftheForeign Trade Actusethephrase
"provided theyaresufficient todiscourage theimport ofgoods" when referring toaduty less
thanthefullmargin ofdumping oramount ofsubsidy rather thanthewording "...ifsuchlesser
dutywould beadequate toremove theinjury tothedomestic industry", ascontained inArticle 9.1
oftheAgreement onImplementation ofArticle VIandArticle 19.2oftheSCM Agreement?
Reply
Although Article 62oftheForeign Trade Actcontains language different from thatofthe
GATT Agreements, Article 90oftheRegulations doesemploy thesame language. Accordingly, the
alleged inconsistency doesnotinfactexist. However, ifthere were adiscrepancy between thetext
ofArticle 62oftheForeign Trade ActandthetextofArticle 9.1oftheADAgreement andArticle 19.2
oftheSMC Agreement, forthereasons explained repeatedly, theGATT Agreements takeprecedence.
4. Article 66requires animporter toprove thatlikegoods arefrom anon-subject Member
inorder tobenotassessed acountervailing duty. Could Mexico clarify whether animporter
would have todoanything inaddition totherequirements setoutinthenormal Mexican Rules
ofOrigin procedures '?
Reply
Animporter isonlyrequired todemonstrate, pursuant tothenormal rulesoforigin procedure
established inMexican legislation, thatthecountry oforigin isdifferent fromthecountry whose goods
aresubject topayment ofcountervailing duties.
5. Could Mexico reconcile theapparent quantitative restriction onexporters inArticle 72,
where theexporter voluntarily agrees to"cease exports", withArticle 8.1oftheAgreement on
Implementation ofArticle VI,which onlyallows fortheexporter to"cease imports tothearea
inquestion atdumped prices"? Canada isconcerned thatanundertaking thatrestricts exports
isadefacto voluntary export restraint, asprohibited byArticle 11oftheWTO Agreement on
Safeguards.
Reply
Owing totheexpress prohibition under theWTO Agreement onSafeguards, onaccepting
undertakings byexporters whorestrict theirexports toMexico, theSecretariat willcease toapply the
corresponding parts ofArticle 72oftheForeign Trade Act,inorder tobeconsistent withtheWTO
Agreements.
6. Could Mexico provide thetextofArticle 6ofitsForeign Trade Act,which isreferred
toinArticle 73ofthatAct?
Reply
Theappropriate partofthetextofArticle 6oftheForeign Trade Act,referred toinArticle 73
oftheAct,isasfollows "...This Commission shallberesponsible forissuing opinions onforeign trade
matters inconformity withtheprovisions ofthisAct...".G/ADP/W/68
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7. Could Mexico provide adetailed explanation ofthedifference between "confidential
information" and"restricted commercial information" andanytexttodetermine whether
information qualifies asrestricted commercial information", asnoted inArticle 80,andinclude
examples ofeachtypeofinformation? DotheMexican authorities intend toallow fortherelease
ofbothtypes ofinformation iftheparty presenting theinformation soallows?
Reply
Inconformity withArticles 149and150oftheRegulations, "confidential information" istaken
tomean anyspecific information about theenterprise concerned whose disclosure ordissemination
tothepublic might cause injury toitscompetitive position, suchasproduction processes andcosts,
terms andconditions ofsale,distribution costs, specification ofcomponents andtheother items listed
inArticle 149itself. "Restricted commercial information" istaken tomean, under theterms of
Article 150oftheRegulations, information whose disclosure mayresult insubstantial andirreversible
financial harm tothenetworth oftheowner oftheinformation andmayinclude, among other things,
secret formulas orprocesses which haveacommercial value, arenotpatented andareknown exclusively
toasmall group ofpeople whousethem intheproduction ofacommercial product.
However, ifanenterprise authorizes disclosure totheother interested parties ofinformation
thatithasprovided inthecourse ofaninvestigation andwhich hasdeemed confidential orrestricted
commercial information, theauthority willgrant suchaccess toit.
8. Could Mexico indicate whether there areanyspecific time-limits onthepublic hearings
noted inArticle 81?
Reply
TheForeign Trade ActandtheRegulations donotstipulate anytime-limit forcompletion of
publichearings.Inpractice,theSecretariat,afterameetingheldwiththerepresentativesoftheinterested
parties, grants amaximum period fortheoralpleadings ofeachone.
9. Could Mexico indicate whyinterested parties areprohibited from providing statements
byauthorities asnoted inArticle 82?Could Mexico include initsexplanation which authorities
arebeing referred toandpossible examples ofsuchprohibited statements?
Reply
Itisprohibited toofferaconfession (confesión) bytheauthorities asevidence. Thisprohibition
isbased onthelegalprinciples thatapply inMexican law,since confession relates toactscommitted
byoneself (byaperson inparticular), whereas anauthority isanimpersonal body. However, this
prohibition doesnotprevent theinvestigating authority, where necessary, from issuing itsreports in
writing.
10. Could Mexico indicate whether allinterested parties would benotified oftheproceeding
instituted inaccordance withthesecond paragraph ofArticle 82suchthattheywould haveadequate
timetoprepare andparticipate insuchproceedings should theysodesire? Could Mexico provide
examples ofsuchproceedings andtheapplicable procedures?G/ADP/W/68
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Reply
Iftheinvestigating authority decides toinstitute, repeat orextend anyproceedings todiscover
evidence, itwillnotify theparties withaninterest therein, forthepurpose ofprocedural equity, but
onlyifthecompletion ofaformality sorequires. Theauthority isnotunder anobligation tonotify
alloftheparties.
Examples ofsuchproceedings areavisual inspection oftheproduction plantoftheapplicants
orrequests foradditional information from anyoftheparties.
11. Thesecond paragraph ofArticle 83indicates that,intheabsence ofanexporter allowing
verification totakeplace, theMinistry "shall assume thattherequesting party 'sclaims aretrue,
unless there existelements which indicate otherwise". Could Mexico indicate whether thestatement
means that, intheevent ofnon-cooperation, theMinistry willusethebestinformation available
asrequired byArticle 6.8andAnnex IIoftheAgreement onImplementation ofArticle VI?
Reply
Yes.
12. CouldMexicoprovidethetextofthoseportionsoftheMexicanFederalTaxCodeapplicable
totheadministrative proceedings referred toinArticle 85?
Reply
Since application oftheFederal TaxCode isonasupplementary basis, anything connected
withadministrative proceedings thatisnotspecifically regulated bytheForeign Trade Actorthe
Regulations thereto willberegulated inconformity withtheCode, except fornotifications andsearches,
asstipulated inArticle 85oftheAct. Regardless ofthesupplementary character oftheCode, clearly
itapplies onlytoprocedural matters inconnection withwhich therearelacunae, provided themeaning
ofthesubstantive ruleisnotaffected.
Attached tothese replies aretheprovisions oftheMexican Federal TaxCode concerning
administrative proceedings which areapplied onasupplementary basis.
Inpractice, application onasupplementary basis should beevaluated inspecific cases, for
which reason itwould berestrictive toenumerate portions oftheTaxCode.
13. Could Mexico indicate howitwould takeintoaccount theinterests ofother production
processes andconsumers ascontemplated byArticle 88?
Reply
Theinvestigating authority, inmaking itsevaluation, verifies thepossible effects ofinjury to
other production processes aswellastoconsumers. This isdone byevaluating theeffects of
countervailing duties andother factors under certain market conditions.
Thiscanmean, asstipulated inArticle 90oftheRegulations, thatthecountervailing dutymay
belessthanthemargin ofpricediscrimination andtheamount ofsubsidies, provided thatitissufficient
toeliminate theinjury orthreat ofinjury caused.G/ADP/W/68
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14. Inrespect ofArticles 87and89,would Mexico characterize itsproposed system forthe
collection ofduties asprospective innature?
Reply
Yes.
15. Article 93.III and93.IV provide forfinesasaresult oftheprovision offalseinformation
orthefailure toprovide information. Could Mexico indicate whether suchfines areapplicable
tonationals orcorporations ofother Members and/or governments ofother Members? Ifyes,
under what WTO authority doesMexico basethisprovision?
Reply
Thefinesreferred toinArticle 93.III andArticle 93.IV oftheForeign Trade Actapply both
tonationals andtoforeigners, including thegovernments ofother Members. However, GATT 1994
andtheAgreements aresilent onthedetermination ofunlawful actsandtherelevant sanctions, and
leaveittothesovereignwillofMemberstopenalizeactswhich,underdomesticlegislation,areunlawful,
(e.g.violation ofconfidentiality undertakings).
16. Inregard totheretroactive application offinalmeasures asprovided forinArticle 93.V,
could Mexico explain whyitusedathree-month timerestriction rather thanthe90-day maximum
inArticle 10.6oftheAgreement onImplementation ofArticle VIandArticle 20.6oftheSCM
Agreement?
Reply
Thedifference between theprovisions oftheADAgreement andtheSubsidies Agreement with
regard totheForeign Trade ActisthattheActdefines calculation oftheamount ofthefineinmonths,
andtheAgreement incalendar days. However, theintention isthesame, since three months are
approximately equivalent to90days.
Nevertheless, inviewofthedifference between thetwomethods, theinvestigating authority
willapply theGATT Agreements inthecaseofMembers, asindicated inthereply toquestion 1.
17. Inrespect ofthelastparagraph inArticle 93,could Mexico indicate whether foreign
nationals would besubject topenal andcivilsanctions andwhat suchpenal andcivilsanctions
maybe,including examples where appropriate?
Reply
Inthecaseofforeigners whocommit criminal orciviloffences among theinfringements referred
toinArticle 93,regardless oftheterms ofapplicable international treaties andagreements, theywill
beliable tothepenalties setoutintherelevant legislation.
Examples ofcriminal offences, under theterms ofArticle 93oftheForeign Trade Act,include,
amongothers,falsificationofdocumentsingeneral(Articles243-245,PenalCodefortheFederalDistrict
andforOther States inFederal Matters; damage andinjury (Articles 2080, 2104, 2106, 2107 and
others relating totheCivil Code fortheFederal District).
18. Regarding theappeal offinalcountervailing measures noted inArticle 94,could Mexico
indicate therelationship between the"Ministry" andtheMinistry ofFinance andPublic Credit?G/ADP/W/68
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Reply
Therelationship between theMinistry ofTrade andIndustrial Development (the"Ministry")
andtheMinistry ofFinance andPublic Credit inconnection withcountervailing duties liesinthefact
thatitistheMinistry ofTrade which determines theamount ofthecountervailing duties, whether final
orprovisional, inthecorresponding resolutions, whereas itistheMinistry ofFinance which collects
theamount thereof andcarries outtheactstoapply theduties.
Accordingly, itispossible tocontest theresolutions oftheMinistry ofTrade andIndustrial
Development,whichestablishthecountervailingduties,orthedeterminationsoftheMinistryofFinance,
concerning collection oftheduties.
19. Could Mexico provide thetextofArticle 239bisoftheMexican Federal TaxCode noted
inArticle 95,andexplain the"deadline" referred tointhelastparagraph andtherelated process?
Reply
Article 239bisoftheMexican Federal TaxCode states:
"The Upper Chamber oftheFederal TaxCourt, exofficio oronasubstantiated request by
theRegional Chamber fortheMinistry ofFinance andPublic Credit, mayruleonactions which,
because oftheirspecial characteristics, sodeserve. Such characteristics are:
(i) Thebusiness value mustbeonehundred times higher thanthegeneral minimum wage
forthegeographical areaoftheFederal District, fortheyearinquestion.
(ii) Forpurposes oftheruling, itisnecessary toestablish, forthefirsttime, thedirect
interpretation ofalawortoestablish thescope oftheconstituent elements ofatax.
IftheUpper Chamber decides, exofficio ,toexercise itspowers under thisArticle, itshall
soinform theRegional Chamber before thelatter admits thechallenge totheclaim.
Therequestbytheabove-mentionedMinistrymaybesubmittedbeforesuchadmissionisdecided,
inwritten form, addressed totheUpper Chamber through therespective Regional Chamber
andaccompanied bytherequisite documentary evidence.
When theRegional Chamber proposes thatamatter should beresolved bytheUpper Chamber,
itshallforward therequest totheUpper Chamber inthedocument admitting thechallenge
totheclaim.
Decisions bytheUpper Chamber toadmit therequest ordecide exofficio toruleontheaction
willbenotified inperson totheparties bytheRegional Chamber. When thenotification is
made, theyshallbeasked togivetheirdomicile forthepurpose ofreceiving notifications at
theUpper Chamber andalsotodesignate someone authorized toreceive them or,inthecase
oftheauthorities, toappoint theirrepresentative fortheChamber, withnotice totheparties
that,otherwise, theresolution bytheUpper Chamber willbeposted up.
Once preparation oftheaction hasbeencompleted, theRegional Chamber shallforward the
original filetotheUpper Chamber. Onreceipt, thePresident oftheUpper Chamber shall
appoint themagistrate."G/ADP/W/68
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Thedeadline referred tointhelastparagraph ofArticle 95oftheForeign Trade Actsdetermined
inArticle 121oftheFederal TaxCode, which stipulates thatthedocument ofappeal shallbesubmitted
totheauthority which ordered (Ministry ofTrade andIndustrial Development) orcarried out(Ministry
ofFinance andPublic Credit) thecontested act,within 45daysfollowing thedateonwhich ithastaken
effect.
Specific Questions Regarding Annex II:Regulations under theForeign Trade Act
1. Could Mexico explain what isintended inthesecond sentence ofArticle 43bythereference
to"...factors ofatransitory nature oftheeconomic situation" andprovide examples ofsuch
factors orsuchaneconomic situation?
Reply
Thetranslation iscompletely wrong. Theprovision inquestion should stateinEnglish "due
tosituations which aretransitory orcircumstantial innature". Thisrulerecognizes that,overtheshort
term, salesatalossmaybeperfectly normal. Forexample, inthecaseofsupply shocks duetonatural
phenomena, suchasfrosts ordroughts, production costs perunitshoot up.Obviously, salesinthis
context arenecessarily made ataloss,since producers arenotinaposition toestablish sufficiently
highprices toabsorb suchcosts, foriftheydidsotheywould beoutside themarket. Inthiscase,
thecosts could becalculated overalonger period thantheperiod ofinvestigation, something which
would make them more representative forthepurposes ofcomparison withsaleprices. Thisruleis
analogous totheruleinthelastsentence inArticle 2.2.1 oftheADAgreement.
2. Could Mexico explain theuseofthephrase "materials andcomponents" inrespect of
indirect manufacturing costs inArticle 46.1.A.
Reply
Indirect materials andcomponents areinputs which cannot beassigned bylineofproduction
(forexample, wadding, oilandlubricants). Another example aretoolsthatdonotformpartoffixed
assets.
3. Article 46.Inotes thatproduction costsaretobedetermined based ontheweighted average
costincurred inallthefactories ofeachexporter whereas Article 2.2.1.1 oftheAgreement on
Implementation ofArticle VIprovides thatsuchcosts shall normally bebased onrecords kept
bytheproducer orexporter inaccordance withthegenerally accepted accounting principles in
thecountry ofexport aslongassuch records reasonably reflect those costs. Asthese costing
methodologies maynotyieldthesame result, could Mexico reconcile thedifference initsregulations
andtheAgreement?
Reply
TheRegulations areconsistent withArticle 2.2.1.1 oftheADAgreement, asexplained below.
Theproduction costs usedasevidence ofsalesatalossandinforming theconstructed price arethe
same. Inconformity withthepenultimate paragraph ofArticle 46.IoftheRegulations, these costs
mustbecalculated onthebasisofinformation relating toallofanexporter 'sfactories, which precludes
information specifically applicable totheplant orplants manufacturing theexported product. This
isbecause evidence ofsalesatalossinvolves acomparison ofdomestic costswiththedomestic prices,
whereas theconstructed value entails construction ofdomestic prices byaccumulation ofdomestic costs.
Consequently, neither onenortheother should beestablished onthebasis oftheparticular costs of
theexported products. Thisruledoesnotcontravene anyprovision oftheADAgreement.G/ADP/W/68
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4. Inrespect ofArticle 46.IandinlightofArticle 54.I,could Mexico indicate whether export
packing costs would beincluded inaconstructed costofproduction?
Reply
Theconstructed value relates toproducts soldonthedomestic market andnottoexported
products (thedomestic priceisconstructed, nottheexport price). Consequently, export packing costs
areirrelevant forthepurposes oftheconstructed value. However, inthecaseofpacking costs for
domestic sales, suchcostswould beconsidered partoftheproduction cost. Thisisexplicitly provided
forinthelastparagraph ofArticle 46.1oftheRegulations.
5. Could Mexico explain what ismeant inArticle 46.II bytheinclusion in"overheads" of
thedepreciation ofassets notrelated toproduction andprovide anexplanation ofthedifference
between assets notrelated toproduction andassets notinuse(seealsoArticle 46.VI)?
Reply
Article 46.IIoftheRegulations isclearinthatdepreciation ofassets notintended forproduction
forms partofgeneral costs, butnot"overheads". Furthermore, depreciation ofassets notintended
forproduction (company buildings, forexample) represents acosttotheenterprise and,accordingly,
hastobetaken intoaccount forthepurposes ofcalculating totalcosts. Since thisisacorporate cost,
itisregarded asageneral cost.
Theterm"assets notinuse"isself-explanatory. Anexample ofaproductive asset "notin
use"isofafishing vessel inharbour because, during theperiod under investigation, shoals fishwere
notlarge enough torequire useofthewhole fleet.
6. Could Mexico reconcile itsintended useofacquisition costs asasurrogate forthecost
ofproduction ofgoods inArticle 47withtherequirements inArticle 2.2.1.1 oftheAgreement
onImplementation ofArticle VI?
Reply
There isnoconflict whatsoever. Article 2.2.1.1 states thatcostsshallnormally becalculated
onthebasis ofrecords keptbytheexporter under investigation. Bydefinition, trading enterprises
donothaveaproduction costbuttheyhaveanacquisition cost(thecostatwhich theybuygoods from
themanufacturing enterprise). Trading enterprises keeprecords oftheiracquisition costs. Therefore,
there isnothing toprevent them from providing theMinistry withthisinformation.
7. Could Mexico explain thereference tothe"Ministry forthesupplier enterprises" inthe
second paragraph ofArticle 47:whatthisbody isandwhat itsrelationship would betoanexporter
orsupplier?
Reply
Thetranslation iswrong. Thetextrefers tothetotalcostthattheMinistry hasdetermined
forenterprises which supply trading enterprises.
8. Thelastparagraph ofArticle 54denotes ageneral ruleregarding theallocation ofexpenses
ofageneral character, andArticle 56notes two"general rules" inrespect ofadjustments required
toaccount fordifferences inphysical characteristics. Arethese rules meant tobediscretionary
ormandatory?G/ADP/W/68
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Reply
ThetwoArticles mentioned arenotrelated tooneanother andforthisreason theirprovisions
arenotcomparable. Article 54oftheRegulations relates toadjustments fordifferences inconditions
ofsale. Thepoint hereisthatgeneral costsareattributable toallsalesand,therefore, cannot besubject
toadjustment(allsaleswouldbethesamecondition).Foritspart,Article56oftheRegulationsregulates
theprocedure formaking adjustments forphysical characteristics. BothArticles aremandatory.
9. Could Mexico elaborate onthespecific methodologies envisioned toadjust forquantitative
differences between normal value andexport price asnoted inArticle 55.II andexplain theuse
oftheterm "model ofprices" inArticle 55.III B?
Reply
Article 55relates toadjustment forquantities. Thetextisself-explanatory. However, tomake
forbetter understanding, thefollowing explanation isprovided. Paragraph IoftheArticle establishes
thatwhen there isapattern ofprices thatdiffer depending onthevolume ofthepurchase, themargin
ofprice discrimination should beestablished bylevels (bycategories ofvolume); forexample,
high-volume normal values compared withhigh-volume export prices. Paragraph IIoftheArticle
indicates that,incases inwhich certain domestic salesarenotforquantities similar toexport quantities,
theprices ofsuchsales, mustbeadjusted todomestic prices thatarecomparable, interms ofvolume,
toexternal sales. Forexample, ifthere arenolow-volume export sales, theprices oflow-volume
domestic salesmustbeadjusted totheprices ofhigh-volume domestic sales(assuming thatallexport
salesareatthislevel).
Paragraph IIIoftheArticle establishes certain rules ofcontrol. Paragraph III.A concerns
fictitious markets. Under paragraph III.B, thepattern ofprices differentiated byvolume mustapply
inaconsistent manner; inother words, ithastobeshown thattheprices ofhigh-volume salesare
lower thantheprices oflow-volume sales. Acopyofthefinalresolution relating totheanti-dumping
investigation intobond paper isattached. Thiscaseillustrates infulltheapplication ofthevarious
provisions contained inArticle 55oftheRegulations. Finally, theterm"model ofprices" doesnot
form partofthetextoftheArticle and,again, istheresult ofabadtranslation.
10. Thelastparagraph ofArticle 55makes reference to"available information". Could Mexico
explain whyitdidnotusethephrase "best available information" asused inArticle 6.8and
Annex IIoftheAgreement onImplementation ofArticle VI?
Reply
These twoconcepts donotmean thesame thing. Thelastparagraph ofArticle 55states that
when themethods ofadjustment provided forinparagraphs IandIIarenotpracticable, theadjustment
forquantities maybemade byanyother method onthebasis oftheinformation available onfile,in
thiscase,thedataprovided bytheexporter concerned. Themeaning oftheconcept of"best available
information" referred toinArticle 6.8oftheADAgreement istheopposite, inother words, itrelates
toinformation thatisnotfrom theexporter under investigation.
11. Could Mexico elaborate ontheArticle 58adjustment fortheeffects ofinflation, andprovide
thebasis intheAgreement forthisprovision?G/ADP/W/68
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Reply
Cases ofconstructed value require calculation ofcosts. Incountries withhighinflation, costs
expressed incurrent prices aredistorted. Thiseffect maybeoffset byadjustments. Theprovision
intheAgreement permitting thiskindofadjustment isArticle 2.4,which establishes that"...due
allowance shallbemade ineachcase,onitmerits, fordifferences which affect pricecomparability...".
12. Article 75.IandArticle 80.Iwould suggest thatthere aremultiple competent administrative
authorities which canentertain requests andissueresolutions fortheinitiation ofaninvestigation.
Could Mexico please clarify themeaning ofthese twoprovisions?
Reply
Inbothcases thereference istotheMinistry ofTrade andIndustrial Development. However,
itshould benoted thattheMinistry hasanadministrative unit,theInternational Trade Practices Unit,
which, under applicable legislation, isresponsible forhandling theinvestigation inaccordance with
theterms ofArticle 75.I.
Furthermore, Article 80.I, inreferring to"theauthority issuing theresolution", means the
Ministry ofTrade andIndustrial Development, forwhich reason there isnoalleged multiplicity of
competent administrative authorities.
13. What ismeant by:
(i) TheArticle 75.VII reference to"thelegal basis oftherequest"
and
(ii) theArticle 75.XV reference to"other regulatory ortrade-restrictive measures
concerning theproduct" (i.e.dothese include unilateral trade measures tobe
imposed bytheMexican authorities?)
Reply
The"legal basisoftherequest" means alltheprecepts orarticles oftheapplicable legislation
thatevery applicant mustmention insupport ofhisassertions andarguments (i.e."pursuant toSection...
oftheTrade Act...").
The"description ofrequests forother regulatory ortrade-restrictive measures concerning the
product which isthesubject oftherequest" means anexplanation ofrequests made totheappropriate
authorities forother regulatory orrestrictive measures, forexample, asafeguard request.
14. Could Mexico provide anexplanation ofthemeaning of"summons" inthecontext of
Article 81.IoftheRegulations? Does itrefer toaformal instrument which requires theperson
served (i.e.summoned), toappear before therelevant authority under threat ofpenalty oflaw?G/ADP/W/68
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Reply
Thesummons referred toinArticle 81.Irefers toanotification ofanofficial character, contained
inthepublication oftheresolution toinitiate aninvestigation. Thepurpose istoenable parties which
regard themselves asinterested totakepartintheinvestigation andstatethematters theyconsider
relevant. When aninterested party doesnotappear inresponse tosuchasummons, hedoesnot
participate intheinvestigation andtheauthority therefore actsonthebestavailable information.
15. DoArticle 82.I.F andArticle 83.I.F mean thatMexico intends toimplement alesser duty
rule?
Reply
Indeed, bothArticle 82.I(F), andArticle 83.I(F) relate totheso-called lesser dutyrule. The
basis forthese Articles liesinArticle 62oftheActandArticle 90oftheRegulations, which explain
thatthecountervailing dutymaybesetbelow themargin ofprice discrimination andtheamount of
thesubsidy, provided itisenough toeliminate theinjury orthreat ofinjury.
16. Article 89allows theMinistry tofixduties forexporters whohave been given the
opportunity, butdidnotparticipate intheinvestigation. Could Mexico indicate whether such
duties willbecalculated based onknown margins, i.e.weighted average, orsetatthehighest
known margin?
Reply
Under Article 89oftheRegulations, countervailing duties forexporters whohadtheopportunity
toparticipate butdidnotdosoarefixed atthehighest margin ofprice discrimination known tothe
investigating authority.
17. Article 93requires thepublication ofthereply toarequest forclarification orexplanation
ofresolutions under which final duties areimposed. Inorder toclarify theintent ofsuch an
explanation, willtherequest alsobepublished?
Reply
Article 93oftheRegulations doesnotrequire publication oftherequest bytheinterested parties;
itsimply states, inthelastparagraph, thatthereply totherequest shallbepublished.
18. Regarding theundertaking provisions inArticle 112,could Mexico clarify itisunderstood
thatundertakings aresubject totheprohibition ofanincrease inexport price greater than an
amount necessary toeliminate themargin ofdumping oramount ofsubsidy asprovided forin
SCM Article 18.1andtheAgreement onImplementation ofArticle VI,Article 8.1?
Reply
Since price undertakings aremeasures onthesame footing astheimposition ofanti-dumping
orcountervailing duties and,inkeeping withArticle 112,theobject istoeliminate theinjurious effect
ofdumping orsubsidies, theymustfulfil theprinciples setoutinArticle 18.1andArticle 8.1ofthe
ADAgreement andtheSubsidies Agreement respectively.G/ADP/W/68
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19. Inregard toArticle 136,doesMexico intend toinclude union inthelistoflegally cost
constituted organizations abletobring complaints?
Reply
Forthepurposes ofLawandtheRegulations theconcept oflegally constituted organizations
doesnotinclude unions.