4.19 According to Guatemala, "significant impact" is measured with regard to the impact on the Members's trading interests, and not the impact on the exporter or exporters under investigation. The complainant in a dispute before the WTO is the Member, not the exporter or exporters under investigation. According to Article 17.4 of the ADP Agreement and Article 6.2 of the DSU, the only party empowered to request the establishment of a panel is the Member. Moreover, the duties and obligations laid down in the ADP Agreement apply to Members, not to exporting firms. The drafters of the ADP Agreement could have provided in Article 17.4 that the "significant impact" applied to the exporter or exporters investigated, but they did not do so. Guatemala suggests that this was precisely the position adopted by Mexico in a previous case. In United States - Anti-Dumping Duties on Grey Portland Cement and Cement Clinker from Mexico ¹¹, Mexico had stressed that the GATT was called upon to regulate conduct between the signatory countries and that the dispute settlement mechanism was a government-to-government process. According to Guatemala, Mexico had contended that the earlier version of Article 17.4 of the ADP Agreement "expressly allowed the signatories to challenge ... final determinations, and even preliminary determinations where these had a significant impact on their trading interests". ¹² According to Guatemala, Mexico had not suggested that it sufficed to show a significant impact on the exporters investigated.

4.20 Guatemala denies that the provisional measure had a significant impact on Mexico's trading interests. Guatemala also argues that, under the terms of the provisional measure, importers could choose between providing a surety or making a cash deposit to cover the estimated margin of dumping, or paying the actual provisional duty. If on the occasion of the first administrative review Cruz Azul were to demonstrate that the imports in question were not dumped imports, sureties provided by the importers in Guatemala would be released and their cash deposits would be refunded. Furthermore, Guatemala notes that the provisional measure was in force for only four months, and that the imports covered by the provisional measure accounted for only a fraction of total Mexican exports during that four-month period. According to official export data from Bancomex, during 1996 exports of grey portland cement from Mexico to Guatemala constituted only 0.016% of Mexico's exports of all products to all countries ($96 billion in total exports to all countries/$15.6 million in cement exports to Guatemala). Using data supplied by Mexico and Bancomex, Mexico's exports of grey portland cement to Guatemala in 1996 constituted only 4.3% of Mexico's exports of all products to Guatemala in 1996 ($360 million in total exports to Guatemala/$15.6 million in cement exports to Guatemala). For the period during the application of the provisional measure (September-December 1996), Mexico's exports of grey portland cement to Guatemala constituted only 3% of Mexico's exports of all products to Guatemala ($101.8 million in total exports to Guatemala from September-December 1996/$3.1 million in cement exports to Guatemala from September-December 1996). Because of its low value to weight ratio and the high cost of overland transportation, Guatemala submits that cement is not a significant export product for Mexico. In addition, Guatemala suggests that the traditional export markets for Mexican cement are the United States and other countries that have cement consumption that is many times greater than that of Guatemala. Even after the United States imposed very high anti-dumping duties against Mexican cement in August 1990, the Mexican industry did not redirect its exports to Guatemala. Instead, Mexico redirected its cement exports to Asian markets that are accessible by ocean freight, which is much less costly than overland freight. Guatemala therefore argues that the provisional measure did not have a significant impact on Mexico's trading interests. 

4.21 Guatemala also argues that Mexico failed to allege, and cannot demonstrate, that the provisional measure had a significant impact on the Mexican industry producing grey portland cement. Guatemala asserts that the provisional measure only concerned exports of cement by one Mexican producer, and that it did not involve exports by the main Mexican cement producers - CEMEX, Apasco or Cementos de Chihuahua. Guatemala notes that both CEMEX and Apasco currently export cement to Guatemala. Thus, the fact that Guatemala applied the provisional measure to a very small share of the Mexican cement industry demonstrates that the provisional measure did not have a significant impact on the Mexican cement industry, much less on Mexico's trading interests as a whole. Referring to information from the Mexican National Bank for Foreign Trade and the 1996 Global Cement Report, Guatemala argues that Mexico's exports of grey portland cement to Guatemala during 1996 (287,545 tonnes) only accounted for 0.65% of the Mexican cement industry's production capacity (44 million tonnes) and 1.1% of Mexico's total cement production forecast for 1996 (26,331,000 tonnes). Thus, with an impact of less than 1%, one can conclude that the exports from the Mexican cement industry to Guatemala, or the loss thereof, could never have a significant impact on the overall trading interests of the Mexican cement industry, much less on the overall trading interests of Mexico. 

4.22 Guatemala considers that the aim of the limitations on jurisdiction contained in Article 17.4 of the ADP Agreement is that Members should not unreasonably question any provisional measure imposed temporarily, when such measure has only a negligible impact and only affects one enterprise on the territory of the exporting Member. According to Guatemala, the logic of this approach is apparent when one considers that under Article 13 of the ADP Agreement, the right of domestic judicial review is limited to final determinations. WTO resources are intended to be used for considering disputes relating to the imposition of definitive anti-dumping duties and price undertakings, except where the imposition of the provisional measure has a significant impact on the Member's trading interests. Guatemala asserts that the provisional measure imposed by Guatemala had no significant impact on Mexico's overall trading interests. According to Guatemala, the Panel therefore lacks authority to consider the question raised by Mexico regarding the Guatemalan provisional measure, and Mexico's claim should therefore be rejected. 

4.23 Guatemala submits that it is an essential prerequisite that the Member bringing a claim in respect of a provisional measure prove to the panel that the measure has had such a negative impact on its trade interests that it is not possible to await the final determination before seeking resolution of the dispute. If the exporting Member against whom the provisional measure has been applied does not demonstrate its impact, how is the panel to know for certain whether or not a provisional measure has a significant impact? There is no way it can know unless the Member that requested establishment of the panel provides irrefutable evidence of significant impact. 

4.24 Mexico disputes Guatemala's argument that, for the Panel to have jurisdiction to deal with the provisional measure, Mexico must demonstrate that the provisional measure had a "significant impact" on its overall trading interests. Mexico states that the second sentence of Article 17.4 of the ADP Agreement nowhere contains the term "demonstrate" and hence the obligation to prove or establish the existence of a "significant impact" cannot be inferred. The omission of the term "demonstrate" contrasts with the precision with which the same term is used, for example, in the first two sentences of Article 3.5 of the ADP Agreement on determination of injury. ¹³ If those who drafted the ADP Agreement had considered or agreed that it was necessary to demonstrate "significant impact", the text of Article 17.4 of the ADP Agreement would have contained at least one reference to the term "demonstrate". 

4.25 Mexico asserts that there is no trace of the term "overall trading interests" used by Guatemala, either in Article 17.4 or anywhere else in the ADP Agreement. Using Guatemala's definition of this term, Mexico considers that neither the United States nor other Members of the WTO with overall trading interests of several billions of dollars could make use of this provision of Article 17.4 of the ADP Agreement. Mexico submits that Guatemala's approach would render the second sentence of Article 17.4 meaningless. 

4.26 In Mexico's opinion, the reference to "significant impact" is sufficiently broad to leave the decision to invoke the second sentence of Article 17.4 of the ADP Agreement to the exporting Member affected, even before the results of the final resolution are known. In this connection, Mexico notes that Article 6.1 of the DSU begins with the words "[i]f ... the complaining party so requests ...". 

4.27 Guatemala denies that a finding of significant impact is subjective; it must refer to concrete effects which can, in fact, be assessed. Guatemala further denies that it is up to the exporting Member to decide whether to submit the case to the dispute settlement system or not. Discretion with respect to bringing a case only applies to cases in which the exporting Member is challenging the final measure, because where the final measure is concerned it is the general guidelines set forth in Article XXIII of GATT 1994 and Article 3.7 of the DSU that apply, according to which a Member wishing to bring a case may exercise its discretion in deciding whether or not to do so. On the other hand, in anti-dumping cases concerning provisional measures, Article 17.4 of the ADP Agreement, far from allowing the complaining Member to exercise its discretion with respect to the impact of the measure, expressly requires that the complainant should prove significant impact. 

4.28 Mexico states that on 4 February 1997 the DSB was asked to establish a panel at its meeting on 25 February 1997. The DSB's consideration of the request was postponed because Guatemala opposed the establishment of a panel, alleging only that two appeals by Cruz Azul and Distribuidora Comercial Molina were pending. The establishment of a panel was again submitted for consideration by the DSB at its next meeting on 20 March 1997, at which Guatemala also had ample opportunity to make whatever arguments it thought fit. However, Mexico notes that Guatemala did not advance any arguments relating to significant impact. Therefore, even if it were assumed, for argument's sake, that it was necessary to demonstrate "significant impact", Mexico considers that this is no longer the appropriate moment in the procedure for advancing that argument, since Guatemala is claiming that the Panel should examine what was a matter for examination by the DSB. 

4.29 Guatemala submits that it was not obligated under any provision of the ADP Agreement or the DSU, nor did it have any reason, to make this preliminary objection before the DSB. The Panel - and not the DSB - is the appropriate body for defining the scope of a panel's authority, including whether a measure may or may not be examined according to Article 17.4 of the ADP Agreement. According to Article 7.1 of the DSU, the uniform terms of reference are "to examine, in the light of the relevant provisions in (name of the covered agreement(s)) ... the matter ... and to make such findings ... ". Article 7.2 of the DSU confirms that "[p]anels shall address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute." Consequently, a panel established under the WTO has the authority and the obligation to examine the relevant provisions cited by the parties to the dispute. On the other hand, Article 2 of the DSU provides that the DSB shall administer the rules and procedures for the settlement of disputes, but shall only "have the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under the covered agreements". Article 2 does not give the DSB the authority to issue decisions or interpret provisions of the covered Agreements cited by the parties to the dispute. A panel is established to examine a specific dispute, it is composed of three members selected in accordance with Article 8 of the DSU on the basis of their personal qualities, and is a more appropriate body than the approximately 130 members of the DSB for dealing with complex preliminary aspects. Guatemala asserts that preliminary objections by the parties have been examined by many panels established under the GATT and the WTO, particularly for the purpose of determining whether the claims or measures are properly included within the panel's scope of competence, i.e., are within the panel's terms of reference. ¹⁴ A panel established to settle a dispute is thus the appropriate forum for examining preliminary objections raised under the ADP Agreement. 

4.30 Guatemala notes that the DSB only authorizes the establishment of panels with either uniform terms of reference or, if applicable, special terms of reference. The uniform terms of reference only refer to the matter brought up by the complaining Member, but do not refer to the arguments of the defending Member. The latter is therefore not obliged to submit its arguments or preliminary objections in advance to the DSB. At this stage in the proceeding, the DSB has no interest in arguments raised by the respondent Member. The latter need only raise its arguments and preliminary objections in its first submission to the panel. 

4.31 Guatemala states that Article 6.1 of the DSU was adopted to ensure that if there is a claim against a Member, the latter may not unilaterally prevent the establishment of a panel. According to Article 6.1, a panel "shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda, unless at that meeting the DSB decides by consensus not to establish a panel". Consequently, the reverse consensus rule did not allow Guatemala to object on the basis of Article 17.4 of the ADP Agreement, and Guatemala was thus obliged to wait and put forward its objection in its first written submission. In any event, Article 17.4 provides that proving the existence of "a significant impact" is a necessary prerequisite for determining whether a panel is competent or not to examine the provisional measure. Guatemala expected that Mexico's first submission in the procedure would try to prove the significant impact. Since Mexico did not put forward any argument much less fulfil this prerequisite, Guatemala made its objections in its first written submission to the Panel. According to Guatemala, there is no provision either in the ADP Agreement or the DSU obliging Guatemala to make its preliminary objections to the DSB. Moreover, in line with the traditional principles applicable to "waivers", there is no obligation to raise the claim in one particular forum in order to retain the right to raise it in another forum, if raising it in the first forum would have been meaningless. As already indicated, Guatemala did not raise the preliminary objection in the DSB because the DSB is not the appropriate forum for taking decisions in this respect, and because raising the objection would have served no purpose in view of the rule of reverse consensus in Article 6.1 of the DSU. Moreover, Guatemala notes that no panel has ever refused to examine a preliminary argument on the grounds that it was not brought before the DSB. 

4.32 Mexico suggests that Guatemala's arguments are contradictory. In order to justify not having challenged this matter at the two meetings of the DSB when it could have done so, Guatemala maintains that it was up to the Panel, and not the DSB, to examine the matter. Mexico suggests that if this were the case, it would be incorrect to infer, as Guatemala apparently has done, that Mexico would have had to demonstrate significant impact to the DSB in order to be entitled to the establishment of a panel. Pursuing this line of reasoning, Mexico argues that both the complainant and the respondent should have the same opportunity before the Panel, above all if one considers that the complainant cannot, by definition, submit a claim concerning lack of significant impact, while the respondent could have raised the matter before the DSB. 

4.33 Mexico asserts that the notion of significant impact usually includes effects, both qualitative and quantitative, at various levels (federal, subfederal, state) and in various sectors (public, private), according to the circumstances. Mexico submits that the dispute with Guatemala involves concerns of a systemic nature which go beyond Mexico's interests as an exporter to the Guatemalan market alone. A ruling in favour of Guatemala would create a precedent that could affect Mexican exports of any product to any market. In particular, the dispute would imperil Mexico's exports to Central America, since the other countries of the subregion, which apply the same anti-dumping regulations as Guatemala, would have noted that the initiation and conduct of an anti-dumping investigation with serious flaws could be endorsed by a WTO panel despite such flaws and that, even if a ruling were obtained against them, the worst that could happen would be for a panel to recommend a post facto adjustment of the violations committed. 

4.34 Guatemala asserts that the systemic concerns invoked by Mexico and the alleged adverse effect on Mexican exports of any product to any market are not consistent with Article 17.4 of the ADP Agreement. On the contrary, the true systemic interest lies in not allowing a complainant to justify or provide excuses for failing to observe legal requirements on the grounds of alleged systemic considerations. 

4.35 According to Mexico, Guatemala's anti-dumping investigation has affected a significant proportion of Mexico's total exports to that country. Moreover, because of the uncertainties that arose in Guatemala with respect to the enterprises and the product subject to investigation, the investigation affected the exports not only of Cruz Azul but also of all the other Mexican cement companies which were exporting or planning to export to Guatemala. Mexico submits that, as a result of practical difficulties incurred in Guatemala, sureties or cash deposits could not be used for Cruz Azul's exports, and actual provisional duties were therefore paid by the importers. 

4.36 Guatemala notes that its preliminary determination did not give rise to any "uncertainty" as to the enterprise or the product under investigation. Without conceding that there was any uncertainty, it would have been totally inappropriate for Mexico to refer to an alleged uncertainty created by the "investigation" to demonstrate significant impact as required by Article 17.4 when what is required is for Mexico to demonstrate the impact caused by the provisional measure. Nor is it right to say that the measure affected all of the other Mexican cement firms that have exported or that had planned to export to Guatemala. On the contrary, since the measure was imposed only on Cruz Azul, firms such as Apasco and even a new exporter, Cemex, are competing with Cementos Progreso in a healthy market. 

4.37 Mexico considers that, from a practical point of view, it is logical to assume that no exporting Member would seek dispute settlement involving a provisional measure under the second sentence of Article 17.4 of the ADP Agreement if the measure had no significant impact on that Member. What would be the point of initiating a dispute in the WTO if the investigation in question was not having a significant impact? No Member, least of all Mexico, would allocate economic and human resources to something which was not worth the trouble. 

4.38 Guatemala replies that if one were to accept that every claim is in itself necessarily evidence of significant impact, the second sentence of Article 17.4 of the ADP Agreement would be meaningless. 

4.39 Mexico suggests that if it were to accept - simply to illustrate the importance of anti-dumping duties on Mexico's cement exports to Guatemala - that significant impact had to be linked with the volume of the trade affected by the measure, the following figures would be worth noting: the exports affected by anti-dumping duties accounted for more than 5% of Mexico's total exports to Guatemala in 1996; Cruz Azul's exports represented almost 91% of Mexico's total cement exports to Guatemala, and Cruz Azul's cement exports to Guatemala accounted for more than 72% of the firm's total exports worldwide. 

4.40 Guatemala argues that the share of exports that Guatemala allegedly represents for Cruz Azul does not provide an appropriate or reasonable evaluation because Cruz Azul's total exports are insignificant when compared to the firm's overall operations. For example, in 1996, Cruz Azul's exports of grey portland cement to Guatemala amounted to 261,378 metric tonnes, which represents only 4.7% of its installed capacity of 5,560,000 metric tonnes. Moreover, if the same comparison is made in respect of exports of grey portland cement from Cruz Azul to all countries, Guatemala notes that they represent only 6.6% of the firm's installed capacity. In other words, Cruz Azul's exports, be it to Guatemala or to all countries, could never have a significant impact on that single firm's trading interests, much less on the Mexican cement industry or Mexico's trading interests as a whole. 

4.41 In response to a request by the Panel ¹⁵, Mexico also provided data concerning the percentage of affected exports in relation to total Cruz Azul domestic production in 1995 and 1996, where "Production" refers to production by the Lagunas plant in the State of Oaxaca (which was the sole plant to export to Guatemala in the relevant period) in metric tonnes, and "Total production" refers to the total production of both of Cruz Azul's Mexican plants in metric tonnes, including the plant in the State of Hidalgo that never exported to Guatemala. Mexico suggests that, because the plant in the State of Hidalgo did not export to Guatemala, the Panel should focus on the data concerning the Lagunas plant. 

4.42 Mexico notes that the period June-December has been included for the year 1995 because it was the period under investigation. Before that there were no imports from Mexico. The year 1996 has been broken down into two parts to highlight the fact that the preliminary determination, with anti-dumping duties of 38.72%, was made in August of that year. Mexico emphasises that the provisional determination, with the application of anti-dumping duties, produced a more than significant fall in the Cruz Azul plant's export/production percentage, i.e. 59.5%. 

4.43 Guatemala submits that according to the data provided by Mexico, Cruz Azul produced 293,077 tonnes per month during January 1995-August 1996. Its production increased to 331,250 tonnes per month during September-December 1996 when the provisional duties were in effect. In other words, based on Mexico's own data, production jumped 38,173 tonnes per month, or 13%, at the very time that Mexico claims that Cruz Azul suffered a significant impact. Furthermore, the exports of Cruz Azul to Guatemala averaged 20,686 tonnes per month during January 1995-August 1996 and decreased to 11,549 tonnes per month during September-December 1996. The alleged drop in monthly exports from 20,686 tonnes to 11,549 tonnes would suggest that Cruz Azul lost exports of only 36,548 tonnes while the provisional duties were in effect. That alleged loss equals less than 2% of the capacity of Cruz Azul to produce grey portland cement during those four months. 

4.44 Guatemala submits that, according to the annual report of Cruz Azul, the Lagunas plant produces about 37% of total production, and the Hidalgo plant produces the remaining 63%. Guatemala suggests that is why Mexico asked the Panel to discount data concerning the Hidalgo plant. Guatemala queries how a Member can claim to have suffered a significant impact on its trading interests based on data for only one minor plant of one minor producer of grey portland cement in Mexico, especially when cement is not a significant export product for Mexico in the first place. 

4.45 Guatemala objects to the untimely submission of new factual information by Mexico on the last scheduled day of the second meeting of the Panel. Guatemala submits that Mexico had an obligation to demonstrate significant impact in its request for the establishment of a panel, or at the very least, in its first written submission to the Panel. Guatemala also objects to the failure by Mexico to submit any evidence to substantiate its simple assertions of significant impact. Guatemala argues that, as the data was presented by Mexico at the second meeting with the Panel, it has had no opportunity to evaluate the accuracy of the data submitted by Mexico against any source documents and has had no opportunity to present rebuttal data for other time periods from the same sources. In other words, Mexico has been able to pick and choose from data allegedly obtained from Cruz Azul that best supports its position, but Guatemala has had no opportunity to review other data from Cruz Azul that would detract from the claims of Mexico. 

4.46 Mexico asserts that significant impact cannot be used as a condition for establishing a panel or as a determining factor in deciding whether the panel may examine a dispute under the second sentence of Article 17.4 of the ADP Agreement. The concept of significant impact cannot be a determining factor in deciding whether the dispute may be examined because the timetables set forth in the DSU and the ADP Agreement imply that the second sentence of Article 17.4 of the ADP Agreement would be rendered void, which is not possible. According to Mexico, for the complainant to be able to demonstrate significant impact (assuming that it is necessary to do so) in purely quantitative terms (a view which it does not share), it would take longer than the actual duration of the provisional measure and, in the end, the complainant would lose the right to challenge the provisional measure under the second sentence of Article 17.4 of the ADP Agreement. Indeed, according to Article 7.4 of the ADP Agreement, the application of provisional measures cannot exceed four months (with one exception that does not apply to this case), whereas the complainant would require approximately five months to demonstrate significant impact (one and a half months to obtain the export statistics, two months to hold consultations, one month for the DSB to establish a panel and one month for the panel to begin its work). 

4.47 Guatemala also submits that in order to make a claim relating to a provisional measure pursuant to Article 17.4 of the ADP Agreement, the complainant Member must claim "... that the measure was taken contrary to the provisions of paragraph 1 of Article 7 ...". In the introduction to its first written submission, Mexico states that "in the anti-dumping investigation in question actions were taken that are inconsistent with, at least, Articles 2, 3, 4, 5, 6 and 7 and Annex I of the ADP Agreement". Guatemala recalls that Mexico makes no reference to Article 7 in any other part of its submission, and does not cite paragraph 1 of Article 7 in any part of its submission. At no time did Mexico argue that Guatemala had violated paragraph 1 of Article 7. Nor did Mexico mention Article 7.1 of the ADP Agreement in its oral submission. Indeed, Guatemala notes that Mexico, in its request for the establishment of a panel, did not claim that paragraph 1 of Article 7 had been violated. In failing to invoke Article 7.1, Guatemala submits that Mexico also failed to meet the second requirement for the Panel to have competence to examine the provisional measure pursuant to Article 17.4 of the ADP Agreement.

4.48 Mexico notes Guatemala's argument concerning Article 7.1 of the ADP Agreement, and recalls that it clearly cited Article 7 in its request for the establishment of a panel, and subsequently in its submissions to the Panel. Consequently, Guatemala's second objection with respect to the provisional measure is entirely unfounded. Furthermore, since the violations of Article 7.1 occurred at the initiation of the investigation and subsequently in the affirmative preliminary resolution, Mexico suggests that it is logical that the proof of such violations should be supplied in respect of the articles concerning the initiation and the preliminary determination and not only in respect of Article 7.1, as Guatemala apparently suggests. 

Continue on to
IV. Main Arguments of the Parties, Item 4. Whether the Initiation is Before the Panel

Notes:

11. United States - Anti-Dumping Duties on Grey Portland Cement and Cement Clinker from Mexico, ADP/82, not adopted, dated 7 September 1992.

12. Ibid, paragraph 3.1.11.

13. The first sentence of Article 3.5 provides that "[i]t must be demonstrated that ... the dumped imports are ... causing injury ...". The second sentence begins "[t]he demonstration of a causal relationship ... shall be based on ...".

14. Guatemala notes that the Appellate Body has established that the terms of reference are important because "they establish the jurisdiction of the panel by defining the precise claims at issue in the dispute." (Report of the Appellate Body, Brazil - Measures Affecting Desiccated Coconut, WT/DS22/AB/R, page 22 of the English text (21 February 1997)). In the case Japan - Taxes on Alcoholic Beverages, the WTO Panel concluded that its terms of reference did not permit it to entertain the claim of the United States (WT/DS8/R, WT/DS10/R, WT/DS11/R, paragraph 6.5 (11 July 1996)). According to Guatemala many panels under the Tokyo Round Anti-Dumping Code also defined their scope by identifying the measures that were properly included in their terms of reference. For example, in the case United States - Measures Affecting Alcoholic and Malt Beverages, the Panel took a preliminary decision to the effect that it would only examine the specific United States measures and that its terms of reference did not permit it to examine other measures (DS/23R, paragraph 3.5 (19 June 1992)).

15. The request was made (in Spanish) three days before the Panel's second meeting with the parties.