4.102 According to Guatemala, the same commentator considered that the standard of review of the establishment of facts as set forth in Article 17.6(i) was consistent with the panel reports delivered during the closing stages of the Uruguay Round. ⁵⁷ Guatemala recalls for example, that in United States - Measures Affecting Imports of Softwood Lumber from Canada the panel ruled that:

"It was the role of the national investigating authority in the importing country, not that of the Panel, to make the necessary determinations in connection with the initiation of a countervailing duty case. ... The role of the Panel was thus not to determine whether there was sufficient evidence for initiation but to review whether the national authorities in the importing country had made the initiation determination in accordance with relevant provisions of the Agreement."  ⁵⁸

4.103 Guatemala considers that Article 17.6(ii) of the ADP Agreement establishes the standard of review applicable to the examination by the panel of an investigating authority's interpretation of the Agreement. According to Guatemala, Article 17.6(ii) establishes that the Panel must respect the investigating authority's interpretation of the ADP Agreement, provided such interpretation is permissible under the customary rules of interpretation of public international law. 

4.104 According to Guatemala, the main purpose of the standard of review contained in Article 17.6 is to ensure that panels do not go beyond the role assigned to them by international law of reviewing the evaluation of facts by a Member or that Member's interpretation of the provisions of the ADP Agreement, to the detriment of the sovereignty of that Member or its expectations as to conformity with the ADP Agreement. Guatemala suggests that preservation of the sovereignty of a Member and maintenance of that Member's expectations are all the more important now that the WTO dispute settlement system is effectively binding for the parties. Thus, Guatemala submits that the Panel must respect the evaluation of facts contained in the Ministry's determinations, even though the Panel might have reached a different conclusion. The Panel must also respect Guatemala's permissible interpretations of the ADP Agreement in accordance with the customary rules of interpretation of public international law. 

4.105 Guatemala notes that Mexico has alleged that Guatemala carried out "a partial and subjective" establishment of the facts relating to the factors set out in Article 3.7 of the ADP Agreement. Mexico has not, however, cited Article 17.6(i) of the ADP Agreement, and has failed to provide any proof of its allegations. Guatemala endorses the United States' argument that a party attempting to prove that an investigating authority's determination is not 'unbiased' within the meaning of Article 17.6(i) must present positive evidence showing that the decision was influenced by bias or prejudice; mere allegations and conjecture cannot discharge the challenging party's burden on this issue. Guatemala suggests that the United States' position is consistent with the findings of the panel in EC - Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil in the sense that, in the absence of other evidence, it cannot be stated that a decision to base a determination on one set of data rather than on other, different, data signifies that there is bias or lack of objectivity.  ⁵⁹

4.106 Guatemala endorses the United States' view that the factual evidence before the Ministry is described at length in Guatemala's preliminary determination and first submission to this Panel. According to Guatemala, Mexico's claims regarding the threat of injury factors reveal that Mexico has only offered an alternative reading of the evidence or, in some cases, only suggested that an alternative reading might be possible. Mexico has not demonstrated that an alternative finding is necessitated by the factual record. 

4.107 According to Guatemala, even assuming that Mexico had claimed that the Ministry's preliminary determination was not "unbiased and objective" as required by Article 17.6(i) of the ADP Agreement, Mexico did not provide any proof to substantiate its claim. On the contrary, it simply asked the Panel to review once again Guatemala's establishment of the facts and to arrive at a different finding, which is contrary to the text and the intention of Article 17.6(i) of the ADP Agreement. 

4.108 Guatemala submits that Mexico provides a tendentiously incorrect analysis of the matter by not drawing a proper distinction between the standard of review for the establishment of the facts (Article 17.6(i)) and the standard of review applicable to the interpretation of the legal provisions of the Agreement (Article 17.6(ii)). The standard of review applicable to the facts and the standard of review for the interpretation of the law are quite different. Guatemala suggests that Mexico tries to ignore the distinction between subparagraph (i) and subparagraph (ii), and tries to convince the Panel that the "permissible interpretations" mentioned in Article 17.6(ii) of the ADP Agreement refer to the evaluation of the evidence, when they clearly refer to the interpretation of the legal provisions. Guatemala states that the Ministry's establishment of the facts was unbiased and objective, and only facts that had been properly established were accepted; in no case was any other material used. Guatemala requests that the Panel should not invalidate Guatemala's evaluation of the facts. As regards the separate subject of the interpretation of the ADP Agreement, Guatemala submits that it complied with the provisions of the ADP Agreement, and where various interpretations were possible, it always took special care to ensure that its interpretations were permissible. Thus, Guatemala requests that the Panel applies the customary rules of public international law and, given the existence of various permissible interpretations of a legal provision, declares that Guatemala's interpretation is consistent with the ADP Agreement. 

4.109 Guatemala submits that, in a further attempt to undermine the standard of review by requesting the Panel to replace the Ministry's evaluation, Mexico infers that Article 17.6 of the ADP Agreement and Article 11 of the DSU are complimentary. Guatemala suggests that this position is in conflict with the actual text of these provisions since Appendix 2 to the DSU contains a list of rules, including Article 17.6 of the ADP Agreement, that are special or additional. In describing the ordinary terms of reference of panels, Guatemala notes that Article 7.1 of the DSU stipulates that panels must conduct their examination in the light of the relevant provisions of the covered agreement. In cases of anti-dumping, Guatemala submits that a relevant provision is Article 17.6 of the ADP Agreement. Thus, Guatemala asserts that a panel dealing with an anti-dumping case is not authorized to carry out any evaluation of the facts, since Article 17.6 reserves this function for the investigating authority. 

4.110 Mexico considers that Guatemala's anti-dumping investigation is inconsistent with the ADP Agreement on several scores, and that these inconsistencies show that the Ministry: (i) failed to establish the facts properly; (ii) did not conduct an unbiased and objective evaluation of the facts; and (iii) placed a number of inadmissible constructions on the ADP Agreement. 

4.111 Mexico argues that, with regard to the initiation of the investigation, Guatemala did not properly establish the facts because: 

(i) Guatemala accepted as valid two alleged invoices (for one load of cement each) without ensuring that the invoices were actually valid;

(ii) Guatemala assumed, wrongly, that the volume of cement recorded in the two alleged invoices was equal to the volume of the sacks sold in Guatemala;

(iii) Guatemala confused the submission of two import certificates for transactions that took place on two consecutive days in the same month, and that were used as evidence of the export price, with information on the trend in the volume of dumped imports;

(iv) Guatemala considered that the investigation had been initiated when the import certificates for the preceding year were requested from the Directorate of Customs, whereas in reality it was initiated when the notice of initiation was published in the Official Journal;

(v) Guatemala initiated the investigation without any evidence as to the volume of cement exports; and

(vi) Guatemala did not adequately examine the causal link. 

4.112 Mexico argues that, with regard to the initiation of the investigation, Guatemala did not make an unbiased and objective evaluation of the facts because:

(i) under Guatemalan law the Ministry must accept evidence submitted by the applicant as valid and leave it to the other interested parties to prove the contrary;

(ii) the Ministry tried to make good the deficiencies of Cementos Progreso's initial application by requesting the submission of a supplementary application which would correct the defects of the first, particularly those relating to injury;

(iii) the Ministry wrongly accepted the application for the initiation of an investigation despite the fact that, even taking the supplementary application into account, it contained the defects identified by Mexico, in particular a lack of evidence or information concerning threat of injury and causal link; and

(iv) the Ministry not only assumed the role of applicant by requesting from the Directorate of Customs information on the import certificates for the last year which should have been obtained and submitted by Cementos Progreso, but also decided to initiate the investigation without waiting for the results of its request for information. 

4.113 With regard to the conduct of the investigation, Mexico submits that the Ministry conducted a biased and non-objective evaluation of the facts on which the preliminary affirmative finding of threat of injury was based. Mexico argues that Guatemala's preliminary determination of threat of injury does not fulfil the relevant requirements of the ADP Agreement. The preliminary determination, for example, does not indicate whether due account was taken of other factors which may have influenced the situation of the domestic industry; there is no causal link between the factors considered and the alleged threat of injury; data subsequent to the investigation period set by the Ministry have been used; the evolution of imports does not demonstrate any inverse correlation between the increase in imports and Cementos Progreso's sales trends (at times they both increased or fell simultaneously); inventories of a product (clinker) other than the product under investigation (grey portland cement) have been used; it is asserted, with no evidence or explanation, that the drop in Cementos Progreso's sales is due to imports; prices which, according to Guatemala, were recorded in some Guatemalan cities were used as if the investigation had been a regional one and despite the fact that the prices supplied by Cementos Progreso (which rose) were available; a loss of customers is mentioned without the accuracy of this claim having been ascertained; there was no under-utilization of installed capacity as claimed by Cementos Progreso, considering in particular that in spite of the closure of its kilns, it continued to produce cement subsequent to the investigation period at close to 100% of its real production capacity; and it is considered on the basis of a number of estimates supplied by a firm of consultants that Cruz Azul's available capacity can cause an imminent and substantial increase in its exports to Guatemala when, even if the total estimated excess capacity (360,000 tonnes per year) were directed solely at the Guatemalan market, the increase could not be more than 30,000 tonnes a month. 

C. Violations Alleged Regarding the First Stage of the Investigation 

1. Initiation

4.114 Mexico submits that, by initiating the investigation on the basis of information contained in Cementos Progreso's application, Guatemala violated Articles 2.1, 2.4, 3.7, 5.2, 5.3 and 5.8 of the ADP Agreement. Mexico asserts that, as a result of deficiencies in the information submitted by Cementos Progreso concerning dumping, injury and causal link, the Ministry did not have sufficient evidence to justify initiation and should have rejected the application. 

4.115 Guatemala notes that the level of evidence "sufficient" to justify initiation is significantly less than the level of evidence required for a preliminary or final affirmative determination. According to the Chairman of the panel in United States - Measures Affecting Imports of Softwood Lumber from Canada: 

"A number of substantive concerns have been raised by the parties in this case. The Panel saw considerable merit in many of Canada's criticisms with respect to the United States' initiation of a countervailing duty investigation on imports of softwood lumber from Canada. In particular, the Panel recognized that the data and methodologies used by the United States contained shortcomings, in some cases of a serious nature. A number of questions arose regarding particular aspects of the evidence addressed by the US Department of Commerce. Moreover, certain facts available to the United States, for example on the impact of the recession, were, but arguably should not have been, ignored. Such information might have had an important bearing on this case, even at the initiation stage. However, the Panel had to take into account that it was not reviewing a determination of the existence of subsidy, injury and causality, but a finding that sufficient evidence of these elements existed to warrant an investigation. Moreover, in reviewing this matter, which necessarily involved a large range of issues of fact, the Panel had to take into account that the matter was not before it on a de novo basis. The Panel was also aware, despite its rigorous application of the criteria established in paragraphs 29, 30, 31, and 33 of its report, of concerns that the threshold for initiation as it applied in customary practice in several countries was relatively low. Nonetheless, the panel was of the view that the threshold required by Article 2:1 of the Agreement for initiation of a countervailing duty investigation was such that the Panel could not properly find that the United States initiation in this case was inconsistent with that Article, having regard to the standard of review." ⁶⁰

4.117 Guatemala also argues that Mexico ignored the new standard of review contained in Article 17.6(i) of the ADP Agreement. Mexico is urging the Panel to carry out a new examination of the evidence evaluated by the Ministry pursuant to Article 5 of the ADP Agreement. Mexico wants the Panel to reach a conclusion that differs from that reached by the Ministry concerning whether or not the application complied with Article 5.2 and whether the Ministry determined properly that the application included accurate and adequate evidence in compliance with Article 5.3. Article 17.6(i) was included in the ADP Agreement to prevent panels from casting doubt on decisions by authorities, unless the facts were established improperly or only evaluated partially. Mexico has not put forward any argument saying that the Ministry did not establish the facts properly because it did not follow the required procedures or that the Ministry evaluated the facts in a partial manner. Consequently, the Panel should respect the decision to initiate an investigation taken by the Guatemalan Ministry of the Economy, pursuant to Guatemala's obligations under Articles 5.2 and 5.3 of the ADP Agreement.

(a) Articles 2.1/2.4 

4.119 With regard to the evidence of dumping submitted by Cementos Progreso, Mexico argues that the prices recorded in the alleged invoices and used as evidence of the normal value, and those recorded in the import certificates and used as evidence of the export price, cannot be considered as comparable within the meaning of Articles 2.1 and 2.4 of the ADP Agreement unless due allowance is made in each case for differences which affect price comparability. The Ministry failed to make a fair comparison between the normal value and the export price, and failed to make due allowance for differences in levels of trade, quantities, form of payment and exchange rate. In particular, the Ministry failed to consider the following:

(i) the transactions compared were carried out at different levels of trade, since the normal value was calculated at the retail level, while the export price was calculated at the wholesale level  ⁶¹;

(ii) the conditions and terms of sale for these transactions were different in that:

- the prices in the alleged invoices used to calculate normal value referred to 50 kg. sacks, while the prices in the import certificates used to calculate the export price referred to 42.5 kg. sacks;

- the prices used for normal value were spot prices (including the distributor's share), while those used for the export price were credit sale prices; and

(iii) the dollar-peso exchange rate claimed by Cementos Progreso has not been properly documented, and is based on a mere statement by the claimant for which no proper evidence has been provided. 

4.121 Guatemala rejects Mexico's reasons for considering that the prices were not comparable. Firstly, the Ministry had no reason or obligation to ask the applicant to provide evidence of the levels of trade in Mexico or in Guatemala. The identification of different levels of trade requires an investigation in which numerous facts must be obtained and depends on detailed and substantive information from the exporter, information which is not available to the applicant prior to the initiation of the investigation. Secondly, as discussed elsewhere, the Ministry did not have any reason or obligation to ask the applicant to provide evidence of the terms and conditions of sale in each market. Thirdly, if, as Mexico claims, the sales on the domestic market were cash sales and the export sales were credit sales, these facts would serve simply to increase the amount of the margin of dumping. The failure to make the adjustment for credit sale benefitted Cruz Azul in that the margin was underestimated. Moreover, Guatemala objects to the reference made by Mexico to a communication between the Ministry and Mexico on 26 July 1996. This communication is not part of the file that is being examined by the Panel, but is a communication made in the course of informal consultations preceding formal consultations. In any case, the said communication correctly states that the information needed to adjust the exporter's domestic market prices and the export prices for a fair comparison under Article 2.4 of the ADP Agreement in the preliminary or final determination is not information that is available to the applicant. 

4.122 Guatemala submits that Article 2 of the ADP Agreement does not apply to the decision to initiate an investigation. As Article 2 is entitled "Determination of Dumping", this Article applies only to the preliminary and final determinations of dumping, and not to the decision to initiate an investigation. According to Article 2.4, precise adjustments of the export price and the normal value can only be made during an investigation, when the investigating authority has access to the detailed information in the possession of the exporting firms needed to calculate the adjustments. Neither Articles 5.2 nor 5.3 refer to Article 2. In view of the express reference to specific paragraphs of Article 3 in Article 5.2(iv), the absence of references to other provisions of the ADP Agreement such as Article 2 shows that Article 2 does not apply. The first sentence of Article 5.2 does not contain any reference to Article 2. The reference is to "... within the meaning of Article VI of GATT 1994 as interpreted by this Agreement.." and applies solely to "injury" and not to dumping. The third sentence of Article 5.2 describes the evidence and information to be included in the application, provided that such information is reasonably available to the applicant. Article 5.2(iii) describes the evidence and information that must be included in the application to substantiate the allegation of dumping. Article 5.2(iii) does not contain any reference to Article 2. Article 5.2 clearly establishes that no paragraph in Article 2 applies to the decision to initiate an investigation. 

4.123 Mexico asserts that Article 2 applies to the whole of the ADP Agreement and hence to the decision to initiate an investigation. This follows from the text of Article 2, and from the very logic of the ADP Agreement. Mexico notes there is no provision in the ADP Agreement that supports Guatemala's argument to the contrary. 

4.124 Mexico argues that a legal provision cannot be applied outside of a general legal framework. In other words, the law as a whole applies and no legal system considers the law to be a dictionary in which the concepts apply in isolation. Article 5 of the ADP Agreement should apply together with the other relevant provisions, which as a whole constitute the legal framework of the anti-dumping mechanism. Article 2 is the technical explanation of the meaning of the word "dumping" as used throughout the ADP Agreement. Thus, Guatemala's argument that this concept applies only for the preliminary and final determinations of dumping cannot be sustained. 

4.125 According to Mexico, Article 5.2 specifically includes the concept laid down in Article 2 by requiring "... evidence of (a) dumping". Having explained the meaning of the word "dumping" for the purpose of the ADP Agreement in Article 2 thereof, it would have been absurd for the negotiators to use any other definition of dumping and injury in Article 5.2. Article 2 defines the term "dumping" and Article 5.2, by using the term, incorporates this definition. Furthermore, Article 5.2(i) refers to the "volume and value of the domestic production of the like product". In this case, one must consider Article 2.6 of the ADP Agreement in order to understand the concept of like product. Likewise, in order to be able to identify the domestic industry, it is necessary to turn to the definition of domestic industry provided in Article 4 of the ADP Agreement. In the same way, Article 5.2(iii) states "... where appropriate, information on the prices at which the product is sold from the country or countries of origin or export to a third country or countries, or on the constructed value of the product ...". In this case, it is necessary to turn to some of the wording in Article 2 in order to determine in which cases it is "appropriate" to apply the concepts of third country normal value and constructed normal value, and also to determine the way in which the value of the product under investigation is constructed. The last part of Article 5.2(iii) refers to the concept of related parties. The Article does not repeat what is meant by a relationship between the exporter and the importer as this is already explained in Article 2.3 of the ADP Agreement. It would be absurd to claim that Article 5 should repeat what is meant by this concept. Mexico notes that, in general, Article 5 states what is required to prove the existence of dumping for the purpose of initiation, but does not indicate the way in which the comparison between the normal value and the export price should be made. This is logical because the methodology is laid down in Article 2. In order to avoid the interpretation proposed by Guatemala, Article 2.1 starts with the words "For the purposes of the Agreement". 

4.126 Guatemala argues that the obligation to meet the numerous requirements set forth in Article 2, which concerns the determination of dumping, and Article 3, which concerns the determination of injury, is only applicable to the preliminary determination and the final determination of dumping and injury, but not to the decision to initiate the investigation. Otherwise, the third sentence of Article 5.2 would be pointless, since the requirements for determining dumping, injury and causal link are set forth in Articles 2 and 3 of the Agreement.

(b) Article 3.7 

4.127 Mexico submits that investigating authorities must apply Article 3.7 of the ADP Agreement when determining within the context of Article 5.3 whether there is sufficient evidence of threat of injury to justify initiation of an investigation: Mexico suggests that Cementos Progreso cannot be considered to have provided adequate evidence for the investigating authorities to determine that exports from Cruz Azul threatened to cause material injury as claimed by the claimant, since the information contained in the two import certificates submitted by the claimant cannot lead one to conclude or even to suppose that any of the conditions listed in 3.7 of the ADP Agreement, or in Article 3.2, obtained in the Guatemalan market. Article 3.7 sets forth an illustrative list of factors to be considered in determining whether there is threat of material injury. Article 3.2 sets forth factors to be considered in determining if there is present material injury. 

4.128 Guatemala considers that Article 3 does not apply to the decision to initiate an investigation. Article 3 is entitled "Determination of Injury". Strictly speaking, this Article applies only to the preliminary and final determinations of dumping and injury, and not to the decision to initiate an investigation. While Article 5.2(iv) states that the factors listed in paragraphs 2 and 4 of Article 3 as evidence of injury may be used as a general guideline as to the of information to be included in the application, neither Articles 5.2 nor 5.3 incorporate Article 3. In view of the express reference to specific paragraphs of Article 3 in Article 5.2(iv), the absence of any references to the remainder of Article 3 shows that Article 3 does not apply in any other way. Thus, Article 3 is not relevant to the initiation of an investigation, except with respect to paragraphs 2 and 4. 

4.129 Guatemala notes that the first sentence of Article 5.2 does not contain any reference to Article 3. The reference in Article 5.2 is only to "... injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement ...". The third sentence of Article 5.2 describes the evidence and information to be included in the application, provided that such information is reasonably available to the applicant. Article 5.2(iv) describes the evidence and information that must be contained in the application in order to prove injury and a causal link. Article 5.2(iv) only contains a cross-reference to paragraphs 2 and 4 of Article 3 and not to the other paragraphs of Article 3. Consequently, Article 5.2 clearly establishes that only two of the eight paragraphs in Article 3 apply to the decision to initiate an investigation. 

Continue on to IV. Main Arguments of the Parties, Section 4.130

Notes:

57. Edmond McGovern, International Trade Regulation, 12.143 (1995).

58. United States - Measures Affecting Imports of Softwood Lumber from Canada, BISD 40S/358, paragraph 334, adopted on 27 October 1993.

59. EC - Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil, ADP/137, paragraphs 512-13, adopted on 30 October 1995.

60. Letter from the Chairman of the panel to the Chairman of the GATT Committee on Subsidies and Countervailing Measures, SCM/163, 19 February 1993.

61. Mexico submits that these differences inevitably increase the margin of dumping artificially, since different volumes are being compared: the normal value has been calculated for only 50 kg. of cement, while the export price has been calculated for two transactions involving 4,000 and 7,000 sacks respectively.