4.154 Mexico rejects Guatemala's argument that, according to Article 5.2 of the ADP Agreement, there is sufficient evidence of causal link if the applicant provides evidence of dumping in accordance with Article 5.2(iii) and evidence of injury in accordance with Article 5.2(iv). The references in the first paragraph of Article 5.2, which state that the application shall include evidence of "a causal link between the dumped imports and the alleged injury", should be interpreted as referring implicitly to those parts of Article 3 that explain the meaning of the causal link requirements. The purpose of identifying or clearly showing the meaning of the words dumping, injury and causal link in Articles 2 and 3 is to provide clarity and a basis for understanding the rest of the ADP Agreement. Attempting to avoid the aforementioned obligation by arguing that Article 5.2 does not specify what evidence of a causal link must be given would make the ADP Agreement inapplicable. The reason why Article 5.2 does not specify the evidence to substantiate a causal link is because it is necessary to turn to the provision that does, namely paragraphs 4, 5 and 6 of Article 3 of the ADP Agreement. It is not necessary for each article of the ADP Agreement to repeat what is stated in the other articles of the ADP Agreement. In order to apply the ADP Agreement, it has to be interpreted as a whole. Guatemala's argument is untenable also because the information requirements in Article 5.2, including subparagraph (iv), state that "the effects of [allegedly dumped] imports on prices of the like product in the domestic market and the consequent impact of the imports on the domestic industry" shall be demonstrated "by relevant factors and indices having a bearing on the state of the domestic industry, such as those listed in paragraphs 2 and 4 of Article 3". This explicit reference in Article 5.2(iv) to Articles 3.2 and 3.4 should dissipate any doubts on the kind of information to be included in an application for the purpose of establishing a causal link between the imports and the state of the domestic industry. This cross-reference is particularly relevant to the case under consideration because the domestic industry comprises one single producer. Article 5.2(iv), with its illustrative references to Articles 3.2 and 3.4, requires the applicant to provide information on whether there has been "significant price undercutting" or "whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred", and on "relevant economic factors and indices" including "actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacities; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments". The applicant is the only producer and so is in a privileged position to provide information on these factors. It would be absurd if the signatories in the Uruguay Round, having indicated in Article 3 the elements to be used to prove a causal link, would not then be able to analyze these elements because Article 5.2 does not specifically mention the way in which they must be analyzed. 

4.155 Mexico rejects Guatemala's argument that, under Article 5.2 of the ADP Agreement, an application need not contain information on the four factors listed in Article 3.7 relating to threat of injury. Article 5.2 requires that the application include evidence of "injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement". Article VI of GATT 1994 in turn consistently refers to the injury requirement in terms of material injury or threat of injury, and provides that "no contracting party shall levy anti-dumping duties on the importation of any product of the territory of another contracting party unless it determines that the effect of the dumping is such as to cause or threaten material injury to an established domestic industry." ⁶⁵ Consequently, "injury within the meaning of Article VI of GATT 1994" should be interpreted as material injury or threat of material injury. Moreover, the explicit reference in Article 5.2 to the phrase "injury ... as interpreted by this Agreement" concerns ADP Agreement definitions of material injury and threat of material injury, the latter being specified in Article 3.7. In the same way as Article 2 explains the technical meaning of dumping and certain provisions in Article 3 give the technical meaning of material injury, Article 3.7 establishes what the negotiators defined as "threat of material injury", together with the factors to be taken into account by the authorities when making a determination of threat of injury. It is in the interests of all Members of the WTO, as expressed in the report of the panel in United States - Measures Affecting Imports of Softwood Lumber from Canada to avoid "the potentially burdensome consequences of an anti-dumping investigation initiated on an unmeritorious basis". ⁶⁶ The interest becomes even more important in cases that proceed on the basis of a threat of material injury. It would be strange if the ADP Agreement was interpreted in the sense that applicants in cases of threat of material injury were subject to less stringent requirements than those in cases of present material injury. 

4.156 Mexico concludes from the wording of Article 5.2 that for an application to have been properly submitted, in addition to providing evidence of dumping and injury it must also contain evidence of a causal link, and for its part Article 5.2(iv) clearly establishes the information which must be provided in this respect by making it clear that what is required is not only information on the volume of imports but also on the evolution of the volume of imports, to show that there has in fact been a significant increase. Article 5.2 also requires not just information on prices but also information on the effect of the imports on prices in the domestic market in order to confirm that this has been to depress them to a significant degree or prevent increases which otherwise would have occurred. Article 5.2 calls for the submission of not just information on the indicators for the domestic industry but also on the consequent impact of the imports on the latter, for the purpose of determining how the industry has been affected by the imports. Thus, it is not possible to arrive at the conclusion reached by Guatemala, namely that to comply with the provisions of Article 5.2 it is sufficient to show that there is sufficient evidence of a causal link if the application provides evidence of dumping and evidence of injury.

4.157 Mexico states that, according to Article 5.2, the application for the initiation of an investigation must contain such information as is reasonably available to the applicant. Article 5.2 consists of three sentences and four subparagraphs. The first sentence relates to the evidence which must be submitted. The second stipulates that simple assertions are not sufficient, and the third describes the information which must be provided. It is in the third sentence (information), not in the first (evidence), that the words "reasonably available to the applicant" occur. Mexico notes that, according to Guatemala, the words "reasonably available to the applicant" apply to the evidence (first sentence) rather than the information (third sentence). On the basis of this inadmissible interpretation of Article 5.2, Guatemala also concludes that the words "reasonably available to the applicant" mean that there is no obligation upon the latter to meet any of the requirements of this paragraph, or that the applicant need only submit two invoices and two import certificates for an investigation to be initiated. 

4.158 Guatemala maintains that Article 5.2 does not require the complainant to provide documentary evidence or testimony in the form of sworn statements to support the factual information contained in the application. Mexico is simply disputing the probative value ascribed to the evidence without presenting any evidence of bias or lack of objectivity. The terms "evidence" and "information" are used interchangeably in Articles 5.2 and 5.3 of the ADP Agreement and in the corresponding Articles - 11.2 and 11.3 - of the SCM Agreement. Article 11.2(iv) of the SCM Agreement establishes that "[the] evidence includes information." The "evidence" referred to in the first sentence of Article 5.2 of the ADP Agreement consists of the categories of "information" described in subparagraphs (i) to (v) of the third sentence of the same Article. Cementos Progreso's application contained "assertions" of dumping, threat of material injury and causal relationship. All the information included in the application and its annexes and the supplement to the application concerning the categories of information described in subparagraphs (i) to (iv) of the third sentence of Article 5.2 constitutes the evidence or information substantiating the assertions. Moreover, Guatemala states that Article 5.2 does not require documentary evidence. For example, according to the interpretation made by the United States of Article 5.2 which Guatemala submitted to the Panel, in an anti-dumping application it is necessary to include "all factual information" substantiating the assertions of dumping, injury, and causal relationship. According to the definition given by the United States of "factual information," such information includes "data or statements of fact in support of allegations" as well as "documentary evidence." ⁶⁷

(d) Article 5.3 

4.160 Mexico stresses that the words "accuracy and adequacy" must be understood in the light of the standard of sufficient evidence mentioned in Article 5.3. In this respect, Mexico agrees with the explanation of the panel in United States - Measures Affecting Imports of Softwood Lumber from Canada: 

"... the term 'sufficient evidence' in the context of initiation of a countervailing duty investigation was to be interpreted to mean 'evidence that provides a reason to believe that a subsidy exists and that the domestic industry is injured as a result of subsidized imports'." ⁶⁸ "... 'sufficient evidence' clearly had to mean more than mere allegation or conjecture, and could not be taken to mean just 'any evidence'. In particular, there had to be a factual basis to the decision of the national investigative authorities and this factual basis had to be susceptible to review under the Agreement. Whereas the quantum and quality of evidence required at the time of initiation was less than that required to establish, pursuant to investigation, the required Agreement elements of subsidy, subsidized imports, injury and causal linkage between subsidized imports and injury, the Panel was of the view that the evidence required at the time of initiation nonetheless had to be relevant to establishing these same Agreement elements."  ⁶⁹

4.162 In Mexico's opinion, the word "accuracy" in Article 5.3 of the ADP Agreement shows that it was the negotiators' intention that the information should be true and correct and that the national authorities should be obliged to establish the truth and relevance of the information prior to initiation. 

4.163 Mexico also considers that evidence may be relevant to the initiation of an investigation without being sufficient to justify the initiation of an investigation.

4.164 According to Guatemala, Article 5.3 provides that the investigating authorities must examine the evidence provided in the application to determine whether it is sufficient within the meaning of Article 5.2 to justify the initiation of an investigation. The investigating authorities may decide that the evidence is sufficient after examining the accuracy and adequacy of the evidence. Article 5.3 does not require the investigating authority to carry out an investigation or to confirm or verify the claims contained in the application. Thus, the Panel must accept the decision of an investigating authority to initiate the investigation provided the authority has carried out the required examination to determine whether there is sufficient evidence. In the present case, the Ministry determined that the application included "adequate" evidence because it contained information and evidence that was reasonably available to the applicant relating to the categories of evidence described in subparagraphs (i) to (iv) of Article 5.2. The Ministry also determined that the application included "accurate" evidence because it contained reasonable, consistent and plausible information and evidence and did not include any declarations contradicting the facts known to the Ministry at that time. Guatemala notes that during the Uruguay Round, a draft anti-dumping text was discussed which would have required the authorities to verify the evidence provided in the application for the initiation of an investigation against any information readily available to the authorities. ⁷¹ However, this proposal was rejected at the time in favour of Article 5.3, which requires only that the investigating authority should examine the accuracy and adequacy of the evidence provided in the application, but does not require them to verify the information against other sources. 

4.165 Guatemala states that the file clearly shows that the Ministry examined the accuracy and adequacy of the evidence submitted in the application in order to determine whether there was sufficient evidence to justify the initiation of an investigation. On 6 November 1995 the Ministry ordered the Directorate of Economic Integration to examine the application and its accompanying documentation. On 17 November 1995, two asesores from the Directorate of Economic Integration submitted opinions to the Director in which they presented their assessment of the application and the accompanying evidence and expressed the opinion that there was sufficient evidence to justify the initiation of an investigation. On 15 December 1995, the Directorate of Economic Integration approved these opinions and concluded that there was sufficient evidence to initiate an investigation. 

4.166 Guatemala maintains that it complied with its obligation under Article 5.3 to examine the evidence. Mexico, or the Panel, could engage in a de novo review and arrive and a different conclusion. However, Guatemala submits that this is not the Panel's function. According to Article 17.6, the Panel must accept the investigating authorities' establishment of the fact that there was sufficient evidence - reasonably available to the applicant - to justify the initiation of an investigation. Otherwise, the Panel would be assuming the role of the investigating authority. 

(i) Dumping 

4.167 Mexico submits that the Ministry did not have sufficient evidence of dumping to justify the initiation of the investigation. Mexico submits that, by initiating the investigation on the basis of the evidence submitted by Cementos Progreso on normal value and export price, and by conducting the examination of dumping on the basis of that evidence in spite of the shortcomings mentioned, the Ministry violated Article 5.3 of the ADP Agreement. Furthermore, Mexico alleges that the investigating authority failed to examine the accuracy and adequacy of the evidence provided, also contrary to Article 5.3. Mexico argues the documents submitted by the claimant as evidence of normal value do not qualify as adequate and accurate evidence because: 

(a) neither of the alleged invoices indicates the type of cement concerned (in other words, the Ministry could not be sure whether the product concerned was "like" the product under investigation, within the meaning of Article 2.1 of the ADP Agreement), the brand name of the cement under investigation, or the size of the sacks (Mexico sells cement in 50 kg. sacks, while Guatemala sells cement in 42.5 kg. sacks, a point which the applicant failed to mention despite the fact that the sacks clearly indicate their contents). Thus, the Ministry could not be certain that the product mentioned in the alleged invoices was in fact the product under investigation and not another, higher-priced product. Furthermore, on the basis of this kind of evidence the investigating authority could not ascertain the quantity of the product sold or establish that the product in fact came from Cruz Azul rather than another firm;

(b) the transactions recorded in the two alleged invoices cannot be considered as representative since they only apply to the sale of one sack of cement each, and they both took place in the course of two days (25 and 26) of one of the months (August) of the investigation period (1 June to 30 November 1995). Trying to compare a one-tenth part of a tonne with the total sales of the domestic producer on the Mexican market during the investigation period (six months) cannot be considered a fair, impartial, objective or reasonable comparison; and

(c) the price indicated in the alleged invoices for the sale of cement in Mexico cannot be considered as representative for the determination of the normal value since, although the invoices record commercial transactions which allegedly took place, the sales in question reflect an insignificant share of the operations of Cruz Azul in the Mexican market. 

(a) it cannot be maintained that two transactions consisting in the sale of 299 and 179 tonnes respectively are representative of a market which, at the beginning of the period under investigation, was estimated at approximately 95,000 tonnes per month; and

(b) as in the case of the normal value, the two transactions were conducted over two days (14 and 15) of one of the six months of the investigation period (August). 

4.170 Guatemala submits that the absence of any reference to a particular type of cement on the invoices relied on as evidence of normal value indicates that in Mexico the price of cement does not vary according to the type. The same raw materials and the same production process are used to manufacture the various types of grey portland cement, which is used to make concrete or concrete products. There are slight differences in the chemical composition and physical characteristics of the different types of cement. Although Cruz Azul's reply to the original questionnaire sought an adjustment of the normal value in order to take into account the difference between the cement sold in Mexico (Type II Pz) and one of the types sold in Guatemala (Type 1 PM), in its subsequent reply to the supplementary questionnaire it stated that price adjustment was not necessary. Neither Cruz Azul nor any other party has submitted any evidence to suggest that there is a price variation among the different types of grey portland cement. Nor has Cruz Azul argued that any of the documents attached to the application did not refer to grey portland cement. In any event, the application mentioned the export price for Cruz Azul's sales of Type II grey portland cement with pozzolana. In its submission to the Ministry of 13 May 1996, Cruz Azul acknowledged that the cement sold in Tapachula, Mexico, was type II grey portland cement with pozzolana. The evidence on Cruz Azul prices in Tapachula, Mexico, and on the export price to Guatemala shown in the application therefore refer to the same product - Type II grey portland cement with pozzolana (Type II Pz). The evidence on the export price contained in the application only refers to Type II Pz cement, in other words the same cement that Cruz Azul later acknowledged that it sells in Tapachula. 

4.171 Mexico disputes Guatemala's statement that the price of cement does not vary according to type. The Mexican official standard for the manufacture of portland cement indicates the various types of chemical specifications for different kinds and qualities of cement, i.e. higher quality cement has a lower proportion of tricalcium aluminate. This component has to be catalyzed with ferrous oxide in order to be reduced. For example, up to 15% of pozzolana may be added to Type I PM pozzolanic cement. If pozzolanic cement is manufactured, between 15-40% of pozzolana has to be added, and this implies additional costs so the price is higher. In short, the price necessarily varies according to the quality and type of cement. 

4.172 Guatemala argues that if the price did vary according to the type of cement as alleged by Mexico, it is reasonable to assume that the type of cement would appear on the invoice. Had an invoice covered white cement, for example, the price shown would have been two or three times higher, since it is common knowledge that white cement sells at two or three times the price of grey cement. Furthermore, if one assumes that the price of cement in Mexico varies according to the type, this price difference is not information that is reasonably available to Cementos Progreso because the various types of cement are not mentioned on the invoices for cement sold in Mexico. In view of the meetings held between representatives of the Ministry and Cementos Progreso for the purpose of discussing the price information, and given the fact that the Ministry was already familiar with the Guatemalan cement industry and the price mechanism for this product because of the Guatemala's price control programme, the Ministry did not seek additional information from Cementos Progreso on the prices in Mexico or on the export prices. The fact that the Ministry was familiar with the cement market and the price mechanism was very useful in examining the accuracy and adequacy of the evidence provided in connection with prices. The Ministry realizes that it is extremely difficult to obtain more precise information on any Mexican product - not simply cement - and accordingly the Ministry was of the view that the evidence concerning Cruz Azul's domestic prices submitted by Cementos Progreso was the only evidence reasonably available. 

4.173 Mexico stated that the assumption by the Ministry that sacks of cement in Mexico were of the same weight as sacks of cement in Guatemala provided irrefutable proof that the Ministry had not examined the accuracy of the evidence. Otherwise, the difference in weight would have been detected prior to the initiation of the investigation. 

4.174 Guatemala states that the fact that the Ministry assumed that the sacks sold in Mexico were not different in size from those sold in Guatemala does not mean that the Ministry did not conduct an examination of the adequacy and accuracy of the evidence. In fact, it was reasonable to assume that the exporter would not go to the additional expense of using sacks of different sizes for each market. Moreover, had this fact been known ? that packaging the cement for export to Guatemala did incur extra costs for Cruz Azul - it would have added substance to the applicant's assertion of threat of material injury, since it shows that Cruz Azul was making investments in order to increase its exports to Guatemala. In any case, adjustments in price information to take account of minor differences in weight would not have made any difference to the conclusion that there was a high margin of dumping. 

4.175 Guatemala asserts that Mexico tried to focus the Panel's attention on certain documents, taken in isolation and outside the context in which they had been evaluated by the investigating authorities. However, the Ministry did not evaluate each piece of documentary evidence or any other form of evidence in isolation. The Ministry took into account all the evidence when drawing up its conclusions. It did not therefore consider in isolation any of the eight documents in the application that substantiated the allegation of dumping. The Ministry examined all the documentation as a whole, found that the documents were consistent and decided that they constituted accurate and relevant proof of dumping. Documentary evidence is regarded as authentic, subject to the right of the opposing party to prove that it is null and false, which in no way implies that mere assertions are assumed to be valid. As the ADP Agreement does not impose any obligation to collect documentary evidence, establish any mechanism to verify the accuracy of the evidence, or impose any system for the evaluation of evidence, the Government of Guatemala was legally entitled to proceed as it did. 

4.176 According to Mexico, this argument by Guatemala reveals that it failed to comply with its obligation under Article 5.3 to examine the accuracy and adequacy of each and every piece of evidence provided by the claimant. Article 5.3 states that the examination concerns the accuracy and adequacy of the evidence (pruebas in the Spanish version) in the plural, meaning the accuracy and adequacy of different pieces of evidence. Mexico asks how it is possible to conduct a collective or overall examination of evidence when, by definition, accuracy must pertain to each individual piece of evidence. Otherwise, it is impossible for the examination of each piece of evidence to be accurate. How is it possible, moreover, to assert that the documentary evidence is considered reliable without prejudice to the right of the exporter to demonstrate that the said evidence is not reliable, not forgetting that the exporter is not yet involved in the process since the investigation has not yet been initiated. 

4.177 In response to a question from the Panel, Guatemala notes that it consulted with the officials responsible for the case during the previous administration and established that when the representatives of Cementos Progreso brought the case before the Ministry - as indicated in section IV of the original application, these meetings took place before the written application was submitted - they said that they had purchased grey portland cement as per the two invoices in Tapachula, Mexico, and that they had been able to establish that Cruz Azul's prices for grey portland cement were considerably higher than the prices of the grey portland cement exported by Cruz Azul to Guatemala. This additional evidence helped the Ministry verify the accuracy and adequacy of the evidence contained in the written application. 

(ii) Threat of injury

4.179 According to Mexico, the only evidence available to the Ministry at the time of initiation of the investigation concerning the alleged threat of injury claimed by Cementos Progreso was two import certificates. Mexico argues that these import certificates cannot be considered as adequate or accurate evidence of threat of injury within the meaning of Articles 3.7, 5.2 and 5.3 of the ADP Agreement, since they do not provide proof of any of the factors listed in Article 3.7. It is not possible to arrive at a positive conclusion about the existence of massive imports on the basis of the evidence provided by Cementos Progreso in its application. The Ministry assumed the applicant's statements concerning threat of injury to be valid even though they were clearly no more than simple assertions unsubstantiated by relevant or positive evidence. ⁷³

Continue on to IV. Main Arguments of the Parties, Section 4.180

Notes:

65. Article VI.6(a) of GATT 1994.

66. United States - Measures Affecting Imports of Softwood Lumber from Canada, BISD 40S/358, paragraph 331, adopted on 27 October 1993.

67. Federal Register, Vol. 62, p.27380, 27383 and 27384, 17 May 1997.

68. Ibid, para. 333.

69. Ibid, para. 332.

70. Ibid.

71. Carlisle II Draft Anti-Dumping Text (14 August 1990), Inside US Trade, 21 August 1990, in Special Report.

72. Guatemala notes that white portland cement is covered by tariff heading No. 2523.21.00.

73. Mexico suggests that, to obtain a clearer idea of what should be understood by positive evidence, reference should be made to the report of the panel in United States - Anti-Dumping Duties on Imports of Stainless Steel Plate from Sweden, ADP/117, para. 276, not adopted, dated 24 February 1994 ("... such information as would persuade an objective, unprejudiced mind ...").