7.57 We believe that the approach taken by the Panel in the Softwood Lumber dispute is a sensible one and is consistent with the standard of review under Article 17.6(i). Thus, we agree with the Panel in Softwood Lumber that our role is not to evaluate anew the evidence and information before the Ministry at the time it decided to initiate. Rather, we are to examine whether the evidence relied on by the Ministry ²³⁸ was sufficient, that is, whether an unbiased and objective investigating authority evaluating that evidence could properly have determined that sufficient evidence of dumping, injury, and causal link existed to justify initiating the investigation. Moreover, we agree with the view expressed by the Panel in Softwood Lumber that the quantum and quality of evidence required at the time of initiation is less than that required for a preliminary, or final, determination of dumping, injury, and causation, made after investigation. ²³⁹ That is, evidence which would be insufficient, either in quantity or in quality, to justify a preliminary or final determination of dumping, injury or causal link, may well be sufficient to justify initiation of the investigation. 

7.58 While the parties seem largely in accord that the application must contain evidence and information on the essential elements of dumping, injury, and causal link, they disagree on what types of evidence and information are required. Thus, Mexico argues that the substantive provisions governing determinations of dumping and injury in Articles 2.1, 2.4, and 3.7, must be taken into account in evaluating the evidence in an application to determine its sufficiency. Guatemala, on the other hand, argues that Article 2 does not apply to the decision whether to initiate an investigation, but only to the preliminary or final determination of dumping, and that while Articles 3.2 and 3.4 apply to the decision to initiate, by virtue of being referenced in Article 5.2(iv), Article 3.7 is not so referenced, and therefore does not apply to the decision whether to initiate. Thus, Guatemala argues that information of the type referred to in Articles 2 and 3.7 need not be included in the application, and is not relevant to the evaluation of whether there is sufficient evidence to justify initiation. These issues are discussed further below, in connection with our examination of the decision of the Ministry. 

7.59 We also considered relevant the provisions of Article 5.8, which provides in pertinent part:

 "An application under paragraph 1 [of Article 5] shall be rejected and an investigation shall be terminated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either dumping or of injury to justify proceeding with the case".

7.60 Turning to the Ministry's decision that there was sufficient evidence to justify initiating the anti-dumping investigation in this case, we note that there is no discussion or analysis of the evidence and information before the Ministry in the Resolution or in the public notice. However, the 17 November 1995 recommendation of the advisors in the Ministry's Department of Economic Integration sets forth the analysis of the evidence and information presented, and concludes that it was sufficient to justify initiation. We have scrutinized all the information which was on the record before the Ministry at the time of initiation in examining whether an unbiased and objective investigating authority could properly have made the determination that was reached by the Ministry. 

1. Dumping 

7.61 With regard to dumping, the application states that the retail price of grey portland cement in Mexico ranged between 27 and 28 Mexican new pesos, which was converted at then prevailing rates of exchange to Guatemalen Quetzales ("Q") Q 27.62 per 94-pound sack, and that the cash price of the product imported from Mexico was US$2.57 per 94-pound sack, which was equivalent to Q 14.77 at the time. The price in Mexico was substantiated by two invoices showing the prices for two separate sales in Tapachula, Mexico, in August 1995. One invoice is labelled Cruz Azul, and reflects the sale of one "bto [bulto] cto [cemento] gris" on 26 August 1995 at 28 Mexican pesos. The other invoice is labelled Proveedora de Laminas, and reflects the sale of one "saco cemento Cruz Azul" on 25 August 1995 at 27 Mexican pesos. The price of imported Mexican cement in Guatemala was substantiated by import certificates, invoices and bills of lading for two transactions on the same date in August 1995. ²⁴⁰ There is no indication that any other information on dumping was available to or considered by the Ministry. 7.62 The two invoices reflect two separate sales at the retail level of one sack of cement of unspecified weight each. The import documents reflect two separate import transactions at the distributor (or wholesale) level of several thousand sacks of cement, each sack weighing 94 pounds (42.6 kilograms). The alleged margin of dumping is calculated in the application by comparing the average retail price for the cement bought in Mexico (converted into Guatemalan Quetzales at then current rates) with the average c.i.f. value of the cement imported into Guatemala (converted into Guatemalan Quetzales at then current rates). The Ministry recommended initiation based on this information. In our view, this comparison ignores obvious problems with the data: (1) the transactions involve significantly different volumes; and (2) the transactions occurred at different levels of trade. 

7.63 While in general we agree with Guatemala that there is not a "minimum" of documentation which must be submitted to substantiate an assertion of dumping, this does not mean that any documentation will be sufficient to justify initiation in a particular case. Guatemala also argues that the considerations outlined above are addressed only in Article 2 of the ADP Agreement, which is not referenced in Article 5.2, and are therefore irrelevant to the determination to initiate. We cannot accept Guatemala's interpretation of the ADP Agreement in this regard. In this case, we consider that based on an unbiased and objective evaluation of the information before it, the Ministry could not properly have determined that there was sufficient evidence of dumping to justify the initiation of the investigation. 

7.64 In our view, in assessing whether there is sufficient evidence of dumping to justify initiation, an investigating authority may not ignore the provisions of Article 2 of the ADP Agreement. Article 5.2 of the Agreement requires an application to include evidence of "dumping" and Article 5.3 requires a determination that there is "sufficient" evidence to justify initiation. Article 2 of the ADP Agreement sets forth the technical elements of a calculation of dumping, including the requirements for determining normal value, export price, and adjustments required for a fair comparison. In our view, the reference in Article 5.2 to "dumping" must be read as a reference to dumping as it is defined in Article 2. This does not, of course, mean that the evidence provided in the application must be of the quantity and quality that would be necessary to make a preliminary or final determination of dumping. However, evidence of the relevant type is, in our view, required in a case such as this one where it is obvious on the face of the application that the normal value and export price alleged in the application will require adjustments in order to effectuate a fair comparison. At a minimum, there should be some recognition that a fair comparison will require such adjustments. 

7.65 Guatemala argues that at the time of initiation, it was not possible to make adjustments, as the precise information needed is within the control of the exporting company, which bears the burden of showing that adjustments should be made. We do not accept this position. Article 2.4 provides, in pertinent part: 

"A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability.⁷
___________________________________________ 

⁷It is understood that some of the above factors may overlap, and authorities shall ensure that they do not duplicate adjustments that have been already made under this provision".

7.66 In this case it is apparent on the face of the application that the alleged normal value and the alleged export price are not comparable for purposes of considering whether dumping exists without adjustment. The recommendation to the Director of the Department of Economic Integration reflects this lack of comparability when it states that the normal value is the average price "to the final consumer", and the export price is the average of "the c.i.f. values". However, there is no recognition of the need for any adjustments in either the recommendation or the notice of initiation. While we would not expect the authorities to have, at the initiation stage, precise information on the adjustments to be made, we find it particularly troubling that there is not even any recognition that the normal value and export price alleged in the application are not comparable, nor any indication that more information on this issue was requested from the applicant or otherwise sought by the Ministry. When, as in this case, it is evident from the information before the investigating authority that some form of adjustment will be required to make a fair comparison and establish a dumping margin, an unbiased and objective investigating authority could not, in our view, properly determine that there was sufficient evidence of dumping to justify initiation in the absence of such adjustment, or at least without acknowledging the need for such adjustment. ²⁴¹

7.67 As noted above, while there is clearly a different standard applicable to making a preliminary or final determination of dumping, than to determining whether there is sufficient evidence of dumping to justify initiation of an investigation, we cannot agree with Guatemala's position that Article 2 is irrelevant to the initiation determination. The subject matter, or type, of evidence needed to justify initiation is the same as that needed to make a preliminary or final determination of dumping, although the quality and quantity is less. Thus, in our view, based on an unbiased and objective evaluation of the evidence and information before it in this case, the Ministry could not properly have determined that there was sufficient evidence of dumping to justify the initiation of the investigation. 

2. Threat of material injury 

7.68 The only information before the Ministry on the volume of the allegedly dumped imports consisted of the documentation concerning two importations of cement into Guatemala through a single customs post on the same date in August 1995 referred to above. There were statements in the application that the volume of imports was massive, and that imports may have been entering through other customs posts. In our view, these assertions are unsubstantiated by any relevant evidence in the application. Nor is there any indication in the evaluation prepared by the two advisors, or in the Resolution of the Director, that any evidence or information beyond that contained in the application was considered in making the determination to initiate. ²⁴² Guatemala argued before the Panel that the two import certificates demonstrate that imports were massive in light of the average daily consumption of cement in Guatemala. However, there is no information in the application from which average daily consumption of cement in Guatemala can be determined. Nor is there any indication in the evaluation prepared by the two advisors, or in the Resolution of the Director, that the consumption of cement in Guatemala was either known, or considered, in making the determination to initiate. ²⁴³ Thus, there is no indication that the volume of imports represented by the two import certificates was compared to consumption in Guatemala, or that an assessment that those imports were "massive" was made at the time of initiation. Rather, the Ministry appears to have accepted the characterization of the applicant in this regard. 

7.69 The remaining information contained in the application concerning the threat of material injury consists of the following: 

"Cementos Progreso, S.A. is being threatened by massive imports of cement from Mexico. By way of evidence, the initial complaint contained two photocopies of import certificates showing imports at prices below the normal retail price in Mexico, and which therefore threatened the company with imminent material injury, as set out below: 
"Cement entering Guatemala by land at prices lower than normal value is directly affecting investment planning by the company, specifically for plant improvements and expansion, which would entail: 
- Expanding raw material milling facilities at the plant itself;
- maximizing the efficiency of the plant;
- building a third kiln at the San Miguel Sanarate plant;
- restructuring the existing electricity system by converting the plant that presently runs on bunker;
- the foregoing expansions would call for at least an additional 400 workers, who would no longer be needed if the projects were stopped;
- rather than invest in cement at below-cost prices, the company would prefer to cease production and become an importer;
- loss of market shares;
- were the company to become an importer, it would be compelled to dismiss 1,052 workers, with all the attendant social problems;
- the plant would lose its expertise, or what is referred to as technology transfer". 

7.71 It was suggested that the concerns of domestic producers to keep sensitive business information confidential might explain the fact that the applicant did not provide more specific information concerning its own operations, i.e. sales, financial information, etc., which might substantiate the assertion of threat of material injury. However, both the ADP Agreement and Guatemalan law provide for confidential treatment of information where warranted. Thus, the fact that relevant information is considered confidential does not justify the failure to submit such relevant information with the application to substantiate the assertions therein. Guatemala argued before the panel that an applicant is not required to include "documentary evidence" of the threat of injury. In Guatemala's view, the assertion that Cementos Progreso was facing a threat of material injury was substantiated by the declaration that if dumped imports continued to be sold at dumped prices, Cementos Progreso would have to cancel plans to expand and modernize its production plant. In our view, however, this is not "substantiation" of the assertions, but merely statements of the applicant. "Sufficient evidence to justify initiation" must, in our view, mean something whose "accuracy and adequacy" can be objectively evaluated as required by Article 5.3 of the ADP Agreement. Mere statements do not fall into this category of information. Moreover, there is no indication as to what evaluation was made of the "accuracy and adequacy" of these statements. 

7.72 Relevant evidence might have included information on any increase in the volume of imports either in absolute terms or relative to production or consumption in Guatemala, as set forth in Article 3.2 of the ADP Agreement, referenced in Article 5.2(iv). As noted above, the only information on the volume of imports was the documentation reflecting two importations, and assertions concerning possible imports through other customs posts. There was no information in the application, or apparently otherwise available to the Ministry, concerning consumption in Guatemala. The only information in the application concerned the capacity of Cementos Progreso, which was stated to be 1.6 million metric tonnes, and the fact that Cementos Progreso was using 100 percent of its installed capacity operating 3 shifts per day, 24 hours per day. Thus, at the most, it could have been concluded from the face of the application that annual production was 1.6 million metric tonnes. ²⁴⁵ The two sales reflected in the import certificates were for a total of 480,000 kilograms, or 480 metric tonnes, of cement on one day in August 1995. Thus, assuming Guatemalan production equalled capacity, and that production was equal all days of the year 1995, the information in the application might have been interpreted as showing that the imports were equivalent to 11 percent of production (not consumption) for one day in August, or alternatively, that those imports were equivalent to 0.03 percent of annual production of cement in Guatemala. This calculation does not provide any information whether there had been any increase in imports, as there is no information in the application concerning the level of imports at any time other than one day in August 1995. ²⁴⁶ Moreover, as noted above, there is no indication that such a calculation was carried out at the time of initiation. Finally, we note the argument made by Guatemala that, in light of the fact that there were no imports prior to June 1995, any increase in imports from that zero level was massive. We do not accept this conclusion. Indeed, we note that the application does not state that imports were zero before June 1995, and there is no indication in the analysis underlying the decision to initiate that the Ministry knew or considered the volume of imports prior to June 1995 in making its determination. ²⁴⁷ While the application, which was filed in October 1995, did assert that Cementos Progreso had been "for at least three months now ... confronting the unfair business practice known as dumping", this is not the same as a statement that there were no imports before June of 1995. There is simply no discernible basis that was before the Ministry at the time of its initiation determination on which the volume of imports could properly have been characterized as "massive." 

7.73 Other evidence might have included information regarding whether there had been significant price undercutting by the dumped imports, or whether the effect of such imports was otherwise to depress prices to a significant degree or prevent price increases which otherwise would have occurred as set forth in Article 3.2 of the ADP Agreement, referenced in Article 5.2(iv). The information on the price of Mexican cement in Guatemala in the application indicates that the c.i.f. price of the cement reflected in the import certificates was Q 14.77. The only information on the price of Guatemalan cement in the application indicates that the average retail price for Guatemalan cement was Q 24 in the capital city, and Q 32 in the Department of El Pet�n. In our view, these prices are not comparable, and therefore do not shed any light on the effect of dumped imports on prices. C.i.f. prices to distributors as shown in the import certificates cannot properly be compared with retail prices for Guatemalan cement, as the difference in level of sale may have a significant impact on the prices, and thus the comparison. 

7.74 Moreover, evidence to substantiate the allegation of threat of material injury might have included information on the relevant economic factors and indices having a bearing on the state of the industry set forth in Article 3.4 of the ADP Agreement, that is, actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacity; 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. Again, we are particularly troubled by the lack of information provided in this regard, as this information is uniquely within the control of the applicant. The application, as noted above, contains statements concerning some of these factors, but no specific or quantifiable information, except for the statement that the expansion plans called for an additional 400 workers, and should Cementos Progreso cease production entirely, it would be compelled to dismiss 1,052 workers. There is no information in the application concerning the level of sales enjoyed by Cementos Progreso, or its profits. While a statement is made that the allegedly dumped imports were directly affecting investment planning by the company, there is no information concerning ability to raise capital or otherwise fund investments, which might support the statement. In our view, the statements made by the applicant regarding the effects of allegedly dumped imports on investment planning for plant improvements and expansion are unsupported by relevant evidence. We cannot agree that the statements quoted above constitute "evidence" substantiating the assertions in the application. 

7.75 Finally, we note that there is no evidence or information in the application on the factors relevant to threat of material injury set forth in Article 3.7 of the ADP Agreement. Guatemala argues that Article 5.2 "does not require that the application provide information on the four factors set forth in Article 3.7." We recognize that there is no specific reference in Article 5.2 to the factors enumerated in Article 3.7 regarding threat of injury, such as there is to the factors set forth in Articles 3.2 and 3.4 regarding injury. However, we do not accept the view that the lack of a specific reference to Article 3.7 means that an applicant is not required to submit "such information as is reasonably available to the applicant" on the question of threat of material injury, if threat of material injury is alleged in the application. Such an interpretation of the Agreement would, in our view, be entirely impermissible, as it would be inconsistent with the text, as well as the object and purpose, of Article 5.2 as a whole. 

7.76 Looking at the text, we note that the chapeau of Article 5.2 provides, in pertinent part: 

"An application under paragraph 1 shall include evidence of ... (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement...". 

"Under this Agreement the term "injury" shall, unless otherwise specified, be taken to mean material injury to a domestic industry, threat of material injury to a domestic industry, or material retardation of the establishment of such and industry and shall be interpreted in accordance with the provisions of this Article". 

7.77 Moreover, while as noted above, there is clearly a different standard applicable to making a preliminary or final determination of material injury, including threat of material injury, than to determining whether there is sufficient evidence of material injury, including threat of material injury to justify initiation of an investigation, we cannot agree with Guatemala's apparent position that the factors set forth in Article 3.7 are irrelevant to the initiation determination. We cannot perceive how, in the absence of information pertaining to those factors, an unbiased and objective investigating authority could properly determine that there is sufficient evidence of threat of material injury to justify initiation in a case in which threat of material injury is alleged. In other words, the subject matter, or type, of evidence needed to justify initiation is the same as that needed to make a preliminary or final determination of threat of injury, although the quality and quantity is less. Thus, in our view, based on an unbiased and objective evaluation of the evidence and information before it in this case, the Ministry could not properly have determined that there was sufficient evidence of injury, that is threat of injury, to justify the initiation of the investigation. 

3. Causal link 

7.78 Finally, we conclude that an unbiased and objective investigating authority could not properly have determined that there was sufficient evidence of causal link to justify initiation if there was not sufficient evidence of dumping and threat of injury. In this case, having concluded that the evidence of dumping and threat of material injury were insufficient to justify initiation, we also conclude that the evidence of causal link between the dumped imports and the alleged injury was, perforce, not sufficient to justify initiation. The ADP Agreement clearly requires sufficient evidence of all three elements before an investigation may be initiated. 

4. Conclusion 

7.79 In sum, in our view, based on an unbiased and objective evaluation of the evidence and information that was before it at the time of initiation in this case, the Ministry could not properly have determined that there was sufficient evidence of dumping, threat of injury, and causal link, to justify the initiation of the investigation. 7.80 Therefore, we determine that Guatemala failed to comply with the requirements of Article 5.3 of the ADP Agreement by initiating the investigation on the basis of evidence of dumping, injury and causal link that was not "sufficient" to justify initiation. 

VIII. Recommendation 

8.1 Mexico argues that the violations of the ADP Agreement in this case go to the foundations of the anti-dumping investigation conducted by Guatemala, and effectively render the investigation invalid from the outset. Consequently, Mexico argues that the consequences of the invalid initiation must be undone, and requests us to recommend that Guatemala (1) revoke the anti-dumping measure imposed on imports of grey portland cement from Cruz Azul, and (2) refund those anti-dumping duties already collected. This we decline to do. 

8.2 Article 19.1 of the DSU is explicit concerning the recommendation a panel is to make in the event it determines that a measure, or in this case, action, is inconsistent with a covered agreement: 

"it shall recommend that the Member concerned bring the measure into conformity with that agreement". (footnotes omitted). 

"In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations". 

8.3 Thus, in a dispute where a panel concludes that a Member has violated the provisions of the ADP Agreement, it is constrained by the language of Article 19.1 to recommend that the Member bring its actions, or its measure, as the case may be, into conformity with the provisions of the ADP Agreement. In addition, the panel could, at most, suggest ways in which it believes the Member could appropriately implement that recommendation. In the first instance, however, the modalities of implementation of a panel, or Appellate Body, recommendation are for the Member concerned to determine. This is confirmed by the language of Article 21.3 of the DSU, which provides: 

"At a DSB meeting held within 30 days after the date of adoption of the panel or Appellate Body report, the Member concerned shall inform the DSB of its intentions in respect of implementation of the recommendations and rulings of the DSB". (footnote omitted).

8.4 We have concluded in this case that Guatemala violated the provisions of the ADP Agreement by failing to notify the Government of Mexico before proceeding to initiate, as required by Article 5.5. We therefore recommend that the Dispute Settlement Body request Guatemala to bring its action into conformity with its obligations under Article 5.5 of the ADP Agreement. In this case, in view of our suggestion with respect to implementation of our second recommendation, we make no suggestion related to implementation of this recommendation. 

8.5 We have also concluded that Guatemala violated the provisions of the ADP Agreement by initiating the investigation when there was not sufficient evidence to justify initiation, as required by Article 5.3. Therefore, we recommend that the Dispute Settlement Body request Guatemala to bring its action into conformity with its obligations under Article 5.3 of the Agreement. 8.6 We have determined that an unbiased and objective investigating authority could not properly have determined, based on the evidence and information available at the time of initiation, that there was sufficient evidence to justify initiation of the anti-dumping investigation conducted by the Guatemalan Ministry of Economy. Thus, the entire investigation rested on an insufficient basis, and therefore should never have been conducted. This is, in our view, a violation which cannot be corrected effectively by any actions during the course of the ensuing investigation. ²⁴⁹ Therefore, we suggest that Guatemala revoke the existing anti-dumping measure on imports of Mexican cement, because, in our view, this is the only appropriate means of implementing our recommendation.

Notes:

238. We note that we are not entirely persuaded that the information in the application was, in fact, all that was reasonably available to the applicant, particularly with respect to the question of threat of material injury. However, for the purposes of our analysis, we have assumed that this was the case.

239. Softwood Lumber at para. 332.

240. The first set of documents comprise an invoice reflecting the sale of 7,035 "bolsas" of "cemento portland gris" (also identified as "cemento portland gris tipo 11 compuzolana en bolsas de 94 libras") at a unit price of US$2.45, to Dist. Comercial Molina by Cruz Azul on 11 August 1995, a bill of lading dated 14 August 1995, and an import certificate dated 15 August 1995. The second set of documents comprise an invoice reflecting the sale of 4,221 "bolsas" of "cemento portland gris" (also identified as "cemento portland compuzolana gris 11 en bolsas de 94 libras") at a unit price of US$2.45, to Distribuidora de Leon on 11 August 1995 by Cruz Azul, a bill of lading dated 14 August 1995, and an import certificate dated 15 August 1995.

241. As discussed above, the fact that information necessary to consider such an adjustment might not have been reasonably available to the applicant does not transform a lack of information into sufficient evidence to justify initiation. For instance, the investigating authority might be able to look to the domestic industry's own experience for information on adjustments.

242. We note that Guatemala asserted that the Ministry "knew" certain information, such as transport costs in Guatemala, information concerning Cementos Progreso and the market for cement in Guatemala, that Mexico was going through a severe recession, particularly in the construction sector, etc., and that such knowledge was brought to bear on its evaluation of the information in the application and together with that information constituted sufficient evidence to justify initiation. Thus, for instance, Guatemala asserted before the Panel that there was sufficient information to establish a presumption that there was excess capacity in Mexico, and a decline in demand for cement in Mexico, which caused Cruz Azul to start exporting to Guatemala in 1995, and indicated that exports would increase. While such facts may have been known to the Ministry, there is no reference to them in the application, in the evaluation prepared by the two advisors, or in the resolution itself. Indeed, there is no reference whatsoever to excess capacity in Mexico, or to a likelihood that imports would increase, in the resolution or the underlying recommendation. Thus, we cannot consider such facts in evaluating whether the Ministry properly concluded that there was sufficient evidence to justify initiation in this case.

243. Notably, there is no information concerning the existence, or non-existence, of imports of cement from any source other than Cruz Azul. Consumption, of course, cannot be calculated without such information.

244. We note that we do not question the truth of these statements. However, that a statement may be true does not mean that it is substantiated by relevant evidence, or that it is evidence which substantiates other statements.

245. There is a real question whether such an assumption would have been reasonable, but we are engaged here in evaluating the best possible case scenario for Guatemala's position.

246. Information on import volumes was requested by the Ministry from the Directorate-General of Customs after initiation.

247. In this regard, we note that the fact that the recommendation was that an investigation of the Mexican company exporting cement to Guatemala by land be initiated might be understood to suggest that there were other imports entering Guatemala by sea.

248. Similarly, while Article 3.7 contains factors which must be specifically considered in determining threat of injury, the factors in Article 3.2 remain relevant.

249. By contrast, we can envision examples of errors during the course of an anti-dumping investigation which would constitute violations of the ADP Agreement when they occur, but which could effectively be corrected during the subsequent course of the investigation. However, this is not such a case.