We have made certain technical corrections and adjustments, including on the basis of requests from the European Communities as referred to in section B, infra.
requests from the european communities
With regard to paragraph 3.1, point 1, the European Communities requests that we adjust the drafting to better reflect the wording of this claim as set forth in the Request for Establishment of a Panel. Mexico makes no comment on this request. We have made the requested adjustment.
With regard to paragraphs 4.1 and 5.1, the European Communities requests that we attach in full all answers to questions from the Panel, and comments thereon, on the basis that these answers and comments contain arguments that are important to understand the case. Mexico makes no comment on this request. We have not acceded to the request of the European Communities because we consider it unnecessary given that we have quoted in extenso in the body of the report those answers to which we refer in our findings. Our decision not to annex the full questions and answers also is in the interest of conserving resources. As noted by the European Communities, these questions and answers are part of the record of the Panel proceeding and continue to be so regardless of whether they are annexed to the report of the Panel.
The European Communities requests that in paragraph 7.17 we add a new second sentence including the dates it received the invitation for consultations and the timing of the fixing of the date for consultations to more fully reflect its arguments as they were submitted to the Panel. Mexico makes no comment on this request. We have not made the requested additions. We note that the European Communities did provide additional chronological information in response to Panel question 101, however, the European Communities did not provide any legal arguments with respect to these dates in its written submissions or oral statements before us.
In respect of paragraph 7.31, second sentence, the European Communities requests that we change our factual finding regarding the date of initiation of the investigation from 17 July 2003, to 16 July 2003, on the basis that Mexico acknowledges this date in certain of its submissions. Mexico disagrees with this comment, stating that 17 July 2003 is the correct date of initiation, as referred to in the interim report, and as indicated in Mexico's Second written submission. We have not made the requested change, as our finding is based on our reading of the relevant legislation of Mexico. We note as well that the European Communities, in submissions before us, identified 17 July 2003 as the date on which the initiation resolution came into effect. (See, e.g., European Communities – First oral statement, para. 17; Second oral statement, para. 5.) Finally, as noted, in its reactions to the interim review request of the European Communities, Mexico confirms the date of 17 July 2003 as the correct date.
The European Communities requests that we replace "a bona fide one" in the penultimate sentence of paragraph 7.35 with "a bona fides one" or "made in bona fide". Mexico submits no comment on this request. We have changed the reference to refer to "bona fides".
The European Communities requests that we delete paragraphs 7.37 and 7.38, because its arguments "are not limited to the aim (object and purpose) of Article 13.1 of the SCM Agreement", arguing that it also submitted arguments relating to the context of that provision. Mexico submits no comment regarding this request. We have not accepted this request, as we consider that the report makes clear that we understood the European Communities to be making a textual argument based on the language pertaining to the "aim" of the consultations, not only an argument based on the "aim" (object and purpose) of Article 13.1. Additionally, we address the European Communities other arguments in the subsequent paragraphs. We have introduced certain drafting changes to these paragraphs to further clarify this point.
The European Communities further submits that paragraph 7.38 contains a denial of implicit obligations under the WTO agreements as well as a denial of the concept of implicit obligations per se. Mexico disagrees with this request, as in its view the paragraph in question does not deny the existence of implicit obligations as such, but rather states that in the specific case it is not possible to conclude that Article 13.1 of the Agreement contains the specific implicit obligation to hold consultations asserted by the European Communities. We have introduced certain drafting changes to this paragraph to clarify this point.
The European Communities requests that in paragraph 7.42, last sentence, we replace the term "4 July, the date of the invitation to consultations" with "8 July, the date of reception by the European Communities of the invitation by Mexico to hold consultations, which was issued by Mexico on 4 July", as "nobody is really invited before receiving the invitation". Mexico disagrees, stating that even if one cannot consider oneself invited until an invitation is received, the obligation on the importing Member cannot go to such an extreme, as this would imply that Mexico had the obligation to ensure that the specific office of the European Communities in charge of this matter in fact received the invitation. Mexico also submits that the issue under dispute is whether the obligation is to invite for consultations or to invite and hold consultations. We have not made the change requested by the European Communities. We consider that this does not reflect the arguments as presented by the European Communities, which consistently refer to the date on which the invitation to consultations was sent (4 July 2003) (see, e.g., European Communities – First written submission, para. 87), and which focus on whether Mexico was obliged to hold consultations, or at least issue the invitation in time that consultations could be held, before initiation.
Also concerning paragraph 7.42, the European Communities requests that in the last sentence we change the reference from "17 July 2003" to "16 July 2003". Mexico disagrees, for the reasons as outline in paragraph i.4, supra, and we have declined to make the requested change for the same reasons.
In respect of paragraph 7.58, the European Communities requests that we delete the term "specifically", on the grounds that Mexico never disputed the conformity of the European Communities domestic support measures with Article 6 of the Agreement on Agriculture. Mexico submits no comment on this request. We have not made the requested change, we believe the language adequately reflects Mexico's representations to the Panel with respect to this issue. However, in light of the European Communities' request that we delete the term "apparent" in paragraph 7.59, we have made certain drafting changes in that paragraph which we believe further clarify the position Mexico took on the applicability of Article 13(b)(i) of the Agreement on Agriculture during the conduct of the olive oil investigation.
With respect to paragraph 7.59, the European Communities also requests that we delete the last sentence of this paragraph because it is redundant with what is already stated in paragraph 7.56. Mexico submits no comment on this request. We have not made the requested deletion, because we consider that the reference in paragraph 7.59, which concludes a sub-section of our reasoning, is more specific than the earlier reference which summarized the three steps that would be analyzed in the following sub-sections, and is necessary for our reasoning in the sub-section to be complete.
Regarding paragraphs 7.61 through 7.64, the European Communities requests that we change our findings and conclusions in respect of the European Communities' claim under Article 13(b)(i) of the Agreement on Agriculture. First, the European Communities argues, the language of the Peace Clause refers to "injury or threat thereof", and because footnote 45 of the SCM Agreement does not foresee threat of material retardation, the reference to "injury" in the Peace Clause must refer only to material injury (i.e., not to all the forms of injury referred to in footnote 45 of the SCM Agreement). Second, according to the European Communities, if the obligation not to apply duties in the case of material retardation does not extend to initiation, the result would be "absurd", in that an investigating authority would be entitled to initiate on the basis of a form of injury in respect of which a duty could not be imposed. Third, the European Communities submits, the Panel's remark that Economía initiated the investigation on the basis of "injury" in the broad sense, would allow any investigating authority to circumvent the application of the first clause of Article 13(b)(i) of the Agreement on Agriculture, which runs counter to the principle of effective treaty interpretation. Fourth, the European Communities considers that Economía's imposition of provisional and final measures on the basis of material injury is irrelevant for the aim of assessing the validity of the initiation. Mexico disagrees with this request, because it does not believe that there is a problem in initiating on the basis of injury in the general sense, especially where as in the present case the form of injury was not completely clear at the outset. Mexico argues that to presume that the investigating authority has to know before the investigation is initiated which form of injury has to be investigated would be equivalent to asking it to have evidence of the quantity and quality sufficient for issuing a preliminary or final determination. We have not accepted the request from the European Communities to change our findings in respect of this claim. We believe that the reasoning in the Report sufficiently addresses the arguments of the European Communities.
Also in respect of paragraph 7.64, the European Communities requests, in case we do not agree with its request described in the preceding paragraph, that we rephrase our finding to say that "the EC has not established that Mexico acted inconsistently with the first clause of Article 13(b)(i) of the Agreement on Agriculture", i.e., the same wording as in our conclusions in Section VIII of the report. Mexico submits no comment on this request. We have changed the wording in paragraph 7.64 to reflect the wording in our conclusions in Section VIII.
Concerning paragraphs 7.72 to 7.80, the European Communities considers that our finding is that in order to comply with the Peace Clause in the Agreement on Agriculture, it is enough to abide by the legal requirements of the relevant provisions in the SCM Agreement, which interpretation gives no added value to the Peace Clause and therefore is contrary to the principle of effective treaty interpretation. The European Communities asks us, accordingly, to redraft our arguments and find that Mexico acted inconsistently with Article 13(b)(i) of the Agreement on Agriculture. Mexico submits no comment on this request. We disagree with the European Communities' characterization of our finding. As set forth in paragraph 7.72, having ruled against the claim of the European Communities under Article 13.1 of the SCM Agreement regarding the timing of the invitation to consultations, we do not find that that same timing constitutes evidence of "haste" in the sense of Article 13(b)(i) of the Agreement on Agriculture such that it would support a conclusion that Mexico acted without due restraint in its initiation of the olive oil investigation.
Regarding footnote 112, the European Communities requests that we check the reference to Mexico's exhibit cited in that footnote. Mexico submits no comment on this request. We have corrected the reference.
At the suggestion of the European Communities, we have corrected the punctuation in paragraph 7.75.
Regarding paragraph 7.115, the European Communities contests the accuracy of our statement that it was only in response to a direct question from the Panel that the European Communities identified specific "essential facts". In this regard, the European Communities cites its arguments in paragraphs 34 to 37 of its Second written submission. Mexico disagrees with this request as in its view the European Communities has not identified any essential fact that was dismissed by the investigating authority in its analysis, but rather has only made general statements in which it indicated that it was difficult to imagine that in certain procedural steps no essential fact had been obtained. We note that paragraphs 34 to 37 of the European Communities Second written submission were quoted in paragraph 7.111 (previously part of paragraph 7.110) and cited in footnote 141 to that paragraph. We have added additional citations to more fully reflect the arguments made by the European Communities in those paragraphs of its second written submission. We have also modified paragraph 7.115 to clarify our presentation of the arguments of the European Communities.
In respect of footnote 175, the European Communities requests that we add to the description of the Appellate Body finding in Softwood Lumber IV that that finding was limited to aggregated investigations, and that a pass-through analysis might be required in determining individual countervailing duty rates through a review procedure. Mexico makes no comment on this request. We have not modified the drafting of our report, and note in this regard that paragraph 7.168 of the report addresses the question of input products as it arose in the olive oil investigation.
Concerning paragraphs 7.145 through 7.154, the European Communities requests that we merge sections VII.G.2(a)(ii) and (iii), because in its view we inappropriately analyzed its claims under Articles 1 and 14 as separately claims. The European Communities asserts that it "never presented two separate claims", but rather that its claim was that Economía violated both articles, taken together, and that it had explained during the proceedings that the question was whether the olive oil imported into Mexico was a subsidized import, and for that purpose, it was necessary for the investigating authority to establish and explain adequately a connection between the original subsidy and the imported product, and that such a determination has to be evaluated by applying both articles at the same time. Mexico disagrees that the interim report specifies that there were two distinct claims, and considers that the differentiation was made only for purposes of the Panel's analysis, noting that paragraph 7.148 of the report recognizes that there is a single argument: "The European Communities declined to elaborate further its legal arguments regarding how, precisely, Articles 1 and 14 in themselves require a pass-through analysis, in spite of our specific invitations at both the first and second meetings with the Panel to do so." We have not made the requested change as we disagree with the European Communities' characterization of our findings. First, as Mexico points out, we considered jointly the European Communities' arguments regarding the alleged obligation under Articles 1 and 14 to conduct a pass-through analysis, in paragraphs 7.147 and 7.148. Second, however, we note that the European Communities itself in presenting its arguments referred to distinct obligations in Articles 1 and 14 of the SCM Agreement, starting with its Request for Establishment of a Panel which reads, in relevant part:
"the failure to calculate the benefit conferred on the recipient pursuant to paragraph 1 of Article 1 of the SCM Agreement and to apply the method used to each particular case in a transparent way which is adequately explained, in violation of Article 14 of the SCM Agreement;"
Furthermore, we asked specific questions to the European Communities as to the nature of its claim under Article 14, and have described this exchange in paragraph 7.168 and footnote 196. The European Communities made no objection to our question on the grounds that it imperfectly reflected the nature of its claim. Finally, as a practical matter, in order to assess the merits of this claim, we had no choice but to analyze the provisions separately to see whether either one contains an obligation to conduct a pass-through analysis.
Also concerning paragraph 7.145, the European Communities requests that we delete the phrase "For reasons not clear to us, and" from the beginning of the first sentence, as it considers that it has submitted and explained to the Panel the legal reasons why it decided to base its claim on Articles 1 and 14 of the SCM Agreement. Mexico submits no comment on this request. We have not accepted this request, as the language in question is a statement of the perspective of the Panel.
The European Communities objects to our reference in footnote 203 to a lack of factual evidence, and refers to its reply to Panel question 45 in this respect. Mexico considers that the fact that the European Communities "listed" its evidence in this regard does not imply that it presented factual evidence, and notes that the Panel referred to this when it signalled that only arguments and not evidence were submitted. We have not accepted the request of the European Communities. Footnote 203 indicates that the replies provided by certain interested parties to information requests from Economía consisted of argumentation, rather than factual information. We have introduced certain drafting clarifications to this footnote.
Regarding paragraph 7.171, the European Communities objects to our finding nothing "unclear" about the explanation provided by Economía regarding the issue raised in the investigation that certain olive oil exported from the European Communities to Mexico was not of European origin. The European Communities states that it never alleged a lack of clarity. It also argues that we did not take into account the fact that during the investigation, the European Commission submitted certain evidence related to this point, referred to in paragraph 41(a) of the Final Resolution. Mexico submits no comment on this request. We have introduced certain drafting changes into this paragraph to more fully reflect the arguments of the European Communities.
The European Communities argues that paragraphs 7.193 to 7.196 should be deleted. The European Communities considers that US – Lamb is not relevant precedent for this case, given that the issues were distinct from those before us, and further that because that was a safeguards case, there was no issue as to the subsidy POI, but rather a single period for injury and imports. Mexico submits no comment on this request. We have not made the requested change, as we consider that our findings are clear in explaining our reasons for looking at the reasoning in that case, while recognizing the differences in the nature of the two disputes and the fact that they concern two different Agreements.
The European Communities suggests deleting footnote 237, or at least its first three lines, because it addresses Article 15.2, while the statements and submissions of the European Communities that are referenced do not concern that provision. The European Communities also considers that this footnote conflicts with our exercise of judicial economy in respect of its claims under Articles 15.1 and 15.4. Mexico disagrees with this request, commenting that the drafting in the interim report is fully clear and adequate, and that the points referred to by the European Communities are related to one another, such that the Panel's statement appears pertinent We have introduced some drafting changes to clarify that the references to Article 15.2 are by way of context in interpreting the term "domestic industry", rather than on the basis of a claim or argument of the European Communities. With respect to our findings under Articles 15.1 and 15.4, we have made some drafting changes in footnote 375.
Concerning paragraph 7.202, second sentence, the European Communities considers that the report misrepresents its arguments, because it did not argue that output is cumulatively required both at the time of initiation and during the subsidy POI. The European Communities requests that this paragraph and paragraph 7.181 be amended to take this into account. Mexico disagrees with this request, stating that the distinction drawn by the European Communities has no meaning. Mexico recalls the reply of the European Communities to Panel question 102, which refers to data for a particular period of time, as well as to "having current output ... at all stages of the procedure, including at initiation". We note that the European Communities' written submissions, particularly its answers to Panel Questions 13,102, and 143 and its comment on Mexico's answer to 105 support our conclusion that the European Communities is making an argument about output being required at the time of application. Additionally, in its arguments on Article VI and 16 the European Communities refers to a necessity for production during the subsidy period of investigation. The European Communities never stated that it was making these arguments in the alternative. Therefore, we concluded that these were "cumulative" arguments, i.e., that the European Communities was arguing that production is required both at (or near) the time of application and during the subsidy POI. We have. however, modified the drafting of these paragraphs to clarify how the two issues were raised in the submissions of the European Communities.
Also concerning paragraph 7.202, the European Communities states that it "considers that seasonal industries will produce by definition 'at some point' within one year and the subsidy POI shall cover that period in order to allow the establishment of causal link. Similar arguments may be used for industries producing goods on a 'just in time' or made-to-order basis or shutting down for maintenance or upgrading." The European Communities therefore requests us to delete any references to industries of this kind as examples of industries that would be disqualified under the EC interpretation from being counted as domestic industries in countervailing duty investigations. Mexico submits no comment on this request. We have not made the requested change. First, the European Communities did not present this argument to us during the dispute. Second, the statement, to which the European Communities objects, reflects our interpretation and reasoning concerning the implications of the argument that a producer must have "output" at certain times in an investigation in order to be considered a “domestic industry” within the meaning of Article 16.1 of the SCM Agreement.
The European Communities requests that we correct the reference in footnotes 238 and 247 from "Panel question 14" to "Panel question 13". Mexico disagrees, indicating that the reference to Panel question 14 is correct. We have reviewed the responses in question and made the requested correction.
Also regarding footnote 238, the European Communities requests that we insert at the end of the footnote the phrase: ", because the Panel is not faced with a borderline issue, [because] Fortuny has ceased production a whole year before its application was initiated, [and] it was clearly not producing", to reflect its reply to Panel question 13 and its comments on Mexico's reply to Panel question 105. Mexico submits no comment on this request. We have introduced certain drafting changes to this footnote inter alia to more fully reflect these arguments of the European Communities.
The European Communities considers that paragraph 7.203, first sentence misrepresents its arguments when it states that "an industry may be so badly injured by subsidised imports as to be forced to cease production for some period, but under the European Communities' interpretation, it would be disqualified from obtaining the very remedy aimed at addressing such injury." The European Communities maintains that all through these proceedings it has explained that the complainant must have been producing at least at some point during the period preceding the lodging of an application (arguably, the subsidy POI), referring here to its reply to Panel question 102. Mexico submits no comment on this request. We have introduced certain drafting changes to footnote 221 to more fully reflect the arguments of the European Communities. We also have modified the drafting in paragraph 7.203 to clarify that the statement to which the European Communities objects is our view as to the implications of its arguments.
The European Communities requests that we delete the last sentence of footnote 247 because it does not correspond to its arguments as presented in reply to Panel question 13. The European Communities also considers that the statement in the footnote that the European Communities did not provide any specific elaboration as to what constitutes a "borderline" situation clashes with the case-by-case approach followed by the panel in paragraph 7.206. Mexico considers that what is referred to in this footnote corresponds to the answer of the European Communities to Panel question 14, rather than 13. We have clarified that we were referring to the European Communities' answer to Panel question 13 and have made the requested deletion.
The European Communities requests that we correct footnote 254 to refer to its second oral statement, paragraph 12. Mexico submits no comment on this request. We have made the requested correction.
Regarding paragraph 7.233 the European Communities requests that we insert the dates of the two letters from the Government of the State of Baja California, in order to clearly place them in the chronology of the investigation. Regarding paragraph 7.234, the European Communities requests that we insert the date of the Claridades article, which it identifies as June 2001, to place it in the chronology of the investigation. Mexico objects to the date of the Claridades article referred to by the European Communities, stating that the correct date of publication was June 2002, such that this source was one year more recent than indicated by the European Communities. We have verified that the date of the article was June 2001, and have introduced this date into the text of paragraph 7.230. We also have inserted into the text of the same paragraph the dates of the letters from the Government of the State of Baja California.
Regarding paragraph 7.236, the European Communities requests that we insert footnotes to identify where, in the Claridades article the references to production and marketing of olive oil by Ybarra, to the experimental artisanal production, and the Ybarra (Fortuny) brand can be found. Mexico does not comment on this request. We have introduced the requested references, in new footnote 269.
Concerning paragraph 7.238, the European Communities suggests modifying the drafting to read, as in the Panel's conclusions, "we find that the European Communities has not established that Mexico acted inconsistently with its obligations...". Mexico does not comment on this request. We have made the requested change.
Concerning paragraph 7.245, the European Communities requests that we insert the dates of all of the correspondence referred to in subparagraphs (a) to (j), to clearly identify those letters in the chronology of the investigation. Mexico does not comment on this request. We have inserted the dates as requested.
In paragraph 7.245, at the request of the European Communities, we have corrected the spelling of Bufete Químico.
In footnote 395, the European Communities requests that we insert a reference to its first written submission, paragraph 222, and correct the reference to its second oral statement. Mexico states that this footnote is not related to what is signalled by the European Communities. We have adjusted the drafting of the footnote to properly reflect where the comments referenced in the main text are found in the European Communities' submissions.
In footnotes 398 and 399, the European Communities requests that we insert a reference to the Final Resolution (Exhibit EC-1), paragraph 437. Mexico does not comment on this request. We have made the requested additions.
In paragraph 7.321, at the suggestion of the European Communities, upon which Mexico did not comment, we have changed the drafting to read "we find that the European Communities has not established that Mexico acted inconsistently with its obligations..."
The European Communities reiterates the request, made in its first written submission and its closing statement at the second meeting of the Panel with the parties, that the Panel accompany its recommendations with a suggestion to Mexico, pursuant to Article 19.1 of the DSU, that a complete repeal of the measure challenged would be the most appropriate and/or effective way of bringing the measure into conformity with its WTO obligations. In the view of the European Communities this suggestion would help clarify Mexico's obligations in this respect and thus would contribute to securing a positive solution to this dispute. Mexico does not comment on this request. We have introduced new paragraph 8.6 referring to this request.