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Lawyers, other representatives, expert(s), tribunal’s secretary

Report of the Panel

TABLE OF CASES CITED IN THIS REPORT

Short TitleFull Case Title and Citation
Argentina – Ceramic Tiles Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/DS189/R, adopted 5 November 2001, DSR 2001:XII, 6241
Argentina – Footwear (EC) Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515
Argentina – Poultry Anti-Dumping Duties Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19 May 2003, DSR 2003:V, 1727
Brazil – Desiccated Coconut Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, 167
Brazil – Desiccated Coconut Panel Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/R, adopted 20 March 1997, upheld by Appellate Body Report, WT/DS22/AB/R, DSR 1997:I, 189
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377
Canada – Aircraft Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report, WT/DS70/AB/R, DSR 1999:IV, 1443
Canada – Dairy (Article 21.5 – New Zealand and US II) Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products – Second Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW2, WT/DS113/AB/RW2, adopted 17 January 2003, DSR 2003:I, 213
EC – Bed Linen Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/R, adopted 12 March 2001, as modified by Appellate Body Report, WT/DS141/AB/R, DSR 2001:VI, 2077
EC – Bed Linen (Article 21.5 – India) Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSUby India, WT/DS141/RW, adopted 24 April 2003, as modified by Appellate Body Report, WT/DS141/AB/RW, DSR 2003:IV, 1269
EC – Countervailing Measures on DRAM Chips Panel Report, European Communities – Countervailing Measures on Dynamic Random Access Memory Chips from Korea, WT/DS299/R, adopted 3 August 2005, DSR 2005:XVIII, 8671
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135
EC – Trademarks and Geographical Indications (US) Panel Report, European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by the United States, WT/DS174/R, adopted 20 April 2005, DSR 2005:VIII-IX, 3499
EC – Tube or Pipe Fittings Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003, DSR 2003:VI, 2613
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August 2003, as modified by Appellate Body Report, WT/DS219/AB/R, DSR 2003:VII, 2701
Egypt – Steel Rebar Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002, DSR 2002:VII, 2667
Guatemala – Cement II Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 5295
India – Patents (US) Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9
India – Quantitative Restrictions Appellate Body Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22 September 1999, DSR 1999:IV, 1763
India – Quantitative Restrictions Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/R, adopted 22 September 1999, upheld by Appellate Body Report, WT/DS90/AB/R, DSR 1999:V, 1799
Japan – Apples Appellate Body Report, Japan - Measures Affecting the Importation of Apples, WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, 4391
Japan – DRAMs (Korea) Panel Report, Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, WT/DS336/R, adopted 17 December 2007, as modified by Appellate Body Report, WT/DS336/AB/R
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3
Korea – Resins GATT Panel Report, Panel on Korea – Anti-Dumping Duties on Imports of Polyacetal Resins from the United States, ADP/92 and Corr.1, adopted 27 April 1993, BISD 40S/205
Mexico – Anti-Dumping Measures on Rice Appellate Body Report, Mexico – Definitive Anti-Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/AB/R, adopted 20 December 2005, DSR 2005:XXII, 10853
Mexico – Anti-Dumping Measures on Rice Panel Report, Mexico – Definitive Anti-Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/R, adopted 20 December 2005, as modified by Appellate Body Report, WT/DS295/AB/R, DSR 2005:XXIII, 11007
Mexico – Corn Syrup Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, WT/DS132/R, adopted 24 February 2000, and Corr.1, DSR 2000:III, 1345
Mexico – Corn Syrup (Article 21.5 – US) Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSUby the United States, WT/DS132/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6675
Mexico – Steel Pipes and Tubes Panel Report, Mexico – Anti-Dumping Duties on Steel Pipes and Tubes from Guatemala, WT/DS331/R, adopted 24 July 2007
Thailand – H-Beams Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, 2701
Thailand – H-Beams Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/R, adopted 5 April 2001, as modified by Appellate Body Report, WT/DS122/AB/R, DSR 2001:VII, 2741
US – 1916 Act (EC) Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the European Communities, WT/DS136/R and Corr.1, adopted 26 September 2000, upheld by Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4593
US – Canadian Pork GATT Panel Report, United States – Countervailing Duties on Fresh, Chilled and Frozen Pork from Canada, DS7/R, adopted 11 July 1991, BISD 38S/30
US – Cotton Yarn Appellate Body Report, United States – Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan, WT/DS192/AB/R, adopted 5 November 2001, DSR 2001:XII, 6027
US – Countervailing Duty Investigation on DRAMS Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, 8131
US – Countervailing Duty Investigation on DRAMS Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/R, adopted 20 July 2005, as modified by Appellate Body Report, WT/DS296/AB/R, DSR 2005:XVII, 8243
US – Countervailing Measures on Certain EC Products Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003, DSR 2003:I, 5
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, DSR 2005:XII, 5663, and Corr.1
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 4051
US – Lead and Bismuth II Appellate Body Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R, adopted 7 June 2000, DSR 2000:V, 2595
US – Lead and Bismuth II Panel Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/R and Corr.2, adopted 7 June 2000, upheld by Appellate Body Report, WT/DS138/AB/R, DSR 2000:VI, 2623
US – Norwegian Salmon AD GATT Panel Report, Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, ADP/87, adopted 27 April 1994, BISD 41S/229
US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) Panel Report, United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 21.5 of the DSU by Argentina, WT/DS268/RW, adopted 11 May 2007, as modified by Appellate Body Report, WT/DS268/AB/RW
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755
US – Softwood Lumber III Panel Report, United States – Preliminary Determinations with Respect to Certain Softwood Lumber from Canada, WT/DS236/R, adopted 1 November 2002, DSR 2002:IX, 3597
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, 571
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/R and Corr.1, adopted 17 February 2004, as modified by Appellate Body Report, WT/DS257/AB/R, DSR 2004:II, 641
US – Softwood Lumber VI Panel Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, WT/DS277/R, adopted 26 April 2004, DSR 2004:VI, 2485
US – Softwood Lumber VI (Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003, DSR 2003:VII, 3117
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, and Add.1-Add.3, and Corr.1, adopted 21 March 2005, as modified by Appellate Body Report, WT/DS267/AB/R, DSR 2005:II-VI, 299
US – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1, DSR 1997:I, 323

I. INTRODUCTION

A. COMPLAINT OF THE EUROPEAN COMMUNITIES

1.1.
On 31 March 2006, the European Communities ("the EC") requested consultations with Mexico pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), Article XXIII of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), Article 30 of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement") and Article 19 of the Agreement on Agriculture. The consultations concerned the definitive countervailing measures imposed by Mexico on imports of olive oil from the European Communities by the "Final Resolution in the investigation of price subsidization of imports of olive oil" published in the Official Journal of the United Mexican States ("Official Journal") on 1 August 2005.1 The European Communities and Mexico held consultations on 5 May 2006. These consultations failed to resolve the dispute.
1.2.
On 7 December 2006, the European Communities requested the establishment of a panel pursuant to Articles 4.7 and 6.2 of the DSU, Article XXIII of the GATT 1994, Articles 4 and 30 of the SCM Agreement, and Article 19 of the Agreement on Agriculture.2

B. ESTABLISHMENT AND COMPOSITION OF THE PANEL

1.3.
At its meeting on 23 January 2007, the Dispute Settlement Body ("DSB") established the Panel pursuant to the request of the European Communities in document WT/DS341/2, in accordance with Article 6 of the DSU. At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference. The terms of reference are, therefore, the following:

To examine, in the light of the relevant provisions of the covered agreements cited by the European Communities in document WT/DS341/2, the matter referred to the DSB by the European Communities in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.

1.4.
On 13 February 2007, the European Communities requested the Director-General to determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. On 21 February 2007, the Director-General composed the Panel as follows:

Chair: Ms Debra Steger

Members: Mr. Jan Heukelman

Ms Gloria Peña

1.5.
Canada, China, Japan, Norway, and the United States have reserved their rights to participate in the Panel proceedings as third parties.3
1.6.
The Panel met with the parties on 26-27 June 2007 and 3-4 October 2007, and with the third parties on 26 June 2007.

II. FACTUAL ASPECTS

2.1.
This dispute concerns the imposition by Mexico of countervailing duties on imports of olive oil from the European Communities.
2.2.
On 12 March 2003, the Mexican company Fortuny de México, SA de CV ("Fortuny"), filed an application for the imposition of countervailing duties on olive oil originating in the European Communities (mainly from Spain and Italy). Fortuny's application alleged that during the period April-December 2002, subsidized imports of virgin and refined olive oil from the European Communities materially retarded the establishment of a domestic industry producing identical or similar products.4
2.3.
On 2 July 2003, the Minister of Economy signed a resolution accepting the application and initiating the investigation.
2.4.
On 4 July 2003, Mexico invited the European Communities to consultations pursuant to Article 13.1 of the SCM Agreement.5 On 11 July 2003, the European Communities sent a letter accepting the invitation.6 The consultations took place in Mexico City on 17 July 2003.7
2.5.
The Initiation Resolution was published in the Official Journal on 16 July 2003.8 The investigation covered virgin olive oil, including the categories of extra virgin, fine virgin and ordinary virgin; refined, including first-class refined and second-class refined; and blended oil, including first-class blends and second-class blends. These goods were classified in tariff sub-headings 1509.10.01, 1509.10.99, 1509.90.01, 1509.90.02 and 1509.90.99 of the Mexican Tariff Schedule.9
2.6.
The investigation covered the period April-December 200210 ("Period of Investigation" or "POI"). The examination of "trends" in the context of the injury analysis covered the periods 1 April-31 December of 2000, 2001 and 200211 ("Injury Investigation Period" or "Injury POI").
2.7.
During the course of the investigation, there were numerous communications and exchanges, including questionnaires, comments and submissions between the Mexican investigating authority, the Ministry of Economy ("Economía") and the parties to the investigation: Fortuny, the European Commission, the governments of the exporting EC Member States, importers, and exporters. Mexico and the European Communities also held consultations on 17 November 2003 and 2 December 2004.12
2.8.
On 10 June 2004, Economía published the Preliminary Resolution in the Official Journal. The Resolution continued the investigation and imposed provisional countervailing duties on a per kilogram basis. To determine the specific amount payable on each shipment, the maximum duty payable in respect of the individual exporter, calculated on an ad valorem basis, was added to the customs value of the shipment, up to a maximum per kilogram reference price.13
2.9.
On 1 August 2005, Mexico published the Final Resolution in the Official Journal, which imposed definitive countervailing duties. Individual rates of countervailing duties were imposed on imports from eight Spanish and Italian olive oil exporters and on "all other imports" from the EC. The per exporter duty amounts, calculated on a per kilogram basis, were added to the customs value of the imports, up to a maximum per kilogram reference price.14

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

A. THE EUROPEAN COMMUNITIES

3.1.
The European Communities requests the Panel to find that the initiation and conduct of the investigation by Economía, as well as the imposition of the definitive countervailing measures are inconsistent with Mexico's obligations under, inter alia, Article VI of the GATT 1994, Articles 1, 11, 12, 13, 14, 15, 16 and 22 of the SCM Agreement and Articles 13 and 21 of the Agreement on Agriculture. In particular, the European Communities in its request for establishment of the panel requests the Panel find that Mexico violated:15

1. Articles 11.4 and 16 of the SCM Agreement by initiating the investigation in the absence a determination that the application was made by or on behalf of the domestic industry;

2. Article 11.11 of the SCM Agreement by failing to conclude the investigation within one year, and in no case more than 18 months, after its initiation;

3. Article 12.4.1 of the SCM Agreement by failing to require interested parties to provide non-confidential summaries of confidential information in sufficient detail to permit a reasonable understanding of the substance of the information;

4. Articles 12.8, 22.3, and 22.516 of the SCM Agreement by failing to properly inform the interested parties and to a provide reasonable and adequate explanation of the existence of subsidisation, notably as regards pass-through of any benefit;

5. Article 13.1 of the SCM Agreement by failing to grant an opportunity for consultations before the initiation of the investigation with the aim of clarifying the situation as to matters referred to in Article 11.2 of the SCM Agreement and arriving at a mutually agreed solution;

6. Articles 1.1 and 14 of the SCM Agreement by failing to calculate the benefit conferred on the recipient pursuant to Article 1.1 of the SCM Agreement and to apply the method used to each particular case in a transparent way which is adequately explained as required by Article 14 of the SCM Agreement;

7. Article VI:6 of the GATT 1994 and Articles 15.4, 15.5 and 16 of the SCM Agreement by failing to correctly define the domestic industry;

8. Article VI:6 of the GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement by failing to make a determination of injury based on positive evidence involving an examination of all relevant economic factors and indices having a bearing on the state of the industry and to provide reasoned and adequate explanation;

9. Article 15.5 of the SCM Agreement by failing to examine any known factors other than the allegedly subsidized imports which were causing injury to the domestic industry; and

10. Articles 13(b)(i) and 21.1 of the Agreement on Agriculture by initiating a countervailing duty investigation on imports of an agricultural product (olive oil) outside the circumstances contemplated in Article 13(b)(i) of the Agreement on Agriculture and in violation of Article 21.117 of the Agreement on Agriculture.

3.2.
The European Communities requests that the Panel, in accordance with Article 19.1 of the DSU and WTO practice, recommend the Dispute Settlements Body to request that Mexico bring its measure into conformity with the cited Agreements; and, in the light of its authority pursuant to Article 19.1 of the DSU, that the Panel accompany this recommendation with a suggestion to Mexico that a complete repeal of the measure against EC olive oil would be the most appropriate and/or effective way of bringing the measure into conformity.18

B. MEXICO

3.3.
Mexico requests the Panel to reject all of the claims and arguments raised by the European Communities in the proceeding. In particular, Mexico requests that the Panel find:

1. with regard to initiation, that Mexico acted in a manner consistent with Articles 11.4 and 16.1 of the SCM Agreement because Economía properly determined, based on sufficient facts in the application, that Fortuny was the sole domestic producer and was representative of the Mexican domestic industry19;

2. with regard to the duration of the investigation, that Mexico acted consistently with the provisions of Article 11.11 of the SCM Agreement because although the investigation lasted more than 18 months, there were "exceptional circumstances": the delays resulted from Economía's acceptance of requests for extensions by interested exporters, so the rights of interested parties were not adversely affected20;

3. with regard to the non-confidential summaries of confidential information, that Mexico acted in a manner consistent with Article 12.4.1 of the SCM Agreement because there were sufficiently detailed public summaries of all confidential information, and because of Mexico's regime for access to the confidential information on the record21;

4. with regard to the disclosure of the essential facts that served as a basis for the decision to apply definitive measures, that Mexico acted in a manner consistent with Article 12.8 of the SCM Agreement because interested parties may be informed of the essential facts in a number of ways. The essential facts were disclosed in the Preliminary Resolution, which described in detail the treatment of information, arguments and evidence furnished by the parties, and the reasons for information having been taken into account or rejected22;

5. with regard to the invitation for consultations prior to initiation of the investigation, that Mexico acted consistently with Article 13.1 of the SCM Agreement because Economía invited the European Communities for consultations prior to the date of initiation23;

6. with regard to the alleged failure to calculate the benefit conferred on the recipient pursuant to Article 1.1 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, that: (a) there is no provision in the SCM Agreement to indicate that a "pass-through" analysis is required, (b) as Economía correctly found that the subsidy was contingent on the production of olive oil, there was no need to analyze the transfer of the subsidy from olive growers to the producers of the olive oil; and (c) the methodology to calculate the subsidy margin used by Economía was correct24;

7. with regard to Economía's definition of the domestic industry, that Mexico acted consistently with Article 16 of the SCM Agreement and did not violate Article VI:6 of the GATT 1994, because the European Communities failed to present a prima facie case of violation; and that, in any case, Economía made an exhaustive examination of all matters that might have been relevant to the evaluation of injury to the domestic industry and all the evidence reviewed pointed to the conclusion that the domestic industry was composed of Fortuny25;

8. with regard to Economía's determination of injury, that Economía undertook its analysis of injury consistently with Article 15.1 and 15.4 of the SCM Agreement, and did not violate Article VI:6 of the GATT 1994, because Economía complied with Article 15.1 and 15.2 of the SCM Agreement by undertaking an objective examination based on positive evidence of the effect of the subsidized imports on prices, and Economía did examine all of the relevant factors listed in Article 15.4 of the SCM Agreement in its examination of the impact of the subsidized imports on the domestic industry26;

9. with regard to Economía's consideration of "other known factors", that the European Communities has failed to present a prima facie case and that, in any event, Economía properly considered, as required by Article 15.5 of the SCM Agreement, any known factors, other than the allegedly subsidized imports, which were causing injury to the domestic industry27; and

10. with regard to the investigation on imports of an agricultural product outside the circumstances contemplated in Article 13(b)(i) of the Agreement on Agriculture, that the European Communities has not presented a prima facie case and, in any event, that Economía exercised due restraint in the initiation of the investigation; that the obligation to show "due restraint" did not apply to any action in the investigation other than the initiation, and that the obligations contained in Article 13(b)(i) only applied to the initiation and not to any other aspects of the investigation on olive oil given that the Article expired on 31 December 2003 and thus was not applicable after the initiation of the investigation.28

IV. ARGUMENTS OF THE PARTIES

4.1.
The arguments of the parties, as set forth in the executive summaries of their submissions provided to the Panel, are attached to this Report in Annexes A, C and D (see List of Annexes, pages iv-v).

V. ARGUMENTS OF THE THIRD PARTIES

5.1.
The arguments of the third parties – Canada, China, Japan, Norway, and the United States – as set forth in the executive summaries of their submissions provided to the Panel, are attached to this Report in Annex B (see List of Annexes, pages iv-v).

VI. INTERIM REVIEW

6.1.
Pursuant to Article 15.3 of the DSU, the findings of the final panel report shall include a discussion of the arguments made by the parties at the interim review stage. This section of the Panel report provides such a discussion. As is clear from Article 15.3, this Section is part of the Panel's findings.
6.2.
The European Communities requested that we make a number of technical and substantive changes to the interim report. These are described in Section B, infra. Mexico informed us that it had no comments on the interim report. Mexico's reactions to the requests of the European Communities are described in section B, infra.29
6.3.
The Panel issued its final report to the parties on a confidential basis on 26 August 2008.

A. TECHNICAL CORRECTIONS AND ADJUSTMENTS

6.4.
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.

B. REQUESTS FROM THE EUROPEAN COMMUNITIES

6.5.
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.
6.6.
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.
6.7.
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.
6.8.
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.
6.9.
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".
6.10.
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.
6.11.
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.
6.12.
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.
6.13.
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 6.8, supra, and we have declined to make the requested change for the same reasons.
6.14.
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.
6.15.
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.
6.16.
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.
6.17.
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.
6.18.
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.
6.19.
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.
6.20.
At the suggestion of the European Communities, we have corrected the punctuation in paragraph 7.75.
6.21.
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.
6.22.
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.
6.23.
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 SCMAgreement 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.

6.24.
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.
6.25.
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.
6.26.
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.
6.27.
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.
6.28.
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 pertinentWe 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.
6.29.
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.
6.30.
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.
6.31.
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.
6.32.
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.
6.33.
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.
6.34.
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.
6.35.
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.
6.36.
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.
6.37.
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.
6.38.
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.
6.39.
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.
6.40.
In paragraph 7,245, at the request of the European Communities, we have corrected the spelling of Bufete Químico.
6.41.
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.
6.42.
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.
6.43.
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..."
6.44.
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.

VII. FINDINGS

A. GENERAL ISSUES

1. Standard of Review

7.1.
The dispute before us is concerned with the conformity of an investigating authority's actions in a countervailing duty investigation with certain provisions of the GATT 1994 the SCM Agreement and the Agreement on Agriculture. We are aware that, as a reviewer of those actions, we must apply the correct standard of review.
7.2.
We recall that Article 11 of the DSU sets out the applicable standard of review in proceedings under the SCM Agreement, the Agreement on Agriculture,and the GATT 1994. Article 11 of the DSU states, in relevant part, that:

[A] panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements... (emphasis added)

7.3.
The Appellate Body has summarized the standard of review that panels are to apply under Article 11 of the DSU in assessing whether the competent authorities complied with their obligations in making their determinations as follows: panels must examine whether the competent authority has evaluated all relevant factors; they must assess whether the competent authority has examined all the pertinent facts and assess whether an adequate explanation has been provided as to how those facts support the determination; and they must also consider whether the competent authority's explanation addresses fully the nature and complexities of the data and responds to other plausible interpretations of the data. However, panels must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority.30 On this last point, the Appellate Body has emphasized that a "panel may not reject an agency's conclusions simply because the panel would have arrived at a different outcome if it were making the determination itself."31 Furthermore, specifically with respect to disputes involving subsidy determinations in countervailing duty investigations, the Appellate Body recalled that a panel reviewing such a determination:

should bear in mind its role as reviewer of agency action, rather than as initial trier of fact. Thus, a panel examining the evidentiary basis for a subsidy determination should, on the basis of the record evidence before the panel, inquire whether the evidence and explanation relied on by the investigating authority reasonably supports its conclusions....(footnotes omitted)32

7.4.
In US – Softwood Lumber VI (Article 21.5 – Canada) the Appellate Body reiterated that "it is well established that a panel must neither conduct a de novo review nor simply defer to the conclusions of the national authority."33 With respect to review of the factual components of the findings made by investigating authorities the Appellate Body has addressed the issue in numerous cases.34 In US – Softwood Lumber VI (Article 21.5 – Canada) the Appellate Body explained that in a panel's evaluation of factual findings:

A panel's examination of those conclusions must be critical and searching, and be based on the information contained in the record and the explanations given by the authority in its published report. A panel must examine whether, in the light of the evidence on the record, the conclusions reached by the investigating authority are reasoned and adequate. What is 'adequate' will inevitably depend on the facts and circumstances of the case and the particular claims made, but several general lines of inquiry are likely to be relevant. The panel's scrutiny should test whether the reasoning of the authority is coherent and internally consistent. The panel must undertake an in-depth examination of whether the explanations given disclose how the investigating authority treated the facts and evidence in the record and whether there was positive evidence before it to support the inferences made and conclusions reached by it. The panel must examine whether the explanations provided demonstrate that the investigating authority took proper account of the complexities of the data before it, and that it explained why it rejected or discounted alternative explanations and interpretations of the record evidence. A panel must be open to the possibility that the explanations given by the authority are not reasoned or adequate in the light of other plausible alternative explanations, and must take care not to assume itself the role of initial trier of facts, nor to be passive by 'simply accept[ing] the conclusions of the competent authorities'.35

7.5.
We will conduct our assessment of the determinations of Economía with these statements of the Appellate Body in mind. In particular, in evaluating the claims of the European Communities regarding the determinations made by Economía, we will consider whether, in the light of the evidence on the record, the conclusions reached are reasoned and adequate.

2. Burden of Proof

7.6.
We recall the general principles applicable to burden of proof in WTO dispute settlement, i.e., that a party claiming a violation of a provision of a covered agreement by another Member must assert and prove its claim.36 In US – Wool Shirts and Blouses the Appellate Body stated that:

the party who asserts a fact, whether the claimant or the respondent, is responsible for providing proof thereof. Also, it is a generally-accepted canon of evidence in civil law, common law, and, in fact, in most jurisdictions, that the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence. If that party adduces evidence sufficient to raise a presumption that what is claimed is true, the burden then shifts to the other party, who will fail unless it adduces sufficient evidence to rebut the presumption. (original footnote omitted).37

7.7.
Furthermore, in Canada – Dairy (Article 21.5 New Zealand and US II) the Appellate Body stated explicitly that:

as a general matter, the burden of proof rests upon the complaining Member. That Member must make out a prima facie case by presenting sufficient evidence to raise a presumption in favour of its claim. If the complaining Member succeeds, the responding Member may then seek to rebut this presumption. Therefore, under the usual allocation of the burden of proof, a responding Member's measure will be treated as WTO-consistent, until sufficient evidence is presented to prove the contrary.38

7.8.
Moreover, the Appellate Body has stated that "[i]t is also well to remember that a prima facie case is one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima facie case."39 The Appellate Body also has said that "[a] prima facie case must be based on 'evidence and legal argument' put forward by the complaining party in relation to each of the elements of the claim. A complaining party may not simply submit evidence and expect the panel to divine from it a claim of WTO-inconsistency. Nor may a complaining party simply allege facts without relating them to its legal arguments."40
7.9.
The Appellate Body has also explained that "[i]n the context of the GATT 1994 and the WTO Agreement, precisely how much and precisely what kind of evidence will be required to establish such a presumption will necessarily vary from measure to measure, provision to provision, and case to case."41
7.10.
In addition, the Appellate Body in EC – Hormones established that"when that prima facie case is made, the burden of proof moves to the defending party, which must in turn counter or refute the claimed inconsistency."42 As the Appellate Body explained in Japan – Apples, the complaining party is not responsible for providing proof of all facts raised in relation to the issue of determining whether a measure is consistent with a given provision of a covered agreement. Although the complaining party bears the burden of proving its case, the responding party must prove the case it seeks to make in response.43
7.11.
In this dispute, the European Communities, which has claimed that Mexico acted inconsistently with provisions of the SCM Agreement, the Agreement on Agriculture,and the GATT 1994, thus bears the burden of demonstrating that Mexico acted inconsistently with the relevant provisions of those agreements.

3. Treaty Interpretation

7.12.
Article 3.2 of the DSU directs panels to clarify the existing provisions of the covered agreements "in accordance with customary rules of interpretation of public international law". It is well settled in WTO case law that the principles codified in Articles 31, 32 and 33 of the Vienna Convention on the Law of Treaties ("Vienna Convention") are such customary rules.44 These provisions read as follows:

Article 31: General rule of interpretation

1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

3. There shall be taken into account, together with the context:

(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) any relevant rules of international law applicable in the relations between the parties.

4. A special meaning shall be given to a term if it is established that the parties so intended.

Article 32: Supplementary means of interpretation

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leads to a result which is manifestly absurd or unreasonable.

Article 33: Interpretation of treaties authenticated in two or more languages

1. When a treaty has been authenticated in two or more languages, the text is equally authoritative in each language, unless the treaty provides or the parties agree that, in case of divergence, a particular text shall prevail.

2. A version of the treaty in a language other than one of those in which the text was authenticated shall be considered an authentic text only if the treaty so provides or the parties so agree.

3. The terms of the treaty are presumed to have the same meaning in each authentic text.

4. Except where a particular text prevails in accordance with paragraph 1, when a comparison of the authentic texts discloses a difference of meaning which the application of articles 31 and 32 does not remove, the meaning which best reconciles the texts, having regard to the object and purpose of the treaty, shall be adopted.

7.13.
We shall apply these principles in interpreting the relevant provisions of the covered agreements.

B. ARTICLE 13.1 OF THE SCM AGREEMENT

7.14.
The European Communities claims that Mexico failed to invite the European Communities to consultations and failed to hold consultations, or failed at least to provide a sufficient time interval for consultations to take place, before the initiation of the olive oil investigation, contrary to Article 13.1 of the SCM Agreement.

1. Arguments of the Parties

7.15.
The European Communities asserts that Economía initiated its investigation on 2 July 200345, that Mexico only invited the European Communities for consultations on 4 July 2003, and that the first consultations were held only on 17 July 2003. According to the European Communities, because of its failure to hold consultations before the initiation, Mexico is "in outright breach of its obligations under Article 13.1".46
7.16.
Mexico argues that the date of initiation was not 2 July 2003, but 16 July 2003, as this was the date on which the Initiation Resolution was published in its Official Journal.47 Mexico states that under Mexican law, the Initiation Resolution had no legal effect until the day after its publication in the Official Journal, and that the administrative timelines relevant in the investigation were set relative to that date.48 On this basis, Mexico maintains that it complied with its obligations under Article 13.1 because it issued the invitation for consultations prior to the date of initiation.49
7.17.
The European Communities also argues that even if Mexico's argument were accepted that the date of initiation was 16 July 2003, Mexico still violated Article 13.1 because the invitation for consultations was not issued sufficiently before the initiation of the investigation to allow for a meaningful opportunity for consultations to be held prior to initiation.50 The European Communities relies upon Articles 13.2 and 13.3 and footnote 37 to Article 10 as contextual support for its interpretation of Article 13.1. In particular, the European Communities argues that there is an implicit requirement that, whether or not the consultations actually take place before initiation, the invitation must be issued sufficiently prior to initiation that consultations could be held before initiation, i.e., "more broadly" that investigating authorities should "make themselves available for consultations at a stage when those consultations could influence the decision to initiate the investigation", i.e., before initiation.51 If this were not the case, the European Communities argues, the consultations would be pointless, given that their "aim" according to Article 13.1, is to "clarify[] the situation as to matters referred to in paragraph 2 of Article 11 [the content of the application] and arriv[e] at a mutually agreed solution."52
7.18.
In Mexico's view, the obligation in Article 13.1 is to issue the invitation to consultations prior to initiation, rather than to hold the consultations prior to initiation.53 Furthermore, Mexico argues that there is no requirement that the invitation to consultations be issued in sufficient time that consultations could be held prior to initiation.54

2. Reasoning of the Panel

7.19.
The claim of the European Communities under Article 13.1 of the SCM Agreement has two parts. First, the European Communities alleges that Economía did not send the invitation to consultations prior to initiation as required by Article 13.1 of the SCM Agreement. This part of the European Communities' claim presents issues of both law and fact. As a matter of law, we must decide what action constitutes "initiation" within the meaning of the SCM Agreement. As a matter of fact, we must then decide on the date Economía initiated the countervailing duty investigation into olive oil from the European Communities.
7.20.
Second, the European Communities' claim raises questions about the nature of the obligations in Article 13.1. Specifically, the issues are: (1) whether Article 13.1 contains an obligation to hold consultations prior to initiation, and, (2) whether this provision requires that a sufficient amount of time be allowed, between the invitation for consultations and the initiation, for consultations to be held.

(a) Did Economía Send the Invitation to Consultations After Initiation

7.21.
The parties disagree on the actual date of initiation of the olive oil investigation, and thus on whether the invitation to consultations was issued by Mexico prior to that date as required by Article 13.1.55 The European Communities contends that the investigation was initiated on 2 July 2003, the date on which the Minister signed the Initiation Resolution, and that Mexico only issued the invitation to consultations thereafter, on 4 July 2003, thereby breaching Article 13.1 of the SCM Agreement.56 Mexico counters that the investigation was initiated on 16 July 2003, the day the Initiation Resolution was published in the Official Journal of Mexico.57 This disagreement raises two questions. First, what does the term "initiation" mean for the purposes of the SCM Agreement? Second, applying the definition of "initiation" in the SCM Agreement, what is the date on which Economía initiated the countervailing duty investigation into olive oil from the European Communities? Once both questions are resolved, we can examine whether Economía's 4 July 2003 invitation to consultations occurred prior to or after initiation.

(i) "Initiation" Within the Meaning of the SCM Agreement

7.22.
The term "initiated" is defined in footnote 37 to Article 10 of the SCM Agreement, which reads:

The term 'initiated' as used hereinafter means procedural action by which a Member formally commences an investigation as provided in Article 11.

7.23.
According to the European Communities, the signature by the Minister of the Initiation Resolution was the "procedural action" that "formally" commenced the investigation, as referred to in this definition, because signature of a resolution is a formal act, and the focus of the particular resolution in question was the commencement of the investigation, the publication of which followed automatically after the Minister had signed.58 Mexico counters that the SCM Agreement leaves to individual Members how, procedurally, to initiate an investigation. Mexico states that under Mexican law, it is publication in the Official Journal that constitutes initiation, as it is this publication that gives legal effect to initiation resolutions. In particular, Mexico argues, a resolution signed by a Minister, but never published in the Official Journal, would be entirely without legal effect in Mexico. Thus, while signature by the Minister is necessary, a resolution only enters legally into force, and the deadlines in the investigation only start running, when the resolution is published. For this reason, according to Mexico, the date of initiation is the date of publication in the Official Journal.59
7.24.
We begin by examining the definition of "initiated" in footnote 37 of the SCM Agreement. It is important to note that the definition describes a "procedural action by which a Member formally commences an investigation" [emphasis added], without specifying any particular action, or any particular procedure, that a Member must undertake in this regard. The European Communities admits that "the particular steps to be taken [in regard to initiation] are largely left to Members", and that while "[i]t can be inferred from Footnote 37 that the process will involve one element of formality... precisely what this should consist of is not specified".60
7.25.
The heart of this dispute is not over what constitutes a "procedural action" as many steps within an investigation may qualify as such, but rather which procedural action "formally commences" an investigation. The Shorter Oxford English Dictionary defines "formally" as "In prescribed or customary form; with the formalities required to make an action valid or definite."61 The Shorter Oxford English Dictionary also defines "commence" as "make a start or beginning; come into operation."62 As footnote 37 states, we are concerned with "a Member's" initiation of an investigation. Because the SCM Agreement does not contain any specific standards for determining the validity of an action meant to start a countervailing duty investigation, the date of "formal commencement" must be in reference to the internal regime of the importing Member.
7.26.
Other articles of the SCM Agreement that refer to initiation provide context for interpreting the term "initiated" in footnote 37. For example, Article 11 of the SCM Agreement contains a number of substantive requirements that must be satisfied before an importing Member may initiate a countervailing duty investigation. Article 11 demonstrates that when the drafters intended to prescribe that Members satisfy particular standards, they were perfectly able to do so.63 Additionally, Article 22.2 requires investigating authorities to give public notice of the initiation. Article 22.2 (ii) requires that the investigating authority include in the published notice the "date of initiation". In our view, this confirms a reading of footnote 37 that leaves it up to the investigating authority to determine on what date it "formally commenced" an investigation and to then make the public aware of that date through the notice.64
7.27.
Finally, in terms of the object and purpose of the SCM Agreement, we note that the deadline for completing an investigation in Article 11.11; the requirement to release the application to interested exporters in Article 12.1.3; and the timeframes for imposing provisional measures in Article 17.3 all flow from the date of initiation. We view a reading whereby the date of initiation is based on the internal law of the importing Member as ensuring predictability for the interested parties in the investigation under the domestic system of each Member. If WTO dispute settlement proceedings taking place considerably after the termination of an investigation could revisit these procedural steps in the absence of any specific requirements in the SCM Agreement, this predictability would be substantially reduced.
7.28.
Based on the foregoing analysis, we find that what constitutes "initiation" within the meaning of the SCM Agreement will vary based on the procedural actions defined in each Member's individual regime. Therefore, to determine the date on which Economía initiated the investigation and whether Mexico sent the invitation to consultations prior to initiation, as required by Article 13.1 of the SCM Agreement, we must examine what constitutes the procedural act by which an investigation is formally commenced in the Mexican system.

(ii) The Date on Which Economía Initiated the Olive Oil Investigation

7.29.
As noted above, we see the issue of what date Economía initiated the olive oil investigation as one of municipal law, which is a matter of fact. Mexico provided information indicating that, by virtue of the interaction between Article 85 of the Mexican Foreign Trade Law and Article 7 of the Mexican Federal Tax Code, the Initiation Resolution "will enter into effect on the day following its publication".65 This same language is repeated at the end of the Initiation Resolution itself.66 Furthermore, as noted above, Mexico indicated that the time limits imposed upon the interested parties and on Economía in respect of the investigation ran from the date of publication, and this also is reflected in the Resolution.67
7.30.
We therefore find, as a matter of fact, that under Mexican law, the procedural act by which an investigation is formally commenced in the Mexican system is the publication of the Initiation Resolution, which takes legal effect the following day.
7.31.
The Initiation Resolution was published on 16 July 2003. Therefore, on the basis of the evidence provided by Mexico on its domestic law, we find, as a matter of fact, that the date of initiation of the olive oil investigation, in the sense of the SCM Agreement, was 17 July 2003, the day after the Initiation Resolution was published, and not 2 July, the date of the Minister's signature, as argued by the European Communities. Given this finding, there is no basis for the European Communities' allegation that the invitation to consultations was only issued after initiation, contrary to Mexico's obligations under Article 13.1 of the SCM Agreement.

(b) The nature of the obligations in Article 13.1

7.32.
The European Communities makes an additional argument that even if Economía sent the invitation to consultations prior to the initiation as required by Article 13.1, Mexico nevertheless acted inconsistently with Article 13.1, because it did not hold consultations, or provide sufficient time to hold the consultations, between the date it sent the invitation and the date of initiation. This argument focuses on the nature of the obligation contained in Article 13.1 of the SCM Agreement.
7.33.
We start our analysis with the ordinary meaning of the terms of Article 13.1 which read as follows:

13.1 As soon as possible after an application under Article 11 is accepted, and in any event before the initiation of any investigation, Members the products of which may be subject to such investigation shall be invited for consultations with the aim of clarifying the situation as to the matters referred to in paragraph 2 of Article 11 and arriving at a mutually agreed solution.

7.34.
Beginning with the action that is the subject of this provision, namely that the Member the products of which may be subject to the investigation "shall be invited for consultations", we note that the provision makes no explicit reference to consultations being held, referring instead to an invitation to consult. The dictionary definition of the word "invite" confirms that to invite someone to do something is simply to ask that person to do so if he or she wishes. For example, the New Shorter Oxford Dictionary defines "invite" as to "ask (a person) to come with one's permission to or into a place or to an event."68 Thus, the ordinary meaning of the obligation on the importing Member that is considering initiating a countervailing duty investigation is to ask the Member, the products of which may be subject to that investigation (the exporting Member), to consultations. It then falls to the latter Member to decide whether or not to accept the invitation.
7.35.
We do not see a requirement in the text of Article 13.1 that the Members involved must actually hold the referenced consultations. Indeed, if under Article 13.1, the Member considering whether to initiate an investigation were obligated to hold consultations with the exporting Member before it could initiate an investigation, the exporting Member could effectively block initiation simply by declining to consult. We find relevant contextual support in the language of Article 13.3 of the SCM Agreement, which reads: "...these provisions regarding consultations are not intended to prevent the authorities of a Member from proceeding expeditiously with regard to initiating the investigation..." This passage supports the view that Article 13.1 requires the Member considering whether to initiate to "invite" the exporting Member for consultations, but does not require that those consultations be held. We emphasize, however, that the invitation must be a bona fides one. That is, assuming that the exporting Member accepts the invitation, the Member considering whether to initiate an investigation cannot then refuse to participate in the consultations.
7.36.
We now turn to the second, related line of argument by the European Communities, concerning the timing of the invitation to consultations. We start by recalling that the obligation in Article 13.1 that forms the basis of the claim of the European Communities is that the invitation be issued "in any event before the initiation of an investigation" (emphasis added). The claim of the European Communities is that Article 13.1 requires that the invitation to consultations be issued sufficiently "before" initiation that consultations could meaningfully be held prior to initiation.
7.37.
We note that in respect of this claim, the European Communities argues that the obligation that it asserts is not explicit, but is "implicit", flowing from the stated "aim" of the consultations in the text of Article 13.1, i.e., clarifying the situation as to the contents of the application and arriving at a mutually agreed solution. The argument of the European Communities is that this "aim" and the consultations themselves would be deprived of "effet utile" if the referenced consultations only took place after initiation.69
7.38.
Before considering the merits of this argument, we wish to emphasize that we are not convinced by the European Communities' theory that there is an "implicit" obligation in the SCM Agreement to hold consultations. We recall that pursuant to Articles 3.2 and 19.2 of the DSU, panels and the Appellate Body cannot add to or diminish the rights and obligations of Members. The obligations on Members, therefore, are those negotiated by Members and identified in the treaty text through the application of the appropriate principles of treaty interpretation, as discussed in section VII.A.3, supra. This is the standard to which we must adhere.
7.39.
Returning now to the language of Article 13.1 that is at issue in this claim, we see no requirement that a sufficient interval must be allowed after issuance of the invitation and before initiation that consultations could be held. Rather, the requirement in that provision is that the invitation must be issued "in any event before" initiation, with no indication of any specific time interval. Nor does the remaining language of Article 13.1 lead to a different conclusion. First, while the opening clause of Article 13.1 – "[a]s soon as possible after an application under Article 11 is accepted and in any event before the initiation of any investigation" – establishes a window of time for the issuance of the invitation to consultations, this window is expressed not in absolute terms but in relation to the system of the individual Member, and thus falls short of establishing any minimum timeframes for the holding of such consultations.70 In particular, we do not see in the phrase "as soon as possible after an application... is accepted", either by itself, or in conjunction with the requirement to issue the invitation to consultations "in any event before the initiation", an obligation to allow sufficient time prior to initiation for consultations to be held. Second, the last clause of Article 13.1 defines the "aim" of the consultations – "clarifying the situation as to the matters referred to in paragraph 2 of Article 11 [the contents of the application] and arriving at a mutually agreed solution" – and says nothing about the timing of such consultations.
7.40.
Other provisions of Article 13 provide further support for our view that there is no requirement in Article 13.1 to allow sufficient time for consultations to be held before initiation. First, as noted above, Article 13.3 states explicitly that the provisions on consultation – which include Article 13.1 – "are not intended to prevent the authorities of a Member from proceeding expeditiously with regard to initiating...". Not only does this language not indicate that some minimum time interval must be allowed prior to initiation, in fact, it makes explicit that the SCM Agreement strikes a balance between an exporting Member's need to be consulted, on the one hand, and an importing Member's need to proceed expeditiously, on the other hand. Nor does the obligation, referred to in Articles 13.2 and 13.3, to "afford reasonable opportunity for consultation" provide a requirement to allow a sufficient time interval that consultations could be held before initiation. Rather, we view this rather generally worded requirement to mean that the importing Member considering initiation or conducting an investigation has an ongoing obligation to be available for consultations. In this regard, we consider footnote 44 to be of particular relevance. This footnote reads: "It is particularly important... that no affirmative determination whether preliminary or final be made without reasonable opportunity for consultations having been given". In this footnote, the SCM Agreement puts particular emphasis on the importance of the prior opportunity for consultations in relation to two specific stages of an investigation, namely before issuance of affirmative preliminary or final determinations. The fact that footnote 44 omits entirely any mention of the pre-initiation stage further confirms our view that the SCM Agreement does not require a sufficient time interval before initiation that consultations could be held.
7.41.
Turning, finally, to the object and purpose of the SCM Agreement, we first recall that according to Article 13.1, the aim of the consultations referred to is "clarifying the situation as to the matters referred in paragraph 2 of Article 11 [the contents of the application] and arriving at a mutually agreed solution". While we consider that, given their aims, consultations, as referred to in Article 13.1, would have the greatest potential to influence the initiation decision if they were held before initiation, we do not consider that such consultations would be wholly devoid of purpose, as argued by the European Communities, if they did not occur until after an investigation was initiated. In particular, if, during consultations held after initiation, it became clear that the factual basis of the initiation decision was erroneous (because, for example, the alleged subsidy programmes either were not subsidies or were not specific), then pursuant to Article 11.9 of the SCM Agreement,the investigating authority would be obligated to terminate the investigation immediately. We note that the European Communities acknowledges this, stating that "a solution can be reached at any stage of the investigation (as Article 13.2 makes clear)".71 Indeed, this is in keeping with the object and purpose of the countervailing duty provisions of the SCM Agreement, namely to provide the legal framework for Members to take countervailing action where subsidized imports are causing injury to domestic producers. While the consultation provisions create a mechanism that can be used to facilitate an agreed solution, they explicitly "are not intended to prevent" Members from "proceeding expeditiously" with their investigations and the application of measures.
7.42.
For the foregoing reasons, we find that Article 13.1 does not require a Member considering whether to initiate an investigation to allow a sufficient time interval after its invitation to consultations is issued and before initiation, so that consultations could be held. Given our finding, we do not further consider the argument of the European Communities that, even accepting Mexico's contention as to the date of initiation, Mexico still acted in breach of Article 13.1, as there was not sufficient time between 4 July, the date of the invitation to consultations, and 17 July, the date of initiation, for consultations to have been held.
7.43.
Therefore, we find that the European Communities has not established that Mexico acted inconsistently with its obligations under Article 13.1 of the SCM Agreement.

C. ARTICLE 13(B)(I) OF THE AGREEMENT ON AGRICULTURE

7.44.
The European Communities claims that Mexico violated Article 13(b)(i) of the Agreement on Agriculture by initiating a countervailing duty investigation on imports of an agricultural product (olive oil) inconsistently with the provisions of Article 13(b)(i) of the Agreement on Agriculture.

1. Arguments of the Parties

7.45.
The European Communities asserts that the production aids provided to olive growers by the European Communities that are the basis for Mexico's imposition of countervailing duties constitute "domestic support measures that conform fully to the provisions of Article 6 of the Agreement."72 The European Communities argues that Article 13(b)(i) imposes a double restriction on countervailing duty actions. First, duties must not be imposed unless there is a determination of "injury or threat thereof." In the European Communities' view, this means that "no action could be taken in respect of claims based on ‘material retardation'".73 Second, the Mexican authorities were required to exercise "due restraint" in the initiation of the investigation on olive oil. The European Communities alleges that Mexico failed to comply with both of these requirements.74
7.46.
The European Communities argues that Mexico failed to comply with the first restriction by initiating the investigation and imposing countervailing duties even though the applicant's claim was based on "material retardation".75 Specifically, the European Communities argues that Mexico should not have initiated an investigation based on an application alleging "material retardation" and should have rejected Fortuny's application.76
7.47.
The European Communities also argues that Mexico failed to exercise due restraint in the initiation of the countervailing duty investigation on olive oil. Specifically, the European Communities argues that contrary to any notion of due restraint, Mexico embarked on the investigation with exceptional haste,77 in that it did not hold consultations prior to initiation, it did not spend adequate time investigating the full extent of the domestic industry, and it "converted" an application based on "material retardation" into one of "material injury".78
7.48.
The European Communities contends moreover that the obligation to exercise "due restraint" must mean something more than the normal initiation standard in the SCM Agreement, because otherwise, Article 13(b)(i) of the Agreement on Agriculture would have no meaning.79 There must be some circumstances in which "due restraint" could have the effect of preventing an investigation that might otherwise have been initiated.80
7.49.
Mexico argues with respect to the obligation to show "due restraint" in initiating a countervailing duty investigation on an agricultural product, that "due restraint" should not be interpreted as a prohibition on initiation, but rather as adopting an appropriate and reasonable standard for allowing an investigation to be initiated.81 Mexico also argues that the obligation to exercise due restraint contained in Article 13(b)(i) of the Agreement on Agriculture relates only to the period preceding the initiation of the investigation, and that thus to the extent that the European Communities is arguing that the due restraint provisions were violated by imposing countervailing duties, such an argument would has no merit.82
7.50.
With respect to the European Communities' argument that Article 13(b)(i) prohibited Mexico from imposing countervailing duties in response to an application based on material retardation, Mexico notes that there is no provision in the SCM Agreement that requires an investigating authority to accept all of the conclusions in an application.83 Mexico points out that the investigation was initiated on the basis of "injury" in the broad sense of that term.84 Additionally, Mexico notes that, in any case, the duties were imposed after the investigating authority had made a determination of "material injury," not "material retardation".85

2. Reasoning of the Panel

7.51.
Article 13(b)(i) of the Agreement on Agriculture reads as follows:

Due Restraint

During the implementation period, notwithstanding the provisions of GATT 1994 and the Agreement on Subsidies and Countervailing Measures (referred to in this Article as the "Subsidies Agreement"):

(b) domestic support measures that conform fully to the provisions of Article 6 of this Agreement including direct payments that conform to the requirements of paragraph 5 thereof, as reflected in each Member's Schedule, as well as domestic support within de minimis levels and in conformity with paragraph 2 of Article 6, shall be:

(i) exempt from the imposition of countervailing duties unless a determination of injury or threat thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations;...

(a) Applicability of the Provision

7.52.
The first issue we must address is whether Article 13(b)(i) of the Agreement on Agriculture applies to the Mexican measures in this case. By its own terms, Article 13 of the Agreement on Agriculture applied only "[d]uring the implementation period," which is defined in Article 1(f) of that Agreement as follows:

... the six-year period commencing in the year 1995, except that, for the purposes of Article 13, it means the nine-year period commencing in 1995;

7.53.
Both parties agree that the "implementation period" ran at least until the end of 2003.86 The European Communities indicated, in response to a question from the Panel, that depending on whether 'years' are defined as financial or marketing years, the date of expiry of the implementation period might have been some point during 2004.87
7.54.
Although the parties do not agree on the actual date on which the implementation period expired, the claims raised by the European Communities relate to Mexico's initiation of the olive oil investigation.88 As we have found in paragraph 7.31 above, the investigation was initiated on 17 July 2003. This date was well within the implementation period and before Article 13 expired. Therefore, we do not need to decide, for the purposes of this case, precisely when Article 13 expired. It is clear that Article 13 was in force and applicable at the time Economía initiated the countervailing duty investigation on olive oil imports from the European Communities.89 Therefore, we hold that Article 13 applies to the initiation of the countervailing duty investigation by Mexico in this case.

(b) Article 13(b)(i) of the Agreement on Agriculture

7.55.
There are three legal elements in Article 13(b)(i). First, the chapeau of paragraph (b) provides that the obligations and exemptions set forth in the succeeding subparagraphs only apply to "domestic support measures" which conform fully to the provisions of Article 6 of the Agreement on Agriculture. Second, subparagraph (i) exempts such products from the imposition of countervailing duties, unless a determination of injury or threat thereof is made in accordance with Part V of the SCM Agreement. Third, subparagraph (i) also requires that "due restraint shall be shown in initiating any countervailing duty investigations" in relation to those measures.
7.56.
The European Communities, as the complainant, bears the burden of proving that the provisions of Article 13(b)(i) are applicable to the measures at issue and that Mexico has acted inconsistently with its obligations under those provisions.90 Therefore, the European Communities must first demonstrate that its domestic support measures satisfy the requirement in the chapeau of paragraph (b), namely that they conform fully to Article 6 of the Agreement on Agriculture. Then, the European Communities must demonstrate that Mexico has not complied with the provisions of subparagraph (i) of paragraph (b).

(i) Domestic Support Measures which Fully Conform with Article 6 of the Agreement on Agriculture

7.57.
In its first written submission, the European Communities asserts that the production aid provided to olive growers by the European Communities, which are the basis for the imposition of countervailing duties, conform fully to Article 6 of the Agreement on Agriculture.91
7.58.
Mexico did not specifically dispute this assertion and, in fact, conducted its countervailing duty investigation as if the European Communities' domestic support measures were in conformity with Article 6 of the Agreement on Agriculture.92
7.59.
As Mexico conducted the olive oil investigation as if Article 13(b) of the Agreement on Agriculture applied to that investigation, we will proceed on the basis of the same assumption, arguendo, for the purposes of this dispute.93 We note, however, that had this issue been contested between the parties, it would have been incumbent upon the European Communities in the first instance to demonstrate that the provision was applicable.

(ii) Exempt from Imposition of Countervailing Duties Unless a Determination of Injury or Threat Thereof is Made

7.60.
The European Communities argues that Mexico acted inconsistently with Article 13(b)(i) because it accepted an application on the basis of an allegation of material retardation, which is not referred to in that provision, rather than an allegation of injury or threat thereof, which are referred to therein.94 In particular, the first part of subparagraph (i) provides that products covered by the chapeau of paragraph (b) are "exempt from the imposition of countervailing duties unless a determination of injury or threat thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement."
7.61.
We note that the first clause of Article 13(b)(i) refers inter alia to "injury or threat thereof… in accordance with …Part V of the Subsidies Agreement." The paragraph does not refer to "material injury", but rather to "injury". "Injury", in turn, is defined in footnote 45 of the SCM Agreement as "material injury to a domestic industry, threat of material injury to a domestic industry or material retardation of the establishment of such an industry" (emphasis added.) In other words, the definition of the term "injury" for purposes of the SCM Agreement encompasses the concept of material retardation. We therefore do not find that the first clause of subparagraph (i) prohibits the imposition of duties on the basis of a determination of material retardation as opposed to determinations of material injury or threat of material injury.
7.62.
Furthermore, and in any case, we note that the claim of the European Communities focuses on the basis of Economía's initiation of the olive oil investigation, and not on the basis for the imposition of the measures. In particular, the argument of the European Communities is that no investigation should have been initiated on the basis of a form of injury (material retardation) that was not permitted as a basis for the imposition of measures. Even assuming arguendo that the European Communities were correct that the first clause of Article 13(b)(i) excluded determinations of material retardation, we disagree that this clause is relevant to initiation. Instead, the plain language at issue is expressly limited to the "imposition of countervailing duties". Here, we are mindful of the guidance of the Appellate Body not to impute into a treaty words that are not there or to import concepts that were not intended.95 We also recognize that our duty is to interpret the words actually used in the agreement under examination, not the words the interpreter (or one of the parties) may feel should have been used.96
7.63.
Finally, even if the European Communities were correct both that the first clause of Article 13(b)(i) is relevant to initiation, and that it precludes initiation based on claims of material retardation, we note as a factual matter that Economía initiated the olive oil investigation on the basis of "injury", in the broad sense of the term as defined in footnote 45 of the SCM Agreement, and that it imposed provisional and final countervailing duties on the basis of "material injury"97, not material retardation.
7.64.
For these reasons, assuming arguendo that Article 13(b)(i) of the Agreement on Agriculture applied to the olive oil investigation, we find that the European Communities has not established that Mexico failed to comply with the requirement in Article 13(b)(i) of the Agreement on Agriculture to exempt olive oil from imposition of countervailing duties "unless a determination of injury or threat thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement."

(iii) Due Restraint Shall be Shown in Initiating Any Countervailing Duty Investigation

7.65.
The European Communities argues that Mexico acted inconsistently with Article 13(b)(i) by failing to show "due restraint" in initiating the countervailing duty investigation on imports of olive oil from the European Communities. The European Communities defines the verb "to restrain" as to "hold back or prevent from some course of action" or "restrict, limit."98
7.66.
Mexico argues that "due restraint" simply means adopting an appropriate and reasonable standard for allowing an investigation to be initiated, and that it does not involve doing anything differently in cases of agricultural, as compared with non-agricultural, products.99
7.68.
We consider this definition to be consistent with the context of Article 13 as a whole, as well as with the object and purpose of the provision, which is to provide a "peace clause", during the implementation period, for Members taking actions permitted under the SCM Agreement against subsidies that are provided consistent with the provisions of the Agreement on Agriculture.
7.69.
Having determined what the obligation to show "due restraint" requires, we now apply that standard to the facts of this case to determine whether the European Communities has demonstrated that Mexico did not comply with this obligation in initiating the countervailing duty investigation.
7.70.
The European Communities provides three reasons why, in its view, Economía failed to exercise "due restraint" within the meaning of Article 13(b)(i).108 These are that: (1) Economía did not wait to hold consultations with the European Communities prior to initiation, but plunged into the investigation at the first possible moment109; (2) Economía did not spend adequate time investigating, prior to initiation, whether there were domestic producers other than Fortuny, but paused only to take account of Fortuny's position; and (3) Economía accepted an application which was clearly based on "material retardation" and converted it into one of "material injury."110
7.71.
We will examine each of these specific circumstances to determine whether Economía's actions in the olive oil investigation evince such a lack of restraint as to fall short of the "due restraint" obligation of Article 13(b)(i) of the Agreement on Agriculture as interpreted above, again assuming arguendo that that obligation applied to the investigation.
7.72.
With respect to Economía 's initiating the countervailing duty investigation prior to holding consultations, we note that Article 13(b)(i) of the Agreement on Agriculture requires investigating authorities to show "due restraint" in initiatingany countervailing duty investigation on products covered by the chapeau of paragraph (b). As noted in our findings relating to the European Communities' claim under Article 13.1 of the SCM Agreement,a Member is not required to holdthe consultations referred to in that provision prior to initiation. Therefore, we do not see how the failure to take an action that is not required for initiation can be considered evidence of a lack of due restraint in initiatingthe countervailing duty investigation. We also note that we have found that Mexico did not infringe its obligations under Article 13.1 of the SCM Agreement to invite the European Communities to consultations prior to initiation (see, para. 7.42, supra). Having made this finding, we do not see how the timing of this invitation is evidence of "haste" or of a lack of self-control or reserve, as alleged by the European Communities.
7.73.
With respect to the lack of investigation into other possible domestic producers besides Fortuny we note, as described in Section VII.I, that in its application Fortuny asserted that it accounted for 100 per cent of the olive oil production on the commercial market in Mexico and that there were no other domestic producers other than those operating on a "local" or "experimental" basis.111 Fortuny also provided a table of monthly production for 2000, 2001, and 2002.112 Economía sent a "prevención" or supplemental questionnaire to Fortuny asking for, inter alia, additional data on injury indicators, annual capacity and capacity utilization as well as information on any government support programmes that may have been affected by the increase of subsidized imports, information on the world olive oil market, including European production and exports, and audited financial statements for 2000, for the 2001 separation of Formex-Ybarra, and for 2002 for Fortuny and an income statement for the like product for 2000-2002.113 Fortuny responded with additional data, some based on simple worksheets that were in its possession rather than audited financial records that were in the possession of Distribuidora Ybarra.114
7.74.
Economía compared the data provided by Fortuny to information from other sources, namely the government of Baja California and the article published in Claridades Agropecuarias about the olive oil industry in Mexico, which were also provided in the application. Economía found that these other sources corroborated Fortuny's statement that it comprised the entire domestic industry.
7.75.
The evidence before us shows that Economía received an application from Fortuny. Economía, seeking to ensure that it had all the necessary information for initiation, sent additional questions to Fortuny and awaited a reply. Economía also checked the assertions of Fortuny against information from independent sources, the government of Baja California and the magazine Claridades Agropecuarias, which were provided by Fortuny as attachments to its application. Through this process, which took approximately four months, Economía satisfied itself that it had information sufficient to meet the requirements for initiating a countervailing duty investigation.
7.76.
We find nothing in this behaviour that exhibits a lack of self-control or reserve. Therefore, we find that Economía did not fail to exercise due restraint by neglecting to investigate the extent of the domestic industry prior to initiation.
7.77.
The European Communities also alleges that Economía's "conversion" of an application based on material retardation into one of material injury evinces a lack of due restraint within the meaning of Article 13(b)(i) of the Agreement on Agriculture.
7.78.
In this regard, Mexico argues that Economía, upon reviewing Fortuny's application, concluded that it was not possible in principle to initiate an investigation for material retardation in respect of an enterprise that had been producing olive oil since the 1940s.115 Because of this, Economía sent additional questions to Fortuny with respect to the history of olive oil production in Mexico and the production history of Formex-Ybarra (Fortuny's predecessor company).116 Economía concluded that it would be best to initiate an investigation in respect of injury in general and then, during the course of the investigation, determine the specific nature of any injury caused to the domestic industry by subsidized imports.117 Consequently, Economía initiated the investigation on the basis of "injury" in the broad sense of the term within the meaning of footnote 45 of the SCM Agreement.118
7.79.
We consider Economía's decision to delay initiation in order to gather more information from the applicant and to avoid initiating on a basis not supported by the evidence in the application to be indicative of self-control and reserve rather than the lack thereof. Therefore, we find that the European Communities has not established that Economía failed to exercise due restraint by "converting" Fortuny's application from one of material retardation into an investigation of injury.
7.80.
In sum, we find that none of the reasons presented by the European Communities demonstrates a lack of due restraint on the part of Economía. To the contrary, based on our examination of the facts before us, Economía appears to have proceeded with prudence and caution, indicating self-restraint rather than a lack thereof. Therefore, we conclude that the European Communities has not established as a factual matter that Economía failed to show due restraint in initiating the countervailing duty investigation on olive oil.
7.81.
Assuming arguendo that Article 13(b)(i) of the Agreement on Agriculture was applicable to the olive oil investigation, we find that the European Communities has not demonstrated that Mexico failed to comply with the requirement in that provision to exempt olive oil from imposition of countervailing duties "unless a determination of injury or threat thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement". Nor has the European Communities demonstrated that Mexico failed to show due restraint in initiating the countervailing duty investigation on olive oil. Therefore, we find that the European Communities has not established that Mexico acted inconsistently with Article 13(b)(i) of the Agreement on Agriculture.

D. ARTICLE 12.4.1 OF THE SCM AGREEMENT

7.82.
The European Communities asserts that Mexico failed to require interested parties to provide non-confidential summaries of confidential information and that Mexico therefore acted inconsistently with its obligations under Article 12.4.1 of the SCM Agreement.

1. Arguments of the Parties

7.83.
The European Communities asserts that Mexico failed to require interested parties to provide non-confidential summaries of the confidential information that they submitted to Economía and that such interested parties did not justify their failure to provide non-confidential summaries by invoking "exceptional circumstances" within the meaning of Article 12.4.1 of the SCM Agreement.
7.84.
Mexico asserts that the interested parties did furnish non-confidential summaries of confidential information in compliance with Article 12.4.1. It also argues that the Mexican legal system allows representatives of interested parties to access confidential information, so that even if the investigation file did not contain public summaries of information provided by an interested party, the obligations and objectives in Article 12.4.1 of the SCM Agreement would have been met.

2. Reasoning of the Panel

7.85.
Article 12.4.1 of the SCM Agreement reads as follows:

12.4.1 The authorities shall require interested Members or interested parties providing confidential information to furnish non-confidential summaries thereof. These summaries shall be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. In exceptional circumstances, such Members or parties may indicate that such information is not susceptible of summary. In such exceptional circumstances, a statement of the reasons why summarization is not possible must be provided.

7.86.
Article 12.4.1 provides that an investigating authority shall require interested Members or interested parties submitting confidential information also to supply non-confidential summaries of that information for the record. These summaries shall be "in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence".
7.87.
Where confidentiality is claimed with respect to a specific document, we consider that the provision of a public version of that document, from which confidential information has simply been removed, may not necessarily satisfy the requirements of Article 12.4.1. This is because what is required to be summarized pursuant to Article 12.4.1 is the confidential information. The remaining non-confidential parts of the document may not, by themselves, be sufficient to convey a "reasonable understanding" of the substance of the confidential information that has been removed so as to constitute an adequate summarization of that information.
7.88.
There may be circumstances in which the information remaining in the public version of a document may be sufficient, in itself, to provide the required summary of the confidential information. In such circumstances, no additional summary would be required. Such circumstances are likely to be limited, however, given that what the SCM Agreement requires is that the summary conveys a reasonable understanding of the substance of the confidential information. In any event, the sufficiency of a public version of a document from which confidential information has been removed as a "summary" of the removed information clearly must be determined on a case‑by‑case basis.
7.91.
The panel in Mexico – Steel Pipes and Tubes considered the obligations of an investigating authority in assessing an assertion that summarization is not possible in the context of the equivalent provision of the Anti-dumping Agreement (i.e. Article 6.5.1 of the Anti-dumping Agreement). There, the panel concluded:

There is no express provision regulating what should occur in the circumstance where an investigating authority considers that a request for confidentiality is warranted, beyond the obligation to treat such information as confidential. Nor does the text of the Article 6.5 or 6.5.1 contain any express obligation relating to how an investigating authority should decide in respect of a party's assertion that summarization of confidential information is not possible, nor how an investigating authority should or must communicate any decision on this matter.121 (footnotes omitted) (emphasis in original)

7.93.
Before turning to the facts of this case, we briefly consider Mexico's argument that its system, by providing certain representatives of interested parties with access to confidential information, means that even if no public summaries were provided the "obligation and objective established in Article 12 of the SCM Agreement would in any case be complied with".122
7.94.
The panel in Mexico – Steel Pipes and Tubes rejected a similar argument that Mexico's limited disclosure system excuses it from complying with the obligation in Article 6.5 of the Anti-dumping Agreement to require summaries of confidential information.123 We agree with that panel and find no textual support in Article 12.4.1 of the SCM Agreement for the proposition advanced by Mexico. We therefore adopt the following statement of the panel in Mexico – Steel Pipes and Tubes:

Notwithstanding the foregoing, while such a system of limited disclosure is certainly envisaged by Article [12.4.1 of the SCM Agreement], and may certainly act as a supplement to a Member's fulfilment of its obligations under Article [12.4.1 of the SCM Agreement], we find no textual basis in Article [12.4.1 of the SCM Agreement] that would indicate to us that permitting limited access to the entire confidential record to individuals fulfilling certain conditions, provides a derogation from, or replaces, the obligations of an investigating authority under Article [12.4.1 of the SCM Agreement] to require justification for treatment of information as confidential and, if such treatment is justified, to require non-confidential summaries of the confidential information, or, alternatively, to require justification for the non-summarization of certain information. (footnotes omitted)124

7.95.
In its submissions before us, Mexico argued that the panel report in Mexico – Steel Pipes and Tubes supports its position that Mexico's access regime fulfils its obligations in Article 12.4.1.125 On the basis of the above cited passage, we disagree with Mexico's characterization of that panel's conclusions. While that panel ultimately found that Mexico had not acted inconsistently with Article 6.5.1 of the Anti-dumping Agreement, it did not rely on Mexico's arguments relating to its access regime.
7.96.
We now consider whether, in this case, Mexico required non-confidential summaries satisfying the requirements of Article 12.4.1 of the SCM Agreement. Although the entire administrative record was not before us, we asked Mexico to provide us with certain documents, which the European Communities specifically alleged did not contain non-confidential summaries of confidential information in the administrative record.126 Mexico provided us and the European Communities with the requested documents.127 We find, in respect of the documents that we have examined, that there is a "public version" of each submitted document that contained confidential information. The public versions of all of these documents consist of the original documents from which all of the confidential information was simply removed. None of these documents contains any summary of the deleted confidential information.
7.99.
We next consider whether any party submitting non-confidential documents from which confidential information was deleted invoked "exceptional circumstances" and provided an explanation as to why summarization was not possible, as contemplated in the last sentence of Article 12.4.1. The European Communities' position in these proceedings is that no interested party invoked "exceptional circumstances". However, our review of the documents on the record reveals that certain interested parties, namely Fortuny and Ybarra, in cover letters accompanying information submissions to Economía asserted that the information for which confidentiality was claimed could not be summarized.
7.100.
For example, the cover letter to Fortuny's application contains the following statement:

It is necessary to clarify that it is not possible to prepare public summaries of the information and documents that we classified as confidential because of the nature of such information and documents. Also, it is necessary to emphasize that consultation of the public version of the presented documents gives a reasonable and integral understanding of what is submitted.131

7.102.
Based on our reasoning above, we conclude that Mexico has acted inconsistently with its obligations in Article 12.4.1 of the SCM Agreement.

E. ARTICLE 12.8 OF THE SCM AGREEMENT

7.103.
The European Communities claims that Mexico failed to comply with its obligations in Article 12.8 of the SCM Agreement because Economía failed to inform the interested Members and interested parties of the "essential facts under consideration which form the basis for the decision whether to apply definitive measures" as required by this provision.

1. Arguments of the Parties

7.104.
The European Communities claims that Economía did not provide any written communication to the interested Members and interested parties informing them of the "essential facts under consideration which form the basis for the decision whether to apply definitive measures" as required by Article 12.8 of the SCM Agreement, and that Mexico therefore has acted inconsistently with its obligations under that provision.132
7.105.
Mexico disagrees that no disclosure was made, and argues that Economía made the required disclosure via the Preliminary Resolution.133 Mexico maintains that no further disclosure was necessary because no new essential facts were gathered between the issuance of the Preliminary and Final Resolutions, the latter of which formed the basis for the definitive measures.134 In this context, Mexico states that Economía conducted a verification of Fortuny after the Preliminary Resolution was issued, and that this verification only confirmed the information that Fortuny had submitted previously, for which reason the verification did not generate any new essential facts. Mexico argues that the panel report in Argentina – Ceramic Tiles supports its position, as that panel found that the requirements of Article 12.8 can be met in a variety of ways depending upon the facts of the case, including through the issuance of a preliminary determination.135
7.106.
In response to Mexico's argument that Economía's Preliminary Resolution constituted the disclosure of "essential facts" the European Communities argues that that Resolution was inadequate for that purpose, inter alia, because it was not identified as performing that function.136

2. Reasoning of the Panel

7.107.
Article 12.8 of the SCM Agreement provides as follows:

The authorities shall, before a final determination is made, inform all interested Members and interested parties of the essential facts under consideration which form the basis for the decision whether to apply definitive measures. Such disclosure should take place in sufficient time for the parties to defend their interests.

7.108.
We recall that, as the party making the claim, the European Communities bears the burden of establishing a prima facie case of the alleged inconsistency. From this standpoint, we note that the main disagreement between the parties is factual, namely whether Economía's Preliminary Resolution satisfied the requirement in Article 12.8 to disclose "essential facts". In particular, Mexico does not assert that Economía provided the interested Members and interested parties with a specially prepared "essential facts" document, but instead points to the Preliminary Resolution as the means by which it complied with its obligations under Article 12.8. The European Communities, for its part, does not argue that there was no Preliminary Resolution, or that Article 12.8 imposes an obligation to produce a separate "essential facts document". Instead the European Communities maintains that the Preliminary Resolution did not satisfy the requirements of Article 12.8, in part because it was not identified as performing this function, and in part because factual evidence was gathered after the issuance of that Resolution, some of which must have constituted new "essential facts".137
7.109.
The European Communities argues that a preliminary determination could "hardly ever" provide adequate disclosure of essential facts, inter alia because confidential company-specific information cannot be revealed in such a public document, and because a preliminary determination provides the justification for provisional measures and there could be further factual investigations following the preliminary determination that could produce "new or changed essential facts".138 The European Communities does not assert that a preliminary determination can never, as a legal matter, satisfy the disclosure requirement in Article 12.8, but it argues that in the olive oil investigation, Economía committed a legal error by not informing the parties that the Preliminary Resolution was serving this purpose, thereby denying them the opportunity to "defend their interests" as required by Article 12.8.139 Mexico argues that previous panels, particularly the panel in Argentina – Ceramic Tiles, have made clear that Article 12.8 disclosure can be made via preliminary determinations, and that in the olive oil investigation this was sufficient because none of the essential facts changed between the preliminary and final determinations. Thus, the precise question raised by this claim is whether the European Communities has established that the Preliminary Resolution in the olive oil investigation did not satisfy the disclosure obligation in Article 12.8.
7.111.
The allegation of the European Communities is along the same lines. The European Communities does not challenge the possibility as such of making disclosure under Article 12.8 via a preliminary determination, but rather argues that in the olive oil investigation, the preliminary determination was not sufficient for this purpose based on the facts, namely that Economía obtained a large volume of factual material after issuing the Preliminary Resolution, including at the verification of Fortuny. Specifically, the European Communities references three documents, Exhibits MEX-42A, 51D, and 51E1, which it asserts were submitted after the Preliminary Resolution and include substantial data regarding Fortuny.141 However, the European Communities maintains that it is "not in a position to state definitively whether these constituted essential facts because in the versions of the documents that Mexico has provided the confidential information has been blanked out"142. The European Communities, states, nevertheless, that "it can hardly be imagined" that among these "there was not some information that would not qualify as 'essential facts'"143, and further that the interested parties were not informed that the Preliminary Resolution was performing the Article 12.8 disclosure function.
7.112.
Concerning this latter argument of the European Communities, that pursuant to Article 12.8 Economía should have informed the interested parties that the Preliminary Resolution was performing the Article 12.8 disclosure function, the European Communities identifies the problem as one of due process. In particular, the European Communities asserts that because the interested parties did not know that the Preliminary Resolution was performing this function, they did not have the opportunity to "defend their interests" in respect of the "essential facts" contained therein.144 The record of the investigation does not support this assertion, however. To the contrary, the Final Resolution identifies a number of steps in the investigation following the issuance of the preliminary determination during which the parties had the opportunity to present their views, including specifically in respect of the Preliminary Resolution. These steps, which are summarized at paragraphs 29-69 of the Final Resolution, included technical meetings between Economía and certain interested parties, a call by Economía for written submissions of arguments and evidence in respect of the Preliminary Resolution, consultations between the governments of the European Communities and Mexico, a public hearing, and an opportunity following the hearing to make further written submissions concerning any aspect of the proceedings.
7.113.
Indeed, the assertion of the European Communities is not that the interested parties had no opportunity to present their views in respect of the Preliminary Resolution as such, but rather that they did not have the opportunity to present their views in respect of that Resolution in the guise of a document disclosing the "essential facts" pursuant to Article 12.8. Given that the Preliminary Resolution indicated that the facts stated therein were the basis of the preliminary determinations of subsidization, injury, and causation and given the numerous opportunities provided to the interested parties following the issuance of the Preliminary Resolution to provide such evidence and arguments as they wished, we do not consider that the European Communities has established that the interested parties were denied the opportunity to defend their interests in respect of the "essential facts".145
7.114.
We now turn to the factual aspect of this claim, i.e., that new "essential facts" almost certainly were obtained by Economía following its preliminary determination but were not disclosed. Given that the European Communities is the party asserting the claim it bears the burden of identifying any particular facts of record in the olive oil case that were not disclosed in the Preliminary Resolution but were nevertheless "essential facts" relied upon by Economía in making its final determinations in respect of subsidization, injury, and/or causation. Any such undisclosed "essential facts" relied upon by Economía should be evident in the Final Resolution.
7.115.
In this regard, we note that in its second written submission, the European Communities identified several exhibits that were submitted to Economía after the Preliminary Resolution, which it argued must have contained essential facts. However, the European Communities did not identify any specific determination in the Final Resolution that relied upon the information in those exhibits. In response to a direct question from the Panel asking the European Communities to identify specific "essential facts" that were not included in the Preliminary Resolution, but formed part of the basis of the determination in the Final Resolution, the European Communities' response, however, consists only of brief and generally-worded assertions referring to large documents without referring to any specific fact of record, nor does the European Communities attempt to demonstrate that new facts changed the basis for Economía's determinations with respect to the key elements – subsidization, injury and/or causation – in the Final Resolution as compared with the Preliminary Resolution.146 As such, we do not find that the European Communities has established a prima facie case that Economía failed to disclose the "essential facts" as required by Article 12.8 of the SCM Agreement.
7.116.
For the foregoing reasons, we find that the European Communities has not established that Mexico acted inconsistently with its obligations under Article 12.8 of the SCM Agreement.

F. ARTICLE 11.11 OF THE SCM AGREEMENT

7.117.
The European Communities asserts that Mexico failed to conclude its investigation within one year, and in no case more that 18 months after its initiation of the investigation in violation of Article 11.11 of the SCM Agreement.

1. Arguments of the Parties

7.118.
The European Communities asserts that Mexico has acted inconsistently with its obligations in Article 11.11 of the SCM Agreement, because the investigation lasted more than 24 months. In particular, the European Communities argues that the investigation was initiated on 2 July 2003147 and was concluded on 1 August 2005. It is the position of the European Communities that Article 11.11 contains an absolute limit (18 months) on the length of an investigation, and that Mexico exceeded this limit.148
7.119.
Mexico does not deny that its investigation lasted more than 18 months. It argues that the purpose of Article 11.11 is "to protect the interested parties from any unjustified delay or inaction" and that delays were caused by requests for extensions from the interested parties and requests that Economía consider additional information at late stages in the investigation. Consequently, any delay in the investigation did not subvert the purpose of Article 11.11.149

2. Reasoning of the Panel

7.120.
Article 11.11 reads as follows:

Investigations shall, except in special circumstances, be concluded within one year, and in no case more than 18 months, after their initiation. (emphasis added)

7.121.
We consider that the requirement set out in Article 11.11 is clear and unequivocal. This provision starts with a general rule – that investigations must be concluded within one year — and then provides for a limited, conditional exception. In particular, in "special circumstances" an investigation may be prolonged, but "in no case" may the total period of investigation exceed 18 months. We see no basis in this provision (nor authority in any other part of the SCM Agreement) to prolong an investigation beyond 18 months for any reason, including requests from interested parties.
7.122.
Concerning the facts of the case, while Mexico disagrees with the European Communities about the exact date of initiation (see section VII.B, supra), it does not deny that the olive oil investigation lasted longer than the 18-month maximum provided for in Article 11.11. We recall our finding, above, that the date of initiation was 17 July 2003. As such, the total length of the investigation was more than 24 months, i.e., well in excess of the 18-month absolute maximum.
7.123.
We find that Mexico's investigation in this case was concluded more than 18 months after the date of its initiation, and that Article 11.11 does not permit such prolongation under any circumstances. For that reason, we conclude that Mexico has acted inconsistently with its obligation under Article 11.11 of the SCM Agreement.

G. ARTICLES 1 AND 14 OF THE SCM AGREEMENT

7.124.
The European Communities claims that Mexico has acted inconsistently with Articles 1 and 14 of the SCM Agreement by failing "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."

1. Arguments of the parties

7.125.
The European Communities claims that Mexico has acted inconsistently with Articles 1 and 14 of the SCM Agreement by failing "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."150 In its submissions before us in support of this claim, the European Communities argues that Mexico acted inconsistently with Articles 1 and 14 because Economía failed to conduct a "pass-through" analysis to determine the extent to which any benefits received by olive growers for the production of olive oil were transmitted to the exporters of olive oil to Mexico.151 In particular, the European Communities argues that a "pass-through" analysis was required because: (1) the oil obtained by simple crushing of the olives was an input into the product finally exported; and (2) the persons upon whom the countervailing measures were imposed (identified by the European Communities as the exporters) were not related to the initial recipients of the subsidy, the olive growers, and the product had been the subject of arms' length transactions while moving between them.152 According to the European Communities, olives are an input into the production of olive oil, and the olive oil obtained from extraction is an input into the olive oil exported to Mexico, because the extracted oil had to undergo further processing (refining, blending, bottling, packaging) before it was exported.153 In response to questioning from us, the European Communities clarified that, in its view, a "pass-through" analysis is required even when only the second of the two conditions is met, i.e., when the exporters of olive oil are not related to the olive growers who receive the subsidies.154
7.126.
Concerning its allegation of inconsistency with Article 1.1 of the SCM Agreement, the European Communities argues that the crucial issue is whether the olive oil imported into Mexico from the European Communities is "subsidized" in the sense of the SCM Agreement. According to the European Communities, although the SCM Agreement says little about the relationship between the subsidy and the product in relation to countervail, Article VI:3 of the GATT 1994 makes clear that countervailing duties may only be imposed where there is a "'bounty or subsidy... on the manufacture, production or export of [an imported] product'", such that "the subsidy must be linked to some activity concerning the product".155 We note here, however, that the European Communities brings no claim under Article VI:3 of the GATT 1994 in relation to the "pass-through" issue. As regards Articles 1 and 14, the European Communities argues that "the Agreement does have a lot to say about [...] the notion of benefit", first, in Article 1 which explicitly makes benefit an element of "the notion of subsidy"156; and, second, in Article 14, which "addresses the 'calculation of the amount of a subsidy in terms of the benefit to the recipient'."157 The European Communities then states that what is to be "offset" in the sense of Article VI:3 of the GATT 1994 is the benefit conferred by the subsidy.158 The European Communities elaborates that "benefit is addressed by Article 1.1 of the Agreement, which defines it as one of the basic constituents of the concept of subsidy"159, and that "[b]enefit is also addressed by Article 14" which, in "lay[ing] down explicit rules for the methods by which benefit is to be calculated, does nothing to detract from the notion of pass through as elaborated by the EC".160 The European Communities also argues that "Article 14 puts beyond doubt the principle that the calculation of subsidy is one that is based absolutely on commercial realities, and... that it is on these realities that the notion of pass-through is founded."161
7.127.
The European Communities argues that because the subsidy was given to the olive producers, while other persons exported the product, olive oil, to the Member applying the countervailing measure, the investigating authorities needed to establish that the subsidy was passed through to the other persons.162 The European Communities cites the panel report in US – Canadian Pork which arose under the GATT 1947, as indicating that the existence of pass-through of the subsidy from live swine to pork producers would need to be determined by examining the degree to which the prices of the subsidized input product (live swine) were below market levels when the input was sold to the producers of the investigated processed product (pork). The European Communities further argues that the criterion of arms'-length sales has been established by the Appellate Body in the context of privatization of subsidized state-owned companies. In that context, according to the EC, "the criterion of arm's-length sale was coupled with that of sale for 'fair market value'".163
7.128.
Mexico argues that no pass-through analysis was necessary in the olive oil investigation. According to Mexico, the subsidy programme at issue was a direct subsidy on the production of the imported product, olive oil, and had been notified as such by the European Communities to the WTO Committee on Agriculture.164 Mexico asserts that since the investigation was not related to an input product (olives) but to olive oil, which was the same product exported to Mexico, the investigating authority was not bound to conduct a pass-through analysis.165 Mexico submits that the product that was subject to the investigation was olive oil in all its forms, from first crushed to blended and refined.166 Mexico argues that the EC Regulation establishing the programme, and the amendments thereto, make clear that the programme concerned a subsidy for olive oil and not for olives.167 Mexico argues that for these reasons, the jurisprudence on pass-through in the US – Canadian Pork and US – Softwood Lumber IV disputes is not applicable in this case.168
7.129.
Concerning the provisions of the SCM Agreement cited by the European Communities, Mexico argues that neither Article 1 nor Article 14 contains obligations to conduct a pass-through analysis as claimed by the European Communities. Regarding Article 1, Mexico submits that its text contains no requirement to provide a reasoned explanation of the existence of a subsidy or the need to undertake a pass-through analysis of the benefit. Rather, Article 1 only establishes, in a conceptual way, which elements must be present in order to determine that a subsidy exists.169 Mexico recalls that the European Communities is not arguing before the Panel that the aid scheme for olive oil was not a subsidy.170 Regarding Article 14, Mexico argues that this provision neither contains nor envisages any obligation to conduct a pass-through analysis of the benefit of a subsidy, and instead only provides guidelines applicable to the calculation of a benefit.171

2. Reasoning of the Panel

(a) "Pass-through" of Subsidy Benefits

(i) "Pass-through" Analysis in WTO Law

7.130.
We start our analysis by examining the basis in WTO law for the obligation to conduct a pass-through analysis in a countervailing duty investigation. This issue has been addressed specifically in two prior disputes, notably in US – Canadian Pork, a case under the GATT 1947, and more recently by the Appellate Body in US – Softwood Lumber IV.172 Both of these disputes have established that Article VI:3 of the GATT requires an investigating authority in a countervailing duty investigation to conduct a pass-through analysis in certain circumstances, and in Softwood Lumber IV,the panel and the Appellate Body found the same requirement in footnote 36 of Article 10 of the SCM Agreement.
7.131.
US – Canadian Pork was brought by Canada, under Article VI of the GATT 1947. In that case, the United States had applied countervailing measures on imports from Canada of fresh, chilled and frozen pork, while the subsidies that were the subject of the investigation had been provided to Canadian producers of live swine. The United States had effectively concluded that 100 per cent of the subsidies to swine producers had "passed through" to the producers of pork, although the subsidies were provided to the swine producers, not the pork producers, and the swine and pork producers were not vertically integrated, but rather were two separate industries composed of unrelated firms. Under US law at the time, subsidies provided to the producers of a raw agricultural product were deemed to be provided in respect of production of processed products made from the raw products if the demand for the raw product was "substantially dependent" on the demand for the processed product and the processing operation added only limited value to the raw product.
7.132.
Canada complained that the US measures were inconsistent with Article VI:3 of the GATT 1947 because the approach under US law did not correctly establish the amount of subsidization in respect of the imported product, pork. Canada's argument was that the US approach did not ensure that the countervailing measures were not applied "in excess" of the amount of subsidization of the product, contrary to the provisions of Article VI:3 of the GATT 1947 requiring that:

No countervailing duty shall be levied on any product of the territory of a Member imported into the territory of another Member in excess of an amount equal to the estimated bounty or subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in the country of origin or exportation…..

7.133.
The panel in US-Canadian Pork noted that Article VI:3 of the GATT 1947 limited the amount of countervailing duties to the amount of the subsidy "granted directly or indirectly on the production of 'such product'"173, (i.e., the imported product), and found that the United States could apply countervailing measures on imports of pork only if a subsidy had been determined to be bestowed on the production of pork. In this regard, the panel found that application of the two-part test under US law did not result in such a "determination", because it did not take into account "all facts necessary to meet the requirements of Article VI:3". The reasoning of the panel was that the pork and swine industries were separate, and operated at arms' length, such that the subsidies granted to the swine producers could only be considered to have been "bestowed on the production" of pork (as required by Article VI:3 of the GATT 1947) if they had led to a decrease in the level of prices that pork producers paid for live swine to below the level they would have had to pay for swine from other commercially available sources. Because the US two-part test did not address this issue, the panel found that it did not meet the requirements of Article VI:3 of the GATT 1947.174
7.134.
The dispute in US -Softwood Lumber IV addressed a similar issue. In that case, the United States applied countervailing duties on imports of softwood lumber, including remanufactured lumber, from Canada on the basis of subsidies to the harvesting of timber, i.e., the production of raw logs, the input into the production of primary lumber. In particular, the subsidies arose from the fact that timber harvesters paid "less than adequate remuneration" for a government-provided good, standing timber. When the timber was harvested, some of the raw logs were converted to lumber by sawmills, and some of that lumber was then further processed into remanufactured lumber. The United States applied countervailing measures on the imported lumber, including remanufactured lumber, to offset the stumpage subsidies.
7.135.
Canada claimed that the United States had improperly assumed, rather than analyzing and determining, that the stumpage subsidies had passed through to producers of the primary and remanufactured lumber products that were subject to the countervailing measures, and that the United States thus had acted inconsistently with Articles 10, 19 and 32 of the SCM Agreement and Article VI:3 of the GATT 1994.
7.136.
The panel found in favour of Canada's claims under Article 10, and consequentially Article 32 of the SCM Agreement, as well as Article VI:3 of the GATT 1994, in respect of the situations in which producers of logs were unrelated to the sawmills that processed the logs into primary lumber and in which producers of remanufactured lumber were unrelated to the lumber manufacturers (sawmills) from which the remanufacturers obtained their lumber inputs. The panel found that no pass-through analysis was required where the producer of the inputs was related to the lumber producer (i.e., where the production was vertically integrated). The panel exercised judicial economy in respect of Canada's Article 19 claim.
7.137.
The Appellate Body upheld the panel's findings that Article 10 of the SCM Agreement and Article VI:3 of the GATT 1994 require a pass-through analysis in circumstances in which a subsidy is received by a producer of an input product, and the imported product subject to the countervailing duty investigation is a different, downstream product produced by an unrelated producer using the subsidized input.
7.138.
The Appellate Body began its analysis with Article VI:3, noting that this provision "prohibits levying countervailing duties on an imported product 'in excess of an amount equal to the estimated... subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of any merchandise'".175 On this basis, the Appellate Body held that it would not be possible to determine whether countervailing duties were imposed in excess of the amount of the total subsidy accruing to a processed product without establishing whether, and in what amount, the subsidies bestowed on the input product flowed through to the downstream, imported product. The Appellate Body noted that this interpretation was supported by the definition of a "countervailing duty" in footnote 36 to Article 10 of the SCM Agreement, that is, that a countervailing duty is a special duty levied for the purpose of "offsetting" a subsidy bestowed directly or indirectly upon the manufacture, production or export of any merchandise.176
7.139.
More specifically, the Appellate Body found that if a subsidy is conferred on the production of an input product used to produce the imported product, and the producer of the input product is unrelated to the producer of the imported product, it would not be possible to establish that the countervailing duties on the imported product were not in excess of the amount of the subsidy if no analysis was performed to determine the extent to which the subsidy on the input product was transferred to the imported product. In the absence of a pass-through analysis, the Appellate Body emphasized, "it cannot be shown that the essential elements of the subsidy definition in Article 1 are present in respect of the processed product", such that "the right to impose a countervailing duty on the processed product for the purpose of offsetting an input subsidy [...] would not have been established in accordance with Article VI:3 of the GATT 1994, and, consequently, would also not have been in accordance with Articles 10 and 32.1 of the SCM Agreement."177Here, the Appellate Body quoted the panel's finding in US – Canadian Pork that the United States could apply countervailing measures on imports of pork "only if a subsidy had been determined to have been bestowed on the production of pork", and the Appellate Body's ruling in United States – Countervailing Measures on Certain EC Productsthat Article VI:3 of the GATT 1994, in conjunction with Article 10 of the SCM Agreement, require that "investigating authorities, before imposing countervailing duties, must ascertain the precise amount of a subsidy attributed to the imported products under investigation."178
7.141.
The disputes in US – Lead and Bismuth II andUS – Countervailing Measures on Certain EC Productsaddressed a different question concerning transmission of subsidy benefits between unrelated parties, based on entirely different fact situations those in US – Canadian Pork and US – Softwood Lumber IV.181 The issue in those cases related to the effect of the privatization of state-owned firms on the continued existence of benefits from non-recurring subsidies that those firms had received in the past. In both of those cases, inconsistencies were found with Articles 10, 19.1, and 19.4 of the SCM Agreement, as well as, in the case of US-Lead and Bismuth II, Article 21.2 of the SCM Agreement and Article VI:3 of the GATT 1994, and in the case of US – Countervailing Measures on Certain EC Products, with Article 14 of the SCM Agreement. All of these provisions were found to have been violated because the investigating authorities had presumed, instead of analyzing and determining, that the benefits from the past non-recurring subsidies continued to exist and had been fully transferred to the firms' new owners after the privatizations had taken place, in spite of the fact that the new owners had paid fair market value for the firms. The United States was found therefore to have improperly continued to apply countervailing duties to imports produced by the privatized firms, without having established whether any subsidies continued to exist.
7.142.
To summarize, the US - Softwood Lumber IV and US – Canadian Pork cases haveestablished that a pass-through analysis is required in circumstances in which both of the following conditions are present: (1) a subsidy is provided in respect of a product that is an input into the processed, imported product that is the subject of the countervail investigation; and (2) the producer of the input product and the producer of the imported product subject to the countervail investigation are unrelated. This obligation to conduct a pass-through analysis arises under Article VI:3 of the GATT and Article 10 of the SCM Agreement. As the Appellate Body stated in US - Softwood Lumber IV, "because Article VI:3 permits offsetting, through countervailing duties, no more than the 'subsidy determined to have been granted... on the manufacture [or] production... of such product', it follows that Members must not impose duties to offset an amount of the input subsidy that has not passed through to the countervailed processed products."182 There is also jurisprudence that in cases in which non-recurring subsidies were provided to state-owned enterprises that were later privatized at fair market values, the investigating authorities must conduct examinations to determine whether any of those past subsidies continued to exist following the privatization. We do not find this latter jurisprudence to be relevant in the case before us, and therefore we will focus on the cases relating to subsidies provided on input products.
7.144.
In this respect, we recall that the SCM Agreement and Article VI:3 of the GATT 1994 both explicitly permit the application of countervailing measures to "offset" subsidies "bestowed upon [...] the manufacture, production or export" of a product (emphasis added). Taking the simplest hypothetical example, where a subsidy is provided directly to a producer of a product coming within the scope of a countervailing duty investigation, we do not see how that company's eventual sale of the product to an unrelated firm (e.g., a distributor) would have a bearing on the fact that a subsidy has been bestowed in respect of the "production" of that product. Taken to its logical conclusion, the argument by the European Communities, that a pass-through analysis must be conducted in every case in which there are transactions between unrelated firms relating to the product under investigation, would mean that a pass-through analysis would be required in almost every countervail investigation, even when the subsidy was provided directly on the investigated product. We now turn to examine the claims of the European Communities in relation to this issue.

(ii) Claim of the European Communities pursuant to Article 1.1 of the SCM Agreement

7.145.
For reasons not clear to us, and in spite of the fact that the legal bases for a "pass-through" obligation in the past jurisprudence were found in Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement, the European Communities has based its "pass-through" claims in this case solely on the basis of Articles 1 and 14 of the SCM Agreement. The Request for Establishment of a Panel makes no reference in this context to either Article VI:3 of the GATT 1994 or to Article 10 of the SCM Agreement. In its written submissions and in response to questions from the Panel, the EC based its "pass-through" claims on Articles 1 and 14 of the SCM Agreement. We are therefore obliged to consider the European Communities' "pass-through" claims exclusively under the provisions it has cited.184 This requires us to consider an entirely novel legal argument: that an obligation to conduct a "pass-through" analysis in a countervail investigation exists in Articles 1 and 14 of the SCM Agreement.185
7.146.
Turning first to the European Communities' claim pursuant to Article 1.1 of the SCM Agreement, it is well established that the definition of "subsidy" set forth in that provision applies to the entire SCM Agreement186 as well as to the relevant provisions of Article VI of the GATT 1994. This definition provides, in relevant part:

Article 1

Definition of a Subsidy

1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government")...

and

(b) a benefit is thereby conferred.

7.147.
The European Communities' "pass-through" claim appears to be based on the definition of a subsidy in Article 1.1 and, in particular, on the element of "benefit" in subparagraph (b) of that provision. The European Communities' argument is that Mexico did not conduct a pass-through analysis, that it should have done so in the circumstances of this investigation, and that this failure was inconsistent with the "benefit" requirement of Article 1.1, because "the element of the definition of subsidy with which the notion of pass through is most closely linked is that of 'benefit'".187 The European Communities also cites Article 14 in the context of "benefit", stating that this provision addresses the calculation of benefit in terms of benefit to the recipient, and establishes that such calculation must be based on "commercial realities", which are the basis for the notion of pass-through.188
7.148.
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.189 In particular, we asked the European Communities to provide a legal analysis of the provisions it cited and to explain its legal arguments in detail, on the basis of the texts of those provisions, the Vienna Convention, and past case law, as to precisely how the obligation to conduct a pass-through analysis lies in Articles 1 and 14. The European Communities responded that the requirement is implicit, not explicit, and that the Vienna Convention is of limited use in respect of implicit requirements.190 Concerning past cases, the European Communities stated that the claims in the US - Softwood Lumber IV dispute were based on other provisions than Articles 1 and 14 because that was how the complaining party chose to frame its claims in that case, and that the claim in US- Canadian Pork was necessarily based on the GATT 1947 (given that the case predated the SCM Agreement). The European Communities cited US – Countervailing Measures on Certain EC Products, acknowledging that it concerned a different fact situation, but stating that it was relevant nevertheless because it stands for the proposition that the benefit must be conferred on the producer of the product concerned, and a violation of Article 14 was found in that case.191
7.149.
Turning to the analysis of Article 1.1 specifically, we note that as a general rule under the SCM Agreement, if a measure under investigation in a countervailing duty investigation involves a financial contribution in the sense of Article 1.1(a)(1), but no benefit is conferred thereby in the sense of Article 1.1(b), then no subsidy exists, and no countervailing duty can be applied in respect of that measure. In such a circumstance, the investigated measure would not constitute a subsidy, and application of a countervailing duty would be inconsistent with Article 1.1 of the SCM Agreement.192
7.150.
However, in this case, the European Communities is not arguing that a benefit was not provided, and that therefore a subsidy did not exist within the meaning of Article 1.1. Indeed, in its submissions before us, the European Communities maintains that this is not its argument.193 Rather, its allegation is that Mexico did not properly calculate the amount of the benefit from the subsidy that was directly attached to the exporters of olive oil.
7.151.
As Article 1.1 contains a definition of the term "subsidy" for the purposes of the SCM Agreement, the issue in the cases interpreting that provision has been whether or not a "benefit" existed, and therefore whether or not there was a subsidy. We do not see in Article 1.1 any language specifically relating to how the amount of the benefit is to be calculated in a countervail investigation.194
7.153.
On the basis of the foregoing analysis, we conclude that Article 1.1 of the SCM Agreement does not contain a requirement as to how the amount of the benefit must be calculated for the purposes of imposing countervailing duties. We therefore find that the European Communities has not established that Mexico acted inconsistently with its obligations under Article 1.1 of the SCM Agreement by failing to conduct a pass-through analysis in the olive oil investigation.

(iii) Claim of the European Communities pursuant to Article 14 of the SCM Agreement

7.154.
We now turn to the European Communities' claim under Article 14 of the SCM Agreement. This claim, as set forth in the Request for Establishment of a Panel, is that Economía "fail[ed] to apply the method used [to calculate the benefit conferred on the recipient] to each particular case in a transparent way which is adequately explained, in violation of Article 14 of the SCM Agreement." During the course of the dispute, the European Communities elaborated on the basis for this claim. In respect of the issue of pass-through, the European Communities states, inter alia, that the claim is that "Economía failed to explain how it calculated the benefit conferred on the recipient, contrary to the obligation in Article 14", but that "in accordance with the practice of WTO dispute bodies where an allegation of substantive infringement is coupled with one of failing to explain or publicize the point in question, the EC has concentrated on the substantive infringement, which is the failure to examine the issue of pass-through when calculating the amount (if any) by which the imported olive oil is subsidized."196 From this we understand that the European Communities' argument is that because Economía failed to conduct a pass-through analysis where one was required, its explanation of how it calculated the amount of subsidization of the investigated product was not reasoned and adequate.
7.155.
Article 14 reads, in relevant part:

Article 14

Calculation of the Amount of a Subsidy in Terms

of the Benefit to the Recipient

For the purpose of Part V, any method used by the investigating authority to calculate the benefit to the recipient conferred pursuant to paragraph 1 of Article 1 shall be provided for in the national legislation or implementing regulations of the Member concerned and its application to each particular case shall be transparent and adequately explained. Furthermore, any such method shall be consistent with the following guidelines…

7.156.
By its own terms, Article 14 concerns the "method" to be used in a countervailing duty investigation to calculate the amount of benefit to a recipient, and sets forth three basic requirements in this regard. The first has to do with the legislative framework, the second has to do with the application of the law to particular cases, and the third has to do with the general guidelines for how to determine the benefit to the recipient from four basic forms of government financial contributions: equity infusions, loans, loan guarantees, and government provision of goods or services or government purchase of goods.
7.157.
The first requirement, that any method used to calculate the "benefit to the recipient" must be set forth in the importing Member's national legislation or implementing regulations, is not cited in the European Communities' claim. We thus do not consider it further.
7.158.
The third requirement, that any method used to calculate "benefit to the recipient" must be consistent with certain specified guidelines relates only to the four types of financial contribution listed in that provision. We find that this requirement is not relevant in this dispute because the financial contribution of the measure at issue was in the form of recurring grants, in respect of which Article 14 contains no provision. We also note that the European Communities did not cite this requirement as one it alleges Mexico violated. For both of the above reasons, therefore, we do not need to consider this requirement further.
7.159.
The second requirement, which is cited by the European Communities, is that the application of the method for calculating the benefit to the recipient in particular cases "shall be transparent and adequately explained". We see nothing in this provision that requires a Member to conduct a pass-through analysis. As noted above, we understand the allegation of the European Communities to be that the failure by Economía to conduct a pass-through analysis when one was required necessarily meant that its application of the calculation methodology in the olive oil case was not transparent or adequately explained.
7.160.
In support of this claim, the European Communities refers to certain passages concerning the economic effects of the investigated subsidies on prices and supply in the market, in particular vis-à-vis exporters, in paragraphs 117-118 of Economía's Final Resolution, which appear at the end of a section entitled "Pass-through Mechanism". As these are the only specific parts of the Final Resolution referred to by the European Communities in the context of this transparency claim, the implication of the European Communities is that these passages constitute the entirety of Economía's analysis and examination of the pass-through issue in the olive oil investigation. According to the European Communities, these passages fail to explain, transparently and adequately, the benefit calculation methodology in respect of the issue of pass-through, as they are "mere assertions", and even if they were true, they could not explain how a subsidy could have passed through to the exporters.197
7.161.
We begin our analysis of this claim by noting that the Final Resolution contains considerably more information as to the nature of the investigated subsidy programme and Economía's analysis thereof than the few passages cited by the European Communities. We will consider these issues in detail, with a view to determining whether, as claimed by the European Communities, Economía failed to explain, transparently and adequately, its calculation of benefit to the recipient in respect of the pass-through issue raised by interested parties in the investigation.
7.162.
We start by reviewing the portions of the Final Resolution which address the nature of the subsidy programme at issue in this case. According to the Final Resolution, the subsidy programme was provided under Regulation 136/66/EEC of September 1966 of the Council of the European Economic Community, establishing a common market in the oils and fats sector and describing the programme of aid to olive oil, which regulation had been amended on numerous occasions.198
7.163.
The Final Resolution also describes the operation of the subsidy programme as presented to Economía by interested parties in the investigation.199 According to that description, in each marketing year, the grower presented to the national administrators of the programme a crop declaration specifying data concerning the farm and the number of olive trees. The olives were harvested and taken to mills for crushing into oil during the period November through March. The oil mill provided the grower with a certificate attesting to the amount of oil obtained from that grower's olives, which the grower transmitted along with its aid application to the national programme administration. The national administration then calculated the national total quantity of olive oil for which the aid was requested, and transmitted this request to the EC Commission. The total per country aid amount was then divided by the number of kilograms of oil produced to determine the per kilogram amount of aid to be paid. The EC Commission, published these figures.
7.164.
The Final Resolution presents the factual findings of Economía concerning the olive oil aid programme, in paragraphs 100-104, as follows:

"100. In this stage of the investigation, the Ministry confirms its preliminary determination that the subsidy provided by the European Community is olive oil and only a small proportion is destined to olives. From a reading of Regulation 136/66/EEC the purpose and the benefited product are clear. We cite the following paragraphs (the underlining is ours):

'Whereas olive growing and the production of olive oil are particularly important to the economies of certain regions of the Community... that for many consumers, olive oil is the most important source of oils and fats... it is necessary to support this productions through appropriate actions.

'Whereas, to this end, the marketing of the crops must assure fair remuneration to Community producers, the level of which can be defined by a production target price for olive oil...

Title II

Olive Oil

Article 4.

1. A production target price shall be set for the Community.

This price shall be fixed at the wholesale marketing stage for ordinary virgin olive oil with a free fatty acid content expressed as oleic acid of 3.3g / 100g.

2. For the 1998/99 to 2003/04 marketing years, the target production prices referred to in part 1 shall be fixed at 383.77 ecus/100 kg.

3. Except as otherwise decided by the Council by qualified majority pursuant to a proposal by the Commission, the marketing year for olive oil shall run from 1 November to 31 October of the following year.

Article 5

1. Aid for the production of olive oil shall be established. This aid is designed to contribute to the establishment of a fair income for the producers.

The aid shall be provided to the oil growers on the basis of the quantity of olive oil they actually produce.

...

7. With a view to establishing guidance for checks on the determination of the quantity of oil eligible for the aid, yields will be established for olives and oil per homogeneous production zones.

...

9. A percentage of the production aid provided to all or a part of the producers in each producing Member State shall be used to finance regional measures to improve the quality of the production of olive oil and table olives, and their environmental impact.

...

20. When olive oil is exported to third countries and the world prices are higher than the Community price, a regulatory levy may be collected to compensate for these price differences.'

101. The cited regulation establishes, in Article 1, that the aid is to be applied to certain products including olive oil classified in code NC 1509 which refers to olive oil and its fractions, whether or not refined, but without chemical modification, and code NC 1510 00 for the other oils obtained exclusively from olives, and their fractions, including refined oils, but without chemical modification, and blends of those oils or fractions of heading 1509.

102. Furthermore, the EC has notified the Committee on Agriculture of the WTO of its internal aid programme for different products. It should be emphasized that among the listed products, olive oil is identified as a "designated product".

103. As mentioned in the Preliminary Resolution, the Ministry is of the opinion that if a producer of olives brings its product to a mill to obtain olive oil, and in the extreme case obtains nothing, it is clear that this producer would not benefit under the aid programme. That is, the only way in which an olive producer would have access to the subsidy would be on the basis of the olive oil actually produced, which is the product referred to in Regulation 136/66/EEC.

104. On the basis of what is stated in paragraphs 100 to 103 of this Resolution, the Ministry considers that it is unquestionable that the subsidy provided by the European Community is to olive oil, that is, to the product that is subject to the investigation, and that this is not an incorrect interpretation or a problem of translation. At the same time, the Ministry accepts that, as mentioned in Regulation 136/66/EEC, there is a part of the aid that can be applied to support table olives, which are not part of the present investigation."

7.165.
The Final Resolution then, in the section entitled "Pass-Through Mechanism" (from which the excerpts presented by the European Communities were taken), discusses the arguments of the interested parties and the findings of Economía in relation to the precise question of whether a pass-through analysis was required under the facts of the case. This discussion is found at paragraphs 105-118 of the Final Resolution. Economía's conclusion, as set forth in that section, was that no pass-through analysis of the type required in US-Softwood Lumber IV was necessary because, unlike in that case, the olive oil investigation did not involve a subsidy to an input into the final processed product exported to Mexico:

… this is not an investigation of a subsidy to an input (olives) but rather to olive oil, which is itself the product exported to Mexico, for which reason the investigating authority is not obligated to conduct a pass-through analysis of the subsidy because, as provided for in point 100 of the present Resolution, it is unquestionable that Regulation 136/66/EEC and its amendments establish that the aid programme is for olive oil.200

7.166.
Finally, the Final Resolution sets forth, at paragraphs 119-180, the procedural and analytical steps undertaken by Economía in calculating the per unit subsidy amounts. In this context, the representations of the interested parties and the related conclusions of Economía are described.
7.167.
We recall that the claim of the European Communities is that Economía failed to fulfil the transparency requirement in the chapeau of Article 14, i.e., that the method used by Economía to calculate the benefit to the recipient was not transparent and was not adequately explained. We do not agree with the European Communities' characterization of the relevant portions of the Final Resolution. To the contrary, we consider that the Final Resolution contains detailed descriptions of the nature and operation of the subsidy programme, the representations of the interested parties regarding the subsidy programme and the pass-through question, and Economía's reasons for concluding that a pass-through analysis was not required, as well as the calculations performed. We fail to see how the Final Resolution either lacks transparency as to the method used to calculate the benefit to the recipient or fails to adequately explain that method.
7.168.
We further recall that we see no obligation in respect of pass-through analysis in the cited language of Article 14. Even if there were such an obligation, moreover, we would find no basis on which to conclude that Economía had acted inconsistently with it. In particular, bearing in mind the standard of review, we have considered carefully the evidence on the record made available to us as to the nature and operation of the subsidy programme, and have examined the conclusions that Economía drew on the basis of that evidence as presented in the Final Resolution. We consider that Economía's conclusion that the subsidy programme under investigation in this case consisted of aid to olive growers for the production of olive oil was one that could be reasonably reached on the basis of the record evidence. In this regard, we note, first, the language of the Regulation itself, which stipulates that the olive grower receives aid only to the extent that it can prove that it has converted its olives into olive oil201, and is paid only for the actual kilograms of olive oil that its olives produce. The Final Resolution makes clear that the respondent interested parties in the investigation described the operation of the programme in the same way.202 We also take note of the reference in the Final Resolution to the fact that the European Communities' notifications to the WTO refer to olive oil as a "designated product" for the purposes of its domestic support measures. In addition, the Final Resolution indicates that the respondent parties argued that the subsidized product was olives, not olive oil, but provides no indication that those parties submitted any factual evidence in support of this assertion.203 In fact, it appears from the Final Resolution that the principal argument of the respondent parties in respect of the pass-through issue was that the transactions and processing operations intervening between the production of olive oil (by crushing olives) and its exportation to Mexico were what purportedly "disconnected" the subsidy benefits from the product as exported, giving rise to the alleged need for a pass-through analysis.204 As discussed above, there is no support in the jurisprudence for this legal argument. On the basis of the foregoing, we consider that the record evidence supports Economía's finding that the subsidized product was olive oil. Because the evidence indicates that the only basis on which the subsidy could be obtained was the conversion by the growers of olives into olive oil, we consider that the evidence on the record reasonably supports Economía's conclusion that the programme provided a subsidy to the production of olive oil. Furthermore, olive oil in all its forms, from first-crushed to refined and blended oil, was the product covered by the investigation. Therefore, the evidence before Economía reasonably supported its conclusion that the subsidy was not provided on an input product, but rather was provided on the product that was the subject of the investigation, and that as such, no pass-through analysis was necessary.205
7.169.
For these reasons, we find that the European Communities has not demonstrated that, concerning the question of pass-through, Mexico failed to comply with the requirement in Article 14 to provide a transparent and adequate explanation of its method to calculate benefit in respect of the subsidy programme in this case.

(b) Article 14 – Other Calculation Issues

7.170.
The European Communities raises three additional claims under Article 14, as alternatives to its Article 14 claim addressed above related to pass-through. These claims have to do with certain aspects of Economía's calculation of subsidy benefits.206 The first of these claims is that Economía "refused, without giving a reasoned and adequate explanation, to make any adjustment for the fact that a proportion of the exports from the EC to Mexico consisted of oil that had not been in any way subject to the EC aid scheme."207 According to the European Communities, the respondent interested parties presented arguments that certain olive oil exported from the European Communities to Mexico originated in non-EC countries (e.g., Tunisia), and was brought into the European Communities under an inward processing scheme and then re-exported, some to Mexico. The European Communities argues that the subsidy amount should have been adjusted downward to take these non-EC-origin imports into account. According to the European Communities, although the respondent interested parties presented certain information related to this point, Economía did not make the necessary adjustments and failed to provide a reasoned and adequate explanation for its decision.208
7.171.
Mexico takes issue with the Article 14 claim as referred to by the European Communities, namely as the failure of Mexico to provide a transparent and adequate explanation of the method used to calculate the amount of the subsidy. Mexico argues that the obligation in Article 14 is to explain the method used to calculate the amount of benefit conferred by the subsidy.209 In addition, Mexico points to passages in the Preliminary and Final Resolutions which indicate that the respondent interested parties that raised this issue failed to provide factual evidence to enable a calculation of the level of the adjustments they sought, and that for that reason, Economía did not make the adjustments.210 The European Communities has pointed to no specific aspects in which this explanation is either non-transparent or inadequate (e.g., incomplete, unclear, etc.), and we find none. Furthermore, on the substance, we consider that it was not unreasonable for Economía to have declined to make the requested adjustments given that the interested parties that requested them failed to provide any supporting factual evidence in spite of Economía's specific requests for such evidence.
7.172.
A second issue raised by the European Communities relates to adjustments for certain costs incurred by exporting companies. The European Communities' complaint is that although Economía made requested adjustments for companies that provided it with the necessary data, it did not make them for companies that did not, and it unjustifiably requested the former companies to provide information relating to the latter. The European Communities argues that by thus failing to exercise properly its responsibilities to investigate the effect of costs on the level of benefit, Economía also failed to give a reasoned and adequate explanation for its determination.211
7.173.
Mexico's response, quoting the Final Resolution, is that Economía received no response to its request, made to the companies that provided cost data on their own operations, to suggest alternative methodologies that Economía could use to estimate the adjustments for the other companies. Nevertheless, the Final Resolution indicates that Economía made an adjustment for the non-responding companies by averaging the adjustments for those that had provided data.212 We fail to understand the specific nature of the European Communities' complaint with respect to this issue. As is evident in the Final Resolution, certain interested parties requested, and obtained, an adjustment from Economía, and Economía made a comparable adjustment for non-respondent companies. We can find no factual basis to support the European Communities' argument on this point, and thus can find no basis on which to conclude that Economía committed a substantive error under Article 14. Nor do we see anything unclear about the explanation presented in the Final Resolution. Thus, we find that the European Communities has failed to establish that Mexico acted inconsistently with its Article 14 obligations in its treatment of the adjustments for exporters' costs.
7.174.
Finally, the European Communities claims that Economía's calculation of the margin of subsidy was artificially high due to the fact that it was calculated by comparing the amount of the subsidy with the exporter's sales prices adjusted to an ex-factory level. The European Communities argues specifically that because duties were imposed on the basis of the CIF price, it is on this basis that the margin of subsidy should have been determined. According to the European Communities, by comparing the subsidy to the ex-factory price (necessarily a lower figure than the CIF price), Mexico has produced inflated figures.213
7.175.
Mexico responds that because the subsidies were calculated as specific per kilogram amounts, rather than on an ad valorem basis, the fact that the calculations were performed at the ex-factory, rather than the CIF, level made no difference to the calculation of the subsidy margins. Mexico provides a numerical example to illustrate its argument.214
7.176.
We have reviewed the Final Resolution, as well as the explanation provided by Mexico, and we find, as a matter of fact, that the European Communities has not established that the subsidy margins were artificially inflated by having been calculated at the ex-factory level. In particular, the European Communities has not explained specifically how inflation of the figures allegedly occurred, and we find this difficult to envisage given that the margins were, as Mexico points out, calculated on a per kilogram rather than on an ad valorem basis. Nor has the European Communities indicated how the explanation in the Final Resolution lacked clarity. We therefore find that the European Communities has failed to establish that Economía's calculation of the subsidy margins on an ex-factory basis was inconsistent with Mexico's obligations under Article 14 of the SCM Agreement.

H. DEFINITION OF "DOMESTIC INDUSTRY"

7.177.
The European Communities claims that Mexico improperly imposed countervailing duties because it initiated:

an investigation in the absence of a determination by the Mexican authorities that the application was made by or on behalf of the domestic industry, in violation of Articles 11.4 and 16 of the SCM Agreement215

7.178.
The European Communities also alleges that Economía's injury determination is invalid because Fortuny did not constitute a domestic producer, and thus the domestic industry, within the meaning of Article 16.1 of the SCM Agreement. The European Communities further argues that even if Fortuny could be considered the domestic industry, Economía failed to adequately investigate the possibility that domestic producers of the like products other than Fortuny existed, and that therefore any consideration of the injury suffered by that industry would be purely speculative.216 As a result of this alleged failure, the European Communities claims that Mexico "failed to give a reasoned and adequate explanation of its findings and was therefore inconsistent with Article 16 of the SCM Agreement. As a consequence, the findings regarding injury were in breach of the [sic] Article VI:6 of GATT 1994."217
7.179.
This claim thus has two elements, one based on the interpretation of the term "domestic industry" in Article 16.1 of the SCM Agreement, and the other based on the alleged inadequacy of Economía's efforts to determine whether there were Mexican producers of olive oil other than Fortuny. We will address these two elements separately.
7.180.
Before turning to the specific issues raised, however, we note that in its Request for Establishment of a Panel, the European Communities also referred to alleged inconsistencies with Articles 15.4 and 15.5 of the SCM Agreement in the context of this claim. However, it did not provide any argumentation in its written or oral submissions with respect to these provisions in relation to this claim. Instead, in its first written submission, the European Communities explicitly referred to these provisions only as context for its interpretation of Article 16.1 of the SCM Agreement.218 As a result of questioning from the Panel regarding the articles on which the European Communities was alleging an inconsistency, it became apparent that the European Communities was not pursuing specific claims of inconsistency with Articles 15.4 or 15.5 with respect to the definition of the domestic industry.219 Therefore, we will not make any findings on Articles 15.4 or 15.5 with respect to this claim.220.

1. Arguments of the Parties

7.181.
The European Communities argues that in order to constitute a "producer" for the purposes of the SCM Agreement, and thus to constitute part of the domestic industry or the entire domestic industry, as defined in Article 16.1 of that Agreement, an enterprise must actually produce "output" of the domestic like product at two specified times: at the time of presentation of the application for the purpose of initiation, and during the subsidy POI for the purpose of the injury investigation. With respect to initiation, the European Communities argues that if an applicant is not producing output at the time it presents its application, it is not a "producer" and thus cannot form part of or constitute the "domestic industry" within the meaning of Article 16.1. As a result, the requirements of Article 11.4 of the SCM Agreement will not be met, as that provision requires that applications be made "by or on behalf of the domestic industry".221
7.182.
With respect to the injury determination, the European Communities' argues that "if there is no production, there is no industry, and if there is no industry there can be no material injury".222 The European Communities focuses on the subsidy POI because, in its view, "the only verified evidence of subsidization available to the investigating authority will be that from the investigation period and unless the domestic companies concerned have output in that period, no injury can be demonstrated."223 Accordingly, to the European Communities, Economía's alleged failure to comply with the definition of "domestic industry" in Article 16.1 of the SCM Agreement also gives rise to a violation of Article VI:6(a) of the GATT 1994.
7.183.
Mexico disagrees with this analysis, which it recalls was raised during the course of the investigation and addressed by Economía in the Final Resolution. Mexico points to Economía's reasoning at paragraph 218 of that Resolution, that if the European Communities' interpretation were correct, the concept of material retardation of the establishment of an industry would not make sense; cases in which production was suspended due to planned or unforeseen reasons would be inadmissible; it would be impossible to prove production and material injury in the case of producers of agricultural goods, which by definition produce according to natural cycles; and countervailing duties would be unavailable to industries that had been forced to suspend production due to competition from subsidized imports.224

2. Reasoning of the Panel

(a) Introduction

7.184.
The European Communities claims that by defining the domestic industry inconsistently with Article 16.1 of the SCM Agreement, Mexico acted inconsistently with that provision as well as, consequentially, with Article 11.4 of the SCM Agreement and Article VI:6(a) of the GATT 1994. Specifically, the European Communities argues that if an investigating authority does not properly identify the correct domestic industry consistent with Article 16.1, and imposes countervailing duties, it also acts inconsistently with Article VI:6(a) of the GATT 1994, which permits the imposition of countervailing duties only in the event that an investigating authority makes a determination of material injury or threat thereof to an established domestic industry. Likewise, the European Communities argues that because Fortuny was not the "domestic industry" as defined by Article 16.1, its application was not made "by or on behalf of the domestic industry" as required by Article 11.4.225
7.185.
In particular, the European Communities advances an interpretation of Article 16.1 that, because Fortuny was not producing output of olive oil either at the time it presented its application or during the period analyzed to determine the existence of subsidization (the "subsidy POI"), it could not be considered a "producer" in the sense of Article 16.1, and as a consequence it could not constitute the "domestic industry" within the meaning of Article 16.1 of the SCM Agreement. As a result, the European Communities claims, Economía's decision to initiate the investigation and its injury determination were fundamentally flawed. The European Communities argues that these alleged inconsistencies with Article 16.1 of the SCM Agreement also give rise to violations of Article VI:6(a)226 of the GATT 1994 and Article 11.4 of the SCM Agreement.
7.186.
As noted above, the claims under Article VI:6(a) of the GATT 1994 and Article 11.4 of the SCM Agreement both rest upon the central premise that Mexico acted inconsistently with Article 16.1 of the SCM Agreement because the applicant in the olive oil investigation, Fortuny, could not constitute the "domestic industry" within the meaning of that provision. We view these claims as consequential to the claim under Article 16.1 of the SCM Agreement, because they require us, first, to accept the European Communities' interpretation of Article 16.1 of the SCM Agreement as a pre-condition for finding that Mexico acted inconsistently with Article VI:6(a) of the GATT 1994 and Article 11.4 of the SCM Agreement. Therefore, we turn first to the interpretation of Article 16.1 of the SCM Agreement before examining whether as a consequence of any inconsistency with that provision Mexico also acted inconsistently with Article VI:6(a) of the GATT 1994 and Article 11.4 of the SCM Agreement.
7.187.
We note that the European Communities also makes additional claims, in the context of both the initiation of the investigation and the determination of injury, that Economía has not provided a reasoned and adequate explanation of its determination that Fortuny represented the entire domestic industry. In this respect, the European Communities challenges the factual basis of Economía's determination that Fortuny was the sole Mexican producer of olive oil, thus constituting the entire Mexican domestic industry producing olive oil. These allegations are addressed in sections VII.I and VII.J, infra.

(b) Definition of "domestic industry"

7.188.
The basic interpretive issue we must consider is whether the definition of "domestic industry" in Article 16.1 of the SCM Agreement requires an enterprise or a group of enterprises to be producing actual output of the like product at the points in time referred to by the European Communities in order to be considered "producers" for the purpose of that provision. Put another way, the legal question is whether an enterprise or group of enterprises may not be considered to constitute a domestic industry if, at the time of application is filed and/or during the subsidy POI, it or they were not actually producing output.
7.189.
Article 16.1 reads as follows:

16.1 For the purposes of this Agreement, the term 'domestic industry' shall, except as provided in paragraph 2, be interpreted as referring to the domestic producers as a whole of the like products or to those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products, except that when producers are related to the exporters or importers or are themselves importers of the allegedly subsidized product or a like product from other countries, the term 'domestic industry' may be interpreted as referring to the rest of the producers. (footnote omitted)

7.190.
By its own terms, Article 16.1 provides a definition of the term "domestic industry" "for the purposes of this Agreement", i.e., the definition applies to the entire SCM Agreement.227 As such, this term must be given a consistent meaning throughout the SCM Agreement including for the purposes of the term "domestic industry" as used in Article 11.4.228 With respect to Article VI:6(a) of the GATT 1994, the Appellate Body and prior panels have found that the SCM Agreement provides context for the interpretation of Article VI of the GATT 1994,229Indeed, the panel in Brazil – Desiccated Coconut emphasized that "the meaning of Article VI of GATT 1994 cannot be established without reference to the provisions of the SCM Agreement."230 The definition in Article 16.1, therefore also informs the meaning of the term "domestic industry" as used in Article VI:6(a) of the GATT 1994,and an enterprise or group of enterprises that qualifies as a "domestic industry" within the meaning of Article 16.1 of the SCM Agreement will also constitute the domestic industry for the purposes of Article VI:6(a) of the GATT 1994.
7.191.
Turning to the specific language of Article 16.1, "domestic industry" is defined as referring either to "the domestic producers as a whole of the like products" (emphasis added) or "to those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products…". The first part of the definition, "domestic producers as a whole", we take to mean all of the domestic producers. The second part, "those of them", clearly refers to a subset of all of the domestic producers. The word "producers" is obviously central to the definition of "domestic industry". In particular, the question we must ask ourselves is whether an enterprise is a "producer", and therefore whether it constitutes all or part of the domestic industry, if it is not producing "output" of the like product at the time of submission of the application and/or during the subsidy POI.
7.192.
Consistent with the requirements of Article 31 of the Vienna Convention, we begin our analysis of the term "producer" by considering its ordinary meaning. The New Shorter Oxford English Dictionary defines the term, "producer", inter alia as "a person who or thing which produces something or someone", and the term, "produce", as "bring (a thing) into existence, bring about,.... make."231 Other established dictionaries contain similar definitions.232 We consider that the central element in these definitions is their focus on the nature of the activity undertaken – the bringing into existence or making of something. There is no suggestion in any of these definitions that being a producer is something that changes from one moment to the next depending on whether or not there is actual production of output at that moment. Rather, the definitions indicate to us that the essence of being a "producer" of something is to have, as an activity or a business, the bringing into existence or making of a thing.
7.193.
The interpretive question before us in this case is novel and has not been examined previously in cases under the SCM Agreement,the Anti-dumping Agreement, or the GATT. We recall that the panel and the Appellate Body in US-Lamb considered similar language in Article 4.1 of the Agreement on Safeguards, namely that:

'domestic industry' shall be understood to mean the producers as a whole of the like or directly competitive products operating within the territory of a Member, or those whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products.233

While the legal question and the agreementat issue in that case were different from those before us, and thus are not directly applicable to the present dispute, the language in the Agreement on Safeguards nevertheless is sufficiently similar to the language in the SCM Agreement that we consider the reasoning in US – Lamb to be useful to our inquiry into the meaning of the word "producer" in Article 16.1 of the SCM Agreement.

7.194.
The panel in US – Lamb, in interpreting the term "producer" referred to dictionary definitions noting that:

a "producer" is variously defined as "a person or a thing which produces something", or "one that produces, especially one that grows agricultural products or manufactures articles". To "produce" means to "bring a thing into existence, bring about, effect or cause an action or result", or "to give being, form or shape to, make, or manufacture"....

The Appellate Body, in reviewing the panel's interpretation, approved of the use of these definitions, stating that "[a]s the Panel indicated, 'producers' are those who grow or manufacture an article; 'producers' are those who bring a thing into existence."234

7.195.
The specific legal issue in US-Lamb was whether enterprises whose activities or businesses did not include the production of the like product itself (in that case, they produced inputs into the like product) could be considered "producers" of the like product. The panel and the Appellate Body ruled in the negative, focusing on the nature of the respective business activities of the input producers (the growers of live lambs) and the producers of the like product (the packers and breakers of lamb meat). In particular, the conclusions of the panel and the Appellate Body were that because the growers of live lambs did not themselves engage in the processing of live lambs into lamb meat, and because the like product was lamb meat only (and did not include live lambs), the producers of live lambs could not be considered to be producers of the like product, and thus did not form part of the "domestic industry" producing lamb meat.
7.196.
The temporal question underlying the claim of the European Communities in the present dispute did not arise in US – Lamb. Nevertheless, we agree with, and consider relevant to the dispute before us, the approach taken in US – Lamb, i.e., the focus on the essential nature of the business activities of a given enterprise as determinative of whether that enterprise could be considered a producer of the like product and thus be included in the domestic industry for that product. We further consider that the temporal approach advanced by the European Communities, of excluding enterprises as domestic "producers" of the like product solely on the basis that they lack actual output at particular, defined moments, and regardless of the essential nature of their business activities, is fundamentally incompatible with what we believe to be the correct, substantive approach taken in US – Lamb.
7.202.
We also consider that the interpretation advanced by the European Communities runs counter to the object and purpose of the countervail provisions of the SCM Agreement, which is to provide for application of trade remedies where subsidized imports cause material injury or threat thereof to an established domestic industry or the material retardation of the establishment of a domestic industry. If the terms "producer", and by extension "domestic industry", were defined in such a way that, for the purposes of initiation, output was always required at or very near the date of the application, and for the purposes of the injury investigation, output was always required during the subsidy POI, this could have the effect of per se excluding certain kinds of industries from being able to seek countervailing measures, and we see no indication in the text of the Agreement of any such intention on the part of the drafters. For example, many agricultural and food industries, such as the olive oil industry, are seasonal in nature and only produce output at certain times of the year. Firms in these industries may be involved in planting, equipment maintenance, harvesting, processing, selling, maintaining inventory, marketing and distribution at different times of the year. Also, some industries produce goods on a "just in time" or made-to-order basis. In other industries, production facilities may be shut down during certain periods for maintenance or upgrading. We consider that the European Communities' interpretation would exclude these industries from obtaining countervailing remedies during such periods because they, by their very nature, do not produce output at all relevant times in a countervail investigation.238
7.203.
Most importantly, in our view, the European Communities' interpretation could lead to the result that an industry may be so badly injured by subsidized imports as to be forced to cease production for some period, but would be disqualified from obtaining the very remedy aimed at addressing such injury.239 We believe that this outcome would be absurd and contrary to the intention of the drafters of the SCM Agreement. In this context, we are not persuaded by the European Communities' argument that the provisions on ex officio initiation in Article 11.6 address this problem.240 In particular, we do not see how this form of initiation could resolve the substantive question at issue, as Article 11.6 itself indicates that ex officio initiations require the same evidentiary basis as application-based initiations.241Thus, if the European Communities is correct that, for the purposes of initiation, an applicant must have actual output at or near the time it presents an application, Article 11.6 would likewise indicate that "output" would be required at the time of initiation even if it was undertaken ex officio. In addition, as the European Communities recognizes242, all investigations require the same evidentiary basis, whatever the basis of their initiations. Thus, we fail to see how, if we were to follow the European Communities' interpretation of Article 16.1, initiating an investigation ex officio could provide a solution for an industry that had been forced to cease production – and thus was not producing at or near the time of initiation or during the subsidy POI – due to competition from subsidized imports. We see no indication in the SCM Agreement that its drafters intended to preclude such situations from the application of countervailing measures.
7.204.
With respect to the object and purpose of the SCM Agreement, Mexico has argued that the material retardation provisions of the SCM Agreement and Article VI:6(a) of the GATT 1994 would be rendered inutile if the European Communities' interpretation of Article 16.1 were adopted.243 The European Communities responds that some production would be required even in the case of the "establishment of a domestic industry."244 The European Communities bases its argument on a dictionary definition of the term English term "establish" which it argues means to "set up on a permanent or secure basis", and asserts that this definition indicates that "the term [establishment] does not refer to the point of starting up a business, but to the achievement of a level of maturity".245 However, the European Communities provides only an excerpt of the cited definition. We note that the complete definition does, in fact, refer explicitly to starting up a business. The definition reads in full: "Set up on a permanent or secure basis; bring into being, found (a government, institution, business, etc.)." (Emphasis added.) This view is further confirmed by the corresponding provisions in the Spanish and French texts of the SCM Agreement, which are equally authentic, in which the term "establishment" appears as "creación" and "création", respectively. The definitions of these Spanish and French terms also refer to the founding or starting up of a business.246 This broader definition supports the view that the ordinary meaning of the term "establishment" in the context of material retardation includes the starting up, or bringing into being or founding, of an industry, which means that an applicant in such a situation may not yet be a domestic industry. Based on our understanding of the term "establishment of a domestic industry" we are not certain of the exact relevance of the definition in Article 16.1 to a material retardation case. Given that this case does not involve injury in the form of material retardation, we will not address this argument further.
7.205.
Based on the ordinary meaning of Article 16.1 read in light of its context and object and purpose, we find that Article 16.1 does not require that an enterprise or group of enterprises seeking countervail remedies must actually produce output around the date of filing of an application or during the subsidy POI to be considered a "producer" or "producers" and therefore part of or the entire "domestic industry" within the meaning of that Article.

(c) Was Fortuny a "Producer" Within the Meaning of Article 16.1 of the SCM Agreement

7.206.
The determination of whether an enterprise or group of enterprises constitutes a domestic industry must be made on a case-by-case basis, depending upon the particularities and peculiarities of the enterprise or group of enterprises being considered.247 The question before us is whether a real applicant, Fortuny in this countervailing duty investigation, could be considered a "producer" and thus constitutes the "domestic producers as a whole" within the meaning of Article 16.1 of the SCM Agreement. Therefore, we now turn to examining whether Economía made a reasoned and adequate determination that Fortuny itself constituted a producer within the meaning of Article 16.1 of the SCM Agreement.
7.207.
The European Communities contends that Fortuny248 had ceased production for the entirety of the investigation period and for that reason "no reasonable investigating authority could have determined that it was an existing industry".249
7.208.
Mexico argues that Economía relied upon extensive information in reaching its conclusion that Fortuny was a producer of olive oil, including that Fortuny was the legal and business successor of Formex Ybarra, which had produced olive oil uninterruptedly since the 1940s; that Fortuny had the necessary installations and personnel to produce olive oil; that Fortuny did produce the like product to the investigated imported olive oil during the period of investigation for injury; and that Fortuny was an ongoing business that had never been involved in any liquidation or insolvency proceedings.250
7.209.
The record of the investigation demonstrates that during the investigation, Economía examined the questions of whether Fortuny could be considered a producer in spite of having ceased production in March 2002 and whether it had resumed production. As discussed in detail below, starting with Fortuny's application and response to the pre-initiation prevención, Economía obtained information concerning Fortuny's (and its predecessor’s) history of olive oil production, monthly data for a number of economic indicators (capacity, production, sales, employment, etc.) for the three prior calendar years, information about the state of its production facilities, and information about its business plan for resuming operations. During the course of the investigation, Economía received additional information from Fortuny, including that it had resumed olive oil production after the imposition of provisional measures. The record of the investigation also indicates that Economía conducted a verification visit to Fortuny's premises, which confirmed the information that had been submitted by Fortuny relating to its plans for resuming operations and its actual resumption of operations.
7.210.
Turning in more detail to Economía's examination, we note that the question of whether Fortuny was a "producer" is addressed in the Final Resolution inter alia at paragraphs 5 and 58, describing Fortuny's arguments and the information it submitted in this regard; at paragraphs 224, 226, 227 and 400, relating to Fortuny's physical capability to produce olive oil and its resumption of these activities in late 2004; at paragraphs 328-367, concerning the indicators of Fortuny's condition and performance during the period 2000-2002; at paragraphs 368-414, in terms of Economía's assessment of the viability of Fortuny's business plan for restarting operations; and at paragraph 330, in terms of the verification of the information that Fortuny had submitted.
7.211.
Paragraph 5 of the Final Resolution describes the information submitted by Fortuny with the application "proving the existence of the applicant's production plant, its production capacity and the availability of raw materials to begin production and the technical feasibility of that production". Paragraph 58 refers to submissions made by Fortuny detailing, inter alia, the condition and availability of the company's production facilities, the resumption of production, the feasibility of olive oil production, the supply of olives, financing for the purchase of raw materials, activities for marketing and distributing olive oil, volumes and prices of sales, as well as production and financial data for 2004 (i.e., after production was resumed). Paragraph 224 indicates that the information contained in the administrative file showed not only that under certain circumstances it would be viable for Fortuny to resume production, but also that in fact Fortuny did resume production after the provisional countervailing measures were imposed. Paragraphs 226 and 227 indicate that from the outset, Economía had considered Fortuny to have the necessary legal standing to bring the case, because the company was incorporated under the laws of Mexico, and its main activities were the production and transformation of the products of the olive tree, including olive oil. In this regard, Fortuny had submitted documents from Mexican government agencies containing evidence of the existence of its production plant, its production capacity, and the availability of raw materials to start production, and the technical feasibility of that production. Paragraph 400 indicates that during the verification visit, Economía confirmed the nature and condition of Fortuny's production equipment as well as the fact that production was taking place at that time. Paragraphs 328-368 contain a detailed discussion of Economía's analysis of the effects of the investigated imports on Fortuny's condition during the period 2000-2002, i.e., prior to its ceasing operations. Finally, paragraph 330 indicates that as a result of the verification visit, only adjustments of "minor importance" were made to the information submitted by Fortuny.
7.212.
Concerning Economía's assessment of the viability of Fortuny's business plan, paragraphs 368-414 of the Final Resolution indicate that Economía questioned and tested a number of the assumptions that Fortuny had presented, and that it also tested the viability of the plan against various arguments and objections raised by the respondent interested parties. These paragraphs also indicate that in respect of a number of variables, Economía substituted more conservative estimates than had been presented by Fortuny, and that during the verification visit to Fortuny, Economía confirmed and adjusted, as necessary, the information that had been submitted by Fortuny. Economía's conclusion at paragraph 414, which was based on its own simulations of various scenarios under Fortuny's business plan, was that "the project to resume production would be financially viable if countervailing duties were imposed on the subsidized imports and financially non-viable if they were not."
7.213.
We note that the record of the investigation shows that the olive oil business is, by its nature, a seasonal one. This point was not contested, either in the investigation or in the present dispute. In the case of Fortuny, the record indicates that the picking of olives and the production of olive oil normally took place between December and April (with some variability depending on weather conditions).251 Given that Fortuny halted production in March 2002, it had only missed one production season at the time it filed its application, and it produced olive oil in two of the three years under analysis for the determination of injury. Additionally, during the time it was not producing output of olive oil, Fortuny had maintained its olive groves and production facilities, as well as developed a business plan for resuming operations, created a new brand name and label, and prepared its application for countervailing duties. We, therefore, consider that the evidence relied upon and the explanation supplied by Economía reasonably and adequately supports the conclusion that Fortuny was a "producer" during the period of investigation for injury, i.e., that the essential nature of its business, despite a cessation of production for one season, was still the production, distribution, and sale of olive oil.
7.214.
We have examined the facts surrounding Fortuny's particular circumstances and have found that Economía reached a reasoned and adequate determination, based on the evidence before it on the record, and consistent with Article 16.1 of the SCM Agreement, that Fortuny was in fact a producer of the domestic like product.
7.215.
Given these conclusions, we find that the European Communities has not established that solely because Fortuny, which had been continuously producing olive oil for many years, was not producing output of olive oil at the time it presented its application or during the subsidy POI, it was not a "domestic producer" within the meaning of Article 16.1 of the SCM Agreement.
7.216.
For the same reasons, we also find that the European Communities has not established its consequential claims under Article 11.4 of the SCM Agreement and Article VI:6(a) of the GATT 1994, respectively,252 that because Fortuny was not a producer, and thus could not constitute the domestic industry, both Economía's decision to initiate and its injury determination were inconsistent with Mexico's obligations
7.217.
We recall that the European Communities' claims under these provisions relating to the definition of the domestic industry do not end here, but have a second major component, to which we now turn. In particular, the European Communities alleges that even if Fortuny could be considered a producer of the like product, Economía's explanation of its determination that Fortuny constituted the sole producer of the like product, such that Fortuny by itself constituted the entire Mexican domestic industry producing olive oil, could not possibly be reasoned and adequate because Economía had an insufficient factual basis for that determination both at the initiation stage and in the injury investigation. We will address this claim of the European Communities in respect of the initiation of the investigation, under Article 11.4 of the SCM Agreement, in section VII.I, below; and we will address this claim in respect of the injury investigation, under Article VI:6(a) of the GATT 1994 in section VII.J below. In this context, the European Communities cites statements by the Appellate Body that the review by panels of the "factual components" of findings by investigating authorities should focus on whether, in the light of the evidence on the record, the conclusions are "reasoned and adequate".253

I. ARTICLE 11.4 OF THE SCM AGREEMENT

7.218.
As noted, in addition to the above-discussed claims based on the legal interpretation of Article 16.1 of the SCM Agreement, the European Communities argues that even if Fortuny could have been considered a producer of the like product, Mexico nevertheless acted inconsistently with its obligations under Article 11.4 of the SCM Agreement because Economía initiated the investigation without a proper examination of whether there were other Mexican producers of olive oil than Fortuny, and thus without a proper examination of the degree of support for the application. For this reason, the European Communities argues, Economía's determination that the application by Fortuny was made "by or on behalf of the domestic industry" was inconsistent with Article 11.4 of the SCM Agreement.

1. Arguments of the Parties

7.219.
The European Communities asserts that Economía failed to properly determine that Fortuny had filed the application "by or on behalf of the domestic industry" because it did not adequately investigate the possible existence of domestic producers other than Fortuny prior to the initiation; i.e., that Economía's examination of the degree of support for the application was inadequate and that the initiation therefore was inconsistent with Article 11.4 of the SCM Agreement. According to the European Communities, "the investigating authority cannot solely rely on information provided in the application of the domestic industry".254 In addition, the European Communities argues that as a factual matter, the material provided by Fortuny either does not support the conclusion that there were no other producers or amounts to mere assertion rather than evidence.255
7.220.
Mexico argues that Fortuny was, at the time of its application, the sole domestic producer of olive oil. With respect to the possible existence of olive oil producers other than Fortuny, Mexico argues that the evidence examined by Economía at the time of initiation supports the conclusion that there were no other domestic producers of olive oil.256

2. Reasoning of the Panel

7.221.
Article 11.4 reads as follows:

11.4 An investigation shall not be initiated pursuant to paragraph 1 unless the authorities have determined, on the basis of an examination of the degree of support for, or opposition to, the application expressed by domestic producers of the like product, that the application has been made by or on behalf of the domestic industry. The application shall be considered to have been made "by or on behalf of the domestic industry" if it is supported by those domestic producers whose collective output constitutes more than 50 per cent of the total production of the like product produced by that portion of the domestic industry expressing either support for or opposition to the application. However, no investigation shall be initiated when domestic producers expressly supporting the application account for less than 25 per cent of total production of the like product produced by the domestic industry.

7.222.
We note, first, that Article 11.4 is a standing provision designed to ensure that applicants for countervailing duty investigations are sufficiently representative of the domestic industry producing the like product. As such, this provision requires an investigating authority to make a determination as to whether "the application has been made by or on behalf of the domestic industry." This determination is to be undertaken "on the basis of an examination of the degree of support for, or opposition to, the application expressed by domestic producers of the like product".
7.223.
As noted above, Article 16.1 provides for two distinct bases on which to identify the domestic industry: the domestic producers as a whole of the like products or those of them whose collective output of those products constitutes a major proportion of the total domestic production of those products. In circumstances in which, as in the case before us, an applicant claims to constitute the entire domestic industry, two questions are raised for the investigating authority: (1) whether the applicant is a domestic "producer" of the like products; and (2) assuming that the answer to the first question is "yes", whether it constitutes the domestic producers as a whole, in which case it would constitute the entire domestic industry. Where an investigating authority has reached the conclusion that an applicant constitutes the entire domestic industry producing the like product, that authority will not, in practice, need to undertake the measurement and weighing exercise contemplated by the second and third sentences of Article 11.4. Rather, in such a situation, the criteria in those sentences necessarily will be satisfied. Factually, this is what occurred in the case before us: Economía concluded on the basis of the evidence before it that Fortuny constituted the domestic producers as a whole of the like products and, as a result, did not engage in further measurement of the degree of support for the application.257
7.224.
The questions underlying this claim of the European Communities relate to the quality and reliability of the evidence on which Economía relied. The European Communities makes essentially two arguments: first, that as a legal matter, investigating authorities are precluded from basing their standing determinations pursuant to Article 11.4 of the SCM Agreement solely on the information provided in the application; and second, that the factual information provided by Fortuny in the olive oil investigation was an insufficient basis for the conclusion that Fortuny was the sole Mexican producer of olive oil.
7.225.
Concerning the first of these arguments, we see no language in Article 11.4, or in the SCM Agreement generally, prohibiting an investigating authority from basing its determination that an application has been made "by or on behalf of the domestic industry" solely on evidence provided by the applicant. In fact, there is no reference at all in Article 11.4, or elsewhere in the SCM Agreement, to particular sources of information that must or must not be used as the basis for this determination. The only stipulations concerning the quality of the evidence provided in an application are the general requirements in Articles 11.2 and 11.3 of the SCM Agreement (neither of which the European Communities has cited in its claims),that "simple assertions, unsubstantiated by relevant evidence, cannot be considered sufficient" for purposes of an application, and that the authority must "review the accuracy and adequacy of the evidence provided in the application". The focus of these provisions is on the quality and credibility of the evidence, rather than on its exact source.
7.227.
In this context, we disagree with the European Communities that the evidentiary standard applicable to a determination of standing is higher than the standards applicable to determinations of subsidization, injury and causation for the purposes of initiation.259 In particular, we see no textual basis for such a distinction, and consider that all of the information in an application, which pursuant to Article 11.2(i) of the SCM Agreement includes information specifically pertaining to the standing determination of Article 11.4, is subject to the same qualitative "sufficiency" standard referred to in Article 11.3 of the SCM Agreement.
7.228.
For these reasons, we consider that whether or not an investigating authority needs to obtain information beyond that contained in the application regarding the standing of an applicant is a matter to be decided on a case-by-case basis. Moreover, we see nothing in Article 11.4, the only provision cited by the European Communities, which requires an investigating authority in every case to seek additional information over and above the information provided by the applicant pertaining to its standing to request the investigation.
7.229.
Moving to the second argument of the European Communities, concerning the evidence relied upon by Economía, Mexico confirmed to us that Economía relied solely on information provided by Fortuny in reaching its determination for the purposes of initiation that Fortuny was the only Mexican producer of olive oil.260 What Economía considered, in particular, was the information provided in, and attached to, Fortuny's application of 12 March 2003 and the additional information provided by Fortuny on 9 May 2003 in response to Economía's pre-initiation prevención.
7.230.
Mexico identified the information provided by Fortuny, and examined by Economía, as the following:

(a) statements made by Fortuny concerning the state of the domestic industry;

(b) letters dated 3 October 2002, and 27 and 28 January 2003, from the state of Baja California in respect of Fortuny's productive capacity (these were attached to the application); and

(c) information contained in the article "El Olivo, Eco del Mediterraneo" in the journal Claridades Agropecuarias ("Claridades article"), published June 2001 by the Government Agency the "Agricultural Marketing Support and Services" ("ASERCA") of the Federal Ministry of Agriculture, Livestock, Rural Development and Food (this article was also attached to the application).

The statements of Fortuny, the letters from Baja California, and the Claridades article are all referred to in the Initiation Resolution.261

7.231.
We note, and consider significant, that although all of this information was provided by Fortuny, much of it was from sources other than Fortuny, in particular, from government sources. The substance of this evidence is discussed below.
7.232.
In its application, Fortuny stated that it constituted 100 per cent of the domestic industry. In making this statement Fortuny acknowledged that there was a "small cottage industry consisting of estates that produce hand pressed oil".262 It did not, however, consider that those estates constituted part of the domestic olive oil industry as Fortuny was "the only firm in Mexico able to market its products through the same channels as the products under investigation".263 In its reply to Economía's prevención, Fortuny supplied information in respect of production and installed capacity both for Fortuny and for Mexican producers as a whole. That information indicated that Fortuny's historic production and current installed capacity were the same as national production and installed capacity (i.e., that there were no other domestic producers of olive oil, such that Fortuny constituted the entire domestic industry in respect of both production and installed capacity).264 No source is indicated in respect of this information, and we assume that it was based on Fortuny's records of its production and knowledge of its own capacity.
7.233.
Fortuny attached to its application two letters from the Government of the State of Baja California.265 While the letters do not state that there were no other olive oil producers in Mexico or Baja California, they also do not mention or imply the existence of any producers other than Fortuny. The letters indicate that Fortuny maintained a production facility in good repair and that olives were available in the region to supply that facility should Fortuny make a decision to re-start production.
7.234.
The Claridades article was published by the ASERCA programme of Mexico's Federal Ministry of Agriculture, Livestock, Rural Development and Food. Mexico submits that this is an authoritative body, and the European Communities does not contest this.
7.235.
In submissions made before us, there was considerable discussion by the parties as to the meaning of a sentence at page 12 of the Claridades article which, reads as follows:

The main companies established in Mexico that process olives for [table consumption] are Ybarra and Bufalo and for oil only the former.266

Mexico considers that this statement indicates that there were two main companies in Mexico that processed olives for table consumption, but only one company that processed olives for oil, namely Ybarra (predecessor to Fortuny).267 The European Communities' position is that the adjective "main" refers both to the companies producing table olives and the companies producing oil (i.e., that Ybarra and Bufalo were the main companies producing table olives while Ybarra was the main company producing olive oil). For the European Communities, the use of the term "main" as applied to the production of olive oil implies that there were other entities producing olive oil, and it argues that on this basis Mexico was obliged to conduct further investigations to identify such entities and, presumably, to consider their production volume and support for the application in addressing standing pursuant to Article 11.4 of the SCM Agreement.268

7.236.
Considered in isolation, it is unclear to us whether the term "main" in the quoted passage is intended to apply to the production of olive oil or only to the production of table olives. We note, however, that while elsewhere in the Claridades article there are references to production and marketing of olive oil by Ybarra (predecessor to Fortuny), there are no references to the production of olive oil by any other entity (with the limited exception of experimental artisanal production). Furthermore, in respect of brands of olive oil marketed in Mexico, the Ybarra (Fortuny) brand is the only domestic brand identified in the Claridades article.269 We consider that the Claridades article taken as a whole supports the proposition that Fortuny was the only producer of olive oil operating in Mexico.
7.237.
We thus find, as a matter of fact, that there was no concrete evidence, in any of the information that was before Economía at the time it took the decision to initiate, that there were producers of olive oil other than Fortuny (except for small artisanal producers) operating in Mexico. Furthermore, we consider that the information was credible. In particular, although all of the material was provided by Fortuny, it included documents from external, government sources, in particular a government publication dedicated to an examination of the Mexican olive and olive oil industry. Upon examining the totality of the evidence that was before Economía at the time of initiation270, we find that Economía reasonably and adequately could have concluded, for purposes of the standing determination, that there were no other domestic producers of olive oil and that Fortuny thus constituted the entire domestic industry.
7.238.
For the above reasons, we find that the European Communities has not established that Mexico acted inconsistently with its obligations under Article 11.4 of the SCM Agreement when it determined that the application was made "by or on behalf of" the domestic industry.

J. ARTICLE I6.1 OF THE SCM AGREEMENT AND ARTICLE VI:6(A) OF THE GATT 1994

1. Arguments of the Parties

2. Reasoning of the Panel

K. ARTICLES 15.1 AND 15.4 OF THE SCM AGREEMENT AND ARTICLE VI:6(A) OF THE GATT 1994

7.249.
The European Communities claims that Mexico failed to make a determination of injury based on positive evidence involving an examination of all relevant economic factors and indices having a bearing on the state of the industry and to provide a reasoned and adequate explanation of its injury determination, and thus has acted inconsistently with its obligations under Article VI:6 of the GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement.

1. Arguments of the Parties

7.250.
The European Communities makes a variety of arguments with respect to the consistency of Mexico's injury determination with Article VI:6 of the GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement.
7.251.
First, the European Communities argues that there was confusion as to whether Economía's injury determination was based on a finding of material retardation or material injury and that a simultaneous finding of both types of injury was inconsistent with Article VI:6.312
7.252.
Second, the European Communities argues that Mexico has acted inconsistently with Article 15.1(a) in its analysis of the volume of subsidized imports and the effect of the subsidized imports on prices in the domestic market for the like product.313 In particular, the European Communities claims that the lack of "actual" price data for 2002, the period of investigation for subsidy, meant that Economía's determination of price undercutting was inconsistent with the obligation in Article 15.1 to make a determination based on positive evidence and pursuant to an objective examination.314The European Communities argues that the period of time when the injury and subsidy investigations overlap is crucial. In the European Communities' view, "unless there is output (allowing for temporary interruptions) during that overlapping period no finding of the existence of injury or domestic industry can be made."315
7.253.
Third, the European Communities raises various criticisms of the time frames used in Economía's examination of the impact of the subsidized imports on the domestic industry. The European Communities maintains that Economía's analysis was "confused" and that the time frame was repeatedly moved, sometimes focusing on what happened during the investigation period and earlier, and sometimes on the future.316 In particular, the European Communities takes issue with the lack of production by Fortuny from April – December 2002, the period of investigation for subsidy, which it claims is the "central and irreplaceable element of the concept of industry."317
7.254.
Fourth, the European Communities argues that Economía failed to properly identify a domestic industry that suffered material injury, in that, "if there is no production there is no industry, and if there is no industry there can be no material injury, as that term is used in the SCM Agreement."318
7.255.
Finally, the European Communities also alleges that the use of successive nine-month investigation periods constantly undermines the injury analysis, and that "the use of 9-month periods for collecting data, overlapping with some data extending over 12 months, added a major element of unreliability while at the same time introducing needless complexity."319 The European Communities maintains that the data from the three months excluded from each year could have significantly affected the results of the investigation.320 The European Communities argues that Economía's use of the nine-month periods is inconsistent with the obligation to conduct an "objective examination" in Article 15.1 which governs all aspects of the injury determination including the analysis of relevant economic factors having a bearing on the state of the industry pursuant to Article 15.4.321 The European Communities also notes that in two recent disputes, the same practice by Mexico was found not to provide an accurate and unbiased picture of what was being examined.322
7.256.
Mexico argues that its final determination was based on a finding of "material injury" to the domestic industry, not material retardation.323 With respect to the determination of the effect of subsidized imports on prices of the domestic like product, Mexico argues that it made its price undercutting analysis properly and that the data it used for Fortuny's prices during the time it was not producing were consistent with the concept of "positive evidence" in Article 15.1.324
7.257.
Concerning the argument that Economía failed to properly identify a domestic industry that suffered material injury because Fortuny lacked production during the subsidy POI, and thus could not constitute the domestic industry, Mexico disagrees, for the reasons set forth at para. 7,183, supra.
7.258.
With respect to its obligations under Article 15.4, Mexico asserts that Economía properly examined all relevant economic factors and that the evidence weighed in favour of making an affirmative determination of material injury to Fortuny from subsidized imports from Spain and Italy.325 Mexico argues that the European Communities is wrong that because there was no production during the period of investigation, it was not possible to determine material injury, and refers the Panel to Economía 's analysis in the Final Resolution.326 Mexico also notes that Economía found "material injury" on the basis that Fortuny was prevented from resuming operations.327
7.259.
Finally, regarding the use of the successive nine-month periods for the injury analysis, Mexico makes several arguments. First, Mexico states that Economía's analysis of trends and performance relating to the relevant factors was not limited to comparable periods for the three years (April-December 2000, 2001 and 2002), but also took into account monthly or annual data with the objective of gaining a more precise picture of the situation.328 Second, Mexico argues that the European Communities' statement that the nine-month period undermined the objectivity of the examination of injury is a mere assertion. Mexico also notes that the SCM Agreement does not lay down any guidelines concerning the period of time that should be considered in carrying out the injury analysis, and that therefore it did not act inconsistently with the SCM Agreement.329

2. Reasoning of the Panel

7.260.
The European Communities claims that Economía's "failure to make a determination of injury based on positive evidence involving an examination of all relevant economic factors and indices having a bearing on the state of the industry and to provide reasoned and adequate explanation" is inconsistent with Mexico's obligations under Article VI:6 of the GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement.330 The European Communities' claims raise issues of both law and fact. We first consider the nature of the legal obligations under Articles 15.1 and 15.4 of the SCM Agreement, and we then consider whether Economía's actions in the olive oil investigation were, as alleged by the European Communities, inconsistent with those obligations.
7.261.
Before turning to these arguments, we recall that the European Communities claims that Economía's injury determination failed because the domestic industry did not exist. In this regard, we note our discussion on Article 16.1 of the SCM Agreement in section VII.H.2(c), supra and our conclusion at paragraph 7,213 that the explanation supplied by Economía reasonably and adequately supported the conclusion that Fortuny was a "producer" during the period of investigation for injury. We therefore see no need to address this argument further.

(a) Article 15 of the SCM Agreement

7.262.
Article 15.1 reads as follows:

A determination of injury for purposes of Article VI of GATT 1994 shall be based on positive evidence and an objective examination of (a) the volume of the subsidized imports and the effect of the subsidized imports on prices in the domestic market for like products and (b) the consequent impact of these imports on the domestic producers of such products.

7.263.
Article 15.1 is an overarching provision that sets forth a Member's fundamental, substantive obligation with respect to the determination of injury. Moreover, paragraph 1 informs the more specific obligations in the succeeding paragraphs of Article 15.331
7.264.
With respect to the obligation to base a determination of injury on "positive evidence", in US – Hot-Rolled Steel, the Appellate Body explained that the term relates to the quality of the evidence that investigating authorities must rely upon in making a determination.332 In that case, the Appellate Body clarified that the use of the word "positive" means that the evidence must be "of an affirmative, objective and verifiable character, and that it must be credible."333
7.265.
Also in that case, the Appellate Body examined the term "objective examination" and emphasized that it is not concerned with the specific facts underpinning the injury determination, but rather with the investigative process itself.334 Specifically, the Appellate Body found that the word "examination" relates to the way in which the evidence is gathered, inquired into, and subsequently evaluated.335 The Appellate Body has also interpreted the word "objective," which qualifies the word "examination", to indicate that the examination process must conform to the dictates of the basic principles of good faith and fundamental fairness.336 The panel in Mexico – Steel Pipes and Tubes recalled the Appellate Body's reasoning as follows:

…the term 'objective examination' is concerned with the investigative process itself. An 'objective examination' requires that the domestic industry, and the effects of dumped imports, be investigated in an unbiased manner, without favouring the interests of any interested party, or group of interested parties, in the investigation. The duty of the investigating authorities to conduct an 'objective examination' recognizes that the determination will be influenced by the objectivity, or any lack thereof, of the investigative process. Therefore, the identification, investigation and evaluation of the relevant factors must be 'even-handed'.337

7.266.
The panel in Mexico – Anti-dumping Measures on Rice held that the requirements to base a determination of injury on positive evidence and pursuant to an objective examination impose certain obligations on investigating authorities with regard to the completeness of the data used as the basis for their determinations.338 We agree with that panel that an examination can only be "objective" if it is based on data "which provide an accurate and unbiased picture of what it is that one is examining."339
7.267.
In our view, the selection by an investigating authority of the period of investigation is a critical element in the countervailing duty investigative process. It determines the data that will form the basis for the assessment of subsidization, injury and the causal relationship between subsidized imports and the injury to the domestic industry. Although the SCM Agreement does not set forth an express requirement regarding the selection of the period of investigation for the purpose of conducting an injury analysis, this does not mean that an investigating authority's discretion in this respect is unlimited. In our view, the requirements in Article 15.1 to base a determination of injury on positive evidence and pursuant to an objective examination impose certain constraints on an investigating authority's discretion in selecting the period of investigation necessary to ensure the comprehensiveness and reliability of the data used as the basis for an injury determination.340
7.268.