REQUEST UNDER ARTICLE 13.1(E) OF THE
AGREEMENT ON SAFEGUARDS
(REQUEST FROM INDONESIA)
Factual Report to the Council for Trade in
Goods by
the Chairperson of the Committee on Safeguards
The following
document is being submitted by the Chairperson of the Committee on Safeguards,
Mr Jun Morikawa.
_______________
1 Introduction
1.1 Background
1.1. On 11 July 2024, Indonesia submitted a request pursuant to Article
13.1(e) of the Agreement on Safeguards ("SG Agreement") in relation to Türkiye's proposed suspension of concessions and
other obligations referred to in Article 8.2 of the SG Agreement. Indonesia's
request is contained in document _G/L/1531
– _G/SG/297,
attached as Annex 1 to this report ("the Request").
1.2. Article 13.1 of the SG Agreement provides, in relevant part, as
follows:
A Committee on Safeguards is hereby
established, under the authority of the Council for Trade in Goods, which shall
be open to the participation of any Member indicating its wish to serve on
it. The Committee will have the
following functions:
[…]
(e) to review, at the request of the Member
taking a safeguard measure, whether proposals to suspend concessions or other
obligations are "substantially equivalent", and report as appropriate
to the Council for Trade in Goods;
1.3. Article 8.2 of the SG Agreement provides as follows:
If no agreement is reached within 30 days
in the consultations under paragraph 3 of Article 12, then the affected
exporting Members shall be free, not later than 90 days after the measure is
applied, to suspend, upon the expiration of 30 days from the day on which
written notice of such suspension is received by the Council for Trade in
Goods, the application of substantially equivalent concessions or other
obligations under GATT 1994, to the trade of the Member applying the
safeguard measure, the suspension of which the Council for Trade in Goods does
not disapprove.
1.4. The Committee on Safeguards ("the Committee") discussed
this Request at its informal meeting held on 26 September 2024 and its regular
meeting held on 28 October 2024. It further held informal meetings on 11 March
2025 and 11 April 2025.
1.5. The following is a brief chronology of the major notifications
submitted by Indonesia and Türkiye relevant to the investigation referred
to in the Request.
(a)_
On 10 June 2020, Indonesia initiated a safeguard
investigation on the imports of carpets and other textile floor coverings with
the period of investigation covers 2017 - 2019.[1]
On 21 September 2020, Indonesia notified to the Committee its
findings on serious injury and the proposed safeguard measure.[2]
(b)_
On 15 February 2021, Indonesia notified to the
Committee the imposition of the safeguard measure, which took effect on 17
February 2021, and which would be applied for a period of 3 years.[3]
(c)_
On 24 August 2023, Indonesia notified that an
investigation regarding the extension of the safeguard measures was initiated
on 18 August 2023.[4] On 9
November 2023, Indonesia notified the findings of that investigation and
notified that the proposed extension of the safeguard measure would come into
effect on 17 February 2024.[5]
(d)_
On 15 and 16 November 2023, Japan[6]
and Türkiye[7],
respectively, submitted a request for consultations under
Article 12.3 of the SG Agreement.
(e)_
On
16 April 2024, Türkiye notified to the Council for Trade in Goods and the
Committee on Safeguards the proposed suspension of concessions and other
obligations referred to in Article 8.2 of the SG Agreement. (_G/L/1528–G/SG/N/12/TUR/10; Attached as Annex 2 to this
report.)
2 INDONESIA's Request
2.1. Indonesia
requests that the Committee review whether the suspension of concessions or
other obligations proposed by Türkiye is "substantially equivalent"
as provided for in Article 8.2 of the Agreement and to report its findings to
the Council for Trade in Goods.
2.2. Indonesia makes
the following points in the Request:[8]
Türkiye's
proposed suspension of concessions is not "substantially equivalent"
within the meaning of Article 8.2 of the Agreement on Safeguards. Indonesia is
heavily concerned that the choice of the most representative period and the
conversion of the specific duty into an ad valorem duty in Türkiye's
calculations would lead to an overcompensation, which goes beyond the
"substantially equivalent" standard.
In particular, Indonesia disagrees with the
use of 2019 as the reference period for the calculation of substantially
equivalent concessions. In light of common practice among WTO Members,
Indonesia suggests that the level of substantially equivalent concessions
should be determined based on the import volume data from 2020, the preceding
year of the application of the original safeguard measure. Furthermore, during
the consultations, Türkiye admitted that the use of 2019 data was due to the
effects of other than the safeguard measure on import in 2020, which
unprecedented with the common practice among WTO members.
Indonesia is also concerned about the
conversion of the specific duty into an ad valorem duty in
Türkiye's calculations as presented during the consultations under Article 12.3
of the Agreement on Safeguards. Türkiye did not provide any explanation for the
chosen calculation methodology.
Türkiye did not notify the Council for
Trade in Goods on the results of the consultation under Article 12.3 of the
Agreement on Safeguards held on 29 November 2023 as required by Article 12.5 of
the Agreement on Safeguards.
3 Views Expressed
3.1 Türkiye
3.1. Türkiye touched on three issues during the
informal meeting held on 26 September 2024 and the regular meeting[9] held on 28 October 2024.
3.1.1 Period to be taken as a base for calculation
3.2. Türkiye asserts that there is no clear
rule in the SG Agreement indicating which periods should be taken as a base for
substantially equivalent level of concessions. There are various similar
examples in previous country practices. Türkiye used the 2019 data as the most
representative year before the application of the safeguard measure because of
the effects of import registration‑approval system of Indonesia, which started
at the end of 2019 and heavily effected imports of 2020. According to this
system, unless imported within the scope of the production needs of
"Micro, Small and Medium-Scale Indonesian companies" (excluding other
manufacturing companies that import semi-finished products for their own
production needs), the import of products within the scope of the related
regulation would not be possible, and also, final products such as carpets,
rugs, prayer rugs cannot be imported as final products for the purpose of being
offered for sale in the Indonesian market. Türkiye stated that it can be
construed that Indonesia preferred a non-tariff barrier instead of using a
provisional safeguard measure. Indeed, this system of Indonesia has resulted in
Indonesia's subject import volume from the world to decrease from its level in
2019 to more than its one-tenth in 2020, and the subject product's import
volume from Türkiye to decrease to more than its one-thirteenth during the same
period. Indonesia itself had not used 2020 data while taking the decision to
apply the safeguard measure during the original investigation. Instead, the
investigating authority set the investigation period as 2017 to 2019,
immediately prior to the aforementioned decrease of imports, so as to
arbitrarily find the increase in imports.
3.1.2 Conversion of the specific duty into ad valorem duty
3.3. Türkiye calculated the yearly cost via multiplying the volume of
imports from Türkiye with the specific duty of Indonesia and converting this
value from Indonesian Rupi to US dollars. The conversion of the specific duty
into the ad valorem duty was also shown for indicative purposes. On the
other hand, using the ad valorem equivalent of the specific duty gives
the same result. Moreover, during the consultations, there was no discussion
related to this methodology and Indonesia even used the methodology that
Türkiye used via only changing the period. In addition, Indonesia prepared a
separate calculation based on the import data of 2021 when the safeguard
measure was in force.
3.1.3 Indonesia's extension process
3.4. Indonesia's notification _G/SG/N/10/IDN/27/Suppl.2
- _G/SG/N/11/IDN/24/Suppl.2
dated 14 August 2024 regarding the extension of the safeguard measure
provides that the safeguard measures are to be extended for 3 years from 20
August 2024. The duration of the initial safeguard measure was between 17
February 2021 and 16 February 2024. This means that the safeguard measure had
not been imposed for more than 6 months after the duration of the initial
safeguard measure. The period of non-application covers the period from 17
February 2024 to 19 August 2024. Therefore, the safeguard measure
that started to be applied from 20 August 2024 cannot be construed as an
extended measure. Article 7.5 of the SG Agreement provides as follows:
No safeguard measure shall be applied
again to the import of a product which has been subject to such a measure […]
for a period of time equal to that during which such measure had been
previously applied, provided that the period of non-application is at least two
years.
3.5. Türkiye also made the following point at the regular meeting[10]
held on 28 October 2024:
If the Committee could not agree to the
document by consensus, Türkiye requested the document to be issued as a factual
report to be submitted to the Council for Trade in Goods under the Chair's own
responsibility.
3.2 Indonesia
3.6. Indonesia made the following points at the regular meeting of the
Committee of 28 October 2024 (excerpts from the minutes contained in
document _G/SG/M/65):
·_
Indonesia disagrees with the
use of 2019 as the reference period for the calculation of substantially
equivalent concessions. In light of common practice among WTO Members,
Indonesia suggests that the level of substantially equivalent concessions
should be determined based on the data from 2020, which is the last year before
the application of the original safeguard measure. That would result in the
substantially equivalent concessions at most in the amount of USD 1.8 million.
Alternatively, the level of substantially equivalent concessions could be
determined based on the three-year period preceding the application of the
safeguard measure (2018-2020).
·_
Indonesia respectfully
disagrees with the comments suggesting that the 2020 data is unreliable as a
basis for calculating compensation, particularly in light of the declining
imports resulting from the introduction of an importation regime. Article 8.1 of
the SG Agreement only allows members to calculate trade compensation based on
the adverse effects of the measure, not other measures as suggested, on their
trade.
·_
Indonesia is also concerned
about the conversion of the special duty into an ad valorem duty in
Türkiye's calculations as presented during the consultations under Article 12.3
of the SG Agreement. Türkiye has failed to provide any explanation for the
chosen calculation methodology.
·_
Indonesia [understands] that
the scope of Article 13.1(e) is limited to a review whether a proposal of the
suspension of concessions or other obligations is "substantially
equivalent" as provided for in Article 8.2 of the SG Agreement. Therefore,
in accordance with Article 13.1(e) of the SG Agreement, Indonesia requests that
the Committee review whether the suspension of concessions or other obligations
proposed by Türkiye is "substantially equivalent" as provided for in
Article 8.2 of the SG Agreement.
3.7. Indonesia also made the following points at the informal meeting
held on 11 March 2025:
·_
Indonesia wishes to reiterate
that the appropriate forum for addressing the views expressed by Türkiye and
Japan regarding whether the measure in question constitutes an extended
safeguard measure is not under Article 13.1(e) of the Agreement on Safeguards.
The scope of Article 13.1(e) is strictly limited to assessing whether the
proposed rebalancing measure is substantially equivalent, as stipulated in
Article 8.2 of the Agreement on Safeguards.
·_
Regarding the investigation
period, Indonesia reaffirms that import data from 2017 to 2019 remains
both valid and relevant for determining the initial safeguard measure imposed
in 2021. In utilizing this data, the Indonesian Safeguard Committee (KPPI) has
duly observed the provisions of the Agreement on Safeguards, relevant
precedents, and the practices of other WTO Members.
3.3 Other
Members' Views
3.8. The views of other Members are summarized below:
3.9. Japan made the following points during the informal meeting of 26
September 2024.[11]
·_
Article 8 of the SG Agreement
does not specify any particular calculation methodology. There are no relevant
precedent cases either. However, the suspension of "substantially
equivalent concessions or other obligations under GATT 1994" under Article
8.2 is applied only after the "consultations" for
"agreement" on "compensation for the adverse effects of the
measure on their trade" under Article 8.1 have failed. Japan believes that
"adverse effects" on trade would mean any form of trade effects to be
caused by the subject safeguard measures, for example, not only the expected
additional tariff burdens, but also their "chilling effect" on future
exports. Therefore, Japan believes that the calculation of the
"substantially equivalent" obligations and the choice of
representative period for such calculation should be conducted on a case‑by‑case
basis, with reference to all the factual background surrounding the safeguard
measure, as well as the conditions of "trade" between the Member
proposing the safeguard measure and the "exporting Member". As for
this case, while the period of investigation of the original safeguard
investigation by Indonesia was 2017-2019, Türkiye chose the trade data only in
2019. Türkiye's choice would lead to the largest amount of
"concessions" since Türkiye's export reached the peak in 2019. On the
other hand, Japan also has some doubts on the relevance of Indonesia's proposal
to use the import volume data in 2020, the immediately preceding year of the
application of the original safeguard measures. It is true that the latest
trade data could generally reflect the accurate trade flows. However, as for
this case, the import data in 2020 was sharply decreased by almost one‑tenth of
that in 2019, due to the import registration and approval system newly
implemented by Indonesia itself. It is quite unreasonable to implement
safeguard measures despite the sharp decrease of imports, and also to find the
alleged "increase of imports" by setting the POI in 2017-2019, just
before such sharp decrease. Indonesia argues that the trade effect should be
calculated based on the decreased import data in 2020, which is inconsistent
with its own attitude in the original investigation.
·_
Türkiye notified its proposed
suspension of concessions in April assuming that the safeguard measure by
Indonesia was extended after the original term ending on 17 February 2024.
However, while Indonesia notified its intention to extend the measures on 9
November 2023 (_G/SG/N/8/IDN/27/Suppl.2),
since then, the application of the extended measures had not been notified
under Article 12.3(c) for months. Eventually, Indonesia's Article 12.3(c)
notification on 14 August 2024 (_G/SG/N/10/IDN/27/Suppl.2
- _G/SG/N/11/IDN/24/Suppl.2)
provides that the measure was extended for three years from 20 August 2024.
3.10. During the informal meeting held on 26 September 2024 and the
regular meeting[12]
held on 28 October 2024, the United States opined that the Article 13.1
(e) process should not be construed as some kind of quasi-judicial process.
4 Closing
4.1. Despite its efforts, the Committee was unable to reach a consensus
on whether Türkiye's proposal to suspend concessions or other obligations is "substantially
equivalent." Accordingly, the Committee agreed that the
Chair would submit this factual report to the Council for Trade in Goods
under his own responsibility.
Annex 1
(document _G/L/1531 – _G/SG/297)
REQUEST UNDER ARTICLE 13.1(E) OF THE AGREEMENT
ON SAFEGUARDS
REQUEST FROM INDONESIA CONCERNING TÜRKIYE'S
PROPOSED
SUSPENSION OF CONCESSIONS OR OTHER OBLIGATIONS
The following communication, dated and
received on 11 July 2024, is being circulated at the request of the delegation
of Indonesia.
_______________
Without prejudice to rights and obligations under the WTO
covered agreements and pursuant to Article 13.1(e) of the Agreement on
Safeguards, Indonesia hereby requests the Committee on Safeguards to review
whether Türkiye's proposal to suspend concessions or other obligations is
"substantially equivalent" as
provided for in Article 8.2 of the Agreement on Safeguards and to report
as appropriate to the Council for Trade in Goods.
Background
1. On 10 June 2020,
Indonesia initiated a safeguard investigation on the imports of carpets and
other textile floor coverings with the period of investigation covers 2017 to
2019.[13]
On 21 September 2020, Indonesia notified to the Committee on
Safeguards that there was an increased import of the subject goods in 2017 –
2019 in absolute terms with a trend of 25.23% and in relative to domestic
production with a trend of 27.83%.[14]
2. On 2 February
2021, Indonesia issued Minister of Finance Regulation (PMK)
Number 10/PMK.010/2021 regarding the imposition of a safeguard measure, in
the form a specific duty, on the importation of carpets and other textile floor
coverings, for a period of three years starting on 17 February 2021, as
follows: IDR 85,679/m2 (2021-2022); IDR 81,763/m2 (2022‑2023);
and IDR 78,027/m2 (2023-2024). This was duly notified to the
Committee on Safeguards.[15]
3. On 15 August
2023, the Indonesian Safeguards Committee (Komite Pengamanan Perdagangan
Indonesia/KPPI, hereinafter referred to as "the Investigating
Authority") received an application from the Indonesia Textile Association
to extend the safeguard measures on carpets and other textile floor coverings.
The Investigating Authority reviewed the application and found sufficient
initial evidence to initiate a safeguard investigation. Consequently, on 18
August 2023, the Investigating Authority initiated a safeguard investigation
for the period from 2020 to 2022.[16] On 9 November 2023,
Indonesia notified the findings of that investigation and the proposed
extension of the safeguard measure for a period of three years to the Committee
on Safeguards.[17]
4. On 15 and 16
November 2023, Indonesia received the requests for consultations under
Article 12.3 of the Agreement on Safeguards from Japan[18] and Türkiye[19], respectively. Both consultations were
held on 29 November 2023. On 22 December 2023, another bilateral meeting was
held between Indonesia and Türkiye. Indonesia and Türkiye discussed the
proposed extension of the safeguard measures and disagreed on the methodology
for the calculation of the substantially equivalent concessions within the
meaning of Articles 8.1 and 8.2 of the Agreement on Safeguards. Indonesia
remained open to continue the consultations with Türkiye.
5. Türkiye did not
notify the Council for Trade in Goods on the results of the consultation under
Article 12.3 of the Agreement on Safeguards held on 29 November 2023 as
required by Article 12.5 of the Agreement on Safeguards.
Türkiye's proposed suspension of concessions
6. On 17 April
2024, Türkiye notified to the Council for Trade in Goods and the Committee on
Safeguards the proposed suspension of concessions and other obligations
referred to in Article 8.2 of the Agreement on Safeguards.[20] Türkiye proposed the suspension of
substantially equivalent concessions and other obligations under the GATT 1994
to the trade of Indonesia in the form of an increase in duty on the selected
products originating in Indonesia in the amount of USD 24.17 million.
However, the list of products and the proposed duty rates has not yet included
in the notification. Türkiye also reserved its right to apply the proposed
suspension of concessions as of 17 May 2024.
7. In Indonesia's
view, Türkiye's proposed suspension of concessions is not "substantially
equivalent" within the meaning of Article 8.2 of the Agreement on
Safeguards. Indonesia is heavily concerned that the choice of the most
representative period and the conversion of the specific duty into an ad
valorem duty in Türkiye's calculations would lead to an overcompensation,
which goes beyond the "substantially equivalent" standard.
8. In particular,
Indonesia disagrees with the use of 2019 as the reference period for the
calculation of substantially equivalent concessions. In light of common
practice among WTO Members, Indonesia suggests that the level of
substantially equivalent concessions should be determined based on the import
volume data from 2020, the preceding year of the application of the original
safeguard measure. Furthermore, during the consultations, Türkiye admitted that
the use of 2019 data was due to the effects of other than the safeguard measure
on import in 2020, which unprecedented with the common practice among WTO
members.
9. Indonesia is
also concerned about the conversion of the specific duty into an ad valorem
duty in Türkiye's calculations as presented during the consultations under
Article 12.3 of the Agreement on Safeguards. Türkiye did not provide any
explanation for the chosen calculation methodology.
Indonesia's requests
10. Pursuant to
Article 13.1(e) of the Agreement on Safeguards, Indonesia requests that the
Committee on Safeguards review whether the suspension of concessions or other
obligations proposed by Türkiye is "substantially equivalent" as
provided for in Article 8.2 of the Agreement on Safeguards.
11. Indonesia also
requests that the Committee on Safeguards report its findings to the Council
for Trade in Goods.