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WTO ANALYTICAL INDEX: GATT 1994

General Agreement on Tariffs and Trade 1994

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The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.

> Language Incorporating GATT 1947 and other Instruments into GATT 1994
> Preamble
> Article I
> Article II
> Article III
> Article IV
> Article V
> Article VI
> Article VII
> Article VIII
> Article IX
> Article X
> Article XI
> Article XII
> Article XIII
> Article XIV
> Article XV
> Article XVI
> Article XVII
> Article XVIII
> Article XIX
> Article XX
> Article XXI
> Article XXII
> Article XXIII
> Article XXIV
> Article XXV
> Article XXVI
> Article XXVII
> Article XXVIII
> Article XXVIII bis
> Article XXIX
> Article XXX
> Article XXXI
> Article XXXII
> Article XXXIII
> Article XXXIV
> Article XXXV
> Article XXXVI
> Article XXXVII
> Article XXXVIII
> Table of Regional Trade Agreements Notified to the GATT/WTO and in Force, as of 30 September 2011

 

> Analytical Index main page


VI. Article IV     back to top

A. Text of Article IV

Article IV: Special Provisions relating to Cinematograph Films

     If any contracting party establishes or maintains internal quantitative regulations relating to exposed cinematograph films, such regulations shall take the form of screen quotas which shall conform to the following requirements:

 

(a)     Screen quotas may require the exhibition of cinematograph films of national origin during a specified minimum proportion of the total screen time actually utilized, over a specified period of not less than one year, in the commercial exhibition of all films of whatever origin, and shall be computed on the basis of screen time per theatre per year or the equivalent thereof;

 

(b)     With the exception of screen time reserved for films of national origin under a screen quota, screen time including that released by administrative action from screen time reserved for films of national origin, shall not be allocated formally or in effect among sources of supply;

 

(c)     Notwithstanding the provisions of subparagraph (b) of this Article, any contracting party may maintain screen quotas conforming to the requirements of subparagraph (a) of this Article which reserve a minimum proportion of screen time for films of a specified origin other than that of the contracting party imposing such screen quotas; Provided that no such minimum proportion of screen time shall be increased above the level in effect on April 10, 1947;

 

(d)     Screen quotas shall be subject to negotiation for their limitation, liberalization or elimination.


B. Interpretation and Application of Article IV

430.     See also Article III:10.

431.     On GATT practice concerning Article IV.

 

VII. Article V     back to top

A. Text of Article V

Article V: Freedom of Transit

1.     Goods (including baggage), and also vessels and other means of transport, shall be deemed to be in transit across the territory of a contracting party when the passage across such territory, with or without transshipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes. Traffic of this nature is termed in this article “traffic in transit”.

 

2.      There shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties. No distinction shall be made which is based on the flag of vessels, the place of origin, departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of vessels or of other means of transport.

 

3.     Any contracting party may require that traffic in transit through its territory be entered at the proper custom house, but, except in cases of failure to comply with applicable customs laws and regulations, such traffic coming from or going to the territory of other contracting parties shall not be subject to any unnecessary delays or restrictions and shall be exempt from customs duties and from all transit duties or other charges imposed in respect of transit, except charges for transportation or those commensurate with administrative expenses entailed by transit or with the cost of services rendered.

 

4.     All charges and regulations imposed by contracting parties on traffic in transit to or from the territories of other contracting parties shall be reasonable, having regard to the conditions of the traffic.

 

5.     With respect to all charges, regulations and formalities in connection with transit, each contracting party shall accord to traffic in transit to or from the territory of any other contracting party treatment no less favourable than the treatment accorded to traffic in transit to or from any third country.*

 

6.     Each contracting party shall accord to products which have been in transit through the territory of any other contracting party treatment no less favourable than that which would have been accorded to such products had they been transported from their place of origin to their destination without going through the territory of such other contracting party. Any contracting party shall, however, be free to maintain its requirements of direct consignment existing on the date of this Agreement, in respect of any goods in regard to which such direct consignment is a requisite condition of eligibility for entry of the goods at preferential rates of duty or has relation to the contracting party’s prescribed method of valuation for duty purposes.

 

7.     The provisions of this Article shall not apply to the operation of aircraft in transit, but shall apply to air transit of goods (including baggage).


B. Text of Note Ad Article V

Ad Article V: Paragraph 5

    With regard to transportation charges, the principle laid down in paragraph 5 refers to like products being transported on the same route under like conditions.

 
C. Interpretation and Application of Article V

1. General

(a) “traffic in transit”

432.     In Colombia — Ports of Entry, the dispute concerned in part legislation authorizing restrictions on entry of certain textiles, apparel and footwear arriving from Panama, which could only be entered at Bogota airport or Barranquilla seaport. Such goods could be shipped through any Colombian port if they were “subjected to trans-shipment” and/or were goods submitted for trans-shipment that do not have Colombia as their final destination.(622) Non-compliance with the obligation to enter and import goods from Panama exclusively at Bogota airport or Barranquilla seaport would subject the goods to seizure and forfeiture.

433.     The Panel analysed claims under Articles V:2 and V:6 regarding these restrictions. It noted that Article V:1 and the second sentence of Article V:2 are based on corresponding provisions in the 1921 Barcelona Convention and Statute on Freedom of Transit; the Panel also analysed the drafting history of Article V.(623)

2. Article V:2

(a) “There shall be freedom of transit”

434.     Responding to the argument that the ports of entry measure described in paragraph 432 above was outside the scope of Article V, the Panel in Colombia — Ports of Entry concluded that

“In light of the ordinary meaning of freedom and the text of Article V:2 … the provision of ‘freedom of transit’ pursuant to Article V:2, first sentence requires extending unrestricted access via the most convenient routes for the passage of goods in international transit whether or not the goods have been trans-shipped, warehoused, break-bulked, or have changed modes of transport. Accordingly, goods in international transit from any Member must be allowed entry whenever destined for the territory of a third country. Reasonably, in the Panel’s view, a Member is not required to guarantee transport on necessarily any or all routes in its territory, but only on the ones ‘most convenient’ for transport through its territory.”(624)

435.     The Panel found the measure violated Article V:2 because “the right to proceed in international transit under the [provision for goods ‘subjected to transshipment’] is conditioned on whether goods arriving from Panama or the CFZ are trans-shipped, and not on whether the goods have a country other than Colombia as their final destination. The applicable definition of ‘trans-shipment’ in Colombian law indicates that goods must be transferred between means of transportation that will be used to remove the goods from Colombia. As such, goods must be trans-shipped in order to proceed as traffic in transit, in plain contravention of the definition given to the term of art ‘traffic in transit’ in Article V:1.”(625) The Panel found that the fact that there is no road connecting Panama and Colombia, and the lack of practicality of goods arriving by land through Ecuador, were not sufficient to rebut this finding of violation.(626)

(b) “No distinction shall be made”

436.     The Panel in Colombia — Ports of Entry observed:

“In spite of the absence of an explicit reference to traffic in transit in this second sentence of Article V:2, the Panel believes that it is sufficiently clear from its text that the MFN obligation in the second sentence is closely related to the obligation to extend freedom of transit, in the first sentence. In the Panel’s view, the second sentence complements and expands upon the obligation to extend freedom of transit, stating additionally that distinctions must not be made based on the nationality, or place of origin, departure, entry, exit or destination of the vessel transporting goods. Moreover, both obligations form part of the same textual provision.”(627)

437.     Also:

“As noted, the first sentence in Article V:2 addresses freedom of transit for goods in international transit. As a complement to this protection, the Panel considers that Article V:2, second sentence further prohibits Members from making distinctions in the treatment of goods, based on their origin or trajectory prior to arriving in their territory, based on their ownership, or based on the transport or vessel of the goods. Accordingly, the Panel concludes that Article V:2, second sentence requires that goods from all Members must be ensured an identical level of access and equal conditions when proceeding in international transit.”(628)

438.     Regarding the ports of entry measure described in paragraph 432 above, the Panel found: “in light of the fact that only goods arriving from Panama or the CFZ are subject to the requirements under the Article 4 exemption, while goods originating in or departing from a Member other than Panama are permitted to proceed in international transit … Colombia makes distinctions based on the place of origin or departure of textiles, apparel and footwear arriving from Panama or the CFZ in violation of the second sentence of Article V:2.”(629)

3. Article V:5

439.     In Colombia — Ports of Entry, the Panel discussed the relative scope of paragraphs 5 and 6 of Article V:

Article V:5 extends MFN protection to ‘traffic in transit’ ‘[w]ith respect to all charges, regulations and formalities in connection with transit’ (emphasis added). In accordance with the Ad Note to this provision, MFN protection extends to ‘like products being transported on the same route under like conditions’ in relation to transportation charges. Setting aside transportation charges, the protection under Article V:5 broadly extends to all regulations and formalities for all ‘traffic in transit’. As Article V:6 extends MFN protection broadly to ‘treatment’ (i.e. ‘Each contracting party shall accord to products which have been in transit through the territory of any other contracting party treatment no less favourable …’), an interpretation that Article V:6 governs treatment extended to ‘traffic in transit’ would overlap with the broad protection already ensured by Article V:5.”(630)

4. Article V:6

(a) Scope of paragraph 6

440.     The Panel in Colombia — Ports of Entry analysed the scope of Article V:6, observing that “the central issue is whether Article V:6 extends MFN obligations to Members whose territory is the ultimate destination of the good in transit, or whether the obligation only extends to Members whose territory a good passes through intermediately in route to a final destination elsewhere.”(631) Responding to Colombia’s argument that the ports of entry measure described in paragraph 432 above was outside the scope of Article V:6 because it did not apply to goods submitted for trans-shipment, the Panel further noted that Article V:6 refers not to “traffic in transit” but to “products which have been in transit through the territory of any other contracting party.”(632) The Panel further observed that “.… the ordinary meaning of products which ‘have been in transit’ remains unclear” and would require clarification based on the context of Article V:6.(633)

441.     Examining the context of Article V:6, the Panel rejected Colombia’s argument that the scope of all of Article V is informed by its title and Article V:1. Focusing on the second sentence of Article V:6, the Panel observed:

“the second sentence permits a Member to maintain any direct consignment requirements that existed in 1947, whenever those direct consignment requirements were a mandatory condition for entry of the goods at preferential rates of duty or related to the Member’s prescribed method of customs duty valuation. Requirements related to the direct consignment of goods have previously been discussed in a 1981 Note by the [GATT] Secretariat.(634) In that Note, the Secretariat indicated that direct consignment rules for goods require that a product must be transported directly from the place of production to its preferential destination in order to be eligible for origin treatment. Moreover, the Note explains (as relevant at that point in time) that a good under direct consignment could only be transported through territory other than that of its origin or final destination, if justified for geographical reasons, and if the goods in question have remained under customs surveillance and have not entered into the commerce of the transit country.

 

Though not binding on Members’ rights and obligations, the Panel considers the Secretariat’s commentary consistent with the view that the second sentence of Article V:6 is intended to clarify that, in complying with requirements of the first sentence of Article V:6, a Member is nevertheless permitted to maintain any direct consignment requirements that existed in 1947 (when commitments among Members were negotiated) without violating the obligation in the first sentence. In other words, Article V:6, first sentence requires Members to extend MFN treatment to all goods that have been in international transit, except with respect to specific, pre-existing direct consignment commitments.

 

In light of the fact that direct consignment requirements are discussed in the context of being a prerequisite for the eligibility for entry of goods at preferential rates of duty or that relate to that Member’s method of valuation for duty purposes, the Panel thus considers that both the first and second sentences of Article V:6 apply to a Member’s territory which serve as the final destination of the goods.

 

Article V:2 extends MFN protection to goods in transit through Member countries, while Article V:6 extends MFN protection from discrimination based on the geographic course of goods in transit upon reaching their final destination.”(635)

442.     The Panel concluded that “the obligations in Article V:6, first and second sentences apply to Members whose territory is the final destination for goods in international transit.”(636)

(b) Obligations under paragraph 6

443.     As for the substantive obligation concerned, the Panel in Colombia — Ports of Entry considered:

“[T]he obligation in Article V:6 first sentence is straightforward: all treatment extended to goods that were transported from their place of origin to their destination without going through the territory of other contracting party, must be extended to goods that have been transported from their place of origin, and passed through the territories of such other contracting countries as ‘traffic in transit’ prior to reaching their final destination. Such ‘treatment’ must strictly be ‘no less favourable’. As the comparison is made based on a hypothetical, identical set of goods, i.e. the passage of a good that was shipped from its origin via its actual route through one or more Member countries prior to arrival at its final destination is compared to the hypothetical passage of that good directly from its place of origin to its final destination, no like product analysis is required.”(637).

(c) “date of this Agreement”

444.     Article XXVI:1 provides that “the date of this Agreement shall be 30 October 1947.” This date applies for the obligations under Article V:6 of the original contracting parties to the GATT 1947; the former dependent territories of the original contracting parties which, after attaining independence or commercial autonomy, succeeded to contracting party status under Article XXVI:5(c); and Chile. For contracting parties that acceded in 1948–1951, the date used was 24 March 1948. For all accessions to the GATT 1947 thereafter, the accession protocol provided that the “date of this Agreement” for the purposes of Article V:6 was the date of the protocol of accession or (where the acceding government had previously acceded provisionally) the date of the protocol of provisional accession.(638) These accession protocol provisions are incorporated in the GATT 1994 by virtue of paragraph 1(b)(ii) of the GATT 1994 incorporation text. See further under Article XXVI:1 below.

5. Relationship with other GATT provisions

445.     In Colombia — Ports of Entry, the Panel addressed the relationship between the MFN obligations in Article V:6 and Article I:1:

“[T]he Panel would like to address Colombia’s argument that adherence to Panama’s interpretation of MFN obligations in Article V:6 would essentially undo the explicit limitation of MFN protections set forth in Article I:1 of the GATT 1994. As explained above, Article V:6 requires a Member to treat a good shipped from its origin via its actual route through one or more Member countries prior to arrival at its final destination, identically had that same good hypothetically passed from its place of origin to its final destination without traversing a particular territory in question. In contrast, Article I:1 of the GATT 1994 broadly ensures that any advantage extended to a product of a particular origin must be extended immediately and unconditionally to the like product originating in or destined for the territories of all other Members. Thus, Article I:1 ensures MFN treatment to like products of all origins, whereas Article V:6 ensures MFN treatment based on its transit trajectory regardless of the existence of a like product of a different origin. In the Panel’s view, the obligations in these two provisions are not the same and should not be treated as redundant.”(639)

6. GATT practice

446.     See GATT Analytical Index.

 

VIII. Article VI     back to top

A. Text of Article VI

Article VI: Anti-dumping and Countervailing Duties

1.     The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purposes of this Article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another

 

(a)     is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or,

 

(b)     in the absence of such domestic price, is less than either

 

(i)     the highest comparable price for the like product for export to any third country in the ordinary course of trade, or

 

(ii)     the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit.

 

Due allowance shall be made in each case for differences in conditions and terms of sale, for differences in taxation, and for other differences affecting price comparability.*

 

2.     In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti-dumping duty not greater in amount than the margin of dumping in respect of such product. For the purposes of this Article, the margin of dumping is the price difference determined in accordance with the provisions of paragraph 1.*

 

3.     No countervailing duty shall be levied on any product of the territory of any contracting party imported into the territory of another contracting party 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, including any special subsidy to the transportation of a particular product. The term “countervailing duty” shall be understood to mean a special duty levied for the purpose of offsetting any bounty or subsidy bestowed, directly, or indirectly, upon the manufacture, production or export of any merchandise.*

 

4.     No product of the territory of any contracting party imported into the territory of any other contracting party shall be subject to anti-dumping or countervailing duty by reason of the exemption of such product from duties or taxes borne by the like product when destined for consumption in the country of origin or exportation, or by reason of the refund of such duties or taxes.

 

5.     No product of the territory of any contracting party imported into the territory of any other contracting party shall be subject to both anti-dumping and countervailing duties to compensate for the same situation of dumping or export subsidization.

 

6.     (a)     No contracting party shall levy any antidumping or countervailing duty on the importation of any product of the territory of another contracting party unless it determines that the effect of the dumping or subsidization, as the case may be, is such as to cause or threaten material injury to an established domestic industry, or is such as to retard materially the establishment of a domestic industry.

 

    (b)     The CONTRACTING PARTIES may waive the requirement of subparagraph (a) of this paragraph so as to permit a contracting party to levy an anti-dumping or countervailing duty on the importation of any product for the purpose of offsetting dumping or subsidization which causes or threatens material injury to an industry in the territory of another contracting party exporting the product concerned to the territory of the importing contracting party. The CONTRACTING PARTIES shall waive the requirements of subparagraph (a) of this paragraph, so as to permit the levying of a countervailing duty, in cases in which they find that a subsidy is causing or threatening material injury to an industry in the territory of another contracting party exporting the product concerned to the territory of the importing contracting party.*

 

    (c)     In exceptional circumstances, however, where delay might cause damage which would be difficult to repair, a contracting party may levy a countervailing duty for the purpose referred to in subparagraph (b) of this paragraph without the prior approval of the CONTRACTING PARTIES; Provided that such action shall be reported immediately to the CONTRACTING PARTIES and that the countervailing duty shall be withdrawn promptly if the CONTRACTING PARTIES disapprove.

 

7.     A system for the stabilization of the domestic price or of the return to domestic producers of a primary commodity, independently of the movements of export prices, which results at times in the sale of the commodity for export at a price lower than the comparable price charged for the like commodity to buyers in the domestic market, shall be presumed not to result in material injury within the meaning of paragraph 6 if it is determined by consultation among the contracting parties substantially interested in the commodity concerned that:

 

(a)     the system has also resulted in the sale of the commodity for export at a price higher than the comparable price charged for the like commodity to buyers in the domestic market, and

 

(b)     the system is so operated, either because of the effective regulation of production, or otherwise, as not to stimulate exports unduly or otherwise seriously prejudice the interests of other contracting parties.


B. Text of Note Ad Article VI

Ad Article VI: Paragraph 1

1.     Hidden dumping by associated houses (that is, the sale by an importer at a price below that corresponding to the price invoiced by an exporter with whom the importer is associated, and also below the price in the exporting country) constitutes a form of price dumping with respect to which the margin of dumping may be calculated on the basis of the price at which the goods are resold by the importer.

 

2.     It is recognized that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, and in such cases importing contracting parties may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate.

Paragraphs 2 and 3

1.     As in many other cases in customs administration, a contracting party may require reasonable security (bond or cash deposit) for the payment of anti-dumping or countervailing duty pending final determination of the facts in any case of suspected dumping or subsidization.

 

2.     Multiple currency practices can in certain circumstances constitute a subsidy to exports which may be met by countervailing duties under paragraph 3 or can constitute a form of dumping by means of a partial depreciation of a country’s currency which may be met by action under paragraph 2. By “multiple currency practices” is meant practices by governments or sanctioned by governments.

Paragraph 6 (b)

    Waivers under the provisions of this subparagraph shall be granted only on application by the contracting party proposing to levy an anti-dumping or countervailing duty, as the case may be.


C. Interpretation and Application of Article VI

1. Scope and applicability of Article VI

(a) Subject matter applicability

447.     In US — 1916 Act, the EC and Japan brought a dispute concerning the US Antidumping Act of 1916 (“1916 Act”), a US statute providing for penalties of imprisonment, fines or the award of treble damages against importers who had sold foreign-produced goods in the United States at prices “substantially less” than the prices at which the same products are sold in a relevant foreign market, if the importation or sale was done with the intent of destroying or injuring a US industry, of preventing establishment of a US industry, or of restraining or monopolizing trade or commerce in such articles in the United States. The Appellate Body confirmed the Panels’ finding that Article VI applied to the 1916 Act. The Appellate Body observed:

“Whether Article VI of the GATT 1994 is applicable to the 1916 Act depends on whether Article VI regulates all possible measures Members can take in response to dumping. If Article VI regulates only the imposition of anti-dumping duties and neither prohibits nor regulates other measures which Members may take to counteract dumping, then, since the 1916 Act does not provide for anti-dumping duties, Article VI would not apply to the 1916 Act.”(640)

448.     The Appellate Body further noted that “Article VI:1 of the GATT 1994 must be read together with the provisions of the Anti-Dumping Agreement(641) and referred to the text of Article 1 of the Anti-Dumping Agreement; specifically, the Appellate Body stated that “[s]ince ‘an anti-dumping measure’ must, according to Article 1 of the Anti-Dumping Agreement, be consistent with Article VI of the GATT 1994 and the provisions of the Anti-Dumping Agreement, it seems to follow that Article VI would apply to ‘an anti-dumping measure’, i.e., a measure against dumping.”(642)

449.     The Appellate Body went on to state that “the scope of application of Article VI is clarified, in particular, by Article 18.1 of the Anti-Dumping Agreement(643), and indicated that “Article VI is applicable to any ‘specific action against dumping’ of exports, i.e., action that is taken in response to situations presenting the constituent elements of ‘dumping’”:

“[T]he ordinary meaning of the phrase ‘specific action against dumping’ of exports within the meaning of Article 18.1 is action that is taken in response to situations presenting the constituent elements of ‘dumping’. ‘Specific action against dumping’ of exports must, at a minimum, encompass action that may be taken only when the constituent elements of ‘dumping’ are present. Since intent is not a constituent element of ‘dumping’, the intent with which action against dumping is taken is not relevant to the determination of whether such action is ‘specific action against dumping’ of exports within the meaning of Article 18.1 of the Anti-Dumping Agreement.(644)

 

Article 18.1 of the Anti-Dumping Agreement contains a prohibition on the taking of any ‘specific action against dumping’ of exports when such specific action is not ‘in accordance with the provisions of GATT 1994, as interpreted by this Agreement’. Since the only provisions of the GATT 1994 ‘interpreted’ by the Anti-Dumping Agreement are those provisions of Article VI concerning dumping, Article 18.1 should be read as requiring that any ‘specific action against dumping’ of exports from another Member be in accordance with the relevant provisions of Article VI of the GATT 1994, as interpreted by the Anti-Dumping Agreement.

 

… It follows that Article VI is applicable to any ‘specific action against dumping’ of exports, i.e., action that is taken in response to situations presenting the constituent elements of ‘dumping’.”(645)

450.     The Appellate Body commented on this finding in its later report on US — Offset Act (Byrd Amendment):

“The criterion we set out in US 1916 Act for specific action in response to dumping is not whether the constituent elements of dumping or of a subsidy are explicitly referred to in the measure at issue, nor whether dumping or subsidization triggers the application of the action, nor whether the constituent elements of dumping or of a subsidy form part of the essential components of the measure at issue. Our analysis in US 1916 Act focused on the strength of the link between the measure and the elements of dumping or a subsidy. In other words, we focused on the degree of correlation between the scope of application of the measure and the constituent elements of dumping or of a subsidy. … we did not require that the language of the measure include the constituent elements of dumping or of a subsidy. … we required that the constituent elements of dumping (or of a subsidy) be ‘present’, which in our view can include cases where the constituent elements of dumping and of a subsidy are implicit in the measure. …”(646)

(b) Temporal applicability

451.     In Brazil — Desiccated Coconut, the Appellate Body upheld the Panel’s finding that Article VI of GATT 1994 does not apply to countervailing duty measures imposed as a result of an investigation initiated pursuant to an application made before the entry into force of the WTO Agreement. Having found that pursuant to Article 28 of the Vienna Convention on the Law of Treaties, “[a]bsent a contrary intention, a treaty cannot apply to acts or facts which took place, or situations which ceased to exist, before the date of its entry into force”, the Appellate Body based its finding on Article 32.3 of the SCM Agreement, which provides that “the provisions of this Agreement shall apply to investigations … initiated pursuant to applications which have been made on or after the date of entry into force of the WTO Agreement”. The Appellate Body stated that “[i]f Article 32.3 is read in conjunction with Articles 10 and 32.1 of the SCM Agreement, it becomes clear that the term ‘this Agreement’ in Article 32.3 means ‘this [SCM] Agreement and Article VI of the GATT 1994’.”(647) With reference to Articles 10 and 32.1 of the SCM Agreement, the Appellate Body went on to state:

“From reading Article 10, it is clear that countervailing duties may only be imposed in accordance with Article VI of the GATT 1994 and the SCM Agreement. A countervailing duty being a specific action against a subsidy of another WTO Member, pursuant to Article 32.1, it can only be imposed ‘in accordance with the provisions of GATT 1994, as interpreted by this Agreement’. The ordinary meaning of these provisions taken in their context leads us to the conclusion that the negotiators of the SCM Agreement clearly intended that, under the integrated WTO Agreement, countervailing duties may only be imposed in accordance with the provisions of Part V of the SCM Agreement and Article VI of the GATT 1994, taken together.”(648)

2. Article VI:1

(a) Definitional nature and elements of paragraph 1

452.     In US — Zeroing (Japan), the Appellate Body reversed a finding that “simple zeroing” in original investigations was consistent with Article VI:1, and declined to make a finding of inconsistency, remarking that:

Article 2.1 of the Anti-Dumping Agreement and Article VI:1 of the GATT 1994 are definitional provisions. They set out a definition of ‘dumping’ for the purposes of the Anti-Dumping Agreement and the GATT 1994. The definitions in Article 2.1 and Article VI:1 are no doubt central to the interpretation of other provisions of the Anti- Dumping Agreement, such as the obligations relating to, inter alia, the calculation of margins of dumping, volume of dumped imports, and levy of anti-dumping duties to counteract injurious dumping. But, Article 2.1 and Article VI:1, read in isolation, do not impose independent obligations. …”(649)

453.     The Appellate Body in US — Stainless Steel (Mexico) found that the definition of dumping is consistent throughout Article VI; that this definition is carried into the Anti-Dumping Agreement by Article 2.1 of that agreement; that the term “margin of dumping” is also consistent in Article VI:2 and the Anti- Dumping Agreement; that Article VI:1 and Article 2.1 “address the pricing practice of an exporter”; and that “dumping” and “margin of dumping” are exporter-specific concepts.

“The term ‘margin of dumping’ is defined in Article VI:2 of the GATT 1994 as the difference between the ‘export price’ and the ‘normal value’ (that is, ‘the domestic price’ of the like product in the exporting country) determined in accordance with Article VI:1. Article VI:2 further clarifies that the ‘margin of dumping’ is in respect of the dumped ‘product’. The ‘margin of dumping’ thus measures the ‘degree’ — as used in Article 5.1 of the Anti-Dumping Agreement — or the ‘magnitude’ — as used in Article 3.4 of the Anti-Dumping Agreement — of dumping. As the ‘margin of dumping’ is only a measure of dumping, it also has the same meaning throughout the Anti-Dumping Agreement by virtue of Article 2.1.

 

The elements of the definition of ‘dumping’ contained in Article VI:1 of the GATT 1994 and Article 2.1 of the Anti-Dumping Agreement — namely, that ‘dumping’ occurs when a product is ‘introduced into the commerce of another country’ at an ‘export price’ that is less than the ‘comparable price for the like product in the exporting country’ — suggest to us that Article VI:1 of the GATT 1994 and Article 2.1 of the Anti-Dumping Agreement address the pricing practice of an exporter. Article 2.2 of the Anti-Dumping Agreement as well as Article VI:1(b) of the GATT 1994 also point in the same direction because they indicate that, if sales of the like product in the domestic market of the exporting country do not permit a proper comparison, the comparison may be made with the price at which the product is exported to an appropriate third country. Similarly, Article 2.3 of the Anti-Dumping Agreement allows the ‘export price’ to be constructed in cases where it appears to the authorities that the export price is unreliable.

 

The context found in various other provisions of the Anti-Dumping Agreement confirms that ‘dumping’ and ‘margin of dumping’ are exporter-specific concepts. …”(650)

 

To sum up the above analysis, it is clear from Articles VI:1 and VI:2 of the GATT 1994 and the various provisions of the Anti-Dumping Agreement that: (a) ‘dumping’ and ‘margin of dumping’ are exporter-specific concepts; ‘dumping’ is product-related as well, in the sense that an anti-dumping duty is a levy in respect of the product that is investigated and found to be dumped; (b) ‘dumping’ and ‘margin of dumping’ have the same meaning throughout the Anti-Dumping Agreement; (c) an individual margin of dumping is to be established for each investigated exporter, and the amount of anti-dumping duty levied in respect of an exporter shall not exceed its margin of dumping; and (d) the purpose of an anti-dumping duty is to counteract ‘injurious dumping’ and not ‘dumping’ per se. It must be stressed that, under the Anti-Dumping Agreement, the concepts of ‘dumping’, ‘injury’, and ‘margin of dumping’ are interlinked and that, therefore, these terms should be considered and interpreted in a coherent and consistent manner for all parts of the Anti-Dumping Agreement.

 

Based on the above analysis, we disagree with the proposition that importers ‘dump’ and can have ‘margins of dumping’. Dumping arises from the pricing practices of exporters as both normal values and export prices reflect their pricing strategies in home and foreign markets. The fact that ‘dumping’ and ‘margin of dumping’ are exporter-specific concepts under the Anti-Dumping Agreement is not altered by the fact that the export price may be the result of negotiation between the importer and the exporter. Nor is it altered by the fact that it is the importer that incurs the liability to pay anti-dumping duties.”(651)

(b) Irrelevance of “intent” in determining dumping

454.     In US — 1916 Act, the Appellate Body noted that:

“[U]nder Article VI:1 of the GATT 1994 and Article 2 of the Anti-Dumping Agreement, neither the intent of the persons engaging in ‘dumping’ nor the injurious effects that ‘dumping’ may have on a Member’s domestic industry are constituent elements of ‘dumping’.”(652)

3. Note 2 Ad Article VI:1

455.     In US — Anti-Dumping and Countervailing Duties (China), the Appellate Body considered issues regarding the concurrent application of anti-dumping duties calculated under a non-market economy (NME) methodology and of countervailing duties. The Appellate Body characterized Note 2 Ad Article VI:1 as an “exceptional method for the calculation of normal value”:

Article VI:1(a) of the GATT 1994, like Article 2.1 of the Anti-Dumping Agreement, provides that the usual method for calculating normal value will be based on the comparable price for the like product in the exporter’s domestic market. Thus, in anti-dumping investigations, normal value will typically be based on domestic sales prices and any domestic subsidy will have no impact on the calculation of the dumping margin. Nonetheless … [t]he second Ad Note to Article VI:1, which provides the legal basis for the use of surrogate values for NMEs in anti-dumping investigations … authorizes recourse to exceptional methods for the calculation of normal value in investigations of imports from NMEs. In case of domestic subsidization, it is only in these exceptional situations that there is any possibility that the concurrent application of anti-dumping and countervailing duties on the same product could lead to ‘double remedies’.”(653)

456.     In EC — Fasteners, the EU argued that Section 15 of the Protocol of Accession of China allows the EU to treat China as a non-market economy (NME) for the purpose of applying Article 9(5) of the EU’s Basic Anti-Dumping Regulation and “permits a flexible application of the rules”. China responded that Section 15 was only a temporary and limited derogation from the rules.(654) The Panel and the Appellate Body agreed that Section 15 derogates only from the rules on determining normal value, not other rules such as those on determining export prices or individual versus country-wide margins and duties. The Appellate Body remarked concerning Note 2 Ad Article VI:1:

“Section 15 of China’s Accession Protocol contains a similar acknowledgment of the difficulties in determining price comparability as the one contained in the second Ad Note to Article VI:1 of the GATT 1994, in respect of imports from China. The second Ad Note to Article VI:1 recognizes that, in the cases of imports from countries where the State has a complete or substantially complete monopoly of trade and where all domestic prices are fixed by the State, importing Members may determine that a comparison with domestic prices in such a country may not be appropriate due to special difficulties in determining price comparability. This provision allows investigating authorities to disregard domestic prices and costs of such an NME in the determination of normal value and to resort to prices and costs in a market economy third country. Article 2.7 of the Anti-Dumping Agreement states that Article 2 is without prejudice to the second Ad Note to Article VI:1 of the GATT 1994, and thus incorporates the second Ad Note to Article VI:1 into the Anti-Dumping Agreement.

 

 

… paragraph 15(a) of China’s Accession Protocol places the burden on the Chinese producers clearly to show that market economy conditions prevail in the industry producing the like product with respect to its manufacture, production, and sale. If such a showing is made, the importing Member shall use Chinese prices and costs in determining price comparability. Like the second Ad Note to Article VI:1 of the GATT 1994, paragraph 15(a) of China’s Accession Protocol permits importing Members to derogate from a strict comparison with domestic prices or costs in China, that is, in respect of the determination of the normal value. This is indicated by the text of paragraph 15(a), which, in respect of the determination of price comparability, refers to ‘Chinese prices or costs’ or ‘a methodology that is not based on a strict comparison with domestic prices or costs in China’.

 

We do not consider that the references in paragraph 15(a)(i) and (ii) to producers having to show that ‘market economy conditions prevail … with regard to the manufacture, production and sale’ of a product means that paragraph 15(a) permits any derogations also with respect to the determination of export prices. We reach this conclusion because, when producers are not able to show that market economy conditions prevail (including with regard to the sale of the product), paragraph 15(a) makes it clear that all an importing WTO Member is allowed to do as a consequence is to ‘use a methodology that is not based on a strict comparison with domestic prices or costs in China’.

 

… paragraph 15(a) contains special rules for the determination of normal value in anti-dumping investigations involving China. Paragraph 15(d) in turn establishes that these special rules will expire in 2016 and sets out certain conditions that may lead to the early termination of these special rules before 2016.

 

In our view, therefore, Section 15 of China’s Accession Protocol does not authorize WTO Members to treat China differently from other Members except for the determination of price comparability in respect of domestic prices and costs in China, which relates to the determination of normal value. We consider that, while Section 15 of China’s Accession Protocol establishes special rules regarding the domestic price aspect of price comparability, it does not contain an open-ended exception that allows WTO Members to treat China differently for other purposes under the Anti-Dumping Agreement and the GATT 1994, such as the determination of export prices or individual versus country-wide margins and duties.”(655)

457.     In a footnote to this passage, the Appellate Body further discussed Note 2 Ad Article VI:1 and Section 15 of China’s Accession Protocol:

“The second Ad Note to Article VI:1 of the GATT 1994 reads as follows:

 

It is recognized that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, and in such cases importing Members may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate.

 

We observe that the second Ad Note to Article VI:1 refers to a ‘country which has a complete or substantially complete monopoly of its trade’ and ‘where all domestic prices are fixed by the State’. This appears to describe a certain type of NME, where the State monopolizes trade and sets all domestic prices. The second Ad Note to Article VI:1 would thus not on its face be applicable to lesser forms of NMEs that do not fulfil both conditions, that is, the complete or substantially complete monopoly of trade and the fixing of all prices by the State.

 

Furthermore, the reference in the second Ad Note to Article VI:1 to a strict ‘comparison with domestic prices’ not always being ‘appropriate’ provides flexibility only in respect of the determination of normal value. The recognition of special difficulties in determining price comparability in the second Ad Note to Article VI:1 does not mean that importing Members may depart from the provisions regarding the determination of export prices and the calculation of dumping margins and anti-dumping duties set forth in the Anti-Dumping Agreement and in the GATT 1994. While the second Ad Note to Article VI:1 refers to difficulties in determining price comparability in general, the text of this provision clarifies that these difficulties relate exclusively to the normal value side of the comparison. This is indicated by the operative part in the third sentence of this provision, which only allows importing Members to depart from a ‘strict comparison with domestic prices’.”(656)

458.     See also in the Chapter on the Anti-Dumping Agreement regarding US — Shrimp (Viet Nam), in which Viet Nam brought a claim regarding antidumping calculations and the United States pointed to paragraphs 254 and 255 of Vietnam’s Accession Working Party Report. The Panel noted these provisions and found that they only affect calculation of normal value, but do not modify any other provisions of the Anti-Dumping Agreement.

459.     See also the GATT Analytical Index, concerning the circumstances of the insertion of Note 2 Ad Article VI:1 in 1955, and provisions in the accession protocols of Poland and Romania regarding NME antidumping procedures.

4. Article VI:2

(a) “a contracting party may levy … an antidumping duty”: Permissible responses to dumping

460.     In US — 1916 Act, the Appellate Body interpreted Article VI:2 in conjunction with Article 18.1 of the Anti- Dumping Agreement, addressing the question of whether Members may choose to impose other types of anti-dumping measures than anti-dumping duties. The Appellate Body stated:

“[T]he verb ‘may’ in Article VI:2 of the GATT 1994 is, in our opinion, properly understood as giving Members a choice between imposing an anti-dumping duty or not, as well as a choice between imposing an anti-dumping duty equal to the dumping margin or imposing a lower duty. …”(657)

 

“… Article VI of the GATT 1994 and the Anti-Dumping Agreement apply to ’specific action against dumping’. Article VI of the GATT 1994, and, in particular, Article VI:2, read in conjunction with the Anti-Dumping Agreement, limit the permissible responses to dumping to definitive anti-dumping duties, provisional measures and price undertakings. Therefore, the 1916 Act is inconsistent with Article VI:2 and the Anti-Dumping Agreement to the extent that it provides for ‘specific action against dumping’ in the form of civil and criminal proceedings and penalties.”(658)

461.     In US — Offset Act (Byrd Amendment), the Appellate Body referred to this finding in holding that “As CDSOA offset payments are not definitive anti-dumping duties, provisional measures or price undertakings, we conclude, in the light of our finding in US — 1916 Act, that the CDSOA is not ‘in accordance with the provisions of the GATT 1994, as interpreted by’ the Anti-Dumping Agreement.”(659)

462.     See also the GATT Analytical Index, concerning the permissible scope of measures against dumping or subsidization under GATT 1947, including the preparatory work of the GATT on this issue.

(b) Methodology of investigation

(i) No obligation to choose a particular methodology

463.     In EC — Tube or Pipe Fittings the Panel examined whether Article VI:2 prescribes a certain methodology for the investigation of dumping. In the anti-dumping investigation at issue, the EC authorities had used a period of investigation of one year, during which the Brazilian currency was devalued by 42 per cent. Brazil argued that the devaluation had eliminated any dumping and that the Commission had failed to consider whether dumping existed “in the present”. The Panel concluded that events occurring during the period of investigation did not require the authorities to reassess their determination. The Appellate Body upheld the Panel’s finding and rejected Brazil’s argument that Article VI:2 of the GATT 1994 required investigating authorities to “anticipate the level of anti-dumping duty that is strictly necessary to prevent dumping in the future [by making] a reasonable assumption for the future on the basis of the data collected in the [Period of Investigation]”. According to the Appellate Body, the words “in order to offset or prevent dumping” in Article VI:2 do not prescribe the selection of a particular methodology in the anti-dumping investigation:

“We are unable to see an obligation flowing from the opening phrase of Article VI:2 of the GATT 1994 to Article 2 of the Anti-Dumping Agreement that the determination of dumping must be based on the standard of a ‘reasonable assumption for the future’, or that this, in turn, would require that a particular methodology be chosen under Article 2.4.2.”(660)

(ii) Price comparisons and zeroing

464.     In US — Zeroing (EC), the Appellate Body considered the application of the dumping margin calculation methodology known as “zeroing”.(661) The Appellate Body reversed the Panel’s finding that the application of zeroing in the administrative reviews at issue was not inconsistent with Article 9.3 of the Anti-Dumping Agreement or Article VI:2. The Appellate Body explained that Article 9.3 and Article VI:2 require investigating authorities to ensure that the total amount of anti-dumping duties collected on all entries of a product from a given exporter or foreign producer shall not exceed the margin of dumping established for that exporter or foreign producer. The Appellate Body found instead that in the administrative reviews at issue in this case, the United States acted inconsistently with this requirement because, by disregarding the results of comparisons for which the export price of specific transactions exceeded the average normal value, it assessed anti-dumping duties in excess of the foreign producers’ or exporters’ margins of dumping:

“We move now to the question of whether the zeroing methodology applied by the USDOC in the administrative reviews at issue is consistent with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994. It follows from our analysis that, in order to make this determination, it is necessary to compare the antidumping duties collected on all entries of the subject product from a given exporter or foreign producer with that exporter’s or foreign producer’s margin of dumping for the product as a whole. We recall that, if a margin of dumping is calculated on the basis of multiple comparisons made at an intermediate stage, it is only on the basis of aggregating all these intermediate results that an investigating authority can establish margins of dumping for the product as a whole. Therefore, the margins of dumping with which the assessed anti-dumping duties have to be compared under Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 are foreign producers’ or exporters’ margins of dumping that reflect the results of all of the multiple comparisons carried out at an intermediate stage of the calculation.

 

Furthermore, we recall that, in the administrative reviews at issue, the USDOC assessed the anti-dumping duties according to a methodology in which, for each individual importer, comparisons were carried out between the export price of each individual transaction made by the importer and a contemporaneous average normal value. The results of these multiple comparisons were then aggregated to calculate the anti-dumping duties owed by each individual importer. If, for a given individual transaction, the export price exceeded the contemporaneous average normal value, the USDOC, at the aggregation stage, disregarded the result of this individual comparison. Because results of this type were systematically disregarded, the methodology applied by the USDOC in the administrative reviews at issue resulted in amounts of assessed anti-dumping duties that exceeded the foreign producers’ or exporters’ margins of dumping with which the anti-dumping duties had to be compared under Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994. Accordingly, the zeroing methodology, as applied by the USDOC in the administrative reviews at issue, is inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994.”(662)

465.     In US — Stainless Steel (Mexico), the Appellate Body found regarding price comparisons and zeroing, in relation to Article VI:2:

“[U]nder Article VI:2 and Article 9.3, the margin of dumping established for an exporter in accordance with Article 2 operates as a ceiling for the total amount of antidumping duties that can be levied on the entries of the subject merchandise from that exporter.

 

We see no basis in Article VI:2 of the GATT 1994 or in Articles 2 and 9.3 of the Anti-Dumping Agreement for disregarding the results of comparisons where the export price exceeds the normal value when calculating the margin of dumping for an exporter. …”(663)

 

“In our analysis, we have been mindful of the standard of review provided in Article 17.6(ii) of the Anti-Dumping Agreement. However, we consider that Article VI:2 of the GATT 1994 and Article 9.3 of the Anti-Dumping Agreement, when interpreted in accordance with the customary rules of interpretation of public international law as required by the first sentence of Article 17.6(ii) of the Anti-Dumping Agreement, do not admit of another interpretation as far as the issue of zeroing raised in this appeal is concerned.”(664)

466.     In US — Continued Zeroing, the Appellate Body pointed to the need for consistent treatment of price comparisons in original investigations and in reviews:

“We fail to see a textual or contextual basis in the GATT 1994 or the Anti-Dumping Agreement for treating transactions that occur above normal value as ‘dumped’, for purposes of determining the existence and magnitude of dumping in the original investigation, and as ‘non-dumped’, for purposes of assessing the final liability for payment of anti-dumping duties in a periodic review. If, as a consequence of zeroing, the results of certain comparisons are disregarded only for purposes of assessing final liability for payment of anti-dumping duties in a periodic review, a mismatch is created between the product considered ‘dumped’ in the original investigation and the product for which anti-dumping duties are collected. This is not consonant with the need for consistent treatment of a product at the various stages of anti-dumping duty proceedings.”(665)

467.     Concerning GATT practice in respect of Article VI:2, see also the GATT Analytical Index .

5. Article VI:3

(a) Relationship between Paragraph 3 and the SCM Agreement

468.     In Brazil — Desiccated Coconut, the Appellate Body observed:

“A countervailing duty being a specific action against a subsidy of another WTO Member, pursuant to Article 32.1, it can only be imposed ‘in accordance with the provisions of GATT 1994, as interpreted by this Agreement’. … the negotiators of the SCM Agreement clearly intended that, under the integrated WTO Agreement, countervailing duties may only be imposed in accordance with the provisions of Part V of the SCM Agreement and Article VI of the GATT 1994, taken together.”(666)

(b) Permissible responses to subsidization

469.     In US — Offset Act (Byrd Amendment), the Appellate Body found that there are only four permissible responses to a countervailable subsidy, under the GATT and the SCM Agreement:

“In our view, Article VI:3 of the GATT 1994 and Part V of the SCM Agreement encompass all measures taken against subsidization. To be in accordance with the GATT 1994, as interpreted by the SCM Agreement, a response to subsidization must be either in the form of definitive countervailing duties, provisional measures or price undertakings, or in the form of multilaterally-sanctioned countermeasures resulting from resort to the dispute settlement system.”(667)

470.     See also paragraph 462 above.

(c) Calculation of subsidies

471.     The Appellate Body Report on US — Countervailing Measures on Certain EC Products set out the principle that the investigating authorities must determine the amount of subsidies before imposing countervailing duties:

“[U]nder Article VI:3 of the GATT 1994, investigating authorities, before imposing countervailing duties, must ascertain the precise amount of a subsidy attributed to the imported products under investigation. In furtherance of this obligation, Article 10 of the SCM Agreement provides that Members must ‘ensure’ that duties levied for the purpose of offsetting a subsidy are imposed only ‘in accordance with’ the provisions of Article VI:3 of the GATT 1994 and the SCM Agreement. Moreover, Article 19.4 of the SCM Agreement, consistent with the language of Article VI:3 of the GATT 1994, requires that ‘[n]o countervailing duty shall be levied on any imported product in excess of the amount of the subsidy found to exist’. … In sum, these provisions set out the obligation of Members to limit countervailing duties to the amount and duration of the subsidy found to exist by the investigating authority.”(668)

472.     In US — Softwood Lumber IV, the US authorities conducting a countervailing duty investigation of softwood lumber from Canada had failed to conduct a “pass-through” analysis to examine whether subsidies provided to timber harvesters were passed through in their sales of logs to unrelated sawmills and lumber remanufacturers. The Appellate Body upheld the Panel’s finding that Article VI:3, and Articles 10 and 32 of the SCM Agreement, require a pass-through analysis in respect of such log sales:

“Because Article VI:3 permits offsetting, through countervailing duties, no more than the ‘subsidy determined to have been granted … directly or indirectly, 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. It is only the amount by which an indirect subsidy granted to producers of inputs flows through to the processed product, together with the amount of subsidy bestowed directly on producers of the processed product, that may be offset through the imposition of countervailing duties. …”(669)

 

“… where countervailing duties are used to offset subsidies granted to producers of input products, while the duties are to be imposed on processed products, and where input producers and downstream processors operate at arms length, the investigating authority must establish that the benefit conferred by a financial contribution directly on input producers is passed through, at least in part, to producers of the processed product subject to the investigation.”(670)

6. Note 1 Ad Article VI:2–3

473.     In US — Shrimp (Thailand)/US — Customs Bond Directive, Thailand and India each argued that an enhanced Customs bonding requirement applied by the US, to ensure collection of anti-dumping and countervailing duties imposed on shrimp, was “specific action against dumping” inconsistent with Article 18.1 of the Anti-Dumping Agreement. The Panel found that the measure was inconsistent with Article 18.1 because it was specific to dumping, it acted “against” dumping, and it had not been taken in accordance with the provisions of the GATT 1994 as interpreted by the Anti-Dumping Agreement. On appeal, the main issue was whether the application of the enhanced bond requirement to subject shrimp was in accordance with the GATT 1994 — specifically, whether it was consistent with Note 1 Ad Article VI:23 to apply this bonding requirement not just during an anti-dumping investigation, but afterward.

474.     The Appellate Body found that the Ad Note authorizes taking security against the risk of nonpayment of duties, and that the “final determination” referred to includes the duty assessment process in the US retrospective duty assessment system:

“The obligation that is intended to be secured under the Ad Note is the ‘payment of anti-dumping or countervailing duty’. In other words, the Ad Note recognizes the right of WTO Members to take reasonable security against the risk of non-payment of an anti-dumping or countervailing duty that is lawfully established. This risk might exist during the period of an original investigation, and a provisional measure in the form of a security may be taken in accordance with Article 7 of the Anti-Dumping Agreement to protect against this risk. In a retrospective duty assessment system, this risk might also exist after the anti-dumping duty order has been imposed, arising from the difference between the amount collected at the time of import entry and the final liability assessed in an assessment review. The Ad Note also suggests that the reasonable security envisaged by it fulfils the same function as the securities taken ‘in many other cases in customs administration’. As the United States points out, in most other cases in customs administration, security is required upon entry of merchandise when there is some uncertainty about the actual amount of liability that may be lawfully owed by the importer. Such a security is intended to provide a protection against the non-payment risk that might arise from the differences between the amount collected at the time of importation and the liability that may be finally determined. Accordingly, we are of the view that the term ‘final determination’ in the Ad Note includes the determination that is made to assess the final liability for payment of anti-dumping duties under Article 9.3.1 in a retrospective duty assessment system. The ‘facts’ are those that are necessary to be determined in order to assess properly the amount of final liability of the duty in accordance with the Anti-Dumping Agreement.”(671)

475.     The Appellate Body then found that in the US retrospective system, after an anti-dumping order has been imposed, the “existence” of dumping is no longer “suspected”, but that the Ad Note authorizes taking security until the magnitude of liability for antidumping duties is determined:

“[T]he term ‘dumping’ in the Ad Note covers both the existence of dumping and the amount or margin of dumping . … [in the US retrospective system] dumping remains “suspected” within the meaning of the Ad Note as regards its magnitude for the import entries occurring after the anti-dumping duty order is imposed. …

 

For these reasons, we find that the Ad Note authorizes the taking of a reasonable security after the imposition of an anti-dumping duty order, pending the determination of the final liability for payment of the anti-dumping duty. …”(672)

476.     The Appellate Body went on to find that the taking of security did not constitute an impermissible fourth category of response to dumping:

“Generally speaking, a security is accessory or ancillary to the principal obligation that it guarantees. A security that is taken to guarantee the obligation to pay anti-dumping or countervailing duties is intrinsically linked to that obligation. Thus, taking security for the full and final payment of duties should be viewed as a component of the imposition and collection of anti-dumping or countervailing duties. Therefore, a reasonable security taken in accordance with the Ad Note for potential additional antidumping duty liability does not necessarily, in and of itself, constitute a fourth autonomous category of response to dumping.”(673)

477.     Finally, the Appellate Body examined whether the application of the enhanced bond requirement was a “reasonable” security within the meaning of the Ad Note. It outlined the following general considerations:

“In our view, a two-step approach is necessary to assess the ‘reasonableness’ of a security such as the EBR. The first step involves a determination of the ‘likelihood’ of an increase in the margin of dumping of an exporter as a result of which there will be a significant additional liability to be secured. This determination should have a rational basis and be supported by sufficient evidence. The second step involves a determination of the ‘likelihood of default’ on the part of importers in respect of whom such additional liability is likely to arise…. Taking security from an importer who may have no additional liability to pay or from an importer who presents no risk of default, as revealed by available and pertinent evidence, would obviously be unreasonable. Finally, security requirements that impose excessive additional costs on the importers may convert the security into an impermissible specific action against dumping.”(674)

7. Article VI:4

478.     In EC — Tube or Pipe Fittings, Brazil argued that an EC countervailing duty determination violated Article VI:4. An exporter had obtained a refund of indirect taxes borne in Brazil by inputs used to produce the exported product, but the EC denied an allowance for the refund because the exporter had not demonstrated that the refund was for internal taxes. The Panel examined the issue in relation to Article VI:4 and Article 2.4.2 of the Anti-Dumping Agreement and concluded that the facts in the record showed that the export prices used had already netted out the indirect taxes, and the record did not otherwise support Brazil’s claim.(675)

479.     See also items (g) and (h) of the Illustrative List of Export Subsidies in Annex I of the SCM Agreement, as well as Annex II of the SCM Agreement (Guidelines on the Consumption of Inputs in the Production Process). Regarding GATT practice under Article VI:4.

8. Article VI:5

480.     In US — Anti-Dumping and Countervailing Duties (China), the Panel and Appellate Body considered a claim that concurrent application of anti-dumping duties calculated under a non-market economy (NME) methodology and of countervailing duties resulted in a double remedy for the subsidies concerned.

“As the Panel explained, the dumping margin calculated under an NME methodology ‘reflects not only price discrimination by the investigated producer between the domestic and export markets (“dumping”)’, but also ‘economic distortions that affect the producer’s costs of production’, including specific subsidies to the investigated producer of the relevant product in respect of that product. An anti-dumping duty calculated based on an NME methodology may, therefore, ‘remedy’ or ‘offset’ a domestic subsidy, to the extent that such subsidy has contributed to a lowering of the export price.(676) Put differently, the subsidization is ‘counted’ within the overall dumping margin. When a countervailing duty is levied against the same imports, the same domestic subsidy is also ‘counted’ in the calculation of the rate of subsidization and, therefore, the resulting countervailing duty offsets the same subsidy a second time. Accordingly, the concurrent imposition of an anti-dumping duty calculated based on an NME methodology, and a countervailing duty may result in a subsidy being offset more than once, that is, in a double remedy. Double remedies may also arise in the context of domestic subsidies granted within market economies when anti-dumping and countervailing duties are concurrently imposed on the same products and an unsubsidized, constructed, or third country normal value is used in the anti-dumping investigation. ”(677)

481.     The Panel had interpreted the reference to “export subsidization” in Article VI:5 as support for its findings that SCM Articles 19.3 and 19.4 do not address the issue of double remedies. The Appellate Body reversed the Panel, holding that:

Article VI:5 prohibits the concurrent application of antidumping and countervailing duties to compensate for the same situation of dumping or export subsidization. In our view, the term ‘same situation’ is central to an understanding of the rationale underpinning the prohibition contained in Article VI:5, which in turn sheds light on the reason why, in the case of domestic subsidies, an express prohibition is absent.

 

We recall that, in principle, an export subsidy will result in a pro rata reduction in the export price of a product, but will not affect the price of domestic sales of that product. That is, the subsidy will lead to increased price discrimination and a higher margin of dumping. In such circumstances, the situation of subsidization and the situation of dumping are the ‘same situation’, and the application of concurrent duties would amount to the application of ‘double remedies’ to compensate for, or offset, that situation. By comparison, domestic subsidies will, in principle, affect the prices at which a producer sells its goods in the domestic market and in export markets in the same way and to the same extent. Since any lowering of prices attributable to the subsidy will be reflected on both sides of the dumping margin calculation, the overall dumping margin will not be affected by the subsidization. In such circumstances, the concurrent application of duties would not compensate for the same situation, because no part of the dumping margin would be attributable to the subsidization. Only the countervailing duty would offset such subsidization.

 

To the extent that these assumptions hold true, then the presence, in Article VI, of an express prohibition on the concurrent application of duties to counteract the ‘same situation’ of dumping or export subsidization, along with the absence of an express prohibition in connection with situations of domestic subsidization, appears logical — at least when normal value is calculated on the basis of domestic sales prices. We note that Article VI:1(a) of the GATT 1994, like Article 2.1 of the Anti-Dumping Agreement, provides that the usual method for calculating normal value will be based on the comparable price for the like product in the exporter’s domestic market. Thus, in anti-dumping investigations, normal value will typically be based on domestic sales prices and any domestic subsidy will have no impact on the calculation of the dumping margin. Nonetheless, Article VI:1(b), like Article 2.2 of the Anti-Dumping Agreement, sets out exceptional methods for the calculation of normal value, which are not based on actual prices in the exporter’s domestic market. The second Ad Note to Article VI:1, which provides the legal basis for the use of surrogate values for NMEs in anti-dumping investigations, also authorizes recourse to exceptional methods for the calculation of normal value in investigations of imports from NMEs. In case of domestic subsidization, it is only in these exceptional situations that there is any possibility that the concurrent application of anti-dumping and countervailing duties on the same product could lead to ‘double remedies’.”(678)

9. Article VI:6

(a) Article VI:6(a): material injury

482.     In US — 1916 Anti-Dumping Act, the Panel agreed with Japan that the measure at issue (described in paragraph 447 above) violated Article VI:6(a), because this law contained no requirement similar to “material injury” within the meaning of Article VI. The Panel observed:

“We note that Article VI:1 of the GATT 1994 requires the existence of material injury or a threat thereof to an established industry or material retardation of the establishment of a domestic industry. The 1916 Act does not refer to material injury or threat of material injury or material retardation of the establishment of a domestic industry but to the intent of, inter alia, ‘destroying or injuring an industry in the United States, or of preventing the establishment of an industry in the United States’… .

 

For these reasons, we find that the 1916 Act, to the extent that it provides for the identification of an ‘intent’ on the part of the defendant rather than for the actual injury requirements of Article VI, is not compatible with Article VI:1 of the GATT 1994. We note that Article VI:6(a) does not, in substance, contain additional obligations with respect to the existence of material injury, threat of injury or material retardation of the establishment of a domestic industry. However, from the terms of Article VI:6(a), it seems to us that the objective of that paragraph is to require a determination by the authorities of the importing Member that dumping is such as to cause material injury, threat thereof or material retardation. Having regard to the evidence before us, we do not consider that Japan has established a prima facie case of violation of Article VI:6(a) based on the fact that the 1916 Act would not provide for a determination by the US authorities.”(679)

483.     In Mexico — Olive Oil, the EC challenged countervailing duties imposed on imports of olive oil. At the time of the application for these duties, Fortuny, the company submitting the application, did not produce olive oil, and it was not a producer of olive oil during the period of investigation; Mexico imposed these duties based on material retardation of the establishment of a domestic industry. The EC claimed that the duties violated Article 16.1 of the SCM Agreement and consequently Article VI:6 of the GATT. The Panel opined:

“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. 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 … 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.”(680)

484.     The Panel found that “Article 16.1 does not require that an enterprise or group of enterprises seeking countervailing 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”,(681) and that the Mexican authorities had reached a reasoned and adequate determination that Fortuny was in fact a producer of a domestic like product. (682) The Panel consequently rejected the EC claim under Article VI:6(a).(683)

485.     Regarding GATT practice under Article VI:6.

(b) Article VI:6(b) and (c): Anti-dumping and countervailing duties based on material injury to the industry in a third country

486.     See the GATT Analytical Index, on the background to the addition of these provisions to the GATT in 1955, and on practice under the GATT 1947. See also Article 14 of the Anti-Dumping Agreement on anti-dumping action on behalf of a third country.

487.     The provisions of Article VI:6(b) or (c) have never been invoked since they entered into effect in 1957 and no waiver of Article VI:6(a) has ever been requested.

10. Relationship with other GATT provisions

(a) Article I

488.     The Panel in Brazil — Desiccated Coconut found that because Article VI of GATT 1994 did not constitute applicable law for the purposes of the dispute, the claims made under Article I (and II) of GATT 1994, which were derived from claims of inconsistency with Article VI of GATT 1994, could not succeed.(684) The Appellate Body in Brazil — Desiccated Coconut confirmed this finding.(685)

(b) Article II

489.     The Panel in Brazil — Desiccated Coconut found that because Article VI of GATT 1994 did not constitute applicable law for the purposes of the dispute, the claims made under Article II (and I) of GATT 1994, which were derived from claims of inconsistency with Article VI of GATT 1994, could not succeed.(686) The Appellate Body in Brazil — Desiccated Coconut confirmed this finding.(687)

(c) Article III

490.     In US — 1916 Act (EC) and US — 1916 (Japan), exercising judicial economy, the Panel found that the United States’ 1916 Act was inconsistent with Article VI of the GATT 1994. However, the Panel did not also examine the EC claim that it was inconsistent with Article III of GATT 1994. See paragraph 400 above.

(d) Article XI

491.     In US — 1916 Act (Japan), exercising judicial economy, the Panel did not examine a claim under Article XI of GATT 1994, after having found a violation of Article VI. See paragraph 641 below.

11. Relationship with other WTO Agreements

(a) Anti-Dumping Agreement

492.     As the complainant had not established a prima facie case of a violation of Articles 2.1 and 2.2 of the Anti-Dumping Agreement, the Panel in US — 1916 Act (EC) stated that “[t]he fact that we found a violation of Article VI:1 of the GATT 1994 is not as such sufficient to conclude that Articles 2.1 and 2.2 of the Anti-Dumping Agreement have been breached, in the absence of more specific arguments and evidence.”(688)

493.     In US — 1916 Act (Japan), the Panel was faced with the question whether it could make findings under Article VI, without, at the same time, making a finding under a provision of the Anti-Dumping Agreement or whether “the link between Article VI and the Anti-Dumping Agreement is such as to make impossible a finding under Article VI only”. The Panel referred to the findings of the Panel in India — Quantitative Restrictions and of the Appellate Body in Brazil — Desiccated Coconut and distinguished these two cases from the issue before it. The Panel then concluded that it could “make findings under Article VI without, at the same time, having to make findings under the provisions of the Anti-Dumping Agreement, and vice-versa”:

“In the present case, the issue is whether the Panel can make findings in relation to Article VI only or whether the link between Article VI and the Anti-Dumping Agreement is such as to make impossible a finding under Article VI only.

 

Article VI and the Anti-Dumping Agreement are part of the same treaty: the WTO Agreement. In application of the customary rules of interpretation of international law, we are bound to interpret Article VI of the GATT 1994 as part of the WTO Agreement and, pursuant to Article 31 of the Vienna Convention, the Anti-Dumping Agreement forms part of the context of Article VI. This implies that we must look at Article VI and the Anti-Dumping Agreement as part of an “inseparable package of rights and obligations” and that Article VI should not be interpreted in a way that would deprive either Article VI or the Anti- Dumping Agreement of meaning.(689) However, this obligation does not prevent us from making findings in relation to Article VI only, as the panel did in its report on India Quantitative Restrictions.

 

We conclude that we can make findings under Article VI without, at the same time, having to make findings under the provisions of the Anti-Dumping Agreement, and vice-versa. However, the fact that Article VI and the Anti-Dumping Agreement represent an inseparable package of rights and disciplines requires that we interpret each of the provisions invoked by Japan in its claims in conjunction with the other relevant provisions of this ‘inseparable package’, so as to give meaning to all of them.”(690)

494.     Also, the Panel in US — 1916 Act (EC) explained its exercise of judicial economy with respect to Article 3 as follows:

“Since we found above that the 1916 Act violated Article VI:1 by not providing for an injury test compatible with the terms of that Article and since Article 3 simply addresses in more detail the requirement of ‘material injury’ contained in Article VI:1, we do not find it necessary to make specific findings under Article 3 and therefore exercise judicial economy, as we are entitled to do under GATT panel practice and WTO panel and Appellate Body practice.”(691)

(b) SCM Agreement

495.     In the Brazil — Desiccated Coconut dispute, the Panel was faced with the question “whether Article VI creates rules which are separate and distinct from those of the SCM Agreement, and which can be applied without reference to that Agreement, or whether Article VI of GATT 1994 and the SCM Agreement represent an inseparable package of rights and disciplines that must be considered in conjunction.” (692) In phrasing this issue, the Panel in Brazil — Desiccated Coconut made clear that the SCM Agreement did not supersede Article VI of GATT 1994 as the basis for the WTO discipline of countervailing measures. The Panel stated:

“It is evident that both Article VI of GATT 1994 and the SCM Agreement have force, effect, and purpose within the WTO Agreement. That GATT 1994 has not been superseded by other Multilateral Agreements on Trade in Goods … is demonstrated by a general interpretive note to Annex 1A of the WTO Agreement. The fact that certain important provisions of Article VI of GATT 1994 are neither replicated nor elaborated in the SCM Agreement further demonstrates this point. Thus, the question for consideration is not whether the SCM Agreement supersedes Article VI of GATT 1994.”(693)

496.     The Appellate Body in Brazil — Desiccated Coconut confirmed the statement by the Panel that the SCM Agreement did not supersede Article VI of GATT 1994(694), and stated:

“The relationship between the GATT 1994 and the other goods agreements in Annex 1A is complex and must be examined on a case-by-case basis. Although the provisions of the GATT 1947 were incorporated into, and became a part of the GATT 1994, they are not the sum total of the rights and obligations of WTO Members concerning a particular matter. For example, with respect to subsidies on agricultural products, Articles II, VI and XVI of the GATT 1994 alone do not represent the total rights and obligations of WTO Members. The Agreement on Agriculture and the SCM Agreement reflect the latest statement of WTO Members as to their rights and obligations concerning agricultural subsidies. The general interpretative note to Annex 1A was added to reflect that the other goods agreements in Annex 1A, in many ways, represent a substantial elaboration of the provisions of the GATT 1994, and to the extent that the provisions of the other goods agreements conflict with the provisions of the GATT 1994, the provisions of the other goods agreements prevail. This does not mean, however, that the other goods agreements in Annex 1A, such as the SCM Agreement, supersede the GATT 1994.”(695)

497.     The Appellate Body in Brazil — Desiccated Coconut, in addressing the issue of the scope of Article VI of the GATT 1994, noted that “[t]he relationship between the SCM Agreement and Article VI of GATT 1994 is set out in Articles 10 and 32.1 of the SCM Agreement.”(696) With respect to the Appellate Body’s other findings on this issue, see the excerpts referenced in the Chapter on the SCM Agreement.

 

IX. Article VII     back to top

A. Text of Article VII

Article VII: Valuation for Customs Purposes

1.     The contracting parties recognize the validity of the general principles of valuation set forth in the following paragraphs of this Article, and they undertake to give effect to such principles, in respect of all products subject to duties or other charges* or restrictions on importation and exportation based upon or regulated in any manner by value. Moreover, they shall, upon a request by another contracting party review the operation of any of their laws or regulations relating to value for customs purposes in the light of these principles. The CONTRACTING PARTIES may request from contracting parties reports on steps taken by them in pursuance of the provisions of this Article.

 

2.     (a)     The value for customs purposes of imported merchandise should be based on the actual value of the imported merchandise on which duty is assessed, or of like merchandise, and should not be based on the value of merchandise of national origin or on arbitrary or fictitious values.*

 

     (b)     “Actual value” should be the price at which, at a time and place determined by the legislation of the country of importation, such or like merchandise is sold or offered for sale in the ordinary course of trade under fully competitive conditions. To the extent to which the price of such or like merchandise is governed by the quantity in a particular transaction, the price to be considered should uniformly be related to either (i) comparable quantities, or (ii) quantities not less favourable to importers than those in which the greater volume of the merchandise is sold in the trade between the countries of exportation and importation.*

 

    (c)     When the actual value is not ascertainable in accordance with subparagraph (b) of this paragraph, the value for customs purposes should be based on the nearest ascertainable equivalent of such value.*

 

3.     The value for customs purposes of any imported product should not include the amount of any internal tax, applicable within the country of origin or export, from which the imported product has been exempted or has been or will be relieved by means of refund.

 

4.     (a)     Except as otherwise provided for in this paragraph, where it is necessary for the purposes of paragraph 2 of this Article for a contracting party to convert into its own currency a price expressed in the currency of another country, the conversion rate of exchange to be used shall be based, for each currency involved, on the par value as established pursuant to the Articles of Agreement of the International Monetary Fund or on the rate of exchange recognized by the Fund, or on the par value established in accordance with a special exchange agreement entered into pursuant to Article XV of this Agreement.

 

     (b)     Where no such established par value and no such recognized rate of exchange exist, the conversion rate shall reflect effectively the current value of such currency in commercial transactions.

 

     (c)     The CONTRACTING PARTIES, in agreement with the International Monetary Fund, shall formulate rules governing the conversion by contracting parties of any foreign currency in respect of which multiple rates of exchange are maintained consistently with the Articles of Agreement of the International Monetary Fund. Any contracting party may apply such rules in respect of such foreign currencies for the purposes of paragraph 2 of this Article as an alternative to the use of par values. Until such rules are adopted by the Contracting Parties, any contracting party may employ, in respect of any such foreign currency, rules of conversion for the purposes of paragraph 2 of this Article which are designed to reflect effectively the value of such foreign currency in commercial transactions.

 

     (d)     Nothing in this paragraph shall be construed to require any contracting party to alter the method of converting currencies for customs purposes which is applicable in its territory on the date of this Agreement, if such alteration would have the effect of increasing generally the amounts of duty payable.

 

5.     The bases and methods for determining the value of products subject to duties or other charges or restrictions based upon or regulated in any manner by value should be stable and should be given sufficient publicity to enable traders to estimate, with a reasonable degree of certainty, the value for customs purposes.


B. Text of Note Ad Article VII

Ad Article VII Paragraph 1

     The expression “or other charges” is not to be regarded as including internal taxes or equivalent charges imposed on or in connection with imported products.

Paragraph 2

1.     It would be in conformity with Article VII to presume that “actual value” may be represented by the invoice price, plus any non-included charges for legitimate costs which are proper elements of “actual value” and plus any abnormal discount or other reduction from the ordinary competitive price.

 

2.     It would be in conformity with Article VII, paragraph 2(b), for a contracting party to construe the phrase “in the ordinary course of trade … under fully competitive conditions”, as excluding any transaction wherein the buyer and seller are not independent of each other and price is not the sole consideration.

 

3.     The standard of “fully competitive conditions” permits a contracting party to exclude from consideration prices involving special discounts limited to exclusive agents.

 

4.     The wording of subparagraphs (a) and (b) permits a contracting party to determine the value for customs purposes uniformly either (1) on the basis of a particular exporter’s prices of the imported merchandise, or (2) on the basis of the general price level of like merchandise.

C. Interpretation and Application of Article VII

498.     See the Chapter on the Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation Agreement). On GATT practice concerning Article VII.

 

X. Article VIII     back to top

A. Text of Article VIII

Article VIII: Fees and Formalities connected with Importation and Exportation*

1.     (a)     All fees and charges of whatever character (other than import and export duties and other than taxes within the purview of Article III) imposed by contracting parties on or in connection with importation or exportation shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.

 

     (b)     The contracting parties recognize the need for reducing the number and diversity of fees and charges referred to in subparagraph (a).

 

     (c)     The contracting parties also recognize the need for minimizing the incidence and complexity of import and export formalities and for decreasing and simplifying import and export documentation requirements.*

 

2.     A contracting party shall, upon request by another contracting party or by the CONTRACTING PARTIES, review the operation of its laws and regulations in the light of the provisions of this Article.

 

3.     No contracting party shall impose substantial penalties for minor breaches of customs regulations or procedural requirements. In particular, no penalty in respect of any omission or mistake in customs documentation which is easily rectifiable and obviously made without fraudulent intent or gross negligence shall be greater than necessary to serve merely as a warning.

 

4.     The provisions of this Article shall extend to fees, charges, formalities and requirements imposed by governmental authorities in connection with importation and exportation, including those relating to:

(a)     consular transactions, such as consular invoices and certificates;

 

(b)     quantitative restrictions;

 

(c)     licensing;

 

(d)     exchange control;

 

(e)     statistical services;

 

(f)     documents, documentation and certification;

 

(g)     analysis and inspection; and

 

(h)     quarantine, sanitation and fumigation.


B. Text of Note ad Article VIII

Ad Article VIII

1.     While Article VIII does not cover the use of multiple rates of exchange as such, paragraphs 1 and 4 condemn the use of exchange taxes or fees as a device for implementing multiple currency practices; if, however, a contracting party is using multiple currency exchange fees for balance of payments reasons with the approval of the International Monetary Fund, the provisions of paragraph 9 (a) of Article XV fully safeguard its position.

 

2.     It would be consistent with paragraph 1 if, on the importation of products from the territory of a contracting party into the territory of another contracting party, the production of certificates of origin should only be required to the extent that is strictly indispensable.

C. Interpretation and Application of Article VIII

1. Article VIII:1(a)

499.     In Argentina — Textiles and Apparel, the Panel addressed a 3 per cent ad valorem “statistical tax” on imports, described by Argentina as designed to cover the cost of providing trade statistics. The Panel found that this statistical tax was inconsistent with Article VIII:1(a). (Argentina did not appeal this finding, but claimed that the Panel had failed to take properly into account Argentina’s IMF obligations.) The Panel emphasized that an ad valorem tax, by design, is not “limited in amount to the approximate cost of services rendered”, as required by Article VIII:1(a):

“The meaning of Article VIII was examined in detail in the Panel Report on United States Customs User Fee.(697) The panel found that Article VIII’s requirement that the charge be ‘limited in amount to the approximate cost of services rendered’ is ‘actually a dual requirement, because the charge in question must first involve a “service” rendered, and then the level of the charge must not exceed the approximate cost of that “service”’.(698) According to the panel report, the term ‘services rendered’ means ‘services rendered to the individual importer in question’.(699) In the present case Argentina states that the service is not rendered to the individual importer, or to the specific importer associated with a particular operation, but to foreign trade operators in general and foreign trade as an activity per se.

 

An ad valorem duty with no fixed maximum fee, by its very nature, is not ‘limited in amount to the approximate cost of services rendered’. For example, high-price items necessarily will bear a much greater tax burden than low-price goods, yet the service accorded to both is essentially the same. An unlimited ad valorem charge on imported goods violates the provisions of Article VIII because such a charge cannot be related to the cost of the service rendered. For example, in the Customs User Fee report, the panel examined the consistency with Article VIII of 0.22 and 0.17 per cent ad valorem customs merchandise processing fees with no upper limits. The panel concluded that ‘the term “cost of services rendered” … in Article VIII:1(a) must be interpreted to refer to the cost of the customs processing for the individual entry in question and accordingly that the ad valorem structure of the United States merchandise processing fee was inconsistent with Article VIII:1(a) to the extent that it caused fees to be levied in excess of such costs’(700).”(701)

500.     The Panel also rejected Argentina’s argument that its tax had been enacted for “fiscal purposes”:

“Argentina’s statistical tax is levied on an ad valorem basis with no ceiling. As described in paragraph 6.70 above, Argentina’s tax is clearly not related to the cost of a service rendered to the specific importers concerned. The tax as assessed on many goods is not in proportion to the cost of any service rendered. The tax purportedly raises revenue for the purpose of financing customs activities related to the registration, computing and data processing of information on both imports and exports. While the gathering of statistical information concerning imports may benefit traders in general, Article VIII bars the levying of any tax or charge on importers to support the related costs ‘for the individual entry in question’ since it will also benefit exports and exporters.(702)

 

As to Argentina’s argument that it was collecting this tax for ‘fiscal’ purposes in the context of its undertakings with the IMF, we note that not only does Article VIII of GATT expressly prohibit such measures for fiscal purposes but that clearly a measure for fiscal purposes will normally lead to a situation where the tax results in charges being levied in excess of the approximate costs of the statistical services rendered.”(703)

501.     The Panel in US — Certain EC Products examined increased bonding requirements imposed by the United States on imports from the European Communities on 3 March 1999, in order to secure the collection of additional import duties that were authorized by the DSB on a later date. The Panel considered that Article VIII:1 could not provide a justification for the costs relating to the bonding requirements:

“The meaning of Article VIII was examined in the adopted Panel Report on United States Customs Users Fee(704) and in the adopted Appellate Body and Panel Reports on Argentina Textiles. It was found that Article VIII’s requirement that the charge be ‘limited in amount to the approximate cost of services rendered’ is ‘actually a dual requirement, because the charge in question must first involve a “service” rendered, and then the level of the charge must not exceed the approximate cost of that “service”.’(705) The term ‘services rendered’ means ‘services rendered to the individual importer in question.’(706)

 

Although very briefly in its rebuttals, the United States argued that bonding requirements could be viewed as a form of fee for services rendered (the services being the ‘early release of merchandise’) and therefore should benefit from the carve-out of Article II:2(c) of GATT, the United States has not submitted any data on the second requirement. There is no evidence that what was required from importers represented any such approximate costs of any service. It is also difficult to understand why the costs of such service would have suddenly increased on 3 March (did the United States provide more services to importers on 3 March?), and then only for listed imports from the European Communities.”(707)

502.     The Panel in China — Raw Materials examined an Article VIII:1(a) claim in relation to China’s auctioning of export quotas for certain minerals, under which enterprises seeking to export must pay a bid-winning price, equal to the bid price multiplied by the bid quantity, for the right to export under the quota. The Panel first considered the meaning of Article VIII:1(a) and concluded:

Article VIII:1(a) applies to fees and charges imposed ‘on or in connection with importation or exportation’ and requires that such fees and charges are solely applied in exchange for a ‘service rendered’. As such fees, charges, formalities or requirements that are typically imposed when providing customs-related documentation, certification and inspection, and statistical matters are covered.”(708)

503.     Regarding the charge at issue, the Panel concluded that “the bid-winning price collected by China in connection with quota allocation does not constitute a ‘fee or charge of whatever character … imposed … in connection with … exportation’ within the meaning of Article VIII:1(a). In particular, the Panel finds that the collection of the bid-winning prices does not amount to the imposition of a fee or charge on or in connection with exportation.(709) Finally, we observe that a finding otherwise would mean that all quota allocation through bidding or auctioning would be prohibited.”(710) The Panel observed:

“[T]he bid-winning price is initially a proposal submitted by an enterprise. The actual price is determined and assigned to the applicant enterprise at a point well before the exporter enters into a binding commitment to export the good subject to a quota… . In the Panel’s view, this type of arrangement does not amount to the imposition of a fee or charge on or in connection with exportation.”(711)

 

“ … the bid-winning fee is a price offered in expectation of a future return… . a bid-winning price approach generally allows a more efficient allocation of quotas than would be possible through quota allocation based on request, or based on historical quota allocation proportions, or on some arbitrary basis… . The bidding process described above determines the enterprises that will be permitted to export, but it does not affect the price ultimately received by the seller for the goods. Rather it is the total volume permitted for export that generally will determine the export price in the market.

 

Finally, it is clear that the assessed bid-winning price is not in any way related to the approximate cost of a service rendered… . By their very nature, prices submitted through bidding are variable, which would always violate the requirement in Article VIII:1(a) that fees must approximate the cost of a particular service rendered — in this case, the allocation of a quota.”(712)

504.     In recent years, Working Party Reports on the accession of new WTO Members have included commitments regarding conformity with Article VIII:1(a) in respect of the right to trade. For instance, the Working Party Report on the Accession of the Kyrgyz Republic included the following paragraph:

“The representative of the Kyrgyz Republic confirmed that from the date of accession, the Kyrgyz Republic would ensure that all of its laws and regulations relating to the right to trade in goods, and all fees, charges or taxes levied on such rights would be in full conformity with its WTO obligations, including Articles VIII:1(a), XI:1 and III:2 and 4 of the GATT 1994 and that it would also implement such laws and regulations in full conformity with these obligations. The Working Party took note of these commitments.”(713)

2. GATT practice

505.     See GATT Analytical Index.

3. Relationship with other GATT provisions

(a) Article II:1(b) and recording of changes in Schedules pursuant to Understanding on Article II:1(b)

506.     In Argentina — Textiles and Apparel, Argentina argued that the 3 per cent ad valorem statistical tax was included in its Schedule LXIV, and was therefore not in violation of GATT rules. The Panel cited paragraph 1 of the Understanding on the Interpretation of Article II:1(b), providing that recording in a Schedule “does not change the legal character of ‘other duties or charges’”, paragraph 5 providing that such recording “is without prejudice to their consistency with rights and obligations under GATT 1994 other than those affected by paragraph 4. All Members retain the right to challenge, at any time, the consistency of any ‘other duty or charge’ with such obligations”, and the provisions in paragraph 6 ensuring the right to dispute settlement. The panel held as follows:

“The provisions of the WTO Understanding on the Interpretation of Article II:1(b) of GATT 1994, dealing with ‘other duties and charges’, make clear that including a charge in a schedule of concessions in no way immunizes that charge from challenge as a violation of an applicable GATT rule… . This provision is consistent with GATT and WTO jurisprudence dealing with conflicts between non-tariff provisions included in the Member’s Schedules and general GATT and WTO rules.

 

Therefore, we consider that the fact that Argentina’s statistical tax is included in its Schedule is not a defence to its inconsistency with the provisions of Article VIII of GATT.”(714)

4. Relationship with other WTO Agreements

507.     In Argentina — Textiles and Apparel, the Appellate Body responded to an argument by Argentina that the Panel’s interpretation of Article VIII should have taken into account a Memorandum of Understanding between Argentina and the IMF providing for fiscal measures to be adopted including “…increases in import duties, including a temporary 3 per cent surcharge on imports”. The Appellate Body ruled that:

“Argentina did not show an irreconcilable conflict between the provisions of its ‘Memorandum of Understanding’ with the IMF and the provisions of Article VIII of the GATT 1994. We thus agree with the Panel’s implicit finding that Argentina failed to demonstrate that it had a legally binding commitment to the IMF that would somehow supersede Argentina’s obligations under Article VIII of the GATT 1994.”(715)

508.     A communication from the World Customs Organization discussed the obligations in the WCO instruments and their relation to Article VIII.(716)

 

XI. Article IX     back to top

A. Text of Article IX

Article IX: Marks of Origin

1.     Each contracting party shall accord to the products of the territories of other contracting parties treatment with regard to marking requirements no less favourable than the treatment accorded to like products of any third country.

 

2.     The contracting parties recognize that, in adopting and enforcing laws and regulations relating to marks of origin, the difficulties and inconveniences which such measures may cause to the commerce and industry of exporting countries should be reduced to a minimum, due regard being had to the necessity of protecting consumers against fraudulent or misleading indications.

 

3.     Whenever it is administratively practicable to do so, contracting parties should permit required marks of origin to be affixed at the time of importation.

 

4.     The laws and regulations of contracting parties relating to the marking of imported products shall be such as to permit compliance without seriously damaging the products, or materially reducing their value, or unreasonably increasing their cost.

 

5.     As a general rule, no special duty or penalty should be imposed by any contracting party for failure to comply with marking requirements prior to importation unless corrective marking is unreasonably delayed or deceptive marks have been affixed or the required marking has been intentionally omitted.

 

6.     The contracting parties shall co-operate with each other with a view to preventing the use of trade names in such manner as to misrepresent the true origin of a product, to the detriment of such distinctive regional or geographical names of products of the territory of a contracting party as are protected by its legislation. Each contracting party shall accord full and sympathetic consideration to such requests or representations as may be made by any other contracting party regarding the application of the undertaking set forth in the preceding sentence to names of products which have been communicated to it by the other contracting party.


B. Interpretation and Application of Article IX

509.     See GATT Analytical Index.

 

XII. Article X     back to top

A. Text of Article X

Article X: Publication and Administration of Trade Regulations

1.     Laws, regulations, judicial decisions and administrative rulings of general application, made effective by any contracting party, pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefor, or affecting their sale, distribution, transportation, insurance, warehousing inspection, exhibition, processing, mixing or other use, shall be published promptly in such a manner as to enable governments and traders to become acquainted with them. Agreements affecting international trade policy which are in force between the government or a governmental agency of any contracting party and the government or governmental agency of any other contracting party shall also be published. The provisions of this paragraph shall not require any contracting party to disclose confidential information which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises, public or private.

 

2.     No measure of general application taken by any contracting party effecting an advance in a rate of duty or other charge on imports under an established and uniform practice, or imposing a new or more burdensome requirement, restriction or prohibition on imports, or on the transfer of payments there for, shall be enforced before such measure has been officially published.

 

3.     (a)     Each contracting party shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings of the kind described in paragraph 1 of this Article.

 

     (b)     Each contracting party shall maintain, or institute as soon as practicable, judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of the prompt review and correction of administrative action relating to customs matters. Such tribunals or procedures shall be independent of the agencies entrusted with administrative enforcement and their decisions shall be implemented by, and shall govern the practice of, such agencies unless an appeal is lodged with a court or tribunal of superior jurisdiction within the time prescribed for appeals to be lodged by importers; Provided that the central administration of such agency may take steps to obtain a review of the matter in another proceeding if there is good cause to believe that the decision is inconsistent with established principles of law or the actual facts.

 

     (c)     The provisions of subparagraph (b) of this paragraph shall not require the elimination or substitution of procedures in force in the territory of a contracting party on the date of this Agreement which in fact provide for an objective and impartial review of administrative action even though such procedures are not fully or formally independent of the agencies entrusted with administrative enforcement. Any contracting party employing such procedures shall, upon request, furnish the CONTRACTING PARTIES with full information thereon in order that they may determine whether such procedures conform to the requirements of this subparagraph.


B. Interpretation and Application of Article X

1. General

510.     In EC — Poultry, the Appellate Body described the scope of Article X as follows:

Article X relates to the publication and administration of ‘laws, regulations, judicial decisions and administrative rulings of general application’, rather than to the substantive content of such measures… .

 

Thus, to the extent that Brazil’s appeal relates to the substantive content of the EC rules themselves, and not to their publication or administration, that appeal falls outside the scope of Article X of the GATT 1994.”(717)

511.     The Panel in EC — Selected Customs Matters observed as follows:

“The title as well as the content of the various provisions of Article X of the GATT 1994 indicate that that Article, at least in part, is aimed at ensuring that due process is accorded to traders when they import or export.”

2. Article X:1

(a) “Laws, regulations, judicial decisions and administrative rulings”

512.     In Dominican Republic — Import and Sale of Cigarettes, the Panel examined a claim regarding failure to publish average-price surveys of cigarettes conducted by the Dominican Republic Central Bank, used to determine the retail selling price for cigarettes and the tax base for the application of the Selective Consumption Tax on cigarettes. In a finding not appealed, the Panel determined that these surveys were subject to Article X:1:

“[T]he establishment of the tax base for cigarettes, and not the surveys in themselves, may be considered as an administrative ruling of general application. Once the Dominican Republic authorities had determined the tax base for cigarettes at a specific amount, that ruling would be applicable for the importation of all cigarettes within the description, until a new tax base had been set. The Central Bank average-price surveys would be a part of the administrative ruling. Indeed, an essential part, since under the Dominican Republic legislation, the tax base for cigarettes would be obtained through the surveys.

 

In order to become acquainted with the process of establishing the tax base for the application of the Selective Consumption Tax on cigarettes, governments and traders would be entitled to obtain information on the results of the survey, as well as on the methodology used in order to conduct the survey.”(718)

513.     In EC — IT Products, the Panel examined a claim under Article X:1 regarding a CNEN (an explanatory note to the EU’s Customs Nomenclature).

“Substantively, and when read as a whole within the context of Article X:1, the phrase ‘laws, regulations, judicial decisions and administrative rulings’ reflects an intention on the part of the drafters to include a wide range of measures that have the potential to affect trade and traders.(719) A narrow interpretation of the terms ‘laws, regulations, judicial decisions and administrative rulings’ would not be consistent with this intention, and would also undermine the due process objectives of Article X

 

Based on the foregoing, we observe that the ordinary meanings of the terms ‘laws, regulations, judicial decisions and administrative rulings’ indicates that the instruments covered by Article X:1 range from imperative rules of conduct to the exercise of influence or an authoritative pronouncement by certain authoritative bodies.

 

Accordingly, we consider that the coverage of Article X:1 extends to instruments with a degree of authoritativeness issued by certain legislative, administrative or judicial bodies. This does not mean, however, that they have to be ‘binding’ under domestic law. Hence, the fact that CNENs are not legally binding under EC law does not preclude them from being contemplated by the terms ‘laws, regulations, judicial decisions [or] administrative rulings’ under Article X:1. However, whether a particular measure has a degree of authoritativeness such that it would be properly characterized as ‘laws, regulations, administrative rulings or judicial decisions’ requires a case-by-case assessment of the particular factual features of the measure at issue.”(720)

 

“… it is clear that CNENs are important in enabling the European Communities to maintain a uniform application of the Common Customs Tariff within its territory. Although the European Communities has noted that CNENs do not ‘preclude the exercise of discretion’ by member State customs authorities, it is apparent that there is a clear expectation that such discretion will be exercised in a certain fashion and that infringement proceedings may apply in instances where such discretion is not so exercised. The Panel also finds it relevant that CNENs are issued by the Commission, a body with undisputed authority within the EC for ensuring the uniform application of the Customs Code Tariff, and with the power to challenge interpretations not consistent with its own… . Moreover, the Panel notes that BTIs will cease to be valid where they are no longer compatible ‘at Community level’ with ‘the explanatory notes [ … ] adopted for the purposes of interpreting the rules’. In these circumstances, the Panel considers that CNENs have a degree of authoritativeness such that they may be properly characterized as a ‘law, regulation, administrative ruling or judicial decision’ as those terms are used in Article X:1. The fact that CNENs are not ‘legally binding’ under EC law does not diminish this conclusion.

 

In our view, the transparency and due process purpose of Article X:1 would be defeated if CNENs, which evidently play a key role in EC classification practice, were not be covered by the obligations in Article X:1… .”(721)

514.     In Thailand — Cigarettes (Philippines), the Panel examined claims under Article X:1 regarding publication of rules affecting the effective tax rate on cigarettes. During the panel proceedings the Thai Excise Department explained its methodology for calculating the minimum retail sales prices (MRSPs) for imported and domestic cigarettes; the Panel found that this methodology applied “prospectively and generally” to all potential sales of cigarettes, and therefore fell within the scope of Article X:1.(722) The Panel noted:

“[W]e are not saying that every statement that a party makes in a panel proceeding falls within the scope of Article X:1. The factual circumstances of this case, particularly the absence of written rules and Thailand’s detailed explanation of such rules for the first time in this proceeding, confirm that what Thailand itself alleges to be its general methodology for determining the MRSPs must be considered as a rule of general application within the meaning of Article X:1.”(723)

515.     In Thailand — Cigarettes (Philippines), the Panel rejected a claim under Article X:1 that Thailand was required to publish the methodology and data for determining “ex factory prices”, an element for determining the MRSP for cigarettes. The Panel found that:

“[t]he ex factory price, as a general concept … is the result of an internal decision-making process, conducted on a firm-by-firm basis. Therefore, unless it can be shown, by supporting evidence, that a government is somehow involved in determining the ex factory price of certain goods, the ex factory price cannot be characterized as an administrative ruling of general application under Article X:1 as it is a business decision made by an individual company.(724)

 

… While [the Thai Tobacco Monopoly, TTM] is a state enterprise, that does not in itself constitute a proof that the Thai government determines ex factory prices of TTM’s cigarettes. Neither are we presented with evidence suggesting that this is the case or TTM is bound by guidelines or rules imposed by the Thai administration in making its ex factory price determination… .”(725)

516.     In Thailand — Cigarettes (Philippines), the Panel considered a claim regarding failure to publish the procedures for release of guarantees deposited by importers for excise and other internal taxes. Aside from the laws concerning a right to the release of these guarantees, the Philippines asserted, but did not provide evidence, that separate unpublished procedures for obtaining release of guarantees exist and were not published. The Panel concluded that “the Philippines did not discharge its burden of proving the existence of the specific procedural rules generally applied to the release of guarantees within the meaning of Article X:1”,(726) noting that “as the Philippines itself acknowledges, if its own claim pertains to the absence of the specific procedural rules generally applicable to the release of guarantees for the internal taxes, such a claim should have been brought more properly under Article X:3(a).”(727)

517.     In China — Raw Materials, the Panel examined a claim under Article X:1 that China did not publish the total amount of the export quota for zinc; in at least one year, there had been an export prohibition on zinc. The Panel found that China’s failure to set a quota amount was a “law, regulation, judicial decision or administrative ruling”.(728)

(b) “of general application”

518.     In US — Underwear, the Appellate Body upheld the Panel’s interpretation of the term “of general application”:(729)

“We note that Article X:1 of GATT 1994, which also uses the language ‘of general application’, includes ‘administrative rulings’ in its scope. The mere fact that the restraint at issue was an administrative order does not prevent us from concluding that the restraint was a measure of general application. Nor does the fact that it was a country-specific measure exclude the possibility of it being a measure of general application. If, for instance, the restraint was addressed to a specific company or applied to a specific shipment, it would not have qualified as a measure of general application. However, to the extent that the restraint affects an unidentified number of economic operators, including domestic and foreign producers, we find it to be a measure of general application.”(730)

519.     In Japan — Film, the Panel, referring to the finding in US — Underwear immediately above, interpreted the term “of general application” as follows:

“[I]nasmuch as the Article X:1 requirement applies to all administrative rulings of general application, it also should extend to administrative rulings in individual cases where such rulings establish or revise principles or criteria applicable in future cases. At the same time, we consider that it is incumbent upon the United States in this case to clearly demonstrate the existence of such unpublished administrative rulings in individual matters which establish or revise principles applicable in future cases.”(731)

520.     In EC — Poultry, the Appellate Body upheld the Panel’s finding that import licensing of particular shipments by the European Communities was not inconsistent with Article X because “the information which Brazil claims the EC should have made available concerns a specific shipment, which is outside the scope of Article X of GATT.”(732)

Article X:1 of the GATT 1994 makes it clear that Article X does not deal with specific transactions, but rather with rules ‘of general application’. It is clear to us that the EC rules pertaining to import licensing set out in Regulation 1431/94 are rules ‘of general application’… .

 

… Although it is true, as Brazil contends, that any measure of general application will always have to be applied in specific cases, nevertheless, the particular treatment accorded to each individual shipment cannot be considered a measure ‘of general application’ within the meaning of Article X. [Referring to the finding in US Underwear cited immediately above] … We agree with the Panel that ‘conversely, licences issued to a specific company or applied to a specific shipment cannot be considered to be a measure ‘of general application’ ’ within the meaning of Article X.”(733)

521.     In US — Hot-Rolled Steel, in examining a claim of violation of Article X:3(a), the Panel ruled that the anti-dumping measure at issue did not constitute a measure “of general application” within the meaning of Article X:1:

“[W]e have been presented with arguments alleging violation of Article X:3(a) of GATT 1994 which relate to the actions of the United States in the context of a single anti-dumping investigation. We doubt whether the final anti-dumping measure before us in this dispute can be considered a measure of ‘general application’. In this context, we note that Japan has not even alleged, much less established, a pattern of decision-making with respect to the specific matters it is raising which would suggest a lack of uniform, impartial and reasonable administration of the US anti-dumping law. While it is not inconceivable that a Member’s actions in a single instance might be evidence of lack of uniform, impartial, and reasonable administration of its laws, regulations, decisions and rulings, we consider that the actions in question would have to have a significant impact on the overall administration of the law, and not simply on the outcome in the single case in question. Moreover, we consider it unlikely that such a conclusion could be reached where the actions in the single case in question were, themselves, consistent with more specific obligations under other WTO Agreements.”(734)

522.     In EC — Selected Customs Matters, the Panel found that:

“‘[L]aws, regulations, judicial decisions and administrative rulings of general application’ described in Article X:1 of the GATT 1994 are laws, regulations, judicial decisions and administrative rulings that apply to a range of situations or cases, rather than being limited in their scope of application”.(735)

523.     In EC — IT Products, examining the measure in paragraph 513 above, the Panel found that “the CNEN amendments at issue in this dispute are of ‘general application’ within the meaning of Article X:1 of the GATT 1994. This is so because the application of a CNEN is not limited to a single import or a single importer. Rather, the objective of the CNEN is to ensure the uniform application of the Common Customs Tariff to all products falling under a specific CN code upon importation into the European Communities.”(736)

524.     In Thailand — Cigarettes (Philippines), the Panel examined an Article X:1 claim in relation to the data used to calculate the MRSPs, a key factor determining the effective tax rate on cigarettes. The Panel found:

“[D]ata necessary for determining an MRSP, such as the c.i.f. price, customs duties, and internal taxes and marketing costs, are essentially company-specific, rather than generally applicable to all companies. We also note that the Philippines acknowledges that these four specific items are business-derived confidential data, which are by definition company-specific. As such, the data used for such components of the MRSP cannot be considered as rules generally and prospectively applicable.”(737)

525.     In China — Raw Materials, the Panel found that China’s Export Quota Administration Measures, including their allocation rules, fell within the scope of Article X:1.(738) The Panel also found that the measure discussed at paragraph 517 (failure to set an export quota amount for zinc) was “of general application” because it affects any enterprise wishing to export zinc quota.(739)

(c) “made effective”

526.     In EC — IT Products, the Panel examined the meaning of “made effective” and whether and when the CNEN amendments at issue were “made effective”:

“[W]e are of the view that the term ‘made effective’ under Article X:1 of the GATT 1994 also covers measures that were brought into effect, or made operative, in practice and is not limited to measures formally promulgated or that have formally ‘entered into force’. We see no basis to adopt the more restrictive view proposed by the European Communities, which considers that ‘made effective. under Article X:1 refers to measures formally adopted under its domestic system, i.e., adoption by the Commission. This being so, in circumstances where the relevant measure has been ‘made effective’, the requirement to publish promptly will arise regardless of its formal adoption or whether it remains a ‘draft’ measure under the Member’s municipal legal order.”(740)

527.     The Panel then found that “in the particular circumstances of this case, the cumulative effect of the votes in the Customs Code Committee, the relevant BTIs [classification rulings] and the Second Statement by the Chair [that ‘as soon as an opinion has been voted, Member States can issue BTIs for the products concerned’] are such that the measures at issue were ‘made effective’ within the meaning of Article X:1(741) and that they were made effective at the latest, at the time of the October 2007 statement of the Chair.(742) (743)

528.     In China — Raw Materials, the Panel found that China’s failure to set a quota for zinc had been “made effective” as there were no exports of zinc.(744)

(d) “pertaining to the classification … of products for customs purposes, or to requirements … on imports or exports or on the transfer of payments therefor, or affecting their sale, distribution … or other use”

529.     In EC — IT Products, the Panel determined that the CNEN in paragraph 513 above pertained to the classification of customs products.(745)

(e) “shall be published “

530.     In Dominican Republic — Import and Sale of Cigarettes, examining the claim in paragraph 512 above, the Panel found:

“[U]nder its Article X:1 obligations, the Dominican Republic should have either published the information related to the Central Bank average-price surveys of cigarettes or, alternatively, publish[ed] its decision to not conduct these surveys and to resort to an alternative method, in such a manner as to enable governments and traders to become acquainted with the method it would use in order to determine the tax base for the Selective Consumption Tax on cigarettes.”(746)

531.     In EC — IT Products, the Panel found generally regarding publication:

Article X:1 addresses the due process notion of notice by requiring publication that is prompt and that ensures those who need to be aware of certain laws, regulations, judicial decisions and administrative rulings of general application can become acquainted with them.”(747)

532.     In Thailand — Cigarettes (Philippines), the Panel considered a claim regarding failure to publish the methodology for determining MRSPs (an element of the tax rate for cigarettes), discussed at paragraph 514 above. Thailand admitted that it did not publish its methodology as such. The Panel rejected Thailand’s argument that listing eight elements of the MRSP in each published MRSP notice constituted compliance with Article X:1, finding:

“The listing of the components consisting of the MRSP would not enable importers to become acquainted with the detailed rules pertaining to the general methodology within the meaning of Article X:1. We are of the view that for importers to become acquainted with the methodology for determining the MRSP, it is important for them to become familiar with, for instance, how the information they provide is processed. Also, they need to be informed on how Thai Excise determines the marketing costs where the information provided by importers is not accepted.”(748)

(f) “promptly”

533.     Regarding promptness of publication, the Panel in EC — IT Products found:

“the meaning of prompt is not an absolute concept, i.e. a pre-set period of time applicable in all cases. Rather, an assessment of whether a measure has been published ‘promptly’, that is ‘quickly’ and ‘without undue delay’, necessarily requires a case-by-case assessment. Accordingly, we will look at the time span between the moment the CNEN amendments were ‘made effective’ and the time they were ‘published’, and assess whether this is prompt in light of the facts of the case.”(749)

534.     The Panel then found that in the circumstances of the case and in light of the nature of the measures at issue, publication in the EU Official Journal eight months later than the measure was made effective was not “prompt”, but that the measures were posted on the EU Comitology website prior to the latest date on which they “became effective” in the sense of Article X:1.(750)

(g) “in such a manner as to enable governments and traders to become acquainted with them”: website publication

535.     In EC — IT Products, the Panel found that publication of the measure at issue among other documents on the EU Comitology website did not meet the requirements of Article X:1:

“While Article X:1 requires that measures be ‘published’, Article X:2 refers to measures having been ‘officially published’. The absence of the adverb ‘officially’ in Article X:1, which is present in Article X:2, clarifies that the publication of the relevant measure does not need to be in an ‘official’ publication in order to satisfy Article X:1.

 

 

… if measures are to be published ‘in such a manner as to enable governments and traders to become acquainted with them’, it follows that they must be generally available through an appropriate medium rather than simply making them publicly available.(751)

 

 

… it is clear from a textual analysis of Article X:1 that it is not any manner of publication that would satisfy the requirement, but only those that would give power to or supply governments and traders with knowledge of the particular measures that is ‘adequate’ so that traders and Governments may become ‘familiar’ with them, or ‘known’ to them in a ‘more or less complete’ way.

 

In our view, making the minutes of the Customs Code Committee, with draft CNENs attached, available on the Comitology website does not meet this standard. In particular, we note that there is nothing in the minutes, or the draft CNENs attached, that would supply traders and governments with adequate knowledge of measures that are or would be applied in trading with the EC member States. Indeed, the publication of the respective reports of the Customs Code Committee meetings merely provided the text of the CNEN amendments, specifying that these were ‘drafts’. In addition, the documents contain placeholders for the reference number of the measure, e.g. ‘(2006/C … ../..)’ in the first case and ‘(2007/C … ../..)’ in the second case. In light of this, the Panel finds that, in the circumstances described above, posting the draft CNEN on the Comitology website does not constitute publication ‘in such a manner as to enable governments and traders to become acquainted with them’.”(752)

536.     In Thailand — Cigarettes (Philippines), the Panel considered a claim regarding failure to sufficiently publish the general rules relating to the right to the release of guarantees deposited by importers for excise and other internal taxes. The Panel evaluated the provisions in the Customs Act and the notices of assessment given to importers, and concluded:

“[D]espite Thailand’s acknowledgment that ‘in essence, guarantees are to be refunded on the final assessment of the goods’, the relevant documents referred to by Thailand in this dispute do not clearly indicate a definite right to the release of guarantees for the internal taxes upon final assessment of the goods. In such circumstances, importers will not be able to become acquainted with the exact nature of the right they have in respect of the release of guarantees for the internal taxes within the meaning of Article X:1.”(753)

537.     In China — Raw Materials, the Panel found that by failing to publish promptly its decision not to authorize an export quota for zinc in such manner as to enable governments and traders to become acquainted with it, China had violated Article X:1 of the GATT 1994.(754)

(h) “confidential information”

538.     In Thailand — Cigarettes (Philippines), the Panel examined the application of Article X:1 obligations in relation to confidential data used to calculate MRSPs, a key factor determining the effective tax rate on cigarettes. The Panel had found that these data were not within the scope of administrative rulings of general application, but it further found:

“Thailand essentially argues that given that the third sentence of Article X:1 provides that the provisions of Article X:1 shall not require any WTO Member to disclose confidential information, Thailand is not obliged to publish the data used for determining the MRSPs because such data are confidential information. The Philippines also appears to accept Thailand’s position as it acknowledges that data such as the c.i.f. price, internal taxes, the marketing costs, even in indexed format, are confidential information. In our understanding, the Philippines’ sole remaining argument in this connection is that a non-confidential version of an administrative ruling still must be published. We, however, do not find such an obligation in the text of Article X:1.”(755)

(i) GATT practice

539.     For GATT practice in respect of Article X:1.

3. Article X:2

(a) General

540.     In US — Underwear, the Appellate Body described the policy underlying Article X:2 as pertaining to transparency and due process:

Article X:2, General Agreement, may be seen to embody a principle of fundamental importance — that of promoting full disclosure of governmental acts affecting Members and private persons and enterprises, whether of domestic or foreign nationality. The relevant policy principle is widely known as the principle of transparency and has obviously due process dimensions. The essential implication is that Members and other persons affected, or likely to be affected, by governmental measures imposing restraints, requirements and other burdens, should have a reasonable opportunity to acquire authentic information about such measures and accordingly to protect and adjust their activities or alternatively to seek modification of such measures.”(756)

541.     In US — Underwear, the Appellate Body held that prior publication of a measure, as required under Article X of GATT, could not, in and of itself, justify the retroactive effect of applying import quotas with respect to imports during a period starting before the quota’s publication date:

“[W]e are bound to observe that Article X:2 of the General Agreement, does not speak to, and hence does not resolve, the issue of permissibility of giving retroactive effect to a safeguard restraint measure. The presumption of prospective effect only does, of course, relate to the basic principles of transparency and due process, being grounded on, among other things, these principles. But prior publication is required for all measures falling within the scope of Article X:2, not just ATC safeguard restraint measures sought to be applied retrospectively. Prior publication may be an autonomous condition for giving effect at all to a restraint measure. Where no authority exists to give retroactive effect to a restrictive governmental measure, that deficiency is not cured by publishing the measure sometime before its actual application. The necessary authorization is not supplied by Article X:2 of the General Agreement.”(757)

542.     In US — Anti-Dumping Measures on Oil Country Tubular Goods, Mexico claimed that the US Department of Commerce (USDOC) violated Article X:2 because it imposed conditions on a producer of oil country tubular goods (OCTG) for termination of the anti-dumping duty, in advance of the official publication of such conditions. Mexico argued that the use of the commercial quantities threshold requirement constituted a change in the USDOC’s practice and administration of the law that was not notified to WTO Members in advance of its application, in violation of Article X:2. After noting that Article X:2 precludes retroactive application of a measure, the Panel commented that compliance with this obligation and subsequent questions of alleged violation, would “depend on the timing of the publication of a measure, and its enforcement in particular circumstances affecting the rights ofWTO Members.” The Panel concluded that the disputed regulations were published prior to being enforced in the administrative reviews in question:

“As stated above, the legal instrument that introduced the commercial quantities requirement was duly published, and came into effect with respect to administrative reviews initiated on the basis of requests made more than one month subsequent to that publication. As of the date of publication, notice had clearly been given of the substance of the regulation, and of which cases would be affected by the regulation. Thus, exporters, including the Mexican exporters involved in the administrative reviews of OCTG, had notice as to the requirements imposed by USDOC for requests for revocation based on three years of no dumping, including the commercial quantities requirement. In support of its argument, Mexico refers to a case in which the requirement was not applied, without noting that the administrative review in question was initiated based on a request made prior to the effective date of the regulation.”(758)

(b) “measure of general application”

543.     In EC — IT Products, the Panel examined a claim that the EC had breached Article X:2 by applying the CNEN amendments described in paragraph 513 above before their publication in the EU Official Journal. Relying on its finding under Article X:1 (see paragraph 523 above), the Panel in EC — IT Products found that the CNEN amendments were a “measure of general application” in the sense of Article X:2. Comparing Articles X:1 and X:2, the Panel found:

Article X:2 refers simply to ‘measure’ and hence encompasses an even broader category — namely, any act or omission by a WTO Member. It follows therefore that the drafters intended to include a broad range of measures that have the potential to affect trade and traders.”(759)

(c) “effecting an advance in a rate of duty or other charge on imports under an established and uniform practice”

544.     The Panel in EC — IT Products, evaluating a claim under Article X:2 on the CNEN amendments described in paragraph 513 above, found that “Article X:2 of the GATT 1994 covers measures of general application that ‘cause’ an ‘increase’ in a rate of duty”(760) and that “the term ‘effecting’ does not necessarily require that the measures at issue be the sole or single cause for the advance in rate of duty. However, it must be shown that it goes beyond mere influence and there must be a demonstrable link between the measures at issue and the advance.”(761) The Panel then found that these amendments were “of the type that they are intended to have a certain effect, namely, an increase in a rate of duty”(762) because “the CNEN amendments at issue entailed a change in classification practices for some EC member States with the practical consequence that certain STBCs became dutiable. We therefore consider that, at least in some instances, as a result of the CNEN amendments at issue, some EC member States were required to change their classification practices in such a way that effected an advance in rate of duty. Hence, we conclude that the CNEN amendments at issue effect an advance in rate of duty and as such fall within the measures contemplated by Article X:2.”(763)

545.     The same Panel interpreted the scope of Article X:2 as applying to circumstances where “the ‘advance in a rate of duty’ must be ‘under an established and uniform practice’”.(764) The Panel further found that “‘uniform practice’, in its context, refers to the similar application of a measure in the customs territory of a Member. Accordingly, ‘uniform practice’ means that the customs authorities of the EC member States apply the measures at issue similarly and consistently throughout the customs territory of the European Communities.”(765) Summing up, the Panel found:

“[U]nder Article X:2, measures must be of a type that effect an advance in a rate of duty under an established and uniform practice, which means that the advance in a rate of duty must be applied (‘practice’) in the whole customs territory (‘uniform’) and its application should be on a secure basis (‘established’).”(766)

546.     The Panel then found that these criteria were met in the case of the CNEN at issue because these were designed to ensure uniform tariff treatment throughout the customs territory of the EC.(767)

(d) Enforcement before official publication

547.     The Panel in EC — IT Products, evaluating a claim under Article X:2 on the CNEN amendments described in paragraph 513 above, found that “proof that a measure has been applied would establish that it was enforced”(768) and that “even a single instance of enforcement of a measure before its official publication could amount to a violation of Article X:2, depending on the facts of the case”.(769) Based on BTIs (member State classification rulings) issued after (and referring to) a CNEN amendment, and pre-dating the official publication of this CNEN amendment in the Official Journal, the Panel found a breach of Article X:2 because the CNEN amendment was enforced by member States to determine tariff classification prior to official publication.(770)

4. Article X:3

(a) General

548.     In US — Shrimp, the Appellate Body ruled that the lack of transparency of the disputed legislation was contrary to the spirit of Article X:3. The Appellate Body held:

“[T]he provisions of Article X:3 of the GATT 1994 bear upon this matter. In our view, Section 609 falls within the ‘laws, regulations, judicial decisions and administrative rulings of general application’ described in Article X:1. Inasmuch as there are due process requirements generally for measures that are otherwise imposed in compliance with WTO obligations, it is only reasonable that rigorous compliance with the fundamental requirements of due process should be required in the application and administration of a measure which purports to be an exception to the treaty obligations of the member imposing the measure and which effectively results in a suspension pro hac vice of the treaty rights of other members.

 

It is also clear to us that Article X:3 of the GATT 1994 establishes certain minimum standards for transparency and procedural fairness in the administration of trade regulations which, in our view, are not met here. The non-transparent and ex parte nature of the internal governmental procedures applied by the competent officials in the Office of Marine Conservation, the Department of State, and the United States National Marine Fisheries Service throughout the certification processes under Section 609, as well as the fact that countries whose applications are denied do not receive formal notice of such denial, nor of the reasons for the denial, and the fact, too, that there is no formal legal procedure for review of, or appeal from, a denial of an application, are all contrary to the spirit, if not the letter, of Article X:3 of the GATT 1994.”(771)

(b) Article X:3(a)

(i) General

549.     In EC — Bananas III, the Panel rejected the EC argument that Article X:3 applies only to internal measures, but not to licensing regulations for tariff quotas. In its finding, the Panel referred to Article X:1 and held that it “defines the coverage of Article X:3(a)”.(772)

550.     In Thailand — Cigarettes (Philippines), the Panel set out its general views on Article X:3(a):

“To establish a violation of Article X:3(a), a complaining party must … show that the responding Member administers the legal instruments of the kind described in Article X:1 in a manner that is non-uniform, partial and/ or unreasonable.

 

The obligations of uniformity, impartiality and reasonableness are legally independent and the WTO Members are obliged to comply with all three requirements. (773) This means that, as the Panel in Dominican Republic Import and Sale of Cigarettes noted, a violation of any of the three obligations will lead to a violation of the obligations under Article X:3(a).

 

In this regard, it is important to recall the Appellate Body’s observation that Article X:3 of the GATT 1994 establishes certain minimum standards for transparency and procedural fairness in the administration of trade regulations.(774)”(775)

(ii) “shall administer”

551.     In EC — Bananas III, the Appellate Body upheld the Panel’s finding that the imposition of different import licensing systems on like products imported from different Members was inconsistent with Article X:3(a):

“The text of Article X:3(a) clearly indicates that the requirements of ‘uniformity, impartiality and reasonableness’ do not apply to the laws, regulations, decisions and rulings themselves, but rather to the administration of those laws, regulations, decisions and rulings. The context of Article X:3(a) within Article X, which is entitled ‘Publication and Administration of Trade Regulations’, and a reading of the other paragraphs of Article X, make it clear that Article X applies to the administration of laws, regulations, decisions and rulings. To the extent that the laws, regulations, decisions and rulings themselves are discriminatory, they can be examined for their consistency with the relevant provisions of the GATT 1994.”(776)

552.     The Appellate Body in EC — Poultry confirmed the above line of interpretation and found:

“[T]o the extent that Brazil’s appeal relates to the substantive content of the EC rules themselves, and not to their publication or administration, that appeal falls outside the scope of Article X of the GATT 1994. The WTO-consistency of such substantive content must be determined by reference to provisions of the covered agreements other than Article X of the GATT 1994.”(777)

553.     The Panel in Argentina — Hides and Leather rejected Argentina’s argument that the reference to uniformity in Article X:3(a) merely requires nondiscriminatory treatment as between the goods of Members. The Panel stated:

“In our view, there is no requirement that Article X:3(a) be applied only in situations where it is established that a Member has applied its Customs laws and regulations in an inconsistent manner with respect to the imports of or exports to two or more Members.

 

Furthermore, Article X:3(a), by its terms, calls for a uniform, impartial and reasonable administration of trade-related regulations. Nowhere does it refer to Members or products originating in or destined for certain Members’ territories, as is explicitly contained in other GATT 1994 Articles such as I, II and III. Indeed, Article X:1 requires the prompt publication of trade-related regulations ‘so as to enable governments and traders to become acquainted with them.’ Similarly, Article X:3(b) requires Members to provide for domestic review procedures relating to customs matters to which normally only private traders, not Members would have access.(778) These references undercut Argentina’s argument that Article X can only apply in situations where there is discrimination between WTO Members.”(779)

554.     In Argentina — Hides and Leather, the Panel examined a claim regarding an Argentine measure authorizing representatives of the domestic leather industry to attend pre-export customs checks on raw hides. The Panel found that Article X:3(a) applied to the measure at issue, because it did not contain “substantive Customs rules for enforcement of export laws”, but rather “provide[d] for a certain manner of applying those substantive rules”:

“If the substance of a rule could not be challenged, even if the rule was administrative in nature, it is unclear what could ever be challenged under Article X. First, there is no requirement in Article X:3(a) that it apply only to ‘unwritten’ rules. Again, this would be contrary to that provision’s own language linking it to Article X:1. Second, such an approach would also likely run counter to the other aspect of the Appellate Body’s holding in European Communities Poultry regarding Article X, to the effect that it applies to rules of general application and not to specific shipments.(780) Looking only to individual Customs officers’ enforcement actions, rather than measures such as Resolution 2235, as Argentina implies, would almost certainly require a review of a specific instance of abuse rather than the general rule applicable.(781) This would effectively write Article X:3(a) out of existence, which we cannot agree with.(782)

 

Thus, we are left with a situation where we have a written provision, Resolution 2235, and we need to determine whether this Resolution is substantive or administrative. In our view it is administrative in nature and therefore properly subject to review under Article X:3(a). Resolution 2235 does not establish substantive Customs rules for enforcement of export laws… . Rather, Resolution 2235 provides for a means to involve private persons in assisting Customs officials in the application and enforcement of the substantive rules, namely, the rules on classification and export duties. Resolution 2235 does not create the classification requirements; it does not provide for export refunds; it does not impose export duties. It merely provides for a certain manner of applying those substantive rules. This measure clearly is administrative in nature.”(783)

555.     In US — Corrosion-Resistant Steel Sunset Review, Japan argued that the US’s sunset review laws were administrative in nature and consequently could be challenged under Article X:3(a) of the GATT 1994. Japan had asserted that the US’s administration of its sunset review laws was inconsistent with Article X:3(a) as the United States legislation mandated self-initiation of sunset reviews without sufficient evidence. Japan also claimed that the US’s administration of sunset review laws was not uniform, because it took different approaches with regard to Article 11.2 reviews and sunset reviews. The Panel ruled that Japan’s Article X:3(a) claims related to the substance of US laws and regulations rather than their administration, and were therefore outside the scope of Article X:3(a):

“We note that Japan made a substantive claim challenging both the US law as such and its application in this particular sunset review regarding self-initiation of sunset reviews without sufficient evidence. We recall our finding above that self-initiation of sunset reviews under Article 11.3 is not subject to the evidentiary requirements of Article 5.6. This indicates that the substantive content of this aspect of US law, i.e. evidentiary standards applicable to the self-initiation of sunset reviews, can be, and in fact has in this case been, challenged by Japan. Therefore, deriving guidance from the ruling of the Appellate Body, in EC Poultry, we find that this aspect of US law cannot be challenged under Article X:3(a) of GATT 1994 because it relates to the substance rather than the administration of US law.”(784)

556.     In US — Hot-Rolled Steel, the Panel pointed out that, for a Member’s action to violate Article X:3(a) that action should have a significant impact on the overall administration of that Member’s law and not simply on the outcome of the single case in question.(785)

557.     The Appellate Body in EC — Selected Customs Matters also discussed the difference between substantive and administrative measures, and its impact on proof required for claims under Article X:3:

“The statements of the Appellate Body in EC Bananas III and EC Poultry do not exclude, however, the possibility of challenging under Article X:3(a) the substantive content of a legal instrument that regulates the administration of a legal instrument of the kind described in Article X:1. Under Article X:3(a), a distinction must be made between the legal instrument being administered and the legal instrument that regulates the application or implementation of that instrument. While the substantive content of the legal instrument being administered is not challengeable under Article X:3(a), we see no reason why a legal instrument that regulates the application or implementation of that instrument cannot be examined under Article X:3(a) if it is alleged to lead to a lack of uniform, impartial, or reasonable administration of that legal instrument.

 

This distinction has implications for the type of evidence required to support a claim of a violation of Article X:3(a). If a WTO Member challenges under Article X:3(a) the substantive content of a legal instrument that regulates the administration of a legal instrument of the kind described in Article X:1, it will have to prove that this instrument necessarily leads to a lack of uniform, impartial, or reasonable administration. It is not sufficient for the complainant merely to cite the provisions of that legal instrument. The complainant must discharge the burden of substantiating how and why those provisions necessarily lead to impermissible administration of the legal instrument of the kind described in Article X:1.”(786)

558.     The Panel in Thailand — Cigarettes (Philippines) summed up the case law regarding Article X:3(a), and commented:

“In sum, the guidance provided by the Appellate Body suggests that Article X:3(a) dictates the disciplines governing the administration of the legal instruments of the kind described in Article X:1. The scope of administration that is subject to a challenge under Article X:3(a) includes both the manner in which the legal instruments of the kind falling under Article X:1 are applied or implemented in particular cases as well as a legal instrument that regulates such application or implementation. Further, administrative processes leading to administrative decisions may also be included in the scope of the term ‘administer’ and hence Article X:3(a). However, to the extent that a claim of violation under Article X:3(a) is based on an administrative process, the complainant must demonstrate how and why certain features of the administrative processes necessarily lead to a lack of uniform, impartial, or reasonable administration of a legal instrument of the kind described in Article X:1.

 

As a final note, we are mindful of the Appellate Body’s statement that as allegations that the conduct of a WTO Member is biased or unreasonable are serious under any circumstances, such allegations should not be brought lightly, or in a subsidiary fashion.(787) The Appellate Body therefore cautioned that ‘a claim under Article X:3(a) of the GATT 1994 must be supported by solid evidence; the nature and the scope of the claim, and the evidence adduced by the complainant in support of it, should reflect the gravity of the accusations inherent in claims under Article X:3(a) of the GATT 1994’. Overall, our examination of the Philippines’ claims under Article X:3 requires us to exercise a balanced judgment between the traders’ fundamental right to procedural fairness and the sovereign right afforded to the Member governments in managing the manner in which they administer their own laws and regulations.”(788)

559.     In Thailand — Cigarettes (Philippines), the Panel examined a claim that Thailand administered its customs laws in a partial and unreasonable manner, because the Thai government had appointed government officials (the Director of Excise, the Director of Customs, the Director of Revenue or other Ministry of Finance officials) to the position of Director of the Thai Tobacco Monopoly (TTM), or to the TTM board, and these persons served at the same time in both the Ministry and TTM. The Panel considered whether these appointments constituted “administration” in the sense of Article X:3(a):

“Considered against the standard of ‘administration’ under Article X:3(a) as set out by the Appellate Body, we understand that the appointment of dual function officials as TTM directors may not be an application of the Thai customs and fiscal laws and regulations because it is not an act of applying the substance of the customs and tax provisions. Nonetheless the broad scope of administrative processes falling within the scope of Article X:3(a) suggests that the appointment of government officials to the director position of TTM (the only domestic company competing against imported cigarettes in the Thai market) may well be considered as part of the administrative process leading to the application and implementation of the customs and fiscal measures insofar as these government officials are sufficiently involved in applying or implementing the Thai customs and tax laws.”(789)

560.     In Thailand — Cigarettes (Philippines), the Panel examined a claim regarding determination of certain internal taxes on the basis of a guarantee value, instead of a declared transaction value, and regarding lack of an automatic refund mechanism for excess taxes paid. The Panel determined that this claim was improperly brought under Article X:3(a) as it concerned substantive issues to be dealt with under other WTO provisions.(790)

Temporal scope and limitations on the panel’s terms of reference

561.     In EC — Selected Customs Matters, the Appellate Body upheld a Panel finding that the steps and acts of administration that pre-date or post-date the establishment of a panel may be relevant as evidence in determining whether or not a violation of Article X:3(a) of the GATT 1994 exists at the time of establishment.

“Evidence in support of a claim challenging measures that are within a panel’s terms of reference may predate or post-date the establishment of the panel. A panel is not precluded from assessing a piece of evidence for the mere reason that it pre-dates or post-dates its establishment.(791) In this case, the United States was not precluded from presenting evidence relating to acts of administration before and after the date of Panel establishment. A panel enjoys a certain discretion to determine the relevance and probative value of a piece of evidence that pre-dates or post-dates its establishment.”(792)

(iii) “in a uniform, impartial and reasonable manner”

General

562.     In US — Stainless Steel (Korea), the Panel rejected Korea’s claim that the United States violated Article X:3(a) by departing from its own established policy with respect to the determination of the prices of local sales to be compared to allegedly dumped exports. The Panel held that Article X:3(a) was not “intended to function as a mechanism to test the consistency of a Member’s particular decisions or rulings with the Member’s own domestic law and practice”:

“[W]e have grave doubts as to whether Article X:3(a) can or should be used in the manner advocated by Korea. As the United States correctly points out, the WTO dispute settlement system ‘serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements’.(793) It was not in our view intended to function as a mechanism to test the consistency of a Member’s particular decisions or rulings with the Member’s own domestic law and practice; that is a function reserved for each Member’s domestic judicial system,(794) and a function WTO panels would be particularly ill-suited to perform. An incautious adoption of the approach advocated by Korea could however effectively convert every claim that an action is inconsistent with domestic law or practice into a claim under the WTO Agreement.

 

In any event, we do not consider that the DOC in this investigation committed the ‘unprecedented departure’ from ‘established policy’ alleged by Korea such that its behaviour was either non-uniform or unreasonable. In our view, the requirement of uniform administration of laws and regulations must be understood to mean uniformity of treatment in respect of persons similarly situated; it cannot be understood to require identical results where relevant facts differ. Nor do we consider that the requirement of reasonable administration of laws and regulations is violated merely because, in the administration of those laws and regulations, different conclusions were reached based upon differences in the relevant facts.”(795)

563.     In Argentina — Hides and Leather, the Panel explained the nature of the obligation under Article X:3(a) by distinguishing between transparency between WTO Members and transparency with respect to individual traders:

“In applying these tests, it is important to recall that we are not to duplicate the substantive rules of the GATT 1994. Thus, for example, the test generally will not be whether there has been discriminatory treatment in favour of exports to one Member relative to another. Indeed, the focus is on the treatment accorded by government authorities to the traders in question.”(796)

564.     In US — Hot-Rolled Steel, the Panel held that violations of Article X:3(a) require a significant impact on the Member’s overall administration of its law:

“While it is not inconceivable that a Member’s actions in a single instance might be evidence of lack of uniform, impartial, and reasonable administration of its laws, regulations, decisions and rulings, we consider that the actions in question would have to have a significant impact on the overall administration of the law, and not simply on the outcome in the single case in question. Moreover, we consider it unlikely that such a conclusion could be reached where actions in the single case in question were, themselves, consistent with more specific obligations under other WTO Agreements”.(797)

565.     In US — Corrosion-Resistant Steel Sunset Review Japan argued that the application of the US laws and regulations with regard to the sunset reviews was unreasonable and partial, and hence inconsistent with Article X:3(a), because the US authorities demanded less information from United States domestic producers than from foreign exporters. The Panel recalled WTO case law that matters relating to the substantive nature of laws and regulations go beyond the scope of Article X:3(a):

“Japan further argues that the fact that not as much information is requested from domestic producers renders the administration of US law partial.

 

The nature and quantity of the information that will be in the possession of foreign exporters and producers will necessarily differ from the information possessed by the domestic industry, and this information will be used for different purposes by the investigating authority. This is because generally, in investigations (and reviews), foreign exporters will be the main source of information regarding the dumping, or likelihood of continuation or recurrence of dumping, component of the determination that must be made, while domestic producers will possess more information relevant to the injury component of the determination that must be made. Consequently, we find that this aspect of Japan’s claim also falls outside the scope of Article X:3(a).”(798)

“uniform”

566.     The Appellate Body in EC — Selected Customs Matters found that Article X:3(a) of the GATT 1994 does not require uniformity of administrative processes:

“…In its broadest sense, an administrative process may be understood as a series of steps, actions, or events that are taken or occur in relation to the making of an administrative decision. Given this broad definition of administrative process, it appears to us that Article X:3(a) of the GATT 1994 does not contemplate uniformity of administrative processes. In other words, non-uniformity or differences in administrative processes do not, by themselves, constitute a violation of Article X:3(a). This Article contains an obligation to administer in a uniform manner legal instruments of the kind described in Article X:1 — laws, regulations, judicial decisions, and administrative rulings of general application pertaining to the subject matters set out in that provision. We agree with the Panel that the term ‘administer’ in Article X:3(a) refers to putting into practical effect, or applying, a legal instrument of the kind described in Article X:1. Thus, under Article X:3(a), it is the application of a legal instrument of the kind described in Article X:1 that is required to be uniform, but not the processes leading to administrative decisions, or the tools that might be used in the exercise of administration.”(799)

567.     In China — Raw Materials, the Panel found that a system under which export quotas were allocated according to “operation capacity” by 32 local departments in charge of foreign trade, which were not provided with any guidelines or standards (so that each would have to interpret the operation capacity criterion as it sees fit) constituted non-uniform administration inconsistent with Article X:3(a). The Panel stated: “there is a very real risk that in the absence of any definition or standardization of an understanding of what ‘operation capacity’ means that similar exporters in terms of size, experience, and other factors may be treated differently depending on which of 32 dispersed local offices deals with their application. Under such circumstances it could well be assumed that one exporter could well find its application rejected while another exporter of equal description would succeed.”(800) The Panel concluded:

“[T]he lack of any definition, guidelines or standards in how the 32 Local Departments in charge of Foreign Trade should apply the potentially critical operation capacity criterion constitutes relevant evidence in establishing non-uniform administration of the operation capacity criterion. Moreover, the Panel is persuaded that the lack of any definition, guidelines or standards poses a very real risk that this criterion will be administered differently depending on which Local Department handles the quota application.

 

Consequently, the Panel concludes that the lack of any definition, guidelines or standards in how the operation capacity criterion should be applied poses a very real risk to the interests of relevant parties such that this necessarily leads to non-uniform administration inconsistently with Article X:3(a) of the GATT 1994.”(801)

568.     See also below concerning the relationship between Article X:3(a) and Article I.

“Impartial”

569.     In Argentina — Hides and Leather, the Panel examined an Argentine measure authorizing representatives of the domestic leather industry to be present when hides are checked before exportation, and found that it violated Article X:3:

“Much as we are concerned in general about the presence of private parties with conflicting commercial interests in the Customs process, in our view the requirement of impartial administration in this dispute is not a matter of mere presence of representatives [of the downstream consuming industry] in such processes. It all depends on what that person is permitted to do. In our view, the answer to this question is related directly to the question of access to information as part of the product classification process as discussed in the previous Section. Our concern here is focussed on the need for safeguards to prevent the inappropriate flow of one private person’s confidential information to another as a result of the administration of the Customs laws, in this case the implementing Resolution 2235.

 

Whenever a party with a contrary commercial interest, but no relevant legal interest, is allowed to participate in an export transaction such as this, there is an inherent danger that the Customs laws, regulations and rules will be applied in a partial manner so as to permit persons with adverse commercial interests to obtain confidential information to which they have no right.

 

While this situation could be remedied by adequate safeguards, we do not consider that such safeguards presently are in place. Therefore, Resolution 2235 cannot be considered an impartial administration of the Customs laws, regulations and rules described in Article X:1 and, thus, is inconsistent with Article X:3(a) of the GATT 1994.”(802)

570.     In Thailand — Cigarettes (Philippines), the Panel examined a claim that the dual appointment of Thai government officials to posts in the management of the Thai Tobacco Monopoly (TTM) constituted partial administration of laws and regulations. The Panel found that based on the evidence, dual appointment constitutes an administrative process leading to administration of Thai customs and fiscal laws and regulations. (803) The Panel found that the Philippines had not proved that the features relating to the appointment of certain government officials as TTM directors necessarily led to a lack of impartial administration of the Thai customs and fiscal rules:

“In the light of the Appellate Body’s guidance concerning a claim under Article X:3(a) based on an administrative process, our task is to examine whether the Philippines has demonstrated how and why the features of the administrative process at issue, namely certain Thai government officials’ dual role as TTM directors, necessarily leads to a lack of impartial administration. We are also mindful of the Appellate Body’s statement that given the gravity of the accusations inherent in claims under Article X:3(a), a complaining party must support its claim with solid evidence.

 

… Based on the ordinary meaning … impartial administration would appear to mean the application or implementation of the relevant laws and regulations in a fair, unbiased and unprejudiced manner.

 

Argentina — Hides and Leather is the only WTO dispute to date in which the impartiality requirement under Article X:3(a) was addressed. In that dispute, the feature of the administrative process at issue was the presence of a private party with conflicting commercial interests in the customs process. The panel considered that the consistency of the customs process with the impartiality requirement of Article X:3(a) would depend on what that party is permitted to do. The panel found that the answer to this question was related directly to the question of access to information as part of the product classification process. It was the view of the panel that whenever a party with a contrary commercial interest, but no relevant legal interest, is allowed to participate in the customs process, there is an inherent danger that the customs laws, regulations and rules will be applied in a partial manner so as to permit persons with adverse commercial interests to obtain confidential information to which they have no right. The panel nevertheless considered that this situation could be remedied by adequate safeguards to prevent an inappropriate flow of one private person’s confidential information to another as a result of the administration of the implemented customs law at issue.

 

Following the approach of the Panel in Argentina Hides and Leather, we consider that the relevant question is what these dual function government officials arguably with an interest to promote TTM’s profit level are permitted to do… .

 

… the Philippines points to instances where in its view partial administrative decisions were taken under the authority or with the active contribution of these dual function government officials. In these instances, the Philippines has cited to a number of decisions that did not necessarily reflect the commercial interests of [a competing importer], which were made while dual government officials were serving as TTM directors… .

 

We agree that at a theoretical level, evidence of this kind, if properly substantiated, would help demonstrate that the administrative process at issue necessarily leads to a lack of an impartial administration. This is particularly so given that the allegation under Article X:3(a) of a Member government’s biased administration requires the presentation of solid evidence. For example, therefore, a pattern of decisions would tend to show a lack of impartial administration.(804) … unless it can be shown that these determinations are made because of the very presence of the government officials serving also as TTM directors, we are not in a position to find that the appointment of dual function officials led to a partial administration of customs and tax rules. Moreover, it is also questionable whether these determinations can be considered consistent enough to show a pattern of decisions amounting to a partial administration of customs laws and regulations.

 

… We recognize that financial bonuses for TTM directors are indeed related to TTM’s net profit results… . financial incentives could indicate that the dual function officials may be motivated to maximize TTM’s profit level. However, we are not presented with solid evidence suggesting that the existence of such motivation itself would necessarily lead to an administration of the customs and tax rules which would favour TTM’s cigarettes.(805)

 

 

… Based on the hierarchy of norms as commonly established in states, and in the absence of any convincing argument or evidence presented by the Philippines to prove otherwise, we find that the Thai Civil Service Act and the Criminal Code are the legal instruments that provide ethical disciplines to be respected by government officials including those with a dual function as TTM directors.

 

Finally, the Philippines argues that Thailand does not apply the Thai Civil Service Act to TTM … We, however, consider the parties’ arguments on this point irrelevant to our consideration of the impartiality requirement. This is because, even if the Thai Civil Service Act were to apply to TTM so as to prohibit the appointment of government officials to TTM, whether Thailand complied with its own domestic law is not relevant for the purpose of this dispute.

 

… In reaching this conclusion, we are mindful of the seriousness of the allegation concerning a sovereign government’s administration of its laws and regulations. We recognize that there may be situations where a government’s measure or act is so egregiously flawed that the unfairness inherent in such a measure or act may be sufficient to demonstrate an impartial administration without the need to illustrate it with a concrete example(s) of decisions resulted from the concerned administration. However, under the circumstances of this dispute, we do not find that the appointment of government officials as TTM directors, considered in the light of the implemented safeguards present, amounted to such a situation.

 

At the same time, however, we wish to emphasize that the principle of transparency and procedural fairness that permeates the obligations under Article X:3(a) and consequently the trading system in general must be respected by the Members with utmost effort… . In the light of the unusual factual circumstances in Thailand that certain government officials in charge of customs and tax determinations also serve on the board of directors for TTM, the only domestic competitor against imported cigarettes, it would be only prudent for Thailand to ensure that the administration of its customs and fiscal laws is carried out in a transparent and impartial manner.”(806)

571.     In China — Raw Materials, the Panel, considering the measure described in paragraph 567 above, was not convinced that the lack of definition of any guidelines or standards for administration would necessarily lead to partial administration inconsistent with Article X:3(a).(807)

572.     The Panel in China — Raw Materials also examined a claim that the involvement of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) in administering the export quotas on various raw materials created an inherent conflict of interest because an exporter must share sensitive business information with an entity that represents its competitors and potential customers. The Panel opined that “[t]he mere sharing of confidential information will not necessarily result in partial administration. This would be the case only if those persons who receive the confidential commercial information are able to use it in a manner that is contrary to the interests of those providing the information”.(808) Because the Panel concluded that members of the CCCMC Secretariat did not participate in deciding which applicant exporters were awarded a part of the export quota, the Panel concluded that it did not need to consider whether the members of the CCCMC Secretariat are persons with adverse commercial interests, or whether adequate safeguards are in place to prevent the inappropriate flow of confidential information.(809)

“Reasonable”

573.     In Argentina — Hides and Leather, the Panel also ruled that the measure described in paragraph 569 above was not “reasonable”:

“…a process aimed at assuring the proper classification of products, but which inherently contains the possibility of revealing confidential business information, is an unreasonable manner of administering the laws, regulations and rules identified in Article X:1 and therefore is inconsistent with Article X:3(a).”(810)

574.     The Panel in Dominican Republic — Import and Sale of Cigarettes found that the Dominican Republic had administered its Selective Consumption Tax in an unreasonable manner inconsistent with Article X:3(a), because the tax authorities disregarded the actual price of domestic cigarettes when determining the tax base for imports, in a manner not supported by the domestic rules in force at the time:

“…the obligation under Article X:3(a) of the GATT is that Members administer the provisions covered by that Article in a uniform manner, in an impartial manner, and in a reasonable manner. These are not cumulative requirements. A Member may thus act in a breach of its obligations under Article X:3(a) of the GATT, if it administers the provisions in an unreasonable manner, even if there is no evidence that that Member has also administered the provisions in a non-uniform manner or in a partialized manner… .

 

 

By its own admission, it is clear that the Dominican Republic did not clearly support its determination of the tax base for the application of the Selective Consumption Tax on imported cigarettes on any one of the three methodologies contained in the legislation in force at the time. Furthermore, the Dominican Republic authorities disregarded the actual retail selling price of cigarettes to determine the ‘nearest similar product on the domestic market’. The Dominican Republic has argued that the decision to disregard the retail selling price was taken based on the value declared at customs by the importer. In its own words, ‘[t]he authorities of the Dominican Republic relied on several factors, including the declared customs value of the imported cigarettes, whenever there was evidence that the pricing policies of the importer alone could not be relied on to determine the nearest similar product in the domestic market’. However, there is no evidence that the decision was based on any particular provision of the Dominican Republic law in force at the time. Indeed, the Dominican Republic legislation does not appear to grant discretion to the authorities to deviate from the methods described, nor does it grant discretion to disregard retail selling prices and to favour customs-declared values. There is furthermore no evidence that the Dominican Republic authorities notified the importers about the alleged discrepancy between the customs value and the selling price information, nor about the motivation for its decision to disregard retail selling prices.

 

The Panel thus finds that the manner in which the Dominican Republic administered the provisions governing the Selective Consumption Tax, in particular with respect to the determination of the tax base for the application of the tax on cigarettes, and the use in this regard of the ‘nearest similar product on the domestic market’, was unreasonable. The fact that the Dominican Republic authorities did not support its decisions regarding the determination of the tax base for imported cigarettes by resorting to the rules in force at the time and that they decided to disregard retail selling prices of imported cigarettes, is not ‘in accordance with reason’, ‘having sound judgement’, ‘sensible’, ‘within the limits of reason’, nor ‘articulate’.”(811)

575.     In Thailand — Cigarettes (Philippines), the Panel, in a finding not reviewed by the Appellate Body, examined a claim of unreasonable administration and found that the Philippines had not established that the features of Thailand’s granting selected customs and tax officials with a dual function as TTM directors necessarily lead to an unreasonable administration of the Thai customs and tax laws and regulations within the meaning of Article X:3(a):

“[G]ranting dual function officials the power to make customs and fiscal decisions concerning cigarettes, both imported and domestic, as well as access to confidential information on imported cigarettes would appear to constitute an act of inappropriate and/or not sensible administration unless there is a particular rationale that can explain the concerned act.

 

Thailand nonetheless points out that granting dual positions to selected government officials promotes legitimate administrative objectives: (i) they ‘have expertise relevant to the management of a state-owned enterprise’ importing tobacco and collecting the related taxes; (ii) they can ‘play a role in ensuring that TTM itself complies efficiently’ with the Thai legislation; and (iii) they are making sure that TTM’s activities are consistent with Thai public health policy (TTM Board includes an individual of the Ministry of Health).

 

A sovereign state has the discretion and authority to structure its government and manage and administer its own laws and regulations as it deems fit… . we are not in a position to second guess the specific needs of the Thai government in assigning selected customs and tax officials with a dual role as a director of a state enterprise, TTM. We therefore recognize that the Thai government officials serving as DG Excise, DG Revenue, DG Commerce may indeed be well equipped to apply their expertise in laws and regulations relating to customs and internal taxes to the management of TTM.

 

The Philippines argues that, even though those objectives were legitimate, other avenues were available to reach identical results. We agree … However, as noted above, it is our view that Thailand, as a sovereign state, may administer its laws and regulations in the way it considers most appropriate in the particular circumstances in which it is situated. It should be noted though, that a WTO Member’s discretion to administer its own laws must be exercised in a manner consistent with its obligations under the WTO Agreement. Our task is, therefore, not to find the best administrative means to achieve a Member’s goal.”(812)

576.     In Thailand — Cigarettes (Philippines), the Panel also examined a claim that delays in Customs appeals of customs valuation determinations resulted in unreasonable administration of the Thai customs laws under Article X:3(a). The Panel observed that “Although we do not consider that the obligation for a WTO Member to administer its laws and regulations in a reasonable manner under Article X:3(a) sets a specific time limit for administrative review processes, such as the BoA review in this dispute, a review process taking over 7 years, particularly compared to the average time taken for other similar claims (i.e. 2.5 years), would appear to be, at least in the abstract sense, rather unusual.”(813) The Panel found as follows:

“The overall length of the administrative process, combined with less-than-prompt actions (for example requesting information from [the importer]) taken by the BoA, also tends to show prejudice caused to other Member governments and traders under Article X:3(a). The overall delays shown throughout the course of the review process therefore are ‘not appropriate or proportionate’ considered against the nature of the circumstances concerned. We therefore find that the concerned delays in the BoA review process resulted in the administration of the Thai customs law in an unreasonable manner and are in violation of Article X:3(a) of the GATT 1994.”(814)

577.     In China — Raw Materials, examining the measure described at paragraph 567 above, the Panel found that “ there is a very real risk that in the absence of any definition or standardization of an understanding of what ‘operation capacity’ means that similar exporters in terms of size, experience, and other factors may be treated differently depending on which of 32 dispersed local offices deals with their application. Under such circumstances it could well be assumed that one exporter could well find its application rejected while another exporter of equal description would succeed.”(815)

“…the lack of any definition, guidelines or standards in how the 32 Local Departments in charge of Foreign Trade should apply the potentially critical operation capacity criterion constitutes relevant evidence in establishing unreasonable administration of the operation capacity criterion. Moreover, the Panel is persuaded that the lack of any definition, guidelines or standards poses a very real risk that this criterion will be administered differently depending on which Local Department handles the quota application.

 

Consequently, the Panel concludes that the lack of any definition, guidelines or standards to guide how the operation capacity criterion should be applied poses a very real risk to the interests of relevant parties such that this necessarily leads to unreasonable administration inconsistently with Article X:3(a) of the GATT 1994.”(816)

578.     In China — Raw Materials, the Panel also considered and rejected a claim that the involvement of the CCCMC(817) in export quota administration would necessarily lead to unreasonable administration in violation of Article X:3(a). The Panel found that the documents required to be submitted to the CCCMC were relevant to the CCCMC’s task of evaluating eligibility of quota applicants, and that the claimants had not “demonstrated that the features leading to the involvement of the CCCMCin export quota administration pose a very real risk to the interests of relevant parties such that this necessarily results in unreasonable administration of the export quotas inconsistently with Article X:3(a).”(818)

579.     On GATT practice in respect of Article X:3(a).

(c) Article X:3(b)

(i) “prompt review and correction”

580.     The Panel in EC — Selected Customs Matters stated:

“[A] due process theme underlies Article X of the GATT 1994. In the Panel’s view, this theme suggests that an aim of the review provided for under Article X:3(b) of the GATT 1994 is to ensure that a trader who has been adversely affected by a decision of an administrative agency has the ability to have that adverse decision reviewed.”(819)

581.     The Panel in Thailand — Cigarettes (Philippines) examined a claim of violation of Article X:3(b) related to the delays referred to in paragraph 576 above. In a finding upheld by the Appellate Body, the Panel determined that “the excessive delays that have been caused in the … appeals before the BoA (the prerequisite step necessary to even reach the Thai Tax Court) are so significant in terms of their duration and frequency that these specific instances can be considered as an indication of the capacity for delays in the system. Therefore, we conclude that Thailand failed to maintain an independent tribunal for the prompt review of customs value determinations inconsistently with Article X:3(b).”(820):

“[T]he due process objective reflected in Article X:3 of the GATT 1994 suggests that ‘prompt review and correction’ is to be understood as review and correction of administrative action that is performed in a quick and effective manner and without delay. What is quick or performed without delay depends on the context and particular circumstances, including the nature of the specific type of action to be reviewed and corrected. Whether a system does or does not ensure prompt review thus cannot be determined in the abstract. We therefore agree with the Panel that the nature of the specific administrative action at issue informs the meaning of the word ‘prompt’ in the particular circumstances of a Member’s domestic system.

 

… The reference to ‘correction’ indicates that Article X:3(b) requires more than mere declaratory action or ex post review of whether administrative action conforms to domestic law or not. Compliance with the obligation to maintain tribunals or procedures for the ‘correction’ of administrative action relating to customs matters requires that Members ensure that their system of review provides for the relevant administrative action to be set right.

 

Finally, we note that Article X:3(b) does not prescribe one particular type of review or correction of administrative action relating to customs matters. Instead it refers to ‘judicial, arbitral or administrative tribunals or procedures’. This suggests that there are a variety of ways in which a Member may comply with the obligation of maintaining tribunals or procedures for prompt review and correction of administrative action relating to customs matters, provided that, inter alia, such tribunals and procedures are independent of the agencies entrusted with administrative enforcement as required by the second sentence of Article X:3(b).”(821)

582.     The Panel in Thailand — Cigarettes (Philippines) also found that Thailand acted inconsistently with Article X:3(b) by failing to maintain or institute independent review tribunals or process for the prompt review of decisions on guarantees required to be posted by importers to secure the payment of import duties; appeal was only available after issuance of notice of final assessment. Moreover, there was no timetable for issuance of such notices. Upholding the Panel decision, the Appellate Body observed that “the review system maintained by Thailand imposes delays that are essentially coextensive with the lifetime of a guarantee’s security function”(822) and found as follows:

“[T]he character of a guarantee is relevant in determining what can be regarded as ‘prompt’ with respect to the review of guarantee decisions. As set out above, a ‘guarantee’ is defined as ‘[s]omething given or existing as security, such as to fulfil a future engagement or a condition subsequent’. This definition clarifies a key element of a guarantee, namely, its relation to a future event. A guarantee is tied to, but distinct from, the fulfilment of an engagement or condition in the future. Accordingly, a guarantee is effective as a security from the time it is given up to the time when the engagement or condition is fulfilled. Once the future condition is fulfilled, the guarantee no longer serves as a security.

 

We also recall our above consideration that the due process objective reflected in Article X:3 of the GATT 1994 suggests that ‘prompt review and correction’ is to be understood as review and correction of administrative action that is performed in a quick and effective manner and without delay. It follows that the mechanism for the review of administrative action relating to customs matters must permit review to be timely and effective. In the particular circumstances of a guarantee, which is effective as a security from the time it is given until the time when the engagement or condition is fulfilled, we consider that, for a review to be considered timely and effective, it must at least be possible to challenge the guarantee during the time it serves as a security. This is so because it is during the period of time that a guarantee is required that importers are most affected by the guarantee decision.”(823)

(ii) “administrative action relating to customs matters”

583.     In Thailand — Cigarettes (Philippines), the Panel examined a claim under Article X:3(b) regarding the alleged absence of a right to appeal against the amount of a guarantee for payment of customs duties. In a finding upheld by the Appellate Body, the Panel suggested that “‘administrative action relating to customs matters’ in Article X:3(b) of the GATT 1994 includes a wide range of acts applying legal instruments having a rational relationship with customs matters, which clearly includes valuation of goods being imported”(824) and that “the term ‘administrative action relating to customs matters’ in Article X:3(b) is not necessarily limited to final administrative determinations where the so-called intermediary actions taken prior to final determinations result in an immediate adverse effect on traders.”(825) The Panel and the Appellate Body concluded that the imposition of a guarantee is an “administrative action relating to customs matters” within the meaning of Article X:3(b).(826)

(iii) “Such tribunals or procedures shall be independent of the agencies entrusted with administrative enforcement”

584.     The Panel in EC — Selected Customs Matters noted that “in some WTO Members, administrative action relating to customs matters may be reviewed by the same administrative authority that originally took the action… . Such review would not qualify under Article X:3(b) of the GATT 1994 because, in such case, the reviewing body is not independent of the administrative authority whose decision is the subject of review.”(827) It defined “independent” in the context of Article X:3(b) as “free of control or influence from the administrative agencies whose decisions are the subject of review, [so as to act] with freedom in institutional and practical terms from interference by the agencies whose decisions are being reviewed”.(828)

585.     The Appellate Body in EC — Selected Customs Matters found that Article X:3(b) does not require that first instance review decisions must govern the practice of all the agencies entrusted with administrative enforcement throughout the territory of a particular WTO Member:

“[W]e are of the view that Article X:3(b) of the GATT 1994 requires a WTO Member to establish and maintain independent mechanisms for prompt review and correction of administrative action in the area of customs administration. However, neither text nor context nor the object and purpose of this Article require that the decisions emanating from such first instance review must govern the practice of all agencies entrusted with administrative enforcement throughout the territory of a particular WTO Member.”(829)

586.     In Thailand — Cigarettes (Philippines), the Panel found that “Members may have a system under which an initial appeal of an administrative action must be made to an authority within the agency entrusted with enforcement prior to an independent body. We do not therefore consider that the existence of interposing steps prior to an independent review in itself is a systemic flaw that prevents Thailand from maintaining procedures for the prompt review of administrative actions under Article X:3(b).”(830)

(d) Article X:3(c)

(i) “the date of this Agreement”

587.     Article XXVI:1 provides that “the date of this Agreement shall be 30 October 1947.” This date applies for the obligations under Article X:3 of the original contracting parties to the GATT 1947; the former dependent territories of the original contracting parties which, after attaining independence or commercial autonomy, succeeded to contracting party status under Article XXVI:5(c); and Chile. For contracting parties that acceded in 1948–1951, the date used was 24 March 1948. For all accessions to the GATT 1947 thereafter, the accession protocol provided that the “date of this Agreement” for the purposes of Article X:3 was the date of the protocol of accession or (where the acceding government had previously acceded provisionally) the date of the protocol of provisional accession.(831) These accession protocol provisions are incorporated in the GATT 1994 by virtue of paragraph 1(b)(ii) of the GATT 1994 incorporation text. See further under Article XXVI:1 below.

588.     On GATT practice concerning the phrase “the date of this Agreement” in Article X:3.

5. Relationship with other GATT provisions

(a) General

589.     In EC — Bananas III, the Appellate Body explained the relationship between Article X and other GATT provisions. See the excerpt referenced in paragraph 551 above. This finding of the Appellate Body was also cited by the Panel in Argentina — Hides and Leather.(832)

(b) Article I

590.     In Indonesia — Autos, the Panel examined whether a series of measures taken by Indonesia to develop its domestic automobile industry was inconsistent with Article X as well as Articles I and III. After having found that the Indonesian National Car Programme violated “the provisions of Article I and/ or Article III of GATT”, the Panel did not consider it necessary to examine Japan’s claims under Article X of GATT.(833)

591.     In Argentina — Hides and Leather, the Panel addressed the concept of “uniformity” with respect to Article X:3(a), stating that this provision goes beyond Article I to require “uniform administration of Customs laws and procedures between individual shippers and even with respect to the same person at different times and different places”:

“The term ‘uniform’ appears in the GATT 1994 only with respect to administration of Customs laws… .

 

It is obvious from these uses of the terms that it is meant that Customs laws should not vary, that every exporter and importer should be able to expect treatment of the same kind, in the same manner both over time and in different places and with respect to other persons. Uniform administration requires that Members ensure that their laws are applied consistently and predictably and is not limited, for instance, to ensuring equal treatment with respect to WTO Members. That would be a substantive violation properly addressed under Article I. This is a requirement of uniform administration of Customs laws and procedures between individual shippers and even with respect to the same person at different times and different places.

 

We are of the view that this provision should not be read as a broad anti-discrimination provision. We do not think this provision should be interpreted to require all products be treated identically. That would be reading far too much into this paragraph which focuses on the day to day application of Customs laws, rules and regulations. There are many variations in products which might require differential treatment and we do not think this provision should be read as a general invitation for a panel to make such distinctions.”(834)

(c) Article III

592.     In Indonesia — Autos, the Panel discussed the relationship between Articles III and X. See the excerpt referenced in paragraph 590 above.

(d) GATT practice

593.     On GATT practice regarding the relationship between Article X of GATT and other Articles.

6. Relationship with other WTO Agreements

(a) Licensing Agreement

594.     In EC — Bananas III, the Appellate Body reviewed the Panel’s finding that the EC import licensing system on imports of bananas was in violation of Article X as well as Article 1.3 of the Licensing Agreement. The Appellate Body stated that “the provisions of Article X:3(a) of the GATT 1994 and Article 1.3 of the Licensing Agreement have identical coverage”:

Article X:3(a) of the GATT 1994 applies to all ‘laws, regulations, decisions and rulings of the kind described in paragraph 1’ of Article X, which includes those, inter alia, ‘pertaining to … requirements, restrictions or prohibitions on imports …’. The EC import licensing procedures are clearly regulations pertaining to requirements on imports and, therefore, are within the scope of Article X:3(a) of the GATT 1994. As we have concluded, the Licensing Agreement also applies to the EC import licensing procedures. We agree, therefore, … that both the Licensing Agreement and the relevant provisions of the GATT 1994, in particular, Article X:3(a), apply to the EC import licensing procedures. In comparing the language of Article 1.3 of the Licensing Agreement and of Article X:3(a) of the GATT 1994, we note that there are distinctions between these two articles. The former provides that ‘the rules for import licensing procedures shall be neutral in application and administered in a fair and equitable manner’. The latter provides that each Member shall ‘administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions or rulings of the kind described in paragraph 1 of [Article X]’.

 

We attach no significance to the difference in the phrases ‘neutral in application and administered in a fair and equitable manner’ in Article 1.3 of the Licensing Agreement and ‘administer in a uniform, impartial and reasonable manner’ in Article X:3(a) of the GATT 1994. In our view, the two phrases are, for all practical purposes, interchangeable. We agree, therefore, … that the provisions of Article X:3(a) of the GATT 1994 and Article 1.3 of the Licensing Agreement have identical coverage.

 

Although Article X:3(a) of the GATT 1994 and Article 1.3 of the Licensing Agreement both apply, the Panel, in our view, should have applied the Licensing Agreement first, since this agreement deals specifically, and in detail, with the administration of import licensing procedures. If the Panel had done so, then there would have been no need for it to address the alleged inconsistency with Article X:3(a) of the GATT 1994.”(835)

(b) Anti-Dumping Agreement

595.     In US — DRAMS, Korea, the complainant, claimed that a particular United States anti-dumping duty order violated Article X of GATT as well as several Articles of the Anti-Dumping Agreement. Having already found a violation of Article 11.2 of the Anti-Dumping Agreement, the Panel exercised judicial economy with respect to Articles I and X of the GATT 1994.(836)

596.     In US — Stainless Steel, Korea, the complainant, argued that the United States violated Article X:3(a) of GATT as well as Article 2.4.1 of the Anti-Dumping Agreement by performing an unnecessary “double conversion” in calculating the prices of certain local sales which are to be compared to the alleged dumping exports. After having found a violation of Article 2.4.1 in this regard, the Panel exercised judicial economy with respect to Korea’s claim under Article X:3(a).(837)

 

Footnotes:

622. Panel Report, Colombia — Ports of Entry, paras. 7.219–7.223, 7.374–7.375. back to text
623
. Panel Report, Colombia — Ports of Entry, paras. 7.394–7.3965. back to text
624
. Panel Report, Colombia — Ports of Entry, para. 7.401. back to text
625
. Panel Report, Colombia — Ports of Entry, para. 7.418. back to text
626
. Panel Report, Colombia — Ports of Entry, para. 7.422. back to text
627
. Panel Report, Colombia — Ports of Entry, para. 7.397. back to text
628
. Panel Report, Colombia — Ports of Entry, para. 7.402. back to text
629
. Panel Report, Colombia — Ports of Entry, para. 7.430. back to text
630
. Panel Report, Colombia — Ports of Entry, para. 7.468. back to text
631
. Panel Report, Colombia — Ports of Entry, para. 7.445. back to text
632
. Panel Report, Colombia — Ports of Entry, para. 7.453. back to text
633
. Panel Report, Colombia — Ports of Entry, para. 7.454. back to text
634
. Reference in original to GATT document CG.W.18/W.48. back to text
635
. Panel Report, Colombia — Ports of Entry, para. 7.465–7.467. back to text
636
. Panel Report, Colombia — Ports of Entry, para. 7.475. back to text
637
. Panel Report, Colombia — Ports of Entry, para. 7.477. back to text
638
. GATT Analytical Index, p. 216. back to text
639
. Panel Report, Colombia — Ports of Entry, footnote 783 to para. 7.477. back to text
640
. Appellate Body Report, US — 1916 Act, para. 109. back to text
641
. Appellate Body Report, US — 1916 Act, para. 118. back to text
642
. Appellate Body Report, US — 1916 Act, para. 120. back to text
643
. Appellate Body Report, US — 1916 Act, para. 121. back to text
644
. Appellate Body Report, US — 1916 Act, para. 122. back to text
645
. Appellate Body Report, US — 1916 Act, paras. 124–126. The Panel, which reached the same conclusion on the scope of Article VI:2, discussed the object and purpose of the GATT 1994, of the Anti-Dumping Agreement, or of the WTO Agreement, and the preparatory work for Article VI:2. Panel Report, US — 1916 Act (Japan), paras. 6.223–6.229; Panel Report, US — 1916 Act (EC), paras. 6.200–6.203. back to text
646
. Appellate Body Report, US — Offset Act (Byrd Amendment), para. 244. back to text
647
. Appellate Body Report, Brazil — Desiccated Coconut, p. 17. The Appellate Body later noted that Article 18.3 of the Anti-Dumping Agreement is an identical provision to Article 32.3 of the SCM Agreement. Appellate Body Report, Brazil — Desiccated Coconut, fn. 23. back to text
648
. Appellate Body Report, Brazil — Desiccated Coconut, p. 16. back to text
649. Appellate Body Report, US — Zeroing (Japan), para. 140. back to text
650
. Appellate Body Report, US — Stainless Steel (Mexico), paras. 85–87. back to text
651
. Appellate Body Report, US — Stainless Steel (Mexico), paras. 94–95. back to text
652
. Appellate Body Report, US — 1916 Act, para. 107. back to text
653
. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), para. 569. back to text
654
. Appellate Body Report, EC — Fasteners, para. 284. back to text
655
. Appellate Body Report, EC — Fasteners, paras. 285–290. back to text
656
. Appellate Body Report, EC — Fasteners, footnote 460 to para. 285. back to text
657
. Appellate Body Report, US — 1916 Act, para. 116. back to text
658
. Appellate Body Report, US — 1916 Act, para. 137. back to text
659
. Appellate Body Report, US — Offset Act (Byrd Amendment), para. 265. back to text
660
. Appellate Body Report, EC — Tube or Pipe Fittings, para. 76. back to text
661
. Zeroing may be described as the practice of calculating an amount of dumping on the basis of one or more comparisons of normal value(s) with export price(s) that are below normal value, while simply treating as undumped (and thus representing a zero amount of dumping) export prices that are above normal value. To arrive at a margin of dumping, the amount of dumping is divided by the total value of all export price transactions (both above and below normal value). back to text
662
. Appellate Body Report, US — Zeroing (EC), paras. 132–133. back to text
663
. Appellate Body Report, US — Stainless Steel (Mexico), paras. 102–103. back to text
664
. Appellate Body Report, US — Stainless Steel (Mexico), para. 136. back to text
665
. Appellate Body Report, US — Continued Zeroing, para. 285. back to text
666
. Appellate Body Report, Brazil — Desiccated Coconut, p. 16. back to text
667
. Appellate Body Report, US — Offset Act (Byrd Amendment), para. 273. back to text
668
. Appellate Body Report, US — Countervailing Measures on Certain EC Products, para. 139. back to text
669
. Appellate Body Report, US — Softwood Lumber IV, para. 141. back to text
670
. Appellate Body Report, US — Softwood Lumber IV, para. 146. back to text
671
. Appellate Body Report, US — Shrimp (Thailand)/US — Customs Bond Directive, para. 221. back to text
672
. Appellate Body Report, US — Shrimp (Thailand)/US — Customs Bond Directive, paras. 226–227. back to text
673
. Appellate Body Report, US — Shrimp (Thailand)/US — Customs Bond Directive, para. 231. back to text
674
. Appellate Body Report, US — Shrimp (Thailand)/US — Customs Bond Directive, para. 258. back to text
675
. Panel Report, EC — Tube or Pipe Fittings, paras. 7.152–7.167. back to text
676
. (footnote original) Panel Report, para. 14.70. The potential for double remedies is even greater in the context of export subsidies, which benefit only exported goods and therefore presumably lower the export price. (Ibid., footnote 972 to para. 14.72) back to text
677
. Description in Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), para. 543. back to text
678. Appellate Body Report, US — Anti-Dumping and Countervailing Duties (China), paras. 567–569. back to text
679
. Panel Report, US — 1916 Anti-Dumping Act (Japan), paras. 6.252–6.253. back to text
680
. Panel Report, Mexico — Olive Oil, para. 7.190. back to text
681
. Panel Report, Mexico — Olive Oil, para. 7.205. back to text
682
. Panel Report, Mexico — Olive Oil, para. 7.214. back to text
683
. Panel Report, Mexico — Olive Oil, para. 7.216. back to text
684
. Panel Report, Brazil — Desiccated Coconut, para. 281. back to text
685
. Appellate Body Report, Brazil — Desiccated Coconut, p. 21. back to text
686
. Panel Report, Brazil — Desiccated Coconut, para. 281. back to text
687
. Appellate Body Report, Brazil — Desiccated Coconut, p. 21. back to text
688
. Panel Report, US — 1916 Act (EC), para. 6.209. back to text
689
. (footnote original) Appellate Body Report on Brazil — Desiccated Coconut, paras. 74 and 81–83. back to text
690
. Panel Report, US — 1916 Act (Japan), paras. 6.92–6.94. back to text
691
. Panel Report, US — 1916 Act (EC), para. 6.211. See also Panel Report, US — 1916 Act (Japan), para. 6.254. back to text
692
. Panel Report, Brazil — Desiccated Coconut, para. 227. back to text
693
. Panel Report, Brazil — Desiccated Coconut, para. 227. back to text
694
. Appellate Body Report, Brazil — Desiccated Coconut, p. 14. back to text
695
. Appellate Body Report, Brazil — Desiccated Coconut, p. 14. back to text
696
. Appellate Body Report, Brazil — Desiccated Coconut, p. 16. back to text
697
. (footnote original) Panel Report on US — Customs User Fee. back to text
698
. (footnote original) Panel Report on US — Customs User Fee, para. 69. back to text
699
. (footnote original) Panel Report on US — Customs User Fee, para. 80. back to text
700
. (footnote original) Panel Report on US — Customs User Fee, para. 86. back to text
701
. Panel Report, Argentina — Textiles and Apparel, paras. 6.74–6.75. The Panel also referred to the GATT Working Party Report, Accession of the Democratic Republic of the Congo (BISD 18S/89, para. 5). back to text
702
. (footnote original) Panel Report on US — Customs User Fee, paras. 84–86. back to text
703
. Panel Report, Argentina — Textiles and Apparel, paras. 6.77–6.78. back to text
704
. (footnote original) Panel Report on US — Customs User Fee. back to text
705. (footnote original) Panel Report on US — Customs User Fee, para. 69. back to text
706
. (footnote original) Panel Report on US — Customs User Fee, para. 80. back to text
707
. Panel Report, US — Certain EC Products, paras. 6.69–6.70. back to text
708
. Panel Report, China — Raw Materials, para. 7.839. back to text
709
. (Footnote original) The Panel notes that this method of allocation is economically desirable and is not otherwise prohibited under the GATT 1994 or WTO Agreement. back to text
710
. Panel Report, China — Raw Materials, para. 7.851. back to text
711
. Panel Report, China — Raw Materials, para. 7.847. back to text
712
. Panel Report, China — Raw Materials, paras. 7.849–7.850. back to text
713
. WT/ACC/KGZ/26, para. 30. back to text
714
. Panel Report, Argentina — Textiles and Apparel, paras. 6.81–6.82. back to text
715
. Appellate Body Report, Argentina — Textiles and Apparel, paras. 69–70. See also the discussion on relations between the WTO and the IMF in the Chapter on the WTO Agreement, and below under Article XV. back to text
716
. G/C/W/407. back to text
717
. Appellate Body Report, EC — Poultry, para. 115 (also referring to the Appellate Body Report, EC — Bananas III, para. 200, referred to in para. 551 below). back to text
718
. Panel Report, Dominican Republic — Import and Sale of Cigarettes, paras. 7.406–7.407. back to text
719
. (footnote original) In US — Corrosion-Resistant Steel Sunset Review, the Appellate Body similarly found that the expression “laws, regulations and administrative procedures” in Article 18.4 of the Anti-Dumping Agreement seemed to encompass the entire body of generally applicable rules, norms and standards adopted by Members in connection with the conduct of anti-dumping proceedings. (Appellate Body Report on US — Corrosion Resistant Steel Sunset Review, para. 87). back to text
720
. Panel Report, EC — IT Products, paras. 7.1026–7.1027. back to text
721
. Panel Report, EC — IT Products, paras. 7.1029–7.1030. back to text
722
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.773. back to text
723
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.779. back to text
724
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.826. back to text
725
. Panel Report, Thailand — Cigarettes (Philippines), paras. 7.826–7.827. back to text
726
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.849. back to text
727
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.848. back to text
728
. Panel Report, China — Raw Materials¸ para. 7.803. back to text
729
. Appellate Body Report, US — Underwear, p. 21. back to text
730. Panel Report, US — Underwear, para. 7.65. back to text
731
. Panel Report, Japan — Film, para. 10.388. back to text
732
. Panel Report, EC — Poultry, para. 269. back to text
733
. Appellate Body Report, EC — Poultry, paras. 111 and 113. back to text
734
. Panel Report, US — Hot-Rolled Steel, para. 7.268. back to text
735
. Panel Report, EC — Selected Customs Matters, para. 7.116. back to text
736
. Panel Report, EC — IT Products, para. 7.1034. back to text
737
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.806. back to text
738
. Panel Report, China — Raw Materials, paras. 7.732–7.736. back to text
739
. Panel Report, China — Raw Materials, para. 7.804. back to text
740
. Panel Report, EC — IT Products, para. 7.1048. back to text
741
. Panel Report, EC — IT Products, para. 7.1068. back to text
742
. Panel Report, China — Raw Materials, para. 7.805. back to text
743
. Panel Report, EC — IT Products, para. 7.1069. back to text
744
. Panel Report, China — Raw Materials, para. 7.805. back to text
745
. Panel Report, EC — IT Products, para. 7.1036. back to text
746
. Panel Report, Dominican Republic — Import and Sale of Cigarettes, para. 7.414. back to text
747
. Panel Report, EC — IT Products, para. 7.1015. In footnote 1312 to this paragraph, the Panel cited the passage from US — Underwear in paragraph 540 below, and stated that “We consider that this statement, although addressing Article X:2, is equally applicable to Article X:1.” back to text
748. Panel Report, Thailand — Cigarettes (Philippines), para. 7.773. back to text
749
. Panel Report, EC — IT Products, para. 7.1074. back to text
750
. Panel Report, EC — IT Products, paras. 7.1076–7.1077. back to text
751
. (footnote original) In other words, if a “medium” makes measures generally available to the public in such a manner as to “enable governments and traders to become acquainted with them”, we consider that such medium should be regarded as “appropriate” and that publishing on that medium would fall within “published” a used in Article X:1. back to text
752
. Panel Report, EC — IT Products, paras. 7.1082, 7.1084 (also citing the Panel Report, Chile — Price Band System, para. 7.127), 7.1086–7.1087. back to text
753
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.860. back to text
754
. Panel Report, China — Raw Materials, paras. 7.806–7.807. back to text
755
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.819. back to text
756
. Appellate Body Report, US — Underwear, p. 21. back to text
757
. Appellate Body Report, US — Underwear, p. 21. back to text
758
. Panel Report, US — Anti-Dumping Measures on Oil Country Tubular Goods, para. 7.185. back to text
759
. Panel Report, EC — IT Products, para. 7.1097. back to text
760
. Panel Report, EC — IT Products, para. 7.1106. back to text
761
. Panel Report, EC — IT Products, para. 7.1105. back to text
762
. Panel Report, EC — IT Products, para. 7.1107. back to text
763
. Panel Report, EC — IT Products, para. 7.1110. back to text
764
. Panel Report, EC — IT Products, para. 7.1116. back to text
765
. Panel Report, EC — IT Products, para. 7.1119. back to text
766
. Panel Report, EC — IT Products, para. 7.1120. back to text
767
. Panel Report, EC — IT Products, para. 7.1121. back to text
768. Panel Report, EC — IT Products, para. 7.1129. back to text
769. Panel Report, EC — IT Products, para. 7.1131. back to text
770
. Panel Report, EC — IT Products, paras. 7.1132–7.1135. back to text
771
. Appellate Body Report, US — Shrimp, paras. 182–183. back to text
772
. Panel Report, EC — Bananas III, para. 7.206. Also, Panel Report, EC — Bananas III, para. 7.225. back to text
773
. (footnote original) Panel Report on Argentina — Hides and Leather, para. 11.86. back to text
774
. (footnote original) Appellate Body Report on US — Shrimp, para. 183. The Appellate Body also underlined that “inasmuch as there are due process requirements generally for measures that are otherwise imposed in compliance with WTO obligations, it is only reasonable that rigorous compliance with the fundamental requirements of due process should be required in the application and administration of a measure …” ( Appellate Body Report, US — Shrimp, para. 182) (emphasis added). back to text
775
. Panel Report, Thailand — Cigarettes (Philippines), paras. 7.866–7.868. back to text
776
. Appellate Body Report, EC — Bananas, para. 200. See also Panel Report, US — Corrosion-Resistant Steel Sunset Review, para. 7.289. back to text
777
. Appellate Body Report, EC — Poultry, para. 115. back to text
778
. (footnote original) In fact, Article X:3(b), in its second sentence, uses the word “importer”. back to text
779
. Panel Report, Argentina — Hides and Leather, paras. 11.67–11.68. back to text
780
. (footnote original) In EC — Poultry, the Appellate Body further stated that Article X is relevant only to measures “of general application” and not to the particular treatment of each individual shipment. See Appellate Body Report on EC — Poultry, paras. 111 and 113. back to text
781
. (footnote original) We make this statement arguendo and do not imply agreement with Argentina’s implicit assumption of no violation in such instances. back to text
782. (footnote original) See Appellate Body Reports on US — Gasoline, p. 23; Japan — Alcoholic Beverages II, p. 12; Argentina — Footwear (EC), para. 81. back to text
783
. Panel Report, Argentina — Hides and Leather, paras. 11.71–11.72. back to text
784
. Panel Report, US — Corrosion-Resistant Steel Sunset Review, para. 7.293. back to text
785
. Panel Report, US — Hot-Rolled Steel, para. 7.268. See also, Panel Report, US — Corrosion-Resistant Steel Sunset Review, para. 7.307. back to text
786
. Appellate Body Report, EC — Selected Customs Matters, paras. 200–201. See also paragraphs 551552 of this Chapter. back to text
787
. (footnote original) Appellate Body Report on US — Oil Country Tubular Goods Sunset Reviews, para. 217. back to text
788
. Panel Report, Thailand — Cigarettes (Philippines), paras. 7.873–7.874. back to text
789
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.886. back to text
790
. Panel Report, Thailand — Cigarettes (Philippines), paras. 7.982–7.988. back to text
791
. (footnote original) However, we recall that, in US — Cotton Yarn, the Appellate Body stated (when reviewing a textile safeguards determination) that a Member cannot be expected to examine “evidence that did not exist and that, therefore, could not possibly have been taken into account when the Member made its determination… . Consequently, a panel must not consider evidence which did not exist at that point in time.” (Appellate Body Report, US — Cotton Yarn, paras. 77 and 78 (original emphasis; footnote omitted)) We also note the Appellate Body’s statement in EC — Sardines that “[t]he interim review stage is not an appropriate time to introduce new evidence.” (Appellate Body Report on EC — Sardines, para. 301) back to text
792
. Appellate Body Report, EC — Selected Customs Matters, para. 188. back to text
793
. (footnote original) DSU Article 3.2. back to text
794
. (footnote original) It is for this reason that both Article X:3(b) of GATT 1994 and Article 13 of the AD Agreement require Members to maintain appropriate judicial, arbitral or administrative tribunals or procedures. back to text
795
. Panel Report, US — Stainless Steel, paras. 6.50–6.51. back to text
796
. Panel Report, Argentina — Hides and Leather, para. 11.76. back to text
797
. Panel Report, US — Hot-Rolled Steel, para. 7.268. back to text
798
. Panel Report, US — Corrosion-Resistant Steel Sunset Review, paras. 7.305–7.306. back to text
799
. Appellate Body Report, EC — Selected Customs Matters, para. 224. back to text
800. Panel Report, China — Raw Materials, para. 7.743. back to text
801. Panel Report, China — Raw Materials, paras. 7.751–7.752. back to text
802. Panel Report, Argentina — Hides and Leather, paras. 11.99–11.101. back to text
803
. See paragraph 559 above. back to text
804
. (footnote original) Panel Report on US — Hot Rolled Steel, para. 7.268. back to text
805
. (footnote original) In addition, we note that the Appellate Body has recognized that the good faith principle has an implication for the Panels’ interpretation of the Members obligations. (Appellate Body Report on US — Offset Act (Byrd Amendment), para. 297). The Panel in Canada — Continued Suspension also found that one aspect of the good faith principle applied to the context of WTO disputes was to grant members a presumption of WTO consistency in the application of their domestic laws:
          “It is implicit from the duty to perform treaty obligations in good faith that a party to an international agreement should be deemed to have acted in good faith in the performance of its treaty obligations. More generally, even though Article 26 provides for an obligation and not a presumption, pacta sunt servanda is but only one expression of the principle of good faith. Good faith is a general principle of international law that governs all reciprocal actions of States. We are therefore inclined to agree with the European Communities that every party to an international agreement must be presumed to be performing its obligation under that agreement in good faith.” (Panel Report on Canada — Continued Suspension, para. 7.317)
          In the absence of solid evidence to prove the contrary, there is no reason to assume that TTM directors, who are Thai government officials, would act in contradiction to their WTO obligations. back to text
806
. Panel Report, Thailand — Cigarettes (Philippines), paras. 7.903–7/905, 7.907–7.910. back to text
807
. Panel Report, China — Raw Materials, paras. 7.753–7.755. back to text
808
. Panel Report, China — Raw Materials, para. 7.783. back to text
809
. Panel Report, China — Raw Materials, para. 7.785. back to text
810
. Panel Report, Argentina — Hides and Leather, para. 11.94. back to text
811
. Dominican Republic — Import and Sale of Cigarettes, paras. 7.383, 7.387–7.388. back to text
812
. Panel Report, Thailand — Cigarettes (Philippines), paras. 7.921–7.925. back to text
813
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.954. back to text
814
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.969. back to text
815
. Panel Report, China — Raw Materials, para. 7.743. back to text
816
. Panel Report, China — Raw Materials, paras. 7.745–7.746. back to text
817
. See paragraph 572. back to text
818
. Panel Report, China — Raw Materials, paras. 7.794–7.796. back to text
819
. Panel Report, EC — Selected Customs Matters, para. 7.536. back to text
820
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.1015. back to text
821
. Appellate Body Report, Thailand — Cigarettes (Philippines), paras. 203–205. back to text
822
. Appellate Body Report, Thailand — Cigarettes (Philippines), para. 221. back to text
823
. Appellate Body Report, Thailand — Cigarettes (Philippines), paras. 219–220. back to text
824
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.1029; Appellate Body Report, Thailand — Cigarettes (Philippines), para. 202. back to text
825
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.1035. back to text
826
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.1053; Appellate Body Report, Thailand — Cigarettes (Philippines), para. 216. back to text
827
. Panel Report, EC — Selected Customs Matters, fn. 894. back to text
828
. Panel Report, EC — Selected Customs Matters, para. 7.520. back to text
829
. Appellate Body Report, EC — Selected Customs Matters, para. 303. back to text
830
. Panel Report, Thailand — Cigarettes (Philippines), para. 7.1014. back to text
831
. GATT Analytical Index, p. 216. back to text
832
. Panel Report, Argentina — Hides and Leather, para. 11.60. back to text
833
. Panel Report, Indonesia — Autos, para. 14.152. back to text
834
. Panel Report, Argentina — Hides and Leather, paras. 11.81–11.84. back to text
835
. Appellate Body Report, EC — Bananas III, paras. 203–204. back to text
836
. Panel Report, US — DRAMS, para. 6.92. back to text
837
. Panel Report, US — Stainless Steel, para. 6.55. back to text

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