Dispute Settlement Mechanism

Principles guiding the DSB –

Article 3.2 of the DSU – Security and predictability to the multilateral trading system,
preserve rights and obligations of members and cannot add or dimmish rights or obligations
under covered agreements.

Article 3.7 – Aim of DSB is to achieve positive solution.

Stages of a dispute –

1. Consultation
2. Request for Panel; Panel to give report in 120 days
3. Adoption of report on negative consensus
4. If appealed, appellate bodt report within 60 – 90 days
5. Implementation of report
6. Compliance Review
7. Suspension of concessions

1. Consultation (Article 4)

Art. 4.3 – Reply to request within 10 days of receipt of request. Enter consultations within 30
days of date of receipt of request. If the timeline is not complied with, aggrieved may directly
request panel formation.

Art. 4.7 – If not solution within 60 days for request for consultation – request panel
formation; can also request Panel earlier if failed to settle dispute.

2. Panel (Article 6 – 16)

6.1 – Panel to be requested and established at DSB meeting, unless DSB, by consensus,
decides not to establish panel.

8.6 – The Secretariat shall propose nominations for the panel to the parties to the dispute. The
parties to the dispute shall not oppose nominations except for compelling reasons.

11 – a panel should make an objective assessment of the matter before it; Panels should
consult regularly with the parties to the dispute and give them adequate opportunity to
develop a mutually satisfactory solution.
12.8 – The period in which the panel shall conduct its examination, from the date that the
composition and terms of reference of the panel have been agreed upon until the date the final
report is issued to the parties to the dispute, shall, as a general rule, not exceed six months.

13.1 – Each panel shall have the right to seek information and technical advice from any
individual or body which it deems appropriate. A Member should respond promptly and fully
to any request by a panel for such information as the panel considers necessary and
appropriate.

13.2 – Panels may seek information from any relevant source and may consult experts to
obtain their opinion on certain aspects of the matter.

16.4 – Within 60 days after the date of circulation of a panel report to the Members, the
report shall be adopted at a DSB meeting7 unless a party to the dispute formally notifies the
DSB of its decision to appeal or the DSB decides by consensus not to adopt the report.

3. Appellate Body (Articles 17 and 18)

17.1 – composed of seven persons, three of whom shall serve on any one case.

17.2 – The DSB shall appoint persons to serve on the Appellate Body for a four-year term,
and each person may be reappointed once.

17.5 – the proceedings shall not exceed 60 days from the date a party to the dispute formally
notifies its decision to appeal to the date the Appellate Body circulates its report.

17.6 – An appeal shall be limited to issues of law covered in the panel report and legal
interpretations developed by the panel.

4. Recommendations of Panel/ AB (Articles 19)

19.1 – Where a panel or the Appellate Body concludes that a measure is inconsistent with a
covered agreement, it shall recommend that the Member concerned bring the measure into
conformity with that agreement.

5. Compliance

21.1 – Prompt compliance with recommendations or rulings of the DSB is essential.

21.3 - At a DSB meeting held within 30 days11 after the date of adoption of the panel or
Appellate Body report, the Member concerned shall inform the DSB of its intentions in
respect of implementation of the recommendations and rulings of the DSB. If it is
impracticable to comply immediately with the recommendations and rulings, the Member
concerned shall have a reasonable period of time in which to do so.

21.5 – Where there is disagreement as to the existence or consistency with a covered

agreement of measures taken to comply with the recommendations and rulings such dispute
shall be decided through recourse to these dispute settlement procedures, including wherever
possible resort to the original panel. Panel to submit report within 90 days.

6. Suspension of concessions

22.2 – If Member fails to comply with recommendations within a reasonable period of time,
it may enter into negotiation with an aggrieved Member for mutually acceptable
compensation. If no agreement is reached within 20 days from date of reasonable period of
implementation, aggrieved Member may request authorization from the DSB to suspend the
application to the Member concerned of concessions or other obligations.

22.3 – Allows for Cross-retaliation

22.6 - When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant
authorization to suspend concessions or other obligations within 30 days of the expiry of the
reasonable period of time.

22.6 – If the Member concerned objects to the level of suspension proposed or claims that the
principles and procedures set forth in paragraph 3 have not been followed where a
complaining party has requested authorization to suspend concessions or other obligations
pursuant to paragraph 3(b) or (c), the matter shall be referred to arbitration.

Article 23 – Jurisdiction clause

Limitations of DSU

1. Cannot go beyond their jurisdiction.

2. AB can only address issues raised in panel report (Article 17.6 DSU) during appellate
proceedings.
3. Judges cannot legislate (they need to interpret treaties as they stand)
4. The AB and Panel can only suggest ways of implementation of the recommendations
(Article 19.1 DSU)

Types of complaints at WTO (Article 23, GATT)

 1. Violation
2. Non-violation
3. Situation

1. Violation Complaints

Article 23(1)(a), GATT

Two-tier test:

(a) Application of a measure by a Member.

(b) Measure has led to potential nullification and impairment of benefit being accrued
from a GATT obligation.

2. Non-violation complaints

Used to challenge any measure applied by another Member, even if it does not conflict with
GATT 1994, provided that it results in “nullification or impairment of a benefit”.

In EC – Asbestos, the text of XXIII:1(b) establishes three conditions:

a. The application of a measure by a Member of the WTO

b. Existence of a benefit accruing under the applicable agreement
c. The nullification or impairment of a benefit as a result of the application of the
measure.

In almost all cases, the benefit claimed under this article consisted in the legitimate
expectation of improved market access opportunities resulting from the relevant tariff
concessions.

3. Situational Complaints

It could cover any situation whatsoever, as long as it results in “nullification or impairment”.

Cases for the Module

1. EC – Hormones (Article 21.3(c) and 22.6)

Facts (Article 21.3(c) DSU): AB Report adopted in Feb 1998 and EC said will comply in
March 1998, in accordance with 21.3, DSU. 21.3 – relates to “reasonable period of time” for
implementation of report.
Issue: To determine the reasonable period of time within which the EC is required to
implement the recommendations and rulings of the DSB; Interpretation of Article 21.3(c).

Arguments and Holding:

EC wanted 4 years; 2 years for risk assessment and then remaining for undertaking legislative
action. US/Canada said only way to implement is repeal the measure, that takes 10 months.

The arbitrator found that under 21.3(c), 15 months is the general rule, modifiable based on
particular circumstances. Further, 21.3(c) must be interpreted in its context and in light of the
object and purpose of DSU. Article 21.1 stipulates 'prompt compliance' while Article 3.3
requires 'prompt settlement'. Read in context - 'reasonable period of time should be the
shortest period possible within the legal system of the Member to implement the
recommendations and rulings of the DSB.

Also found burden of proof to show particular circumstances is on the person requesting extra
time.

On the issue of implementation of the DSB’s ruling, the arbitrator found that AB and Panel
can recommend ways to implement it, but they had not done so in this case. The arbitrator
does not have authority to make such recommendations. The arbitrator also found that under
Article 3.7, withdrawal of measure is one way to implement, but not the only way. The
Member has discretion to decide way to implement. However, in this case, to allow the
member to implement the way they want would go against “prompt compliance”. Reasonable
period – 15 months.

Facts (Article 22.6 DSU): In 1999, US requested DSB to authorize suspension of

concessions. Referred to arbitration under Article 22.6.

Issue: Whether the level of suspension of tariff concessions proposed by the US is equivalent
to the level of nullification or impairment caused to the US by the EC ban on imports (Art
22.4 DSU).

Arguments and holding:

The arbitrators found they are prohibited from examining nature of concessions to be
suspended – inquiry restricted to equivalence between suspension and trade impairment.

2. Australia – Automotive Leather II (Article 21.5 DSU)

Facts: Australia provided illegal subsidies. The panel asked it to revoke subsidies. Australia
took back money and then granted a loan. US complained saying there is no proper
implementation. Australia argued new loan can’t be taken into consideration while looking at
compliance under Article 21.5.

Issue: Whether the 1999 Loan is within the Panel's Terms of Reference under Article 21.5 of
DSU?

Arguments and holding:

The 1999 loan is inextricably linked to the steps taken by Australia in response to the DSB's
ruling, in terms of its timing and nature. It, therefore, cannot be excluded from the Panel's
consideration without severely limiting the Panel's ability to judge whether Australia has
taken measures to comply with the DSB ruling. Concluded that the 1999 loan specifically
identified in the request for establishment was within the Panel's terms of reference and can
be considered in determining the existence or consistency of measures taken by Australia to
comply with DSB ruling in this dispute.

3. EC – Asbestos (Article XXIII(1)(b) GATT)

Issue 1: Whether Article XXIII: 1(b) of GATT 1994 applies to measures that fall within the
scope of GATT 1994 provisions?

Holding 1: A measure can be inconsistent/violative of a GATT 1994 provision and

simultaneously give rise to a cause of action under Art XXIII: 1(b) of GATT 1994.

Issue 2: Whether Article XXIII: 1(b) applies to measures which pursue health, rather than
commercial, objectives and which can therefore be justified under exceptions to the GATT?

Holding 2: The AB upheld the Panel's findings that Article XXIII: 1(b) applies to measures
which fall within the scope of application of other provisions of GATT 1994 and which
pursue health objectives.

4. India – Lead Acid Batteries (Article 4 DSU)

Example of dispute ending at consultation phase.

5. Columbia – Anti-dumping duties on frozen fries

Example of Article 25 case.

Principles of Non-Discrimination
Most Favored Nation (Article I.1)

Tier – test:

a. whether the measure at issue is a measure covered by Article I:1;

b. whether that measure grants an ‘advantage’;
c. whether the products concerned are ‘like products’; and
d. whether the advantage at issue is accorded ‘immediately and
unconditionally’ to all like products concerned, irrespective of their origin or
destination.

c. Like Products:

4 factors to be accounted for – (i) physical characteristics, (ii) tariff classifications, (iii)
consumer taste and preferences and, (iv) end uses. The analysis is the same under III.4;
different from the analysis under III.2.

d. “Immediately and unconditionally”

‘Immediately’ means ‘without delay, at once, instantly’. No time should lapse between
granting an advantage to a product and according that advantage to all like products.

‘Unconditionally’ means that such advantage cannot be made conditional on any criteria that
[are] not related to the imported product itself.

Cases for MFN:

1. Spain – Unroasted Coffee (Part (c) of tier test - Like product)

Facts: Spain changed its tariff treatment of the import of unroasted coffee wherein certain
types of coffee were given less favourable treatment compared to “mild” coffee.

Issue: Whether the new Spanish law was in conformity with the most-favoured nation
provision of Article I: 1 of GATT 1947?

Arguments and holding:

Panel found that Article I.1 was applicable to both bound and unbound tariff items. A
contracting party had the right to introduce in its customs tariff, new positions, or sub-
positions as appropriate. However, whatever the classification adopted, Article I:1 of GATT
1947 required that the same tariff treatment be applied to "like products".
The question was then – Whether the various types of unroasted coffee listed in the new
Spanish law should be regarded as 'like products' within the meaning of Article I:1?"

Panel found the different types of coffee were like products on 3 grounds:

a. Physical characteristics: Organoleptic differences resulting from geographical factors,

cultivation methods, processing of the beans, and the genetic factor were not
sufficient reason to allow for a different tariff treatment.
a. End-use: Coffee is sold in blends – is a mixture of different types of unroasted coffees
anyway. Plus, End-use of coffee was universally regarded as a well-defined and single
product intended for drinking.
b. No other contracting party applied its tariff regime in respect of unroasted non-
decaffeinated coffee in such a way that different types of coffee were subject to
different tariff rates.

2. US – MFN Footwear (Part (b) of tier test - Advantage)

Facts: It was in relation to revocation of countervailing measures for dutiable and non-
dutiable goods, retrospectively. Issue in question was other countries were getting
retrospective benefit from date of US obligation to provide injury determination before
imposing countervailing measure whereas Brazil was getting benefit from date of request for
injury determination.

Holding: The panel considered the automatic backdating of the effect of revocation of a pre-
existing countervailing duty order, without the necessity of the country subject to the order
making a request for an injury review = advantage under Article I:1.

It was also noted that Article I:1 does not permit balancing more favorable treatment under
some procedures against a less favorable treatment under others.

It also found that since the provisions in question are mandatory in nature, these provisions as
such, not merely their application in concrete cases, have to be consistent with Article I:1.

The Panel noted that the impugned legislation accords a non-tariff advantage to the same
beneficiary countries in the form of the automatic backdating of countervailing duty
revocation orders. This was found to be inconsistent with the most-favored-nation provision
of Article I:1 of the General Agreement.

3. Belgium – Family Allowances (Part (d) of the tier test – “unconditionally”)

Facts: Belgium's law levied a charge on foreign goods purchased by public bodies when such
goods originated from a country whose system of family allowances did not meet the specific
requirements laid down and exempted others.

Issue: Whether Article I:1 of GATT 1947 was violated?

Arguments and holding: Found violative of Article I.1.

First, the panel found that the levy was not at the time of importation, but when it was
domestically acquired by the public body. As such, it is an internal charge, which is covered
by III.2. and therefore, covered by I.1.

The panel then found that the exemption given was not unconditionally extended to all
nations. Belgian legislation would have to be amended insofar as it introduced a
discrimination between countries having a given system of family allowances and those
which had a different system or no system at all and made the granting of the exemption
dependent on certain conditions.

4. Canada v. Japan Dimension Lumber (Part (c) of tier test - Like product)

Facts: Japan imposed 8% levy on spruce-pine-fir (SPF) dimension lumber whereas other
types of dimension lumber were exempt from levy.

Finding and holding:

Japan argued that it had created it tariff classification not on the basis of dimension lumber
but based on the biological species of various lumber. Further, dimension lumber was not an
international standard of identification or classification of lumber, just something Canada
used domestically. The various lumber classified also had multiple uses, not just home-
building in Japan.

Since Canada only argued discriminatory treatment between types of dimension lumber and
not discrimination between different species of lumber itself, the Panel found that dimension
lumber and other woods were not like products and there was no violation.

5. EC – Bananas [AB 1997] (Part (c) of tier test - Like product)

Facts: The EC introduced a new community market for banana imports and gave preference
to different nations on import licensing requirements and import quotas.
Holding: The AB found both (i) the preference to APC bananas a violation of Article I.1. and
(ii) the export certificate requirement for certain Latin American nations a violation as well
since the import licensing regime was considered to be and “advantage” under I.1.

6. Canada – Autos (Part (d) of the tier-test – immediately and unconditionally)

Facts: Canada introduced a measure providing a duty exemption for the importation of
certain automobiles, buses, and other specified commercial vehicles ("motor vehicles") if
they met 3 conditions.

Issue: Whether the Panel erred in concluding that Canada acts inconsistently with Article I:1
of the GATT 1994 by according the advantage of duty-free treatment to motor vehicles
originating in certain countries, which advantage is not accorded immediately and
unconditionally to like products originating in the territories of all other WTO Members?

Holding:

Canada argued that its measure was origin-neutral, and no de-facto discrimination can be
found.

EC argued that although the measure at issue applies to importers and is, on its face, origin-
neutral, the Panel found that such a measure could accord a 'de facto' advantage to products
originating in certain countries.

Japan argued that in practice, discrimination arises because eligibility for the import duty
exemption is restricted to a limited group of manufacturers, as well as because of the intra-
form purchasing practices of the industry.

The AB found the measure inconsistent with MFN obligations on two grounds - (i) de facto
discrimination and (ii) intra-firm character of trade.

First, the total number and proportions of motor vehicles imported into Canada from various
countries and deduced that like products from different origins were not treated equally.

Second, the limitation of the availability of the import duty exemption to certain
manufacturers, including fully owned subsidiaries of firms based in a very limited number of
third countries, discriminates as to the origin of products which will benefit from the
exemption.
Therefore, Canada has granted an "advantage" to some products from some Members that
Canada has not "accorded immediately and unconditionally" to "like" products "originating
in or destined for the territories of all other Members." Canada is violative of Article I:1 of
GATT 1994.

National Treatment (Article III, GATT)

NT covers discrimination within the internal market – internal measures.

Article III.2 of GATT has 2 tests in sentence one and two.

Sentence one requirements – (i) Compared to like domestic products, (ii) No charge in
excess, and (iii) relating to internal charges.

Sentence two requirements – (i) Directly competitive and substitutable goods, (iii) not
similarly taxing and (iii) relating to internal charges.

1. Tier-test under sentence one:

a. Whether the measure is an Internal tax or internal charge

b. Whether the products (domestic and foreign) are like products
c. Whether the taxes are applied in excess of (no de minimis requirement)

Indicators of like products – (i) Uniform Tariff Classification based on Harmonized System,
(ii) Physical properties, (iii) end uses and (iv) consumer taste and preferences.

Here, it is important to note that if the difference is solely based on origin, a prima facie case
of likeness can be found.

2. Tier-test under sentence two:

a. Whether the measure is an internal tax or charge?

b. Whether the products are “directly competitive or substitutable products” (“DCS
products”)?
c. Whether these products are not similarly taxed?
d. Whether the dissimilar taxation is “applied…so as to afford protection to domestic
production”?

“DCS products” – Test, beyond likeness test – (i) imperfectly substitutable, (ii) elastic or
potentially elastic relationship.

“Not similarly taxed” – a de minimus standard applies here.

“To afford protection” – can be discerned from the design, the architecture, and the revealing
structure of a measure. Magnitude of dissimilar taxation may be evidence enough of
protective application of a measure.

Article III.4 is for non-charge related internal measures that can be discriminatory.

Tier – test under Article III.4

a. The imported and domestic products at issue are ‘like products’.

b. That the measure at issue is a ‘law, regulation, or requirement affecting internal
sale…
c. Imported products are accorded ‘less favourable’ treatment than that accorded to like
domestic products.

“Affecting” – means having an effect on adversely modifying the conditions of competition

between the domestic and imported products on the internal market (EC - Bananas). Also
covers procedural measures (Italy – Agricultural Machinery). Requirements here do not
always mean mandatory measures. Further, even if it is due to private action, as long as
private action can be linked to government regulation, the measure will be considered to be
“affecting” trade (Canada – Autos (Panel)).

The same measure can also be violative of III.2. and III.4. at the same time (Brazil – Taxation
and Thailand - Cigarettes).

“Like products” – the scope of ‘like’ in Article III:4 is broader than the scope of ‘like’ in
article III:2, first sentence. … certainly not broader than the combined product scope of the
two sentences of Article III:2 of GATT 1994. (EC – Asbestos, para 99)

“Less favorable treatment” – Treatment no less favorable means according conditions of

competition no less favorable to the imported product than to the like domestic product.
There must be an effective equality of opportunities (US – Section 377). In Korea – Beef for
instance, there was a drastic reduction in commercial opportunities after the introduction of
the measure. There, private entrepreneurs took decisions to not sell imported beef. However,
the legal necessity of making a choice was imposed by the measure itself. That was
inconsistent. Always look at the conditions of competitiveness.

Cases for National Treatment:

 1. Italian Discrimination Against Imported Agricultural Machinery (GATT Panel)
(“Affecting”)

Facts: Italy provided favorable credit line for purchase of Italian made agricultural
machinery.

Issue: Whether the measure is consistent with Article III, GATT.

Arguments and holding:

UK argued that since equally favorable credit facilities were not available to purchasers of
imported machinery, those products did not enjoy the equality of treatment which should be
accorded to them.

The panel found the intention of the drafters of the GATT 1947 was clearly to treat the
imported products in the same way as the like domestic products once they had been cleared
through customs. Further, III.4 says “affecting internal sale, purchase” not “governing”
therefore, not restricted to laws directly regulating sale.

2. US – Section 337

Facts: Under Section 337 of the United States Tariff Act, importation of articles that lead to
unfair competition in US markets can be acted against. This includes the importation or sale
of goods that infringe valid United States patents. In response, a cease and desist may be
issued or the article/ respondent may be excluded from permissible importation into the US.
Although action can also be taken against domestic US goods that infringe patents, the legal
procedures once such allegations have been made differ.

Issue: Whether Section 337 is compatible with GATT obligations.

Arguments and holding:

The Panel first found that there is no distinction between substantive and procedural law. As
such, Section 337, which is procedural in nature, is not excluded from the ambit of Article
III.4.

Further, although Section 337 is applicable against persons and not products, the source of
application is the origin of the product and the characteristics of the product. Therefore, III.4
applies.
The panel then found that Section 337 accords less favorable treatment to imported products
that infringe patents, vis-à-vis domestic products because (i) complainants against imported
product producers get a choice of forum whereas complainants against domestic producers do
not, (ii) there are strict time limits for the procedures to take place against imported products
but not against domestic products, (iii) imported product producers cannot raise
counterclaims, whereas domestic product producers can, (iv) the remedy of exclusion of
producer from US market entirely is only available against importer and (v) there is also no
injunctive relief available to imported products.

3. Japan – Alcoholic Beverages (1996)

Facts: Japanese Liquor Tax Law classifies types of alcohol into 10 categories and taxes them
accordingly. Here Vodka and Sochu are taxed very differently.

Issue: Whether the law is GATT compliant.

Arguments and holding:

The AB and Panel found that Vodka and Sochu are like products, even in physical
characteristics. The only difference is the filtration process. Further, the end uses are the
same.

On the question of “in excess of”, they found that even a minor difference in tariff rates is a
violation of the obligation under Article III.2, first sentence.

In analyzing III.2, second sentence, the DSB emphasized the market place of the two goods
to determine if they were DCS goods. Even under III.2 second sentence, the body found that
the products were not similarly taxed. In the second sentence, there is an additional burden to
determine if the taxation was imposed “so as to afford protection” to the domestic good.
Here, it is not only a question of intent, but how the measure is applied is also indicative.

The panel found a violation of III.2 on two grounds - (i) it is difficult for foreign Sochu to
penetrate domestic markets and (ii) it does not guarantee quality of competitive conditions
between shochu and the rest of 'white' and 'brown' spirits.

4. EC – Bananas

Facts:
Issue:

(1) Whether the EC procedures and requirements for the distribution of licenses for
importing bananas among eligible 'operators' within the EC are measures within the
scope of Article III:4 of the GATT 1994?
(2) Whether the issuance of hurricane licenses exclusively to EC producers and producer
organizations, or to operators including or directly representing them, is inconsistent
with Article III:4 of the GATT 1994?

Arguments and holding:

First, the AB found that the EC licensing procedure include the operator category rules and
the activity function rules, which go far beyond the mere import license requirements. These
rules are intended to cross-subsidize distributors of EC (and ACP) bananas and to ensure that
EC banana ripeners obtain a share of the quota rents. Therefore, these rules affect the internal
sale, offering for sale, purchase within the meaning of Article III:4 and consequently fall
within its scope.

ON issue 2, it was found that hurricane licenses may create an incentive for operators to
purchase bananas of EC origin for marketing in the EC, and that this practice is an advantage
accorded to bananas of EC-origin that is not accorded to bananas of third-country origin. This
would affect the competitive conditions in the market in favor of EC bananas.

5. Canada – Periodicals

Facts: Canadian measures prohibited the import of certain types of magazines, charged excise
on split-run magazines and created categories based on origin for postal rates.

Issue:

1. If Article III:2 of the GATT 1994 is applicable to Part V.1 of the Excise Tax Act,
whether imported split-run periodicals and domestic non-split run periodicals are "like
products" within the meaning of Article III:2, first sentence of the GATT 1994?
2. Even if imported split-run periodicals and domestic non-split-run periodicals are "like
products" within the meaning of Article III:2, first sentence, of the GATT 1994, is it
necessary to demonstrate that Part V.1 of the Excise Tax Act discriminates against
imported products?
 3. Whether Canada's special "funded" postal rates programme qualifies as "a payment of
subsidies exclusively to domestic producers" pursuant to Article III:8(b) of the GATT
1994?

Arguments and holding:

On 1: In this case, the AB did not test imported split-run and domestic non-split run
periodicals under first sentence of III.2 due to inadequate analysis by the Panel. It then moved
to second sentence III.2 analysis.

AB found them to be DCS goods. It clarified that periodicals containing mainly current news
is not directly competitive or substitutable with a periodical dedicated to gardening, chess,
sports, music or cuisine. But news magazines, like TIME, TIME Canada and Maclean's, are
directly competitive or substitutable in spite of the "Canadian" content of Maclean's. It then
found that they were dissimilarly taxed since domestic DCS periodicals were not subject to
excise at all. Further, it was found to afford protection since the dissimilar taxation between
imported split-run periodicals and domestic non-split-run periodicals is beyond excessive,
indeed, it is prohibitive.

On 3: It was found that the funded postal rates were justified under III.8(b) since the article
was intended to exempt from the obligations of Article III only the payment of subsidies
which involves the expenditure of revenue by a government.

6. EC – Asbestos

Facts: France introduced a decree prohibiting asbestos and products containing asbestos.
However, the same had certain limited and temporary exceptions.

Issue:

1. Whether chrysotile asbestos fibres and other fibres namely polyvinyl alcohol fibres
(PVA) cellulose and glass fibres (collectively, 'PCG fibres') are like products under
Article III:4 of GATT 1994?
2. Whether cement-based products containing chrysotile asbestos fibres are 'like'
cement-based products containing PCG fibres?

Arguments and holding:

On 1: AB found that asbestos and PCG fibres are different in their physical properties but to
the carcinogenic properties of the former. In such a case, the complaining member to
establish that, despite the pronounced physical differences, there is a competitive relationship
between the two. It also found that the consumers of the fibres are manufacturers, who
incorporate it into other products, like cement. The health risks associated with asbestos
fibres affect consumer behavior. They also had different tariff classifications. Therefore, they
were not like products.

On 2: The physical properties differ since one contains carcinogenic fibres. There wasn’t
sufficient evidence to differentiate end uses. It was found that both cements had same tariff
classification but differing consumer preferences.

7. Canada - Autos

Facts: One of the three conditions imposed for availing tariff exemption on imports was the
amount of Canadian value added in the manufacturer's local production of motor vehicles
must be "equal to or greater than" the amount of Canadian value added in the local
production of motor vehicles of that class during the "base year" (the "CVA requirements").

Issue:

a. Whether CVA requirement was violative of III.4.

b. Whether the ratio requirements were violative of III.4.

Arguments and holding:

On A: First, it was found that CVA can be subject to III.4 since the same is restricted to laws,
regulations, etc. that apply mandatorily. The word “affecting” has been interpreted widely to
include measures which affect the conditions of competition between domestic and imported
products.

Second, given that the CVA requirements are among the conditions that must be met to
obtain the benefit of duty-free importation of motor vehicles, the exclusion of imported
products from the calculation of the Canadian value-added means that, whereas the use of
domestic products by a manufacturer in Canada can contribute to the fulfilment of a condition
necessary to obtain an advantage, the use of imported products cannot contribute to the
fulfilment of this condition.

While analyzing “requirement” under III.4., the DSB found that a nexus must be shown
between private action and the government measure. Here, it was found that the letters
companies would submit to avail the Auto Pact were binding obligations undertaken by the
companies to the government.

8. Korea - Beef

Facts: The US complained that a Korean regulatory scheme allegedly discriminates against
imported beef by confining sales of imported beef to specialized stores (dual retail system),
limiting the manner of its display, and otherwise constraining the opportunities for the sale of
imported beef.

Issue: Whether the "dual retail system", which requires the sale of imported beef in
specialised stores, was inconsistent with Article III:4 of the GATT 1994?

Arguments and holding:

The Korean measure formally separates the selling of imported beef and domestic beef. This
formal separation is in itself not a less favorable treatment being accorded. The central
consequence of the dual retail system is the imposition of a drastic reduction of commercial
opportunity to reach, and hence to generate sales to, the same consumers served by the
traditional retail channels for domestic beef.

9. US - Tuna

Facts:

Issue: Whether the US measures, although applied at the border, should nonetheless be
examined under the national treatment provisions of Article III?

Arguments and holding:

III.4 not applicable since it is restricted to analyzing measures that relate to product or its
characteristics, not policies or methods of product production.

Rules on Market Access

Market access for goods and services from other countries may be impeded or restricted in
many different ways, but two main categories of barriers to market access can be
distinguished: (1) tariff barriers; and (2) non-tariff barriers.

Tariff Barriers
To determine whether a charge is a border charge (such as a customs duty) or an internal
charge see whether the obligation to pay that charge accrues due to the importation or to an
internal event (such as the distribution, sale, use or transportation of the imported product).
For a charge to constitute a customs duty, the obligation to pay it must accrue at the moment
and by virtue of or on importation.

1. Types of customs duties

Customs duties can be ad-valorem or non-ad-valorem. Ad-valorem is when the tax payable is
based on the value of the product.

Non-ad-valorem can be specific, compound, mixed, or ‘other’ customs duties.

- Specific: An amount based on a unit of quantity.

- Compound: A duty comprising an ad valorem duty to which a specific duty is added
or, less frequently, subtracted.
- Mixed customs duty: A duty that can be either an ad valorem duty or a specific duty,
subject to an upper and/or a lower limit.

2. Purpose of custom duty

- Source of revenue for govts.

- To protect/ promote domestic industry.

3. Legality – Custom duty

WTO law, and in particular the GATT 1994, does not prohibit the imposition of customs
duties on imports. In India – Additional Import Duties (2008), the Appellate Body stated,
“Tariffs are legitimate instruments to accomplish certain trade policy or other objectives
such as to generate fiscal revenue.”

4. Negotiation on reduction of customs duties

Article XXVIIIbis of the GATT 1994, therefore, calls upon WTO Members to negotiate the
reduction of customs duties.

The duties on processed and semi-processed products are often higher than the duties on non-
processed products and raw materials. This phenomenon is referred to as ‘tariff escalation’.

a. Rules governing tariff negotiations:

 i. The principle of reciprocity and mutual advantage: when a Member
requests another Member to reduce its customs duties on certain products,
it must be ready to reduce its own customs duties on products which the
other Member exports, or wishes to export.
The principle of reciprocity does not apply to tariff negotiations between
developed- and developing-country Members – Article XXXVI:8. This is
elaborated in the Enabling Clause of 1979 as well.
ii. Most-favored-nation (MFN) treatment obligation: Any tariff reduction
Member grants to any country as the result of tariff negotiations with that
country must be granted to all other Members, immediately and
unconditionally.
b. Types of negotiations
i. Product by product
ii. Formula based:
ii.i. Linear reduction
ii.ii. Non-linear reduction

Tariff concessions can be modified or withdrawn under Article XXVIII:1.

5. Imposition of customs duties

It is done on the basis of (i) the determination of the proper classification of the imported
good, which allows customs authorities to determine which duty to levy; (ii) the
determination of the customs value of the imported good; and (iii) the determination of the
origin of the imported good.

Cases for Tariff Barriers

1. EC – Custom Classification for Certain Computer Products

Facts: EC provides different tariff rates for ADP machines and telecom equipment. It
classified LAN equipment as telecom but US contested it should be ADP machine. By
classifying it as LAN equipment, EC is providing such equipment less favorable treatment
than provided for it its schedule under Article II. In arguing this, US said treatment that a
concession should provide is the treatment that is reasonably expected by trading partners to
be provided for under the concession.
Issue: Whether the Panel erred in interpreting Schedule LXXX, in particular, by reading
Schedule LXXX in the light of the "legitimate expectations" of an exporting Member, and by
considering that Article II:5 of the GATT 1994 confirms the interpretative value of
"legitimate expectations"?

Finding: The AB reversed the Panel’s findings that the US was entitled to "legitimate
expectations" and EC has violated obligations under II.1. It held that nothing in Article II:5
suggests that the expectations of only the exporting Member can be the basis for interpreting
a concession in a Member's Schedule for the purposes of determining whether that Member
has acted consistently with its obligations under Article II:1. The contemplated treatment in
Article II:5 is the treatment contemplated by both Members.

2. India – Additional and Extra – Additional duties on imports from US [Additional

Import Duties]

Facts: India imposed additional and extra-additional import duties.

Issue:

1. Whether Article II:1(b) covers only duties or charges that "inherently discriminate against
imports", while Article II:2 covers only charges that do not "inherently discriminate against
imports"?

2. Whether the term "equivalent" in Article II:2(a) relates to the "function" of a border charge
and an internal tax, and does not relate to "effect" or "amount"?

3. Whether in order to satisfy the conditions of Article II:2(a), it is not necessary to determine
whether a charge equivalent to an internal tax is "imposed consistently with the provisions of
paragraph 2 of Article III"?

4. Whether the Additional Duty and Extra-Additional Duty are consistent with Article II:1(b)

of the GATT 1994?

Finding:

1. First sentence of Article II:1(b) requires a Member to refrain from imposing “Ordinary
Customs Duties” in excess of concessions provided. Second sentence refers to “other duties
or charges of any kind” that are connected with importation. Article II.2(a) and II.1(b) are
linked because II.2(a) is a non-obstante clause to II.1(b). Therefore, if conditions of II.2(a)
are met, II.1(b) cannot be violated. On the question of whether II.1(b) always inherently
discriminates against imports and II.2(a) does not – no conclusion can be drawn.

2. The term "equivalent" requires a quantitative comparison of the charge and internal tax.

3. The element "imposed consistently with the provisions of paragraph 2 of Article III" forms
an integral part of the assessment under Article II:2(a) of whether a charge and an internal tax
are "equivalent".

4. On whether the additional duties met the requirement of II.2(a) – AB examined the
relationship between additional duties and relevant internal charges by states to judge
whether they were imposed “in excess of” internal charges. Found that the additional duty
imposed was an average of the fiscal burden on like domestic products. Therefore, the
additional duty was in excess of internal charges in some states and therefore violative of
II.2(a) – this would result in the measure being violative of II.1(b) to the extent that it results
in tariff in excess of the schedule of concessions rates.

In relation to extra-additional duties charged – there was no evidence to suggest that relevant
internal taxes or charges were, in fact, imposed on products subject to the Extra-Additional
Duty. These imported goods were also subject to internal taxes such as VAT and no
adjustment was given for taxes already paid. Further, there were some domestic like products
that are exempt from these internal charges whereas no imported product was exempt from
the extra-additional duty charged in lieu of internal charges. Therefore, the extra-additional
duty could not meet the requirement of II.2(a) and would be violative of II.1(b) to the extent
that it results in the imposition of duties in excess of those set forth in India's Schedule of
Concessions.

Non-Tariff Barriers

<Theory notes missing>

Cases relating to Non-trade Barriers

1. Japan – Trade in Semi-Conductors

Facts: Japan imposed export regulation relating to reporting requirements (non-reporting had
fine and penal consequences), minimum price to be charged for exports, encouraged increase
in production to meet demand forecasts.

Issue: Whether Japan’s measures constituted a violation of XI.1.

Finding: Japan argued that the measures were not mandatory and thus beyond the scope of
XI.1. Panel found that the wording of XI.1. was broad and referred to “measures”. However,
not all measures would fall within its ambit.

The test to judge whether a measure could fall within the purview of XI.1. is:

a. Whether here were reasonable grounds to believe that sufficient incentives or

disincentives existed for non-mandatory measures to take effect.
b. Whether the operation of the measures to restrict export of semi-conductors at prices
below company-specific costs was essentially dependent on Government action or
intervention.

If these two are met, the measure would be operating in a mandatory manner such that they
fell within the scope of XI.1.

The Panel found that (i) Japanese producers were aware of the MOU with USA, following
which these measures were instituted. There was also a sort of chilling effect since the
Japanese govt would be fully aware of those selling below cost. Therefore, there was no need
for the measure to be legally binding for it to have an effect. (ii) The entire complex structure
of the measure was intended to control the demand and supply of semi-conductors. The
Japanese govt exercised its authority to prevent below-cost sales. The complex of measures
constituted a coherent system restricting the sale for export of monitored semi-conductors at
prices below company-specific costs to markets other that the United States, inconsistent with
Article XI.1. (iii) There were delays in issuance of export licenses and therefore the issuance
of export licenses was non-automatic. There was a violation of XI.1.

2. India – Quantitative Restrictions On Imports Of Agricultural, Textile And Industrial

Products

Facts: India had an extensive import licensing regime, justified on the basis of Article XII –
balance of payment. US challenged the same.

Issue: Whether the measures at issue were in violation of Article XI:1?

Finding:

On the issue of import licensing regime for restricted products. The Panel found that
discretionary or non-automatic licensing systems by their very nature operate as limitations
on action since certain imports may not be permitted. Thus, this is a restriction prohibited by
Article XI:1. In India’s case, it was a system of discretionary import licensing system. The
licensing regime for the restricted items was a quantitative restriction, within the ambit of
XI.1.

Although canalization of imports through state trading agencies is itself not violative of XI.1.,
India itself included items which were canalized as a part of its quantitative restrictions
justified under XII. This combined with the fact that there were 0 imports of certain canalized
products proves it is a quantitative restriction in this case.

The special licensing regime, being discretionary, was also violative of XI.1. Finally, the
actual user requirement is also covered by XI.1. and is a quantitative restriction.

TBT

TBT agreement covers 3 things – technical regulation, standards, and conformity assessment
procedure.

Technical regulation [Defined in Annex 1.1 of the Agreement] – (i) lays down product
characteristics or related process and production methods, (ii) compliance is mandatory and
(iii) may also exclusively deal with symbols, labelling, markings as they apply to process or
production methods.

Standards [Defined in Annex 1.2 of the Agreement] – (i) approved by recognized body which
provide rules, guidelines or characteristics, (ii) compliance with standards is not mandatory
by law.

Conformity Assessment Procedure [Defined in Annex 1.3 of the Agreement] – (i) any
procedure, (ii) directly or indirectly, (iii) determining whether a technical regulation or
standard has been met.

Article 2.1

– embodies principle of national treatment and MFN.

Test under Article 2.1 for NT [Laid-down in US – Clove Cigarettes]

a. Is the measure in question a technical regulation?

b. Are the imported and domestic products “like”?
 c. Is the treatment accorded to imported products less favorable than that accorded to
“like” domestic products? [Less favorable treatment is similar to III.4, i.e, does it alter
the conditions of competition detrimentally?]
- Here, in cases of de facto discrimination specifically, we must also test whether the
distortion in competition is stemming exclusively from legitimate regulatory
concerns. If yes, it is not a "less favorable treatment". If not, then it is "less favorable".
Here even-handedness is checked.

Test under Article 2.1 for MFN:

a. Is the measure a technical regulation?

b. Are imported and domestic products 'like'?
a. Whether products imported from one WTO Member are accorded ‘treatment no less
favourable’ than ‘like’ products originating in any other country?
- Here, in cases of de facto discrimination specifically, we must also test whether the
distortion in competition is stemming exclusively from legitimate regulatory
concerns. If yes, it is not a "less favorable treatment". If not, then it is "less favorable".
Here even-handedness is checked.

Article 2.2

Test for Article 2.2:

a. Whether the measure in question is a technical regulation?

b. Whether it is trade restrictive?
c. Whether it fulfils a legitimate policy objective, as identified?
d. Whether the measure is not more trade restrictive than necessary to fulfil a legitimate
objective? [Test provided below]
i. Degree of contribution of measure to the legitimate objective [same as step 3]
ii. trade restrictiveness and reasonable availability of less trade restrictive options
achieving same protection.
iii. Nature of risks and gravity of consequences upon non-fulfilment of the
objective.

Article 2.4
Relates to the adoption or using of international standards as basis for formulating domestic
technical regulation, unless such international standards are ineffective or inappropriate to
achieve the legitimate objective pursued.

Article 2.7

“Members shall give positive consideration to accepting as equivalent technical regulations

of other Members, even if these regulations differ from their own, provided they are satisfied
that these regulations adequately fulfil the objectives of their own regulations.”

TBT Cases

1. EC – Asbestos

Facts: A French Decree prohibited the use of asbestos and the use of products containing
asbestos, followed by certain temporary exceptions. Canada claimed it was discriminating
between asbestos fibres and chrysotile fibres, which are like products, but the latter was
allowed.

Issue: Whether the Decree relating to the ban on imports of asbestos and asbestos containing
products constitutes a technical regulation?

Finding:

Technical regulation is defined as – “Document which lays down product characteristics or

their related processes and production methods, including the applicable administrative
provisions, with which compliance is mandatory.”

The requirements are therefore – (i) Document, (ii) laying down product characteristics, and
(iii) applicable administrative provisions, (iv) which are mandatory, (v) on an identifiable
product.

A technical regulation should essentially regulate the characteristics of a product in a binding

fashion – it could prescribe or prohibit one or more characteristics [term understood broadly
not only as inherent product features but also identifiers, labels, etc.]. Here, the prohibition
was on asbestos, not on any characteristic as such. However, the effect of the regulation was
on asbestos products, within which asbestos would be a characteristic. The prohibition was
on all products containing asbestos.
There must be an identifiable product. The requirement does not mean the product must be
expressly named. Here, although no exhaustive list of products is given, the products covered
by the measure are identifiable: all products must be asbestos free; any products containing
asbestos are prohibited – therefore the requirement is met.

The exceptions are subject to a strict administrative regime, compliance with which is
mandatory. Therefore, the measure in question is a technical regulation.

2. EC – Sardines

Facts: The EC had a regulation which sets forth common marketing standards for preserved
sardines. One requirement was they must be prepared exclusively from a certain species of
fish. Subsequently, the WHO and FAO released world-wide standard for preserved sardines
and sardine-type products.

Issue: Whether the measure is a technical regulation? Whether Art. 2.4 applies to pre-existing
regulation? Whether the FAO standard is an international standard? Whether the EC
regulation complies with Art. 2.4.?

Finding:

First, whether TBT applies depends on whether it is a technical regulation. Three

requirements to prove here – (i) whether it applies to an identifiable product, (ii) whether it
relates to a product characteristic and (iii) whether it is mandatory? The AB answered all
three in the affirmative.

Second, Art. 2.4 applies to pre-existing regulation as well. This is because 2.4 is an integral
part of the TBT agreement and nothing in the Article suggests it does not apply to pre-
existing regulations.

Third, the international standard was issued by an international standardization body and is
relevant to the regulation in question and is therefore, a “relevant international standard” for
the purposes of Art. 2.4.

Fourth, under Article 2.4, if the technical regulation and the international standard contradict
each other, it cannot properly be concluded that the international standard has been used "as a
basis for" the technical regulation. Therefore, the test is whether they contradict each other or
a based on similar foundational principles.
Here, all the relevant parts of the international standard must be used to determine whether
they are contradictory to one another or in consonance. It was found that the EC regulation
and the international standard in question are contradictory due to the nature of species
permitted to be marketed as sardines.

We must now test whether the international standard is “ineffective or inappropriate” to

achieve the objective in question. Something is “ineffective” when it doesn’t help accomplish
the aim and “inappropriate” when it is not suitable in the given circumstances. Here, the
legitimate aim pursued is market transparency, consumer protection and fair competition. The
effectiveness and appropriateness of the international standard are determined by the
perceptions and expectations of consumers in the European Communities relating to
preserved sardine products. It was then found that the international standard was effective and
appropriate. The EC regulation was violative of 2.4.

SPS Agreement

For the SPS agreement to be applicable, the measure must be [Article 1.1.]:

(i) A sanitary or phytosanitary measure – Annex A defines an SPS measure and gives
a indicative list.
(ii) That may affect international trade.

Article 1.4. gives SPS precedence over TBT.

Article 2

1. Article 2.1.

- Members may only take SPS measures if they are necessary for the protection of
human, animal or plant life or health.
- The test for compliance with 2.1. is the same as under Article XX(a), (b) and (d) of
GATT – measure must be necessary – no other less trade-restrictive alternative must
be reasonably available.

2. Article 2.2.

- In addition to 2.1., the measure must be – (i) based on scientific principles and (ii)
supported by scientific evidence [measure is not maintainable without the same,
except under Article 5.7.]
 3. Article 2.3.

- The chapeau test under Art. XX has also been incorporated under Article 2.3.
- SPS measure must not arbitrarily or unjustifiably discriminate between countries
where similar conditions prevail or constitute a disguised restriction on international
trade.

4. Article 2.4.

- Compliance with SPS Agreement leads to a rebuttable presumption of compliance

with GATT obligations.

ALL SPS MEASURES MUST BE BASED ON RISK ASSESSMENT.

Risk Assessment

- Defined in Annex A.4. – two types

(a)
i. Identify pests or disease to be prevented AND biological and economic
consequences of allowing such pests or disease to enter.
ii. Evaluate likelihood of entry and consequences identified above.
iii. Evaluate likelihood of entry and spread according to SPS measure that may
be applicable.
(b)
i. Identify adverse effects on humans from toxins, additives, or disease-
causing organisms.
ii. Evaluate potential for such consequences to occur.

1. Article 5.1.

- Risk assessment techniques by relevant international organizations must be taken into

account.

2. Article 5.2

- In undertaking risk assessment, relevant scientific evidence must be accounted for –

there must be sufficient nexus between the scientific evidence and conclusions drawn.

3. Article 5.3.
 - Relevant economic factors must be considered while devising appropriate SPS
measures in case of protection of animal or plant life/health but the same does not
apply to human life.

4. Article 5.4.

- Members must do their best to minimize the negative trade consequences.

5. Article 5.5.

- It has two important elements – (i) the objective of achieving consistency in application
of SPS measures and (ii) preventing arbitrary or unjustifiable discrimination in the
different levels of protection required in different situations. Acknowledges that risk
from different situations will be different and not pose the same level of threat.

6. Article 5.6.

- SPS measure should not be more trade restrictive than necessary. Here necessity test is
same as Article XX(b):
i. There is an SPS measure more reasonably available and economically feasible.
ii. The alternative SPS measure achieves the Member's identified level of protection.
iii. The alternative SPS measure is significantly less trade restrictive than the contested
measure.

7. Article 5.7.

Allows for the provisional adoption of SPS measures, even in the absence of sufficient
scientific evidence but requires (i) accounting for available evidence, (ii) subsequent quest for
additional information and (iii) period review of measure at issue.

Harmonization (Article 3)

3.1. Members should base SPS measures on international standards.

3.2. SPS measures that conform to international standards will be deemed
necessary and consistent with the Agreement and GATT.
3.3. SPS measures that provide greater protection than an international standard
may also be acceptable if there is:
(i) Scientific justification OR
(ii) Is in consequence of the appropriate level of protection determined by a
member under Article 5.
Article 4 and Equivalence

Members shall accept another member’s SPS measure as equivalent if the exporting member
demonstrates their measure provides the appropriate level of protection required by the first
Member.

SPS Cases

1. EC – Hormones

Facts: EC prohibited meat and meat products from animals administered with certain
hormonal substances from being placed in its market or imported. However, under certain
conditions, such meat products were allowed onto the market if substances were administered
for therapeutic or zootechnical purposes.

Issue:

(i) Whether the Panel correctly interpreted Articles 3.1 and 3.3 of the SPS
Agreement?
(ii) Whether the EC measures are "based on" a risk assessment within the meaning of
Article 5.1 of the SPS Agreement?
(iii) Whether the Panel correctly interpreted and applied Article 5.5 of the SPS
Agreement?

Finding:

First, 3.1. uses the word “base” and therefore the domestic standard does not need to
incorporate the international standard in its entirety. It suffices if some elements are adopted
into the domestic standard. However, 3.2. is more stringent and the benefit of the rebuttable
presumption of compliance comes when the international standard has essentially been
adopted entirely in the domestic standard. “Conform” is a stricter degree than “base”. Further,
3.3. is not an exception to 3.1. and an independent right. However, violation of 5.1. would
also mean violation of 3.3.

Second, risk assessment should demonstrate proof of actual risk, not just theoretical, in the
real world. The risk identified must be specific and not general in nature. Further, it is not
mandatory for the Member to conduct their own risk assessment, it can be based on
international organization reports as well. In this case, the EC merely based its measure on
“good veterinary practice” and did not proceed to conduct any analysis of actual harm of not
following such good practice or the issues relating to the control of use of such hormones,
Therefore, the measure was not compliant with 5.1 or 3.3.

Third, under Article 5.5, the test is:

(i) whether different levels of protection have been identified in different

situations,
(ii) whether these different levels of protection lead to arbitrary or
unjustifiable discrimination in treatment of different situations,
(iii) whether they lead to disguised restriction on trade.

In such assessment, indicators of (ii) and (iii) include arbitrary differences creates, lack of
scientific data backing such difference, and gross difference in treatment of different
situations.

2. Japan - Apples

Facts: Disease targeted by the measure was “fire blight”, which is hosted not only in apples
but also pears, etc. Further, scientific evidence establishes that the risk of introduction and
spread of fire blight varies considerably according to the host plant. The measure at issues
consists of 10 cumulatively applied elements that place prohibitions or impose requirements
with respect to import of apple fruit from the US.

Issue:

1. Whether Japan's phytosanitary measure is "maintained without sufficient scientific

evidence" and is therefore inconsistent with Japan's obligations under Article 2.2 of
the SPS Agreement?
2. Whether Japan's phytosanitary measure is not a provisional measure under Article 5.7
because the measure was not imposed in respect of a situation where "relevant
scientific evidence is insufficient"?
3. Whether Japan's phytosanitary measure was not based on a risk assessment, as defined
in Annex A to the SPS Agreement, and as required by Article 5.1 thereof?

Finding:

First, the Panel reviewed evidence adduced by both parties and concluded that it is not likely
that apple fruit would serve as a pathway for the entry, establishment or spread of fire blight
in Japan – the measure was instituted without sufficient scientific evidence.
Second, a 4–part test to adopt a provisional SPS measure – (i) insufficient scientific evidence,
(ii) based on available evidence, (iii) endeavor to find more evidence, and (iv) review
measure imposed. All 4 must be met. In this case, the Panel found that adequate scientific
evidence was available to permit an appropriate risk assessment.

Third, risk assessment has 3 requirements –

a. identify the disease to be prevented and the potential biological and economic
consequences.
- Here, it is important to identify both the general harm and the specific
modality through which specific harm can occur. In this case, apples were just
one potential route of harm.
b. identify the likelihood of entry and adverse consequence.
- Japan did not conduct “risk assessment” as it did not link it to likelihood of
entry into Japan. Competing evidence from US also showed the harm is not
real.
c. evaluate likelihood of entry and damage as per SPS measure.
- assessment should include not just measure which is undertaken by Member
but also measures than might be taken. In this case, Japan’s analysis was
restricted to the measure it took against specifically US apples. No analysis
was undertaken to understand the effectiveness of the measures in general
against the disease being combatted.

Since Japan’s risk assessment is not “risk assessment” as per SPS, its measure is not based on
risk assessment under Article 5.1. and violative of the same.

3. EC – Biotech

Facts: The dispute related to two issues – (i) EC’s regime for approval of biotech products
and (ii) individual state regulation on marketing of certain biotech products. Here, the biotech
products were plant cultivars developed through DNA technology. There were also
provisions on novel food products. The EC would take a case-by-case analysis of biotech
products and grant approval for marketing across the EU. However, members were allowed
to take “safeguard” measures based on additional scientific knowledge about effects on
human health and life. The EC would then take a decision on such “safeguard” within a
timeframe.
Issue:

i. Whether the SPS Agreement was applicable to the contested measures?

ii. Whether the general de facto moratorium on approvals was consistent with Article
5.1 of the SPS Agreement?
iii. Whether the general de facto moratorium on approvals was consistent with Article
2.2 of the SPS Agreement?

Finding:

First, the EC regulation and the state ban were found to fall within the definition of an SPS
measure. The novel food ban, to the extent that it complied with its objectives, with Annex
A(1)(a) – (d), was considered to be an SPS measure. Further, other damage, in sub-paragraph
(d), was to be understood widely, and include all damages, as long as it was caused by pests.
Further, Annex A uses the term “arising from”, and therefore the damage does not need to be
an immediate and direct consequence of pests. Pests, also includes weeds and plants. Since
the regulation would regulate the importation of novel foods, it may have an effect on
international trade. Therefore, the measure is within the ambit of the SPS agreement.

Second, the AB found that the EC decision to apply a general moratorium on approvals was
not an "SPS measure" within the meaning of Article 5.1 and Annex A(1). It relates to
procedural decisions to given approval for importation and did not provide for "requirements
[or] procedures" within the meaning of Annex A(1).

Third, as was held in EC-Hormones, 2.2 must be read with 5.1. EC's decision to apply a
general de facto moratorium on approvals was a decision relating to the application, or
operation, of the existing EC approval procedures and that, as such, it did not constitute an
"SPS measure" within the meaning of Annex A(1).

Trade remedies

Anti-dumping Agreement

Article VI.1. – Dumping occurs when products of one country are introduced in another
country’s market at less than normal value and it leads to threatening an established industry
or retards the establishment of domestic industry.

WTO members may impose anti-dumping duties if –

i. “Dumping” exists.
 Determined through a comparison of normal value and export price. Dumping
exists when price of product exported is less than –
(i) the price of the like product in the domestic market of the exporter or
producer.
(ii) In the absence of (i), (a) the export price to an appropriate third country as the
normal value; or (b) cost of production of the product in the country of origin plus
a reasonable addition for selling cost and profit.
Dumping margin is the difference between export price and normal value.
Generally, the weighted average normal value is compared to the weighted
average export price or determined on each transaction.
ii. There must be injury to the domestic industry producing the like product.
Here, injury is either material injury, threat of injury or retardation of
establishment of industry.
The Anti-dumping agreement requires positive evidence and objective
determination of injury by looking at:
a. volume of dumped imports and its effect on market price of like products and
b. impact of imports on domestic producers.
iii. There must be a causal link between the injury and the dumped products.
According to the ‘non-attribution’ requirement, investigating authorities must
examine any known factors, other than the dumped imports, that are injuring the
domestic industry at the same time and must not attribute the injury caused by
these other factors to the dumped imports.

Types of anti-dumping measures:

a. Provisional Anti-dumping Measure

Based on a preliminary determination of dumping, undertaken o prevent injury during
further investigation.
b. Price undertaking
Voluntary undertaking by exporter to revise price or cease exports at dumping rates –
such an undertaking may only take place after a preliminary determination of
dumping, injury, and causation.
c. Definitive anti-dumping duty
Imposed after a definitive identification of dumping, injury and causation.
 Article 9 of the Anti-Dumping Agreement governs imposition and levy of dumping
duties. The imposition of the duty must not be larger than the dumping margin but
may be lesser.
Members are required to collect duties without discrimination – on imports from each
known exporter or producer found to be dumping and causing injury.
It may be difficult to determine the duping margin on each exporter and in that case,
the weighted average dumping duty calculated on individual exporters may be
imposed.

Anti-dumping duties should be imposed only until necessary to counteract dumping. There
must being either a period review of the need for dumping duties or review upon request by
parties. In any case, definitive duties should not be imposed for longer than 5 years UNLESS
authorities determine that the expiry of the duty ‘would be likely to lead to continuation or
recurrence of dumping and injury’. [This is known as sunset clause].

Anti-dumping cases

1. India – Lead Acid Batteries

Facts: After investigation in 2001, India imposed anti-dumping duties on import of lead-acid
batters from Bangladesh, Japan, China, and Korea. Bangladesh initiated consultation on the
grounds that investigation was not completed timely, information submitted by relevant
Bangladeshi parties was not considered and contested the margin, determination of injury and
causation. In 2004, India reviewed its measures and rescinded anti-dumping duties on imports
from Bangladesh and Japan. Subsequently, the dispute was resolved.

2. EC – Cotton type bed Linen from India

Facts: EC identified different types of cotton type bed linen and calculated the weighted
average export price and weighted average normal value of each of these products. It then
calculated a weighted average across types of bed linens and formulated an overall dumping
margin. However, in making this average, the types where the export price was moral than
the normal value, the margin was taken as zero and then the overall margin was calculated.

Issue: Whether the practice of 'zeroing' while calculating the dumping margin is inconsistent
with the anti-dumping agreement?

Finding:
Article 2.4.2. of the Anti-Dumping Agreement requires determination of dumping margin on
a product. Since EC identified the product as cotton bed linen and not the various sub-types,
it is required to calculate dumping margin on that product itself, and not for various types of
that product.

However, while calculating the margin of dumping, the weighted average normal value and
the weighted average export price of all comparable export transactions must be accounted
for. By zeroing certain types of bed linen in margin of dumping calculation, those export
transactions were not fully accounted for. This resulted in the inflating of the dumping
margin.

It was also found that such zeroing would not amount to “fair comparison”, required under
Article 2.4. and 2.4.2. of the Agreement. Further, the Agreement allows dumping
investigations to target certain exports, time period or regions, but not certain types of
products.

3. US – Continued dumping and subsidy offset act of 2000

Facts: US enacted CDSOA to distribute duties collected countervailing duty or anti-dumping

duties to affected domestic producers for qualifying expenditures.

Issue:

1. Whether the CDSOA is a non-permissible specific action against dumping contrary to

Article 18.1 of the Anti-Dumping Agreement?
2. Whether the CDSOA is inconsistent with Article 5.4 of the Anti- Dumping
Agreement?
3. Whether because of these inconsistencies, the US has failed to comply with Article
18.4 of the Anti-Dumping Agreement?

Finding:

First, Article 18.1, which requires testing a measure for GATT compliance, is only applicable
if (a) the measure in question is specific to dumping and (ii) against dumping.

The first element is met when the measure in question is in response to dumping. Therefore,
there must be a test of whether dumping has occurred. In this case, the CDSOA only
distributed duties collected from anti-dumping duties, which, inter alia, meet the requirements
of dumping under Article VI, GATT. The second element, it is important to determine
whether the measure is against dumping [no requirement of enforcement only against
imported goods], such that there is an incentive to stop dumping. Since the dumping of
imported goods led to the financing of domestic competitors producing like products, the
measure was found to be against dumping. Since the measure in question is not one of the
permissible anti-dumping measures identified (3 measures discussed earlier), it is not in
compliance with GATT as interpreted by the Anti-Dumping Agreement.

Second, Article 5.4. requires the initiation of an investigation into dumping if applications
have been made by domestic industry – whether they have “expressed support” for such
investigation. Here, the threshold is one of quantity and not quality. The CDSOA, although
may seem to incentivize filing of applications, does not mandate applications. Therefore, the
applications made, under which investigation takes place, does meet the requirement of
“expressed support” under Article 5.4.

Third, Article 18.4. requires compliance with the Agreement. Since 18.1 has been violated,
the measure also violates 18.4.

4. US – Anti-dumping and countervailing measures on steel plate from India

Facts: US initiated an investigation into he importation of carbon steel plates from India on
application. The sole respondent was SAIL. During the investigation, based on information
supplied by SAIL and the two applications received, a 58.8% margin of dumping was
determined. However, subsequently, the US found that SAIL had not cooperated in providing
information and the information provided had errors. Therefore, it disregarded all information
supplied by SAIL and determined the margined dumping to be the highest, as submitted in
the applications.

Issue:

1. Whether USDOC acted inconsistently with Article 6.8 and Annex II of the AD
Agreement in resorting to use of facts available in the AD investigation in question?
2. Whether USDOC acted inconsistently with Article 15 of the AD Agreement?

Finding:

First, Article 6.8 and Annex II govern the application of "facts available" in anti-dumping
investigations. Facts available may only be resorted to if the respondent party does not
provide timely and verifiable information. The degree to which facts available may be used is
elaborated under Annex II. If, after consideration given under Annex II.3., there is no
verifiable information supplied, then the investigation may rely wholly on facts available.
However, if some verifiable information has been determined, then such information must be
used in the investigation.

Here, although the US rejected information submitted by SAIL, it had accepted US sale price
information. It failed to use the same in its investigation and there was no justification for the
exclusion of such information from the investigation.

Second, Article 15 relates to a non-binding obligation to give special consideration to

developing nations and providing constructive remedies. Further, the requirement of
consideration is only during final application of the measure, not during investigation of
dumping. Therefore, a company operating in a developing country cannot claim special
circumstances for providing unverifiable information.

Subsidies and Countervailing Measures Agreement (SCM)

Article XVI of GATT and the SCM agreement govern subsidies and countervailing
measures.

Article I of the SCM Agreement defines a subsidy as a financial contribution by a

governmental or public body which confers a benefit.

WTO rules and SCM agreement only applies to specific subsidies [defined under Article 1.2
and 2] which are:

i. Enterprise or industry specific

ii. Region specific
iii. Prohibited subsidies [Article 3]:
a. Subsidies contingent upon export performance or
b. subsidies contingent upon the use of domestic goods over imported
goods.

There is a difference between actionable subsidies and prohibited subsidies.

Article 4 governs dispute settlement under SCM relating to prohibited subsidies. The
processes are the same as under the DSU, except the timelines for submission of panel report,
etc. are shortened. Further, if a panel finds a subsidy is prohibited, it must be withdrawn
immediately. If a compliance panel finds non-compliance, it may authorize “appropriate
countermeasures”.

Vis-à-vis actionable subsidies, they are not prohibited persay, but may be contested in the
event that they cause adverse effects to the interest of other members. Adverse effects
include:

i. injury to the domestic industry of another Member.

- the requirement is the same as under the Anti-Dumping agreement, i.e., material
injury to domestic industry, threat of material injury, retardation of establishment
of industry and the requirements of casual link and non-attribution also apply.
ii. nullification or impairment of benefits accruing directly or indirectly to other
Members under the GATT 1994.
iii. serious prejudice, including a threat thereof, to the interests of another Member.
- includes displacement of imports, price suppression, significant loss of sales in
same market, significant increase in world trade share of subsidized product.
- the requirements of causal link and non-attribution apply here as well.

Dispute settlement in relation to actionable claims is also under DSU.

- If a panel concludes that there is an adverse effect, the infringing party must take measures
to remove such effects or withdraw the subsidy, within 6 months. The infringing party can
also agree to compensate the complaining party for its adverse effects.

- If a compliance panel determines non-compliance within 6 months of report, at the request

of the complaining party, it may authorize countermeasures.

Countervailing measures

Apart from using the DSU process, parties may also impose a countervailing duty to offset
the effects of an illegal subsidy. This can take place when:

i. there are subsidized imports,

ii. that cause injury to domestic industry and,
iii. there is a causal link between the subsidy and the injury caused and the same can’t
be attributed to other factors.

There are three types of countervailing measures [same as Anti-Dumping]:

i. provisional countervailing measures

 ii. voluntary undertaking
iii. definitive countervailing measures

Notes about countervailing measures:

- Should not be in excess of subsidy granted. Should not be discriminatory in nature.

- For importers who were not subject to an individual determination, a request for expedited
review can be made.

- Should be in place for only as long as necessary, but a maximum of 5 years.

- Same sunset review as per Anti-dumping Agreement.

Cases:

1. US – Hot-rolled lead and bismuth carbon steel products

Facts: EC complained about countervailing duties imposed by US on certain steel products

produced by British Steel Corporation (BSC). Subsequently, BSc entered into a joint venture
with a private company to form UES. In 1988, BSC was then privatized (and became BSplc)
and in 1995, bought out the private company from the joint venture to become the whole
owner of UES and renamed UES to BSES. The US claimed the equity infusion granted by
the UK to state-owned BSC caused injury and imposed countervailing duties in 1993.

Issue:

1. Whether the standard of review that applied to this dispute is that which is set forth
under article 11 of the DSU or article 17.6 of the anti-dumping agreement?
2. Whether the countervailing duties at issue were inconsistent with the obligations of
the US under the SCM agreement?
(a) Whether the USDOC should have examined in its 1995, 1996 and 1997
administrative reviews whether a "benefit" accrued to UES and BSplc/BSES
following the changes in ownership?
(b) Whether there was a "benefit" conferred on UES or BSplc/BSES as a result of the
"financial contributions" made to BSC?

Finding:
 1. Article 11 of DSU – Panel to make an objective assessment of case; Article 17.6 of
Anti-dumping Agreement – Panel to determine whether national authorities’
evaluation of facts and conclusion was proper, unbiased, and objective or not.
The AB found that pursuant to Article 1 of DSU and 30 of SCM, the SCM does not
contain any special or additional rules to be applied. Although the Declaration on
Dispute Settlement Pursuant to the Anti-Dumping Agreement or Part V of the SCM
Agreement requires consistent interpretation of SCM and ADA, there is no obligation
to adopt the standard of review for ADA disputes in SCM disputes.
2. The measure at issue is not the original imposition of duties in 1993, but its renewal in
1995, ’96 and ’97. Article 21 of SCM governs administrative review of duties. It
requires a determination of
i. Whether continued imposition of duty is necessary to offset subsidization or
ii. Whether injury would continue or recur if duty is removed.

In doing so, the investigating authority must determine whether there continues to be
a subsidy given.

In determining whether a subsidy has been given, the review requires the
determination of “benefit”, in accordance with Article 14 of the SCM. What matters is
whether a financial contribution has been made on terms more favorable than those
available in the market.

In the present case, UES/BSplc paid fair market value for its assets and then produced
steel products on which duties were imposed. Therefore, the US’ imposition of duties
was inconsistent with the SCM Agreement.

2. US – Tax treatment for "Foreign Sales Corporations"

Facts: EC complained against the US’ IRS which gave special tax treatment to foreign sales
corporations. A FSC is responsible for export-related sales services. Generally, in the US, all
domestic corporations’ worldwide earnings are taxed, and foreign corporations’ domestic
income is taxed. Further, a foreign corporations’ foreign income is taxed if it is determined
the same is "effectively connected with the conduct of a trade or business within the US”.

Under the FSC measure, a portion of the FSC’s foreign income is treated as “not effectively
connected with trade within US” and there is no factual determination of the same. There are
also options in the methodologies allowed to calculate foreign income.
Issue:

1. Whether the FSC measure involves a 'subsidy' under article 1.1 of the SCM agreement?

2. Whether the FSC measure constitutes a prohibited export subsidy under article 3.1(a) of
the SCM agreement?

Finding:

1. Since the US government is foregoing taxes it was otherwise due, the FSC measure is
question was a subsidy.

2. The FSC tax exemptions involve subsidies contingent upon export performance that are
prohibited under Article 3.1(a) of the SCM Agreement.

3. Canada – Aircraft

Facts: The dispute concerns various Canadian measures which Brazil alleges are prohibited
subsidies under Article 3.1(a) and 3.2 of the SCMA. The measures include – equity infusion
to facilitate export, funding by various organizations on terms more favorable than market
conditions, etc.

Issue:

1. Whether the panel correctly interpreted the term 'benefit' in article 1.1 of the SCM
agreement?
2. Whether the panel correctly interpreted and applied the expression ‘contingent... In
fact...upon export performance' in article 3.1(a) of the SCM agreement?

Finding:

1. The word "benefit", as used in Article 1.1(b), implies some kind of comparison., i.e.,
there can be no "benefit" to the recipient unless the "financial contribution" makes the
recipient "better off" than it would otherwise have been, absent that contribution.
(Whether the recipient has received a "financial contribution" on terms more
favorable than those available to the recipient in the market.)
2. The ordinary meaning of contingent means “conditional” and the standard of
contingent is same for both de jure and de facto contingency.
Three factors need to be proved to demonstrate de facto export contingency of a
subsidy:
 i. Granting of subsidy,
Whether there was an imposition of a condition based on export performance
for the grant of subsidy
ii. Tied to export performance,
The facts must "demonstrate" that the granting of a subsidy is tied to or
contingent upon actual or anticipated exports. Mere government knowledge
that exports will take place post grant of subsidy is not enough.
iii. Actual or anticipated exportation or export earnings
This is to be determined on the evidence. A subsidy may well be granted in the
knowledge, or with the anticipation, that exports will result. Yet, that alone is
not sufficient, because that alone is not proof that the granting of the subsidy is
tied to the anticipation of exportation.

One funding scheme was found to be “contingent in fact upon export performance”. The
objective and scheme of the program was examined. The scheme was designed to generate
production of particular products and importance was attached to export performance for
grant of subsidy.

Economic Emergency and Security exception under GATT and GATS

Economic Emergency cases

1. US – Lamb

Facts: US initiated a safeguard investigation into imported lamb and introduced a safeguard
measure in the form of a tariff rate quota against lamb imports. See Article XIX for safeguard
measures.

Issue: Whether the US acted inconsistently with Article XIX:1(a) of the GATT 1994 by
failing to demonstrate, as a matter of fact, the existence of "unforeseen developments"?

Finding:

Clause XIX:1(a) requires the identification of “unforeseen developments” in addition to the

requirements of the second sentence, as a prerequisite to imposition of a safeguard.
Consequently, demonstration must be made of such circumstances for compliance with
Article XIX:1(a). In the present case, there was no such demonstration of unforeseen
circumstances – only a demonstration of the increase in exports but nothing to explain why it
was unforeseen.

Security Exception Cases

1. US – Restrictions on exports to Czechoslovakia

Facts: The US administered export licensing controls that discriminated between destination
countries for security reasons.

Issue: Whether the US measures were justified under Article XXI(b)(iii) of the GATT 1947?

Finding: During the discussion of the complaint in 1949, it was stated, inter alia, that every
country must be the judge in the last resort on questions relating to its own security.

On the other hand, every contracting party should be cautious not to take any step which
might have the effect of undermining GATT. The complaint was rejected by a roll-call vote
of 17 to 1 with 3 abstentions.

2. Russia – Measures concerning traffic in transit.

Facts: In 2016, Russia prohibited the transport of Ukrainian exports destined for Kazakhstan
and Kyrgyz Republic through Russia. Russia invoked XXIb(iii) – measure necessary for the
protection of essential security interests in respect of the emergency in international relations
that occurred in 2014.

Issue:

1. Whether the panel has jurisdiction to review Russia's invocation of article xxi(b)(iii)
of the GATT 1994?
2. Whether the Russian measures fall within the scope of subparagraph (iii) of article
XXI(b), as measures taken in time of war or other emergency in international
relations?

Finding:

1. The invocation of the security exception remains subject to consultations and dispute
settlement procedures under the WTO. This conclusion was arrived at by looking at
the structure of Article XXI, the object and purpose of the agreement and the drafting
history. Although members have a latitude in determining their essential security
 interests and the action necessary to protect those interests, there are still requirements
to be demonstrated, that can be objectively verifiable by the DSB.
Here, those factors are whether the measure has been taken in time the time of
emergency in international relations, which, from the context of the Article,
necessarily arises during armed conflict, or similar military situations.
2. The Panel was satisfied, considering UN resolutions describing the situation as an
armed conflict and subsequent imposing of sanctions by other nations, that the
situation since 2014 constitutes an emergency of international relations. Since all
measures in question were taken post the identification of such emergency, all
measures were covered by the sub-paragraph test of “take in time of emergency of
international relations”.
The chapeau in XXI(b) requires only “essential state interests” to be protected through
the measure in question. Although latitude is given to states in the determination of
what is an “essential state interest”, there is a good faith obligation within the
provision. Therefore, before the Panel, the state must demonstrate such “essential
security interest”. Here, given the nature of the conflict, the essential security interests
that thereby arise for Russia cannot be considered obscure or indeterminate.

Genera Exceptions

Cases

1. US – Section 337

Facts: Under Section 337, unfair competition by imported products, including US domestic
patent infringement, was prevented. If found to be injurious to domestic industry, the US
could prohibit the import of the product or import by the specific producer or issue a cease-
and-desist order. The measure was inconsistent with III.4 of GATT since the legal remedies
provided to domestic infringers of patents and foreign infringers gave imported products less
favorable treatment. Further, in rem general exclusion of the imported product was possible
but the same penalty was not available against domestic producers.

Issue: Whether the measure can be justified under XX(d) of GATT.

Finding:

For a measure to comply with XX(d), there are three requirements:

 i. The law being enforced should itself be GATT compliant.
ii. The measure in issue should be necessary to secure compliance with domestic
law.
iii. The measure must pass the chapeau test under Article XX.

(i) There was the need to enforce US patent law. This was not challenged as inconsistent with
GATT law.

(ii) A measure is necessary if there exists no alternative reasonably available alternative that
is consistent with GATT to achieve the level of protection determined by the country in
question.

First, the Panel found that it was not necessary to provide a different scheme of remedy for
imports alleged to infringe US patents as other nations have often granted their civil courts
jurisdiction over such issues. Therefore, the Panel found the system of determination of
violation of patents unjustifiable under XX(d).

Second, the Panel found the in rem general exclusion order to be necessary since it is difficult
to enforce in personam prohibitions of imported products. As soon as one importer is
prohibited, the foreign producer can find another importer and import the product. It is also
difficult to go to the foreign jurisdiction and enforce the US decision about infringement.
Therefore, in personam prohibitions would not achieve the same level of protection.

2. US – Shrimp

Facts: US promulgated a law which required imported shrimp to be fished with specific
technology to prevent the incidental taking of sea turtles. Imports were only allowed if the
country of origin followed essentially the same regulatory mechanism as the US and were
certified to import to US. The Panel found MFN violation.

Issue: Whether the measure can be justified under XX(b) and XX(g) of GATT.

Finding:

To test whether the measure was justified, two tests are to be passed:

i. Whether the measure can be provisionally justified under XX(g).

ii. Whether the measure can be justified under the chapeau.
To determine whether the measure can be provisionally justified under XX(g), there is a 3
part test:

i. Whether the measure is concerned with “exhaustible natural resources”, i.e.,

whether sea turtles qualify as “exhaustible natural resources.”
ii. Whether the measure relates to the conservation of exhaustible natural resources
iii. Whether it is made effective in conjunction with restrictions on domestic
production or consumption.

On (i), the Panel found that exhaustible and renewable resources are not mutually exclusive.
Further, the term is an evolving term and applying evolutionary interpretation, and the using
other international treaties to understand the ordinary meaning of the term, exhaustible
natural resources can include living organisms. Here, the sea turtles have been identified as
an endangered species are therefore exhaustible natural resources.

On (ii), the structure and design of the prohibition are narrowly tailored to ensure adoption of
technology that would prevent incidental taking of sea turtles and therefore, is in connection
with he conservation of exhaustible natural resources.

On (iii), this is a requirement of even-handedness, which requires similar measures to be

imposed on domestic production as well. The US had implemented a domestic measure
requiring the use of the same technology and therefore the measure was even-handed.
Consequently, the measure is justifiable under XX(g).

Coming to the chapeau test, to determine arbitrary discrimination, there is a 3-part test:

i. There must be discrimination (this is different from MFN and NT).

ii. The discrimination must be arbitrary or unjustifiable.
iii. Discrimination must occur between countries where the same conditions prevail.

On (i), the AB (see paragraph 165), said discrimination occurs when the measure does not
consider the appropriateness of the regulatory program for the conditions prevailing in
the exporting countries. This is because the measure then treats countries that are
differently placed similarly. In this case, due to the strict certification requirements, an
exporting nation would have to adopt essentially the same regulatory policy as the US to
qualify.
They also found the measure to be too rigid, and the US failed its obligation to conduct
negotiations in good faith prior to imposition of the measure with the complaining parties.
The unilateral nature of the measure heightened its potential to disrupt and discriminate in the
market.

On (ii), in addition to points already discussed, there was a lack of transparency and due
process. Therefore, there was arbitrary discrimination.

3. Korea – Beef

Facts: AB found Korea’s dual-retail system, essentially requiring the sale of imported and
domestic beef in different stores, violative of III:4 of GATT.

Issue: Whether the same can be justified under XX(d).

Finding:

To be justified under XX(d), the measure should be:

i. To secure compliance with a law itself consistent with WTO law.

ii. Necessary to secure such compliance.

On (i), the AB found that the measure was introduced to detect and prevent misrepresentation
of origin of beef sold in Korea. Therefore, the system was introduced to secure compliance
with domestic law which was consistent with WTO law.

On (ii), the AB interpreted necessity under 31(1) of VCLT and found that necessity is not
limited to that which is indispensable but is closer to indispensable that merely making a
contribution. It involves weighing and balancing. In judging necessity, there is a 3-part test:

i. The relative importance of the objective to be protected must be determined.

The more vital the interests or value = easier to accept as necessary.
ii. The extent to which the measure in question contributes to securing compliance
with the law in question and objective.
The greater the contribution = more easily a measure might be considered as
necessary.
iii. Extent of restrictive effects produced on international trade.
Measure with a relatively slight impact upon imported products = more easily
considered as necessary.
In this case, the AB adopted the US – Section 337 standard of necessity – a measure is not
necessary if there exist reasonably available alternatives that are more GATT – compliant
that measure in issue. It was found that Korea did not use the dual retail system for other
meat products where similar misrepresentation had occurred. It used traditional, GATT –
compliant measures such as bookkeeping, fines, policing, etc. Since more GATT compliant
measures were available for similar misrepresentations, the same was a reasonable alternative
to Korea’s measure.

Further, although a country gets to decide the level of compliance it wants with its domestic
law, such a level of compliance should be applied consistently between imported and
domestic products. The AB found the traditional methods could achieve the desired level of
enforcement.

4. EC – Asbestos

Facts: The panel found that the prohibited asbestos fibers and permitted ECG fibers were like
products and therefore, there was a violation of III:4 of GATT.

Issue: Whether the measure can be justified under Article XX(b).

Finding:

In determining whether the measure was justified under Article, there was a two-part test:

i. Whether the measure in question protects human health

ii. Whether the measure in question is necessary to protect human health

On (i), the Panel found that handling of asbestos cement is harmful to human health since it
has carcinogenic properties. Therefore, the measure does protect human health.

On (ii), the Panel found that there is no need to quantify the threat to human health. France
has the right to determine the level of protection from the threat to health it wants to achieve,
which here is to halt all health-related risks from use of asbestos. The measure is necessary
if:

i. There is no other available alternative.

ii. Which the member can reasonably employ to protect human health.

The Panel found that there was no other measure that would achieve the same end – a
complete halt on health risks from asbestos. Applying controlled use is not an option as if
fails to achieve the level of protection decided by France. Therefore, the measure was
necessary and justified under XX(b).

Coming to the chapeau test, the Court found that it was not discriminatory as it was evenly
applied to domestic and imported goods. Further, it was not a disguised restriction on trade as
the structure of the measure suggested it was only to protect human health. Therefore, the
measure was justified.

5. India – Solar Cells and Solar Modules

Facts:

Issue:

Finding:

Facts:

Issue:

Finding:

Facts:

Issue:

Finding:

Regional Integration Exception

The regional trade exceptions are set out in Article XXIV of the GATT 1994, and Article V
of GATS.

Measures otherwise inconsistent with GATT can be justified under Article XXIV if – (i) the
measure is introduced upon formation of a free trade union or free trade area and meets the
requirements of XXIV:5 and XXIV:8 and (ii) the formation of the union or area would not be
allowed if the measure was not taken.

Measures otherwise inconsistent with GATS can be justified under Article V if – (i) if the
measure is introduced as part of an agreement liberalizing trade in services that meets all the
requirements set out in Article V:1(a), Article V:1(b), and Article V:4of the GATS and (ii) if
WTO Members would be prevented from being a party to an agreement liberalizing trade in
services if the measure concerned were not allowed.

RTA cases

1. Turkey – Textiles and Clothing

Facts: The measure at issue was Turkey’s quantitative restriction on imports of textiles from
India, pursuant to Turkey – EC customs union. The measure was found violative of Article
XI GATT.

Issue: Whether Turkey's measures were justified under article XXIV of GATT1994?

Finding: To determine whether the measure is justified under Article XXIV, there is two-part
test:

i. Whether a "customs union" as defined in Article XXIV:8 exists?

The Panel assumed there was a customs union and therefore the AB did not go
into the question either.
ii. Whether the formation of a customs union would be prevented without the
inconsistent measure?
Turkey argued that had it not introduced the measure, textile would have been
excluded from the Turkey – EC customs union, which accounts for 40% of
Turkish trade. The panel found that there were other reasonable alternatives
available to Turkey to meet the EC requirements without introduction of
quantitative restrictions – imposition of rules of origin and certificates of origin.

2. Canada – Autos

Facts and Issue: Whether Canada’s CVA requirements, found to be inconsistent with Article
I:1 of GATT, could be justified under XXIV.

Finding:

Canada argued that duty – free imports were largely from Mexico and the US, with whom
Canada had formed a free-trade agreement. The Panel found that the measure not only grants
duty-free treatment in respect of products imported from the United States and Mexico by
manufacturer – beneficiaries but also grants duty-free treatment in respect of products
imported from third countries not parties to a customs union or free- trade area with Canada.
A measure cannot be justified under XXIV if it grants non-trade union countries duty-free
treatment. Further, the benefit is not country-based so some products may be excluded. As
such, the measure is not properly characterized as a measure which provides for duty-free
treatment of imports of products of parties to a free-trade area.

3. Mexico – Taxes on soft drinks

Facts: The measure at issue was a 20% tax on non-cane sugar soft drinks and related
requirements. Mexico argued WTO has no jurisdiction since a NAFTA Panel should settle
the dispute in question.

Issue: Whether a WTO Panel can exercise jurisdiction on the case.

Finding: Panel found that any Member may initiate a WTO dispute when it feels its rights
under the covered agreements have been impaired by a measure taken by another Member.
To not take the case under the DSB would be to diminish the available rights of contracting
parties. Therefore, a Panel was formed.