WORLD TRADE
ORGANIZATION
|
WT/DS207/R
3 May 2002
(02-2373) |
|
Original: English |
CHILE - PRICE BAND SYSTEM AND
SAFEGUARD MEASURES RELATING TO
CERTAIN AGRICULTURAL PRODUCTS Report of the Panel
(Continued)
VII. FINDINGS
-
The Chilean Price Band System
1. Requested findings
7.1 Argentina requests that the Panel conclude that the
Chilean PBS is inconsistent with Article II:1(b) of the GATT 1994 and Article
4.2 of the Agreement on Agriculture. Argentina argues that the Chilean PBS
violates Article II:1(b) of the GATT 1994 since its application can result and
has repeatedly resulted in the collection of duties in excess of the rates bound
in Chile's National Schedule No. VII, i.e. 31.5 per cent. Argentina also
considers that the PBS, in addition to violating the obligations contained in
Article II:1(b) of the GATT 1994, is inconsistent with Article 4.2 of the
Agreement on Agriculture, because Chile maintains a measure of the kind which
has been required to be converted into ordinary customs duties pursuant to
Article 4.2 of the Agreement on Agriculture.
7.2 Chile requests that the Panel conclude that the PBS is
consistent with both Article II:1(b) of the GATT 1994 and Article 4.2 of the
Agreement on Agriculture.
2. Amendment to Article 12 of Law 18.525 in the course of
the panel proceedings
7.3 At the second meeting with the parties, the Panel was
informed by Chile that a new law 19.722 had entered into force on 19 November
2001 which inserts the following paragraph after the last paragraph of Article
12 of Law 18.525:
"The specific duties resulting from the application of
this Article, added to the ad valorem duty, shall not exceed the base
tariff rate bound by Chile under the World Trade Organization for the goods
referred to in this Article, each import transaction being considered
individually and using the c.i.f. value of the goods concerned in the
transaction in question as a basis for calculation. To that end, the
National Customs Service shall adopt the necessary measures to ensure that
the said limit is maintained."
7.4 According to Chile:
"(�) these Chilean actions have eliminated the measures
that Argentina has challenged before this Panel under Article II of the GATT
1994 [�]. Even if Argentina were correct in every respect in its allegations
under those WTO provisions -- which Chile denies -- it is difficult to
understand how, in terms of the purpose of the dispute settlement system,
there could be a more "positive solution" to the dispute for Argentina than
[�] the enactment of legislation assuring that the tariff binding will not
be breached in the future."565 7.5 Our understanding from Chile's explanation is that this
amendment to Article 12 of Law 18.525 puts in place a cap on the Chilean PBS
duties to avoid that those duties, in conjunction with the 8 per cent applied
rate, exceed the 31.5 per cent bound rate. Argentina has informed us in this
respect that it:
"(�) is not in position to confirm the precise content of
the Chilean Exhibit given that Argentina does not have adequate information
to express a definitive view on this issue. As far as Argentina knows, Chile
has not yet even issued the regulations necessary to implement the new
measure."566
7.6 We note in this respect that the Panel in Indonesia -
Autos stated that:
"(�) [i]n previous GATT/WTO cases, where a measure
included in the terms of reference was otherwise terminated or amended after
the commencement of the panel proceedings, panels have nevertheless made
findings in respect of such a measure."567 7.7 We see no reason to deviate from this practice of other
panels. Furthermore, we note that we would be prejudging our examination of
Argentina's claims regarding the Chilean PBS if we were to accept without
further analysis that the change introduced by Chile is relevant to the
consistency of the Chilean PBS with its obligations under the WTO Agreement. We
can only assess the relevance of the change introduced by Chile to the
WTO-consistency of its PBS after having determined what Chile's obligations are
with respect to its PBS under the provisions of GATT 1994 and the Agreement on
Agriculture included in Argentina's request for establishment. We would be
acting in a manner inconsistent with our duties under Article 11 of the DSU if
we were to refrain from making findings for the sole reason that Chile amended
the challenged measure at a late stage of the proceedings.
7.8 We will therefore examine the Chilean PBS as challenged
by Argentina in these proceedings, and make findings accordingly.
3. Order of the Panel's analysis
7.9 Argentina argues that the Chilean PBS is inconsistent
with both Article II:1(b) of GATT 1994 and Article 4.2 of the Agreement on
Agriculture. Both Argentina and Chile have first presented their arguments
regarding Article II:1(b) of GATT 1994, and subsequently regarding Article 4.2
of the Agreement on Agriculture.568 We will first examine whether we should conduct
our analysis in the same order, or whether it would be more appropriate to start
our analysis with the Agreement on Agriculture, and only then turn to GATT 1994.
7.10 Article II:1(b) of GATT 1994 provides:
"The products described in Part I of the Schedule
relating to any contracting party, which are the products of territories of
other contracting parties, shall, on their importation into the territory to
which the Schedule relates, and subject to the terms, conditions or
qualifications set forth in that Schedule, be exempt from ordinary customs
duties in excess of those set forth and provided therein. Such products
shall also be exempt from all other duties or charges of any kind imposed on
or in connection with the importation in excess of those imposed on the date
of this Agreement or those directly and mandatorily required to be imposed
thereafter by legislation in force in the importing territory on that date." 7.11 Article 4.2 of the Agreement on Agriculture provides:
"Members shall not maintain, resort to, or revert to any
measures of the kind which have been required to be converted into ordinary
customs duties1, except as otherwise provided for in Article 5 and Annex 5."
1 These measures include quantitative import
restrictions, variable import levies, minimum import prices, discretionary
import licensing, non-tariff measures maintained through state-trading
enterprises, voluntary export restraints, and similar border measures other
than ordinary customs duties, whether or not the measures are maintained
under country-specific derogations from the provisions of GATT 1947, but not
measures maintained under balance- of-payments provisions or under other
general, non-agriculture-specific provisions of GATT 1994 or of the other
Multilateral Trade Agreements in Annex 1A to the WTO Agreement.
7.12 The Appellate Body explained in its report on EC -
Bananas III569 that a panel should start with an examination of the claims
under the agreement which "deals specifically, and in detail," with the matter
at issue.570 Consequently, in determining under which agreement we should proceed
with first - GATT 1994 or the Agreement on Agriculture -, we will examine which
agreement deals specifically and in detail with the matter at issue.
7.13 We note in this respect that the Chilean PBS applies
exclusively to agricultural products, as defined in Annex 1 to the Agreement on
Agriculture. Consequently, the provisions of the Agreement on Agriculture are
applicable to the Chilean PBS.
7.14 The general aim of the Uruguay Round negotiations on
agriculture was to "achieve greater liberalisation of trade in agriculture and
bring all measures affecting import access and export competition under
strengthened and more operationally effective GATT rules and disciplines".571 As
explained by the Panel in Canada - Measures Affecting the Importation of Milk
and the Exportation of Dairy Products, the object and purpose of the
resulting Agreement on Agriculture is:
"to 'establish a basis for initiating a process of reform
of trade in agriculture' 572 in line with, inter alia, the long-term
objective of establishing 'a fair and market-oriented agricultural trading
system'.573 This objective is pursued in order 'to provide for substantial
progressive reductions in agricultural support and protection sustained over
an agreed period of time, resulting in correcting and preventing
restrictions and distortions in world agricultural markets'."574
575
7.15 We consider that Article 4.2 is central to the
establishment and protection of a fair and market-oriented agricultural trading
system in the area of market access. Members "committed to achieving specific
binding commitments [on, inter alia,] market access".576 In particular,
following Ministerial Mid-term review of the Uruguay Round negotiations and the
December 1991 Draft Final Act, the negotiations on agricultural market access
were undertaken on the premise that trade in agriculture was to be conducted on
the basis of bound ordinary customs duties and that border measures other than
ordinary customs duties would be prohibited.577 This involved the conversion of a
wide range of border measures into ordinary customs duties, a process which has
commonly been referred to as "tariffication". In general terms, the purpose of
this exercise was to enhance transparency and predictability in agricultural
trade, establish or strengthen the link between domestic and world markets, and
allow for a progressive negotiated reduction of protection in agricultural
trade. Article 4.2 of the Agreement on Agriculture, by prohibiting Members from
maintaining, resorting to, or reverting to any measures of the kind which have
been required to be converted into ordinary customs duties, accordingly provides
the legal underpinning for what, in ordinary parlance, is referred to as a
"tariff-only" regime for trade in agriculture.
7.16 We note that Article 4.2 of the Agreement on Agriculture
and Article II:1(b) of GATT 1994 both use the phrase "ordinary customs duties".
Provided this phrase has the same meaning in both provisions,578 neither provision
can therefore be interpreted independently from the other. However, having
regard to the above, we believe that Article 4.2 of the Agreement on Agriculture
deals more specifically and in detail with measures affecting market access of
agricultural products.579 We will therefore start our analysis with an examination
of the Chilean PBS under Article 4.2 of the Agreement on Agriculture.
4. The Chilean PBS and Article 4.2 of the Agreement on
Agriculture
(a) Is the Chilean PBS a measure of the kind which has
been required to be converted into ordinary customs duties?
7.17 This dispute revolves mainly around the question of what
"kind" of measures have been required to be "tariffied", i.e. converted into
ordinary customs duties, at the end of the Uruguay Round. Argentina and Chile
disagree as to whether the Chilean PBS is such a measure "of the kind which
[has] been required to be converted into ordinary customs duties". According to
Argentina, although the Chilean PBS duties constitute ordinary customs duties
for the purpose of Article II:1(b) of GATT 1994, the Chilean PBS per se
constitutes a measure of the kind which has been required to be converted into
ordinary customs duties. According to Chile, the Chilean PBS duties are ordinary
customs duties. Chile argues that the phrase "of the kind which have been
required to be converted" and the illustrative list in footnote 1 contain two
separate conditions to be met for a measure to be prohibited under Article 4.2:
only those measures listed in footnote 1 which effectively "have been required
to be converted into ordinary customs duties" would be prohibited under Article
4.2. Chile argues that no other Member has ever requested Chile to "tariffy" its
PBS during the Uruguay Round negotiations, and that, therefore, its PBS is not a
measure "of the kind which [has] been required to be converted into ordinary
customs duties".
7.18 Substantial elements of Article 4.2 would in our view be
rendered void of meaning if that provision were to be read as only prohibiting
those specific measures which other Members actually and specifically required
to be converted and which were in practice converted at the end of the
Uruguay Round. We believe that such an interpretation, which would imply
that Members decided to forego their right to challenge measures which had not
been specifically identified and converted at the end of the Uruguay Round, is
not tenable. Pursuant to Article 4.2, measures of the kind which have
been required to be converted cannot be maintained, resorted to or
reverted to by any Members, whether or not the Member concerned in fact took
advantage of the tariffication modalities. Thus, firstly, the insertion of the
phrase "of the kind" between "measures" and "which have been required" in
Article 4.2, as well as the reference to "similar border measures" in
footnote 1, indicates that the drafters of the Agreement were aware of the fact
that all the specific measures subject to tariffication might not be precisely
identified at the time of the conclusion of the Uruguay Round in April 1994 or,
in some cases, could be subject to the provisions of Annex 5 of the Agreement.
On the other hand, what was clear at that time by virtue of Article 4.2 was that
all measures "of the kind" would become prohibited for all Members as from the
subsequent entry into force of the WTO, whether or not the measures concerned
had or had not in fact been converted into ordinary customs duties in accordance
with the Uruguay Round "tariffication" modalities. A fortiori, the mere
fact that Members did not single out a specific measure at the end of the
Uruguay Round and requested its tariffication at such time does not imply that
the measure enjoys thereafter immunity from challenge in WTO dispute settlement.
Secondly, by prohibiting all Members from maintaining such measures, the
drafters of the Agreement also clearly envisaged the possibility that a Member
at the end of the Uruguay Round had in place measures "of the kind which have
been required to be converted", but decided not to convert those measures. The
decision whether to tariffy a particular border measure, to eliminate that
measure, or to adopt some other course, was a matter for each participant in the
negotiations to decide. It can therefore not be argued that only those measures
which in practice were "tariffied" in accordance with the Uruguay Round
tariffication modalities are measures "of the kind which have been required to
be converted" for the purposes of Article 4.2.
7.19 Furthermore, we note that "measures of the kind which
have been required to be converted" include the measures listed in
footnote 1. The measures listed in footnote 1 are therefore not exhaustive,
rather they are examples of "measures of the kind" and serve an illustrative
purpose. We also note in this respect that footnote 1 is inserted in the text of
Article 4.2 at the end of the phrase "measures of the kind which have been
required to be converted into ordinary customs duties". The first sentence of
footnote 1 reads "[t]hese measures include [�]". Consequently, the phrase "these
measures" in footnote 1 refers back to the entire phrase "measures of the kind
which have been required to be converted into ordinary customs duties", and the
specific measures listed in footnote 1 are all example of "measures of the kind
which have been required into ordinary customs duties", provided they are not
"maintained under balance-of-payments provisions or under other general,
non-agriculture-specific provisions of GATT 1994 or the other Multilateral Trade
Agreements in Annex 1A to the WTO Agreement". In our view, Chile's position that
a measure listed in footnote 1 is only prohibited under Article 4.2 if such a
measure, in addition, had been singled out, or challenged, by other negotiators
and "been required to be converted into ordinary customs duties" would logically
only be tenable if footnote 1 had been inserted immediately following the term
"measures" in the text of Article 4.2, rather than following the entire phrase
ending with "ordinary customs duties". If that were the case, the specific
measures listed in footnote 1 could indeed have been examples of measures
susceptible to being considered of the kind which have been required to be
converted, and not of measures necessarily being of such a kind. As we
explained, however, the text provides differently.
7.20 Argentina has argued that the Chilean PBS is a "variable
import levy", a "minimum import price", or, in any event, a "similar border
measure other than ordinary customs duties", within the meaning of footnote 1.
As explained above, if the Chilean PBS constitutes a measure listed in footnote
1, including such a "variable import levy", "minimum import price" or "similar
border measure", it will be a measure "of the kind which [has] been required to
be converted into ordinary customs duties", provided it is not "maintained under
balance-of-payments provisions or under other general, non-agriculture-specific
provisions of GATT 1994 or the other Multilateral Trade Agreements in Annex 1A
to the WTO Agreement". Thus, pursuant to footnote 1, for a measure to be
considered "of the kind which [has] been required to be converted into ordinary
customs duties" and thus prohibited for the purposes of Article 4.2, we need to
establish that:
(a) it is a quantitative import restriction, a
variable import levy, a minimum import price, discretionary import
licensing, a non-tariff measure maintained through state-trading
enterprises, a voluntary export restraint, or a similar border measure
other than ordinary customs duties;
(b) it is not maintained under balance-of-payments
provisions or under other general, non-agriculture-specific provisions
of GATT 1994 or the other Multilateral Trade Agreements in Annex 1A to
the WTO Agreement. 7.21 Below we will address each of these requirements
separately.
(i) Is the Chilean PBS a border measure similar to those
listed in footnote 1?
7.22 Argentina argues that the Chilean PBS is a "variable
import levy", a "minimum import price", or a border measure similar to these
measures. Chile argues that its PBS does not constitute any of those measures.
7.23 We note that the illustrative list of footnote 1
contains, on the one hand, specific measures (i.e. "quantitative import
restrictions", "variable import levies", etc.), and, on the other hand, a
residual category of measures ("similar border measures other than ordinary
customs duties"). Consequently, if the Chilean PBS is a border measure other
than an ordinary customs duty which is similar to any of the preceding examples,
it would be a measure of the kind which has been required to be converted for
the purposes of Article 4.2, provided it is not maintained under
balance-of-payments provisions or under other general, non-agriculture-specific
provisions of GATT 1994 or the other Multilateral Trade Agreements in Annex 1A
to the WTO Agreement.
7.24 We recall that, subject to the proviso that it is not
maintained under balance-of-payments provisions or under other general,
non-agriculture-specific provisions of GATT 1994 or the other Multilateral Trade
Agreements in Annex 1A to the WTO Agreement, a measure explicitly listed in
footnote 1 will ipso facto be of the kind which has been required to be
converted into ordinary customs duties. Consequently, such measure is
necessarily not, at the same time, an ordinary customs duty. For the same
reason, we consider that a measure which is "similar to" any of the measures
listed in footnote 1 will also be "other than ordinary customs duties". Our
findings regarding one of those two aspects can therefore be expected to
reinforce our findings regarding the other. For the sake of clarity and
comprehensive analysis, however, we will address each of those two aspects in
separate sections.
"Border measure"
7.25 The Chilean PBS applies exclusively to imported goods
and is enforced at the border by Chilean customs authorities. It is therefore
clear that the Chilean PBS is a border measure.
"Similar to" a "variable import levy" or a "minimum import
price"
Determination of the meaning of "similar to a variable import
levy or a minimum import price"
7.26 First, as regards the term "similar", dictionaries
define this term as "having a resemblance or likeness"580, "of the same nature or
kind"581, and "having characteristics in common".582 Two measures are in our view
"similar" if they share some, but not all, of their fundamental characteristics.
If two measures share all of their fundamental characteristics, they are
identical rather than similar. A border measure should therefore have some
fundamental characteristics in common with one or more of the measures
explicitly listed in footnote 1. It is then a matter of weighing the evidence to
determine whether the characteristics are sufficiently close to be considered
"similar".
7.27 Second, as regards the measures in footnote 1 referenced
by Argentina, it has been pointed out by Chile that the exact features of terms
of art such as "variable import levy" and "minimum import price" may be
difficult to establish on the basis of the text of the Agreement. We note in
that respect that "variable import levy" and "minimum import price" are terms
which may often be understood by the drafters of trade agreements in reference
to one or more particular schemes used by one or more Members. In that sense,
they could indeed be referred to as "terms of art". Nonetheless, we recall that
these terms are subject to the rules of treaty interpretation laid down in
Articles 31, 32 and 33 of the Vienna Convention. According to Article 31 of the
Vienna Convention, we should first determine the ordinary meaning of the terms,
in their context, and in light of the Agreement's object and purpose. Pursuant
to that same provision, we should also take into account certain other
international agreements and relevant rules of international law, as well as
subsequent practice. Only if necessary to resolve ambiguity or to confirm the
ordinary meaning determined using the tools offered by Article 31, Article 32
instructs us to take recourse to supplementary means, including the preparatory
work and the circumstances of the treaty's conclusion. Accordingly, below we
will proceed by first examining the ordinary meaning of these terms. In
addition, we will draw, as appropriate, on other means of interpretation,
including those categorized by the Vienna Convention as supplementary means.
7.28 As a preliminary matter, we note Chile's statement that
"the obligations in Article 4.2 only relate to non-tariff barriers"583
whereas "the PBS only covers the payment of customs duties".584 Although
Chile concedes that there is no such test in the language of the Agreement on
Agriculture, it also asserts that "it might be considered that the defining
characteristic should be whether the measure has the effect of a quantitative
limitation".585 This would seem to imply that Article 4.2 was not meant to
prohibit measures taking the form of duties levied by customs authorities but
only "non-tariff barriers" or quantitative restrictions.586
587 Along those lines,
"similar border measures" would need to have the effect of a quantitative
restriction.
7.29 We cannot agree with the proposition that only measures
with the effect of a quantitative restriction are measures of the kind which
have been required to be converted into ordinary customs duties. Such a
proposition rests on the assumption that the generic term "tariffs" can be
equated with the specific phrase "ordinary customs duties". This assumption is
in our view flawed: Article II:1(b) of GATT 1994 makes clear that the universe
of "tariffs" is not made up of "ordinary customs duties" alone, but also
includes "other duties". By deliberately limiting the mandatory result of the
conversion required by Article 4.2 to "ordinary customs duties", the drafters of
the Agreement on Agriculture did not exclude the possibility that certain other
types of "tariffs" would need to be converted as well. If the drafters of the
Agreement on Agriculture would have wanted to require conversion of only
measures "other than tariffs", they would have said so, and they would not have
used the specific phrase "ordinary customs duties". If they only wanted to
require conversion of quantitative restrictions, they could have drawn on the
language of Article XI:1 of GATT 1994, for instance, which prohibits
"prohibitions or restrictions other than duties, taxes or other charges",
without distinguishing between "ordinary customs duties" and other types of
duties or charges.588
7.30 Certainly, there may be some degree of co-extensiveness
between the scope of "restrictions other than duties, taxes or other charges"
with the scope of "similar border measures other than ordinary customs duties".
We consider that "restrictions other than duties, taxes or other charges" will
be apprehended by the measures referred to by footnote 1 to the Agreement on
Agriculture, including "similar border measures other than ordinary customs
duties".589 However, this does not imply that, therefore, all "similar border
measures other than ordinary customs duties" need to have the effect of a
quantitative restriction. In our view, the scope of footnote 1 to the Agreement
on Agriculture certainly extends to measures within the scope of Article XI:1 of
GATT 1994, but also extends to other measures than merely quantitative
restrictions. The group of measures included in "duties, taxes or other charges"
is clearly broader than only "ordinary customs duties", and includes in our view
"other duties or charges of any kind" (or, at least, "other duties") within the
meaning of Article II:1(b), second sentence, of GATT 1994. Consequently, the
fact that a measure is not a "restriction other than duties, taxes or other
charges" within the meaning of Article XI:1 of GATT 1994 does not prevent that
measure from being a "similar border measure other than ordinary customs duties"
within the meaning of footnote 1 to the Agreement on Agriculture. The
"restrictions other than" referred to in Article XI:1 of GATT 1994 constitute a
narrower category than the "similar border measures other than" in footnote 1 to
the Agreement on Agriculture.
7.31 We find our reasoning confirmed in Annex 5 to the
Agreement on Agriculture. Paragraphs 6 and 10 of that Annex both provide that "ordinary
customs duties" "shall be established on the basis of tariff equivalents
to be calculated in accordance with the guidelines prescribed in the
attachment hereto" (emphasis added). This language makes clear that the generic
term "tariff" is to be distinguished from the phrase "ordinary customs duties",
in that the former merely refers to the numerical form of any duty, whereas the
latter connotes a specific type of duty. Put simply, all ordinary customs duties
are tariffs, but not all tariffs are ordinary customs duties.
7.32 Finally, we see no reason why all the measures listed in
footnote 1 should a priori be considered restrictions within the meaning
of Article XI:1 of GATT 1994. On the contrary, it is clear that the measures
listed in the footnote to Article 4.2 include a number of measures whose status
under Article XI:1 was never definitively resolved under the GATT 1947. These
measures included price-related measures such as variable levies, as well as
measures which could be used to the same effect, such as voluntary restraint
agreements and non-tariff measures applied through state trading enterprises.
Moreover, one of the principal objectives of the Uruguay Round negotiations on
agriculture, as stated in the 1986 Punta Del Este Declaration, was strengthened
and more operationally effective GATT rules and disciplines, in line with
Recommendations adopted by the Contracting Parties at their Fortieth Session in
November 1984. In these recommendations explicit reference was made to the
elaboration of approaches, as a basis for possible negotiations, of appropriate
rules and disciplines "relating to voluntary restraint agreements, to variable
levies and charges, to unbound tariffs, and to minimum import price
arrangements", and in so doing made a distinction between these measures (for
which there were no specific and explicit GATT rules and disciplines)590 and
"quantitative restrictions and other related measures".591 In our view the object
and purpose of Article 4.2 is to bring measures whose definitive legal status
had long remained unresolved, including price-related border restrictions, under
more effective GATT disciplines on the basis of an explicit prohibition, in
order to protect a regime for agricultural products based on the use of ordinary
customs duties which resulted from the Uruguay Round negotiations. Accordingly,
we consider that the scope of the Article 4.2 prohibition is broader than that
of Article XI:1.
7.33 We will now turn to an interpretive analysis of the
specific measures in footnote 1 with which Argentina argues, the Chilean PBS is
similar: "variable import levy" and "minimum import price".
7.34 As regards the literal meaning of "variable import
levy", we note that a levy is a duty or charge; an import levy is a duty
assessed upon importation; a levy is variable when it is "liable to vary".592 These
features can of course not be conclusive as to what constitutes a "variable
import levy", since any "ordinary customs duty" could also fit this description:
Members may periodically change the level or type593 of their applied rates,
provided they remain below the bound rate. Thus, mere variability does
not distinguish ordinary customs duties from "variable import levies". As
regards the literal meaning of "minimum import price", on the other hand, this
phrase would logically refer to a certain price level below which imported
products may not enter a Member's market.594 As regards the context of those terms
in footnote 1, we note that all the measures listed there are instruments which
are characterized either by a lack of transparency and predictability, or impede
transmission of world prices to the domestic market, or both.
7.35 We consider, however, that the text and context of
"variable import levy" and "minimum import price" alone do not enable us to
determine the meaning of those terms without ambiguity. The determination of
their meaning should therefore include an analysis which "go[es] beyond a purely
grammatical or linguistic interpretation".595 Pursuant to Article 32 of the Vienna
Convention, we will take recourse to supplementary means of interpretation. In
this case, we consider that certain documents, which predate the entry into
force of the Agreement on Agriculture but are strictly speaking not part of the
preparatory work596, can shed light on what the WTO Members meant to express by
using those "terms of art".597
7.36 Both variable levies and minimum import price
arrangements, along with other border restrictions, were the subject of
extensive examination in bodies established by the GATT Contracting Parties.
These included Committee II (1958-1962); the post-Kennedy Round Agriculture
Committee (1967-1973); and the Committee on Trade in Agriculture (1982-1986)
which developed the parameters for negotiations in the Uruguay Round on improved
and more operationally effective GATT rules and disciplines for trade in
agriculture. The work of these Committees was undertaken on the basis, inter
alia, of notifications by Members covering all instruments of support and
protection. Thus, in the case of the 1982-1986 Committee on Trade in
Agriculture, reference was made in the information provided by the Contracting
Parties to the GATT 1947 provisions under which individual border measures were
being maintained.598 On the basis of the notifications submitted on variable levies
and minimum import prices, as well as the related examinations undertaken by
Contracting Parties, it appears to us that such measures can be analysed as
generally having the following fundamental characteristics:599
(a) Variable levies generally operate on the basis of
two prices: a threshold, or minimum import entry price and a border or
c.i.f. price for imports. The threshold price may be derived from and
linked to the internal market price as such, or it may correspond to a
governmentally determined (guide or threshold) price which is above the
domestic market price. The import border or price reference may
correspond to individual shipment prices but is more often an
administratively determined lowest world market offer price.
(b) A variable levy generally represents the
difference between the threshold or minimum import entry price and the
lowest world market offer price for the product concerned. In other
words, the variable levy changes systematically in response to movements
in either or both of these price parameters.
(c) Variable levies generally operate so as to
prevent the entry of imports priced below the threshold or minimum entry
price. In this respect, i.e. when prevailing world market prices are low
relative to the threshold price, the protective effect of a variable
levy rises, in terms of the fiscal charge imposed on imports, whereas
this charge declines in the case of ad valorem tariffs or remains
constant in the case of specific duties.
(d) In addition to their protective effects, the
stabilization effects of variable levies generally play a key role in
insulating the domestic market from external price variations.
(e) Notifications on minimum import prices indicate
that these measures are generally not dissimilar from variable levies in
many respects, including in terms of their protective and stabilization
effects, but that their mode of operation is generally less complicated.
Whereas variable import levies are generally based on the difference
between the governmentally determined threshold and the lowest world
market offer price for the product concerned, minimum import price
schemes generally operate in relation to the actual transaction value of
the imports. If the price of an individual consignment is below a
specified minimum import price, an additional charge is imposed
corresponding to the difference.
7.37 These fundamental characteristics of variable import
levies and minimum import prices, which can be distilled from the pre-Uruguay
Round notifications and examination thereof by the GATT Contracting Parties,
provide in our view a useful indication of what GATT Contracting Parties
understood to constitute variable import levies and minimum import prices. To
that extent, we believe that they are also helpful in interpreting those terms
as they appear in Article 4.2 of the Agreement on Agriculture. In conclusion, we
consider that a measure will be similar to a variable import levy or minimum
import price if, based on a weighing of the evidence before us, it shares
sufficiently the fundamental characteristics outlined above.
Application of the Panel's interpretation of "similar to a
variable import levy or a minimum import price" to the Chilean PBS
7.38 We now turn to an examination of the Chilean PBS in
light of the meaning of "similar border measures other than ordinary customs
duties", as determined above. In particular, we will examine whether the Chilean
PBS is similar to a variable import levy or a minimum import price, taking into
account the fundamental characteristics of those measures outlined above.
7.39 We will first recall the rather complex structure and
operation of the Chilean PBS. When a product covered by the Chilean PBS arrives
at the border for importation into Chile, Chilean customs authorities will
determine whether the total amount of applicable duties declared by the importer
corresponds to the amount due under Chilean legislation, and, if necessary,
revise the amount accordingly. In application of the Chilean PBS, they will levy
an 8 per cent ad valorem duty, plus an "additional specific duty" if an
administratively determined lowest offer price from a selected foreign market
(hereinafter referred to as "the Reference Price") falls below the lower
threshold of the PBS. They will apply only the 8 per cent ad valorem duty
if the same Reference Price is between the lower and upper thresholds of the
PBS. They will grant a "rebate" on the 8 per cent ad valorem duty if the
Reference Price is above upper threshold of the PBS. The PBS is determined
annually on the basis of f.o.b. prices observed on a particular international
market over the course of the preceding 60 months600, which are adjusted in
accordance with a Central Bank of Chile index, and listed in descending order.
The lower and upper thresholds of the PBS are obtained by discarding 25 per cent
at the bottom and at the top of that list and adding "usual import costs" to the
prices.601 The lowest and highest prices which are obtained after these operations
constitute the lower and upper thresholds of the PBS. The specific duties and
rebates corresponding to different f.o.b. prices are published in the Official
Journal of Chile. The Reference Price is determined weekly, every Friday, using
the lowest f.o.b. price for the covered products on foreign "markets of concern
to Chile".602 Unlike the prices used for the composition of the PBS, it is not
subject to adjustment for "usual import costs".603 The applicable Reference Price
for a particular shipment is determined in reference to the date of the bill of
lading. The Reference Price is not published, but can be consulted by the public
at the offices of the Chilean customs authorities.604 As indicated, if the
Reference Price falls below the lower threshold of the PBS, an "additional
specific duty" will be levied in addition to the 8 per cent ad valorem
applied rate. We will term this additional duty the PBS duty. The PBS duty will
equal the difference between the Reference Price applicable on the date of the
bill of lading and the lower threshold of the PBS.
7.40 The stated objective of the Chilean PBS is to "ensur[e]
a reasonable margin of fluctuation of domestic wheat, oil-seed, edible vegetable
oil and sugar prices in relation to the international prices for such products"605,
by "introducing a controlled distortion which maintains a minimum import cost
if the international price is too low [�]".606 As explained below, on the basis
of the evidence before us, we consider that the Chilean PBS has many fundamental
characteristics of both a variable import levy and a minimum import price.
7.41 The Chilean PBS operates on the basis of two prices: the
lower threshold of the PBS and the Reference Price. The variable PBS duty
represents the difference between the lower threshold of the PBS and the lowest
relevant market price for the product concerned. Generally, a covered product
will not be able to enter the Chilean market at an import cost below the lower
threshold of the PBS.607 Indeed, for all practical purposes, and subject to the
exceptional instance where the total applied duties would exceed Chile's 31.5
per cent bound rate in the absence of an effective cap,608 the PBS duty will equal
the difference between the lower threshold of the PBS and the Reference Price.
As a result, whenever the Reference Price falls below the lower PBS threshold,
and subject to the exceptional instance where the total applied duties would
exceed Chile's 31.5 per cent bound rate in the absence of an effective cap, a
duty will be applied equalling the difference between those two values. The
Reference Price is the lowest f.o.b. price observed at the time of the
shipment in the markets of concern to Chile. Consequently, if we take the
example of an exporter from a "market of concern to Chile" for the purpose of
setting a particular week's Reference Price, unless he exports his product at
such a low price below the lower threshold of the PBS that the total applied
duties would exceed Chile's bound rate in the absence of an effective cap, he
will generally not be able to export his product at a duty-paid price below the
lower PBS threshold, because even if he can export at a lower price than
exporters from other markets of concern, a PBS duty will still be applied for an
amount equal to the difference between the weekly Reference Price, set on the
basis of the fob price in his market (which is the lowest among the markets of
concern to Chile), and the lower threshold of the PBS. Imports from other
markets will, by operation of the system, normally come in at higher f.o.b.
prices. Thus, the Chilean PBS operates to insulate the Chilean market from world
market prices.609
7.42 This insulation of the Chilean market from world market
prices is accentuated by the fact that the PBS thresholds are determined,
inter alia, after discarding 25 per cent of "atypical observations" at the
bottom and at the top. By eliminating the lowest quarter of prices observed,
Chile substantially increases the likelihood that the lower threshold of the PBS
will equal or exceed the higher internal price. Chile admits that "25 per cent
may seem excessive", but explains that "this percentage is linked to the actual
purpose of the [PBS], which is to maintain a domestic price that is related to
international prices in the medium term".610 In our view, by discarding 25 per cent
of the lowest 60-month values observed, the PBS clearly eliminates much more
than just "atypical observations". In fact, by not accounting for the lowest of
each four observed prices over the course of five years, the PBS may result in
the imposition of highly trade-distortive duties.611
7.43 For example, an Argentinean wheat exporter will
generally not be able to export wheat at an f.o.b. price below the Reference
Price, since Argentina is "a market of concern to Chile". If the Argentinean
wheat exporter becomes more efficient and can export at lower f.o.b. prices to
Chile, the Reference Price will fall accordingly. The lower the Reference Price,
the larger the gap between the lower threshold and the Reference Price, and the
greater the PBS duty. If Argentinean wheat exporters happen to export at the
Reference Price level, their wheat will normally enter Chile at a total import
cost equal to the lower threshold of the PBS. If Argentinean wheat exporters can
only export at an f.o.b. price above the applicable Reference Price - because
exporters from other relevant markets produce more efficiently - their wheat
will come in at a total import cost which normally exceeds the lower threshold
of the PBS.
7.44 Moreover, we observe that several crucial stages of the
operation of the Chilean PBS are characterized by a considerable lack of
transparency and predictability. For instance, exporters can be expected to have
difficulties knowing how the applicable Reference Price is arrived at. No
legislation or regulation in Chile specifies which international markets are
used for the calculation of the Reference Price. Chile's replies to the Panel's
questions indicate that these are "markets of concern to Chile". Chile has
informed the Panel that it uses the lowest f.o.b. price on these markets
of concern to determine the Reference Price. None of these practices appear to
be provided for in Chilean legislation or regulation. Article 12 of Law 18.525
only provides that the relevant date is the date of the bill of lading. When
asked whether the Reference Prices, determined on a weekly basis, are published,
Chile informed the Panel that they are "available to the public at the National
Customs Service". In its comments on the descriptive part of our report,
however, Chile has added that they are also available now through a Chilean
governmental website.612 Moreover, as regards the application of the Chilean PBS to
the edible vegetable oils identified by reference to 25 tariff lines, Chile has
stated that "[i]n general, the Reference Price has coincided with the price of
crude soya bean oil, but in some cases it has corresponded to that of crude
sunflowerseed oil".613 Apparently, there is no means of knowing when one or the
other Reference Price will be used. Furthermore, although the PBS values
themselves are published each year, exporters have no means of knowing how the
PBS values are actually arrived at: no published legislation or regulation in
Chile sets out which international markets are used for the determination of the
PBS values, or how the "usual import costs" which are added to the f.o.b. prices
are calculated. It appears to us that exporters can be expected to encounter
serious difficulties in their commercial planning efforts in a system where
weekly variations in duties are based on factors unknown, i.e. the future
evolution of prices in "markets of concern to Chile". Such lack of
predictability must affect the competitive conditions of imports vis-�-vis
domestic production.
7.45 We recognize that, on the face of it, the Chilean PBS
does not share all the characteristics of both "variable import
levies" and "minimum import prices". First, whereas a "variable import levy"
will generally use as a reference price an administratively determined lowest
world market offer price, a "minimum import price" will generally use the actual
transaction value of the imported good. The Reference Price used in the context
of the Chilean PBS is clearly disconnected from the actual transaction value,
unlike minimum import price schemes. It does use a lowest "market of concern"
price, however, similar to the lowest market offer price generally used in
variable import levy schemes. Second, the lower threshold of the Chilean PBS is
not explicitly derived from, or linked to, an internal market-related price, as
is often the case in variable import levy schemes. Instead, it corresponds to an
administratively determined threshold price which may, but will not necessarily,
be equal to or above the domestic market price. Nonetheless, we consider that,
on the basis of the evidence before us, it cannot be excluded that the lower
threshold of the PBS, given the way in which it is designed, particularly with
the many adjustments made by the administering agencies to the basic world
market price quotations employed, including for inflation, operates in practice
as a "proxy" for such internal prices. It should be recalled in this respect
that the PBS thresholds are determined, inter alia, after discarding 25
per cent of "atypical observations" at the bottom and at the top614, hence
substantially increasing the likelihood that the lower threshold of the PBS will
equal or exceed the higher internal price.
7.46 We consider that the Chilean PBS is a hybrid instrument,
which has most, but not all, of its characteristics in common with either or
both a variable import levy and a minimum import price. After careful assessment
of the evidence before us, however, we consider as a factual matter that the
Chilean PBS shares sufficient fundamental characteristics with those
schemes for it to be considered similar to them, and that the observed
differences between the Chilean PBS and either of those schemes are not of such
a nature as to detract from this similarity.
7.47 We therefore find that the Chilean PBS is a border
measure "similar to" both a "variable import levy" and a "minimum import price".
"Other than ordinary customs duties"
Determination of the meaning of "ordinary customs duties"
7.48 We have already noted above that our findings regarding
"similar to variable import levy and minimum import price" and "other than
ordinary customs duties" are mutually reinforcing.615 We also note that, in Chile's
view, the Chilean PBS duties constitute "ordinary" customs duties.
7.49 We recall that the use of the phrase "ordinary customs
duties" is common to Article II:1(b) of GATT 1994 and Article 4.2 of the
Agreement on Agriculture. Given the central place of this phrase in both
provisions, it would appear that the scope of the obligations resulting from
these provisions is, in part, determined by the interpretation of that phrase.
We note in this respect that the parties616 and third parties to this dispute all
agree that the phrase must have the same meaning in both provisions. We see no
reason to disagree with this proposition. Nothing in the text of either GATT
1994 or the Agreement on Agriculture suggests that this identical phrase should
be given a different meaning in each of those two provisions. On the contrary,
it appears from the drafting history of Article 4.2 of the Agreement on
Agriculture that the drafters of that Agreement actually drew on Article II:1(b)
of GATT 1947 with respect to the use of the term "ordinary".617 Article II:1(b) of
GATT 1994 provides therefore relevant context for the interpretation of this
phrase in Article 4.2 of the Agreement on Agriculture.
7.50 Neither Article II:1(b) of GATT 1994 nor Article 4.2 of
the Agreement on Agriculture, however, defines explicitly what should be
understood by "ordinary" customs duties. Both provisions do give some indication
as to what is not an "ordinary" customs duty. On the one hand, Article
II:1(b) of GATT 1994 distinguishes "ordinary" customs duties in its first
sentence from "all other duties or charges of any kind imposed on, or in
connection with, the importation" in its second sentence. The latter category of
"other duties or charges of any kind" appears to be a residual
category, encompassing duties or charges imposed on or in connection with
importation which cannot be considered "ordinary" customs duties.618 On the other
hand, Article 4.2 prohibits Members from maintaining, resorting to, or reverting
to any measures of the kind which have been required to be converted into
ordinary customs duties. As indicated above, all the measures listed in footnote
1 are, by definition, not "ordinary" customs duties.
7.51 We note that "ordinary customs duties" appear in the
co-authentic French and Spanish versions as "droits de douane
proprement dits" and "derechos de aduana propiamente dichos".
The dictionary meaning of "ordinary" is "occurring in regular custom or
practice", "of common or everyday occurrence, frequent, abundant", "of the usual
kind, not singular or exceptional, commonplace, mundane".619 "Propiamente dicho"
has been translated as "true (something)" or "(something) in the strict sense".620
"Proprement dit" has been explained as "au sens exact et restreint, au
sens propre" and "stricto sensu".621 It appears from these dictionary
meanings that the English text, on the one hand, and the French and Spanish
texts, on the other, differ in terms of the perspective from which they define
"ordinary": the use of "ordinary" in the English text appears to define a
particular kind of "customs duties" in reference to the frequency with
which such customs duties can be found, whereas the French and Spanish texts
suggest that the narrow sense of the term "customs duties" is being
referred to. Thus, the English version describes a particular kind of customs
duty from an empirical perspective, whereas the French and Spanish
versions describe it from a normative perspective. We will therefore
proceed to examine what should be considered "ordinary" both on an empirical and
a normative basis.622
7.52 Article II:1(b), first sentence, of GATT 1994 provides
that Members cannot impose "ordinary customs duties" in excess of those listed
in their Schedules. As an empirical matter, we observe that Members, in
regular practice, invariably express commitments in the ordinary customs duty
column of their Schedules as ad valorem or specific duties, or
combinations thereof.623 All "ordinary" customs duties may therefore be said to
take the form of ad valorem or specific duties (or combinations thereof).624
As a normative matter, we observe that those scheduled duties always
relate to either the value of the imported goods, in the case of ad valorem
duties, or the volume of the imported goods, in the case of specific duties.
Such ordinary customs duties, however, do not appear to involve the
consideration of any other, exogenous, factors, such as, for instance,
fluctuating world market prices. We therefore consider that, for the purpose of
Article II:1(b), first sentence, of GATT 1994 and Article 4.2 of the Agreement
on Agriculture, an "ordinary" customs duty, that is, a customs duty senso
strictu, is to be understood as referring to a customs duty which is not
applied on the basis of factors of an exogenous nature.
7.53 The above determination of the ordinary meaning of
"ordinary customs duties" confirms that there is a normative dimension to
the term "ordinary", and that a "tariff" must have certain fundamental
characteristics for such a "tariff" to be considered an "ordinary" customs duty.
For this reason, we disagree with an argument presented by the European
Communities, apparently endorsed by Chile.625 According to this position:
"(�) the decisive element which distinguishes an
'ordinary customs duty' from a 'variable import levy' is the existence of a
ceiling in the tariff binding."
626 7.54 This position appears to be based on the proposition
that the phrase "ordinary customs duties" in the first sentence of Article
II:1(b) would have been interpreted by the Appellate Body in its report on
Argentina - Textiles and Apparel as including any kind of duties on
imports, and that, according to that report, the imposition of any kind of
duties is consistent with Article II:1(b) provided that such duties do not
exceed the bound rate for "ordinary customs duties".627
7.55 We disagree with the proposition that the imposition of
any kind of duties is consistent with Article II:1(b) provided that such
duties do not exceed the bound rate for "ordinary customs duties". In our view,
the cited Appellate Body report cannot be read as suggesting that any duty or
charge can be considered an "ordinary customs duty" as long as the total amount
of applied duties does not exceed the bound rate for "ordinary customs duties".
As already indicated, whether or not a duty can be considered "ordinary" is not
merely and simply a function of whether or not a Member applies a total amount
of duties and charges in excess of the bound rate for "ordinary customs duties".
If this view were to be accepted, the distinction between "ordinary" and "other"
duties in the first and second sentence of Article II:1(b), and the
corresponding existence of two separate columns in the Schedules, would be
rendered void of all meaning, particularly in light of the Uruguay Round
Understanding on the Interpretation of Article II:1(b) of the GATT 1994. We do
not believe either that this view was espoused by the Appellate Body in the
cited report. In that report, the question of whether or not the duties at issue
constituted "ordinary customs duties" was not even addressed by the Appellate
Body. The Appellate Body merely stated:
"The principal obligation in the first sentence of
Article II:1(b) [�] requires a Member to refrain from imposing ordinary
customs duties in excess of those provided for in that Member's
Schedule. However, the text of Article II:1(b), first sentence, does not
address whether applying a type of duty different from the type
provided for in a Member's Schedule is inconsistent in itself, with that
provision."628
7.56 Thus, the Appellate Body stated what the obligation of
the first sentence of Article II:1(b), regarding the application of "ordinary
customs duties", entails. The Appellate Body recalled that there may be various
"types" of duties within the category of "ordinary customs duties", and
that applying a "type" of duty different from the "type" recorded in the
Schedule is not necessarily inconsistent with the first sentence of Article
II:1(b). By different "types" of duties, however, the Panel and the Appellate
Body were merely referring to the distinction between ad valorem and
specific duties.629 Both parties, as well as the Panel and the Appellate Body,
agreed in that case that the specific and ad valorem duties in question
were all "ordinary" customs duties. Thus, the issue was not whether Argentina's
applied duties were "ordinary", but rather whether Argentina could apply one
type of ordinary customs duty even though its WTO Schedule identified another
type of ordinary customs duty. In our view, therefore, it is clear that the
cited Appellate Body report has no bearing on the question before us, i.e. what
distinguishes an "ordinary" customs duty from other duties and charges.
7.57 We find our interpretation of what constitutes an
"ordinary" customs duty confirmed by our analysis of the object and purpose of
the Agreement on Agriculture. The object and purpose of this Agreement is,
according to the Panel in Canada - Dairy,
"to 'establish a basis for initiating a process of reform
of trade in agriculture'630 in line with, inter alia, the long-term
objective of establishing 'a fair and market-oriented agricultural trading
system'.631 This objective is pursued in order 'to provide for substantial
progressive reductions in agricultural support and protection sustained
over an agreed period of time, resulting in correcting and preventing
restrictions and distortions in world agricultural markets.632
The general aim of the Uruguay Round negotiations on
agriculture was to 'achieve greater liberalization of trade in agriculture
and bring all measures affecting import access and export competition under
strengthened and more operationally effective GATT rules and disciplines'."633
[�]634
7.58 As indicated earlier, an important aspect of this
exercise was the "tariffication" process, involving the conversion of certain,
particularly distortive trade barriers into ordinary customs duties. Key
objectives of tariffication were to make agricultural market access conditions
more transparent and predictable, and establish or strengthen the link between
national and international agricultural markets. As stated in the Punta del Este
Ministerial Declaration on the Uruguay Round:
"Contracting Parties agree that there is an urgent need
to bring more discipline and predictability to world agricultural
trade by correcting and preventing restrictions and distortions including
those related to structural surpluses so as to reduce the uncertainty,
imbalances and instability in world agricultural markets."635
7.59 As explained by the Panel in Turkey - Textiles,
this object and purpose is based on the premise that ordinary customs duties
"are GATT's border protection 'of choice'" because they "permit the most
efficient competitor to supply imports", and are "more transparent
price-based" measures.636
7.60 In our view, customs duties of the ordinary kind
scheduled by the GATT Contracting Parties since 1947 and thereafter the WTO
Members, which are exclusively based on either the value or the volume of the
goods or a combination thereof (i.e. not based on exogenous factors), were
considered by the Uruguay Round negotiators to be most amenable to achieving the
objectives of progressively reducing protection in agricultural markets through
tariff reductions and ensuring predictability and more transparent, price-based
competition. By no longer allowing for instruments of protection which, through
the use of exogenous factors637, result in highly uncertain and unstable levels of
protection often isolating the domestic market from international price
competition, the drafters of the Agreement on Agriculture decided to bring such
instruments under "strengthened and more operationally effective GATT rules and
disciplines", in pursuit of the long-term objective of establishing a fair and
market-oriented agricultural trading system.
Application of the Panel's interpretation of "other than
ordinary customs duties" to the Chilean PBS
7.61 In our analysis of whether the Chilean PBS is a border
measure similar to a variable import levy and a minimum import price, we have
already highlighted the features of the Chilean PBS which reveal its
intrinsically unstable, intransparent and unpredictable nature, as well as the
insulation of the domestic market from international price competition which it
achieves. Nonetheless, in furtherance of our analysis, we will more explicitly
contrast some other aspects of the structure and operation of the Chilean PBS
with those of an "ordinary" customs duty.
7.62 Most importantly, we note that the Chilean PBS duties
are neither in the nature of ad valorem duties, nor specific duties, nor
a combination thereof638, in the sense that they are not just assessed on the
transaction value of individual shipments, nor just on the volume of the goods.
The amount of the applicable duty is a function of a price which is disconnected
from the actual transaction value of the imported good. In fact, the applicable
duty is determined on the basis of exogenous price factors, i.e. the lower
threshold of the PBS and the Reference Price.639
7.63 We also note that several features of the Chilean PBS
are bound to artificially inflate this margin between the lower threshold of the
PBS and the Reference Price, and, consequently, the level of the applicable PBS
duty. Most strikingly, the level of the lower threshold of the PBS is
considerably raised over that of the Reference Price by discarding the lowest 25
per cent of all observed international market prices over the preceding 60
months. The prices observed on "markets of concern" used for the calculation of
the Reference Price do not undergo the same operation. Second, as confirmed by
Chile, the f.o.b. prices used for the PBS values are adjusted, inter alia,
for "usual import costs", whereas the f.o.b. prices used for the Reference
Prices are not.640 These differences can in our view only result in increasing the
margin between the lower threshold of the PBS and the Reference Price, and thus
the applicable PBS duty.641 We find that those aspects of the structure and
operation of the Chilean PBS do not reflect the structure and operation of an
"ordinary" customs duty.
7.64 Finally, we note that under the Chilean PBS, the
Reference Price, and therefore the applicable duty or rebate, is determined in
reference to the date of the bill of lading. Consequently, when two shipments
from two different exporting Members leave their respective port of origin on
two different dates, but arrive at the Chilean port of entry at the same time,
they can be assessed a different duty, to the extent that the Reference Price
may very well vary as regards those two shipments. We are fully aware that
Argentina did not present any claim under Article I of GATT 1994, and that no
such claim is therefore within our Terms of Reference. Whereas we cannot and do
not make any finding of law regarding the consistency of the Chilean PBS with
Article I of GATT 1994, we do find, as a matter of fact, that the Chilean PBS
inherently carries the risk of resulting in higher duties on one shipment
than on another, despite the fact that those shipments arrive at the same time
at the Chilean border, which is not consistent with the characteristics of an
"ordinary" customs duty.
Conclusion
7.65 In light of our findings above, we conclude that the
Chilean PBS is a border measure similar to a variable import levy and a minimum
import price, other than ordinary customs duties, within the meaning of footnote
1 to the Agreement on Agriculture.
(ii) Is the Chilean PBS "maintained under
balance-of-payment provisions or under other general, non-agriculture
specific provisions of GATT 1994 or of the other Multilateral Trade
Agreements in Annex 1A to the WTO Agreement"?
7.66 Chile has not asserted a defence of the Chilean PBS
under Article 4.2 of the Agreement on Agriculture in reference to the
balance-of-payment provisions of GATT 1994 or other general, non-agriculture
specific provisions of the Multilateral Trade Agreements in Annex 1A other than
GATT 1994. Regarding the relationship between Article 4.2 of the Agreement on
Agriculture and Article II:1(b) of GATT 1994, Chile has stated that "[t]he
prohibitions in Article 4.2 of the Agreement on Agriculture apply without regard
to whether the measures breach a tariff binding".642 At the same time, however,
Chile has also stated that the following position, expressed by the European
Communities in the course of these proceedings, "may be correct":643
"(�) a measure that would meet the test set out by the
Appellate Body in Argentina - Footwear, Textiles and Apparel, and
would therefore not be contrary to Article II of GATT 1994, would not be
subject to any further obligation in Article 4.2 of the Agreement on
Agriculture. This conclusion stands even if the measure in question resulted
in the application of a 'duty that varies' - inasmuch as this 'variation' is
maintained below the ceiling written in the Member's tariff binding. Thus,
the decisive element which distinguishes an "ordinary customs duty" from a
"variable levy" is the existence of a ceiling in the tariff binding."644
7.67 In light of Chile's position, we consider that we should
address the argument advanced by the European Communities.
7.68 According to the European Communities, Article II:1(b)
of GATT 1994 is a "non-agriculture-specific" provision of GATT 1994 under which
a measure such as the Chilean PBS could be maintained, provided it does not
exceed the "ordinary customs duties" binding. Consequently, if the measure is
consistent with Article II:1(b) of GATT 1994, it would not be subject to the
obligation laid down in Article 4.2 of the Agreement on Agriculture. We cannot
agree. First, the text of footnote 1 makes clear that the drafters of the
Agreement on Agriculture did not mean to exempt from the obligation of Article
4.2 all measures maintained under any "general, non-agriculture-specific"
provision of GATT 1994. Footnote 1 only excludes from the scope of Article 4.2
measures maintained under balance-of-payment provisions or under other
general, non-agriculture specific provisions of GATT 1994. The use of the term
"other" before "general, non-agriculture specific provisions" makes clear that
balance-of-payment provisions are one example of what is meant by the category
of "general, non-agriculture-specific" provisions of GATT 1994 and the other
Annex 1A Agreements. Balance-of-payment measures can be adopted in accordance
with Article XII of GATT 1994. Article XII is clearly in the nature of an
exception to the general obligations of GATT 1994. In our view, therefore,
footnote 1 was meant to exclude from the scope of Article 4.2 only those
measures which are maintained on the basis of GATT 1994 provisions which allow
Members, subject to certain conditions, to act inconsistently with their general
obligations under GATT 1994. Article XIX regarding safeguard measures645 and
Article XX regarding general exceptions, for instance, would in our view provide
other examples of such "general, non-agriculture-specific provisions".
7.69 Second, we note that Article 21.1 of the Agreement on
Agriculture provides,
"The provisions of GATT 1994 and of other Multilateral
Trade Agreements in Annex 1A to the WTO Agreement shall apply subject to the
provisions of this Agreement." 7.70 In commenting on this provision, the Appellate Body
stated in EC - Bananas III:
"Therefore, the provisions of the GATT 1994 [�] apply to
market access commitments concerning agricultural products, except to the
extent that the Agreement on Agriculture contains specific provisions
dealing specifically with the same matter."646
7.71 If the general rule is that the provisions of GATT 1994
only apply to market access commitments concerning agricultural products to the
extent that the Agreement on Agriculture does not contain specific provisions
dealing specifically with the same matter, it is difficult to see why the
drafters of the Agreement on Agriculture would have turned that rule in effect
upside down in footnote 1 by excluding from the scope of the Agreement on
Agriculture's market access obligations those measures maintained in accordance
with the general obligations of GATT 1994. If this view were to be accepted,
footnote 1 would be rendering Article 21.1 void of meaning as regards the
Agreement on Agriculture's market access provisions. A treaty interpreter,
however, may not adopt a reading that would result in reducing whole clauses or
paragraphs of a treaty to redundancy or inutility.647 In our view, such an
interpretation requires us in this case to read footnote 1 as excluding from the
scope of Article 4.2 those measures which Members are allowed to maintain in
accordance with the provisions in GATT 1994 laying down exceptions to the
general obligations of GATT 1994, such as its balance-of-payment provisions.
7.72 We find this interpretation confirmed by the preparatory
work of the Agreement on Agriculture. The agriculture section of the 1991 Draft
Final Act provides:
"The policy coverage of tariffication shall include all
border measures other than ordinary customs duties* such as [�]."648
* Excluding measures maintained for balance-of-payments
reasons or under general safeguard and exception provisions (Articles
XII, XVIII, XIX, XX and XXI of the General Agreement).
7.73 We consider that this language confirms that the
drafters of the Agreement on Agriculture did not intend to include Article II of
GATT in the category of "other general, non-agriculture specific provisions of
GATT 1994".
7.74 We note that, in any event, the question of whether or
not the Chilean PBS duties have exceeded the "ordinary customs duties" binding
of 31.5 per cent only becomes relevant after it has been determined that the
Chilean PBS duties do indeed constitute such "ordinary" customs duties. As we
have indicated earlier, in our view, the Chilean PBS is a border measure similar
to a variable import levy and a minimum import price, other than ordinary
customs duties. The corresponding binding of 31.5 per cent is therefore
irrelevant for the purpose of assessing the Chilean PBS duties' consistency with
Article II:1(b) of GATT 1994. We will revert to this matter below, in our
discussion of Argentina's claim under Article II:1(b) of GATT 1994.
565 Chile's Oral Statement at the second meeting with the
parties, para. 6.
566 Argentina's response to question 45 of the Panel.
567 Panel report on Indonesia - Certain Measures Affecting the
Automobile Industry ("Indonesia - Autos "), WT/DS54/R,
WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1, 2, 3, 4, adopted 23 July 1998. The
panel referred to: the panel report on United States - Measures Affecting
Imports of Wool Shirts and Blouses from India ("US - Wool Shirts and Blouses),
WT/DS33/R, adopted on 23 May 1997; the US restriction was withdrawn shortly
before the issuance of the panel report; panel report on EEC - Restrictions
on Imports of Dessert Apples, Complaint by Chile, adopted on 22 June 1989,
BISD 36S/93; panel report on EEC-Restrictions on Imports of Apples, Complaint
by the United States, adopted on 22 June 1989, BISD 36S/135; panel report on
United States - Prohibition of Imports of Tuna and Tuna Products from Canada,
adopted on 22 February 1982, BISD 29S/91; panel report on EEC - Restrictions
on Imports of Apples from Chile, adopted on 10 November 1980, BISD 27S/98;
and panel report on EEC - Measures on Animal Feed Proteins, adopted on 14
March 1978, BISD 25S/49. The panel noted that in the panel report on United
States - Section 337 of the Tariff Act of 1930, BISD 36S/345, adopted on 7
November 1989, the challenged measure was amended during the panel process but
the panel refused to take into account such amendment. The panel on Indonesia
- Autos noted that this was also the line taken by the Appellate Body in
Argentina - Textiles and Apparel, WT/DS56/AB/R, adopted on 22 April 1998,
para. 64.
568 We also note, however, that Argentina has asserted that the
Agreement on Agriculture is lex specialis vis-�-vis GATT 1994.
569 Appellate Body report, European Communities - Regime for
the Importation, Sale and Distribution of Bananas ("EC - Bananas III
"), WT/DS27/AB/R, adopted 25 September 1997.
570 Ibid., para. 204.
571 Punta del Este Declaration, Ministerial Declaration on the
Uruguay Round, MIN.DEC, 20 September 1986, p. 6.
572 (original footnote) Preambular paragraph 1.
573 (original footnote) Preambular paragraph 2.
574 (original footnote) Preambular paragraph 3.
575 Panel Report, Canada - Measures Affecting the Importation
of Milk and the Exportation of Dairy Products ("Canada - Dairy "),
WT/DS103/R, WT/DS113/R, adopted 27 October 1999, as modified by the Appellate
Body report, WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, paras. 7.25-7-26.
576 Preambular paragraph 4.
577 MTN.TNC/W/FA, para. 1 of Part B, Annex 3, Section A, at L.25:
The policy coverage of tariffication shall include all
border measures other than ordinary customs duties [�]
578 See para. 7.48 below.
579 We also note in this respect that Article 21.1 of the
Agreement on Agriculture provides that "[t]he provisions of GATT 1994 [�] shall
apply subject to the provisions of this Agreement." The Appellate Body, in its
report on EC - Bananas III has commented on this provision,
Therefore, the provisions of the GATT 1994 [�] apply to
market access commitments concerning agricultural products, except to the
extent that the Agreement on Agriculture contains specific provisions
dealing specifically with the same matter.
Appellate Body report, EC - Bananas III, para. 155.
580 The New Shorter Oxford English Dictionary (L. Brown, Ed.), at
2865.
581 Ibid.
582 Webster's Encyclopaedic English Dictionary, at 957.
583 Chile's First Written Submission, para. 34. Chile's response
to question 6 of the Panel. Emphasis added.
584 Ibid. Emphasis added.
585 Chile's response to question 8 of the Panel. Emphasis added.
586 We note that Chile has also argued that "despite the Members'
intention to reduce the number of non-tariff barriers and other measures
covered, their intention was not to prohibit all such measures". Chile's first
submission, para. 59. Emphasis added.
587 Chile has also argued that "despite the Members' intention to
reduce the number of non-tariff barriers and other measures covered,
their intention was not to prohibit all such measures". Chile's first
submission, para. 59. Emphasis added.
588 This does not mean that that Members cannot schedule other
duties or charges with respect to goods covered by the Agreement on Agriculture
in the corresponding column of their Schedules. We are only saying that, if
a measure is "of the kind which has been required to be converted into ordinary
customs duties", it cannot take another form than an ordinary customs duty.
Article 4.2 of the Agreement on Agriculture does not, of course, prevent Members
from maintaining as other duties or charges measures which are not of that kind.
589 As we will indicate below, under GATT 1947, a panel
considered a minimum import scheme, for instance, a restriction within the
meaning of Art XI:1. Pursuant to footnote 1 of the Agreement on Agriculture,
"minimum import prices" are now measures of the kind which have been required to
be converted into ordinary customs duties. Similarly, with respect to state
trading operations, the panel in Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef found that:
when dealing with measures relating to agricultural
products which should have been converted into tariffs or tariff-quotas, a
violation of Article XI of GATT and its Ad Note relating to
state-trading operations would necessarily constitute a violation of Article
4.2 of the Agreement on Agriculture and its footnote which refers to
non-tariff measures maintained through state-trading enterprises.
Panel Report, Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef ("Korea - Various Measures on Beef "),
WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by the Appellate
Body report, WT/DS161/AB/R, WT/DS169/AB/R, para. 762.
590 We note that a particular minimum import price scheme was
found inconsistent with Article XI by a panel under GATT 1947 (EEC -
Programme of Minimum Import Prices, Licences and Surety Deposits for Certain
Processed Fruits and Vegetables, adopted 18 October 1978, BISD 25S/68).
Nonetheless, it was a price-based measure other than a traditional quantitative
restriction such as a quota.
591 BISD, 33S/19, at 24; 31S/10, at 11.
592 The New Shorter Oxford English Dictionary (L. Brown, Ed.), at
3547.
593 Appellate Body report, Argentina - Textiles and Apparel,
WT/DS56/AB/R and Corr.1, adopted 22 April 1998, para. 46.
594 We consider that, as a practical matter, this could result
from a prohibition on imports priced below the minimum, or because such imports
are subject to an additional charge in order to raise their entry price above
the specified minimum.
595 Sinclair, The Vienna Convention on the Law of Treaties
(2nd ed., 1984), p. 121.
596 We believe that Article 32 of the Vienna Convention allows us
to use such documents, to which all GATT Contracting Parties had access before
and during the negotiations of the Uruguay Round, as a supplementary means of
interpretation. First, in our view, they are part of "the circumstances of the
conclusion" of the WTO Agreement, including the Agreement on Agriculture.
Second, it should be recalled that a treaty interpreter is not restricted to the
supplementary means explicitly listed in Article 32 of the Vienna Convention.
The use of the term "including" clearly indicates that the supplementary means
explicitly mentioned by article 32 are not the only ones a treaty interpreter
can have recourse to (Yasseen, L'interpr�tation des trait�s d'apr�s la
Convention de Vienne sur le Droit des Trait�s, Rec., 1976-III, at 79 and 98;
Sinclair, The Vienna Convention on the Law of Treaties, supra, at
153). As stated by Mr. Ago at the 872nd meeting of the ILC,
[�] the word "including" made it clear that recourse
could be had to means other than preparatory work or the circumstances of
the conclusion of the treaty, though it probably would be wiser not to
mention them expressly.
(Yb.ILC, 1966, Vol. I, Part II, 202, at para.50.)
We see no reason why we could not draw on the referenced GATT
1947 documents pursuant to Article 32 of the Vienna Convention. As stated by Mr.
Yasseen, then Chairman of the ILC, at its 873rd meeting:
[T]he very nature of a convention as an act of will made
it essential to take into account all the work which had led to the
formation of that will - all material which the parties had had before
them when drafting the final text.
(Yb.ILC, 1966, Vol. I, Part. II, 204, at para. 25.
Emphasis added.)
597 We note that GATT 1947 jurisprudence provides only limited
guidance in this respect.
As regards variable import levies, the Panel in
The
Uruguayan Recourse to Article XXIII (adopted 16 November 1962, BISD 11S/95,
100) examined a number of measures described as "import charges" (varying
according to divergences between domestic prices and imported prices but not
exceeding the bound rate); "variable surtaxes" (charged over and above the
normal duties and varying from time to time to take account of differences
between domestic and imported prices); "variable import levies" (raising the
price of the imported product approximately to the levels maintained for the
domestic product); "variable charges" (price supplements levied in order to
maintain the price of imported products at the level of the like domestic
products) (Ibid., at 104, 107, 134, and 143). The Panel did not consider
it "appropriate to examine the consistency or otherwise of these measures under
the [GATT 1947]", although it considered that there were "a priori grounds for
assuming that those measures could have an adverse effects on Uruguayan
exports." (Ibid., at 135)
As regards minimum import prices, we note that the Panel in
EEC - Programme of Minimum Import Prices, Licences and Surety Deposits for
Certain Processed Fruits and Vegetables (adopted 18 October 1978, BISD
25S/68) ruled that a particular minimum import price scheme maintained by the EC
was inconsistent with Article XI of GATT 1947 (Ibid., para. 4.14.). The
Panel in that case considered that the minimum import price system, as enforced
by the additional security, was a restriction other than duties, taxes, or other
charges within the meaning of Article XI:1, although one member of the Panel
considered that the minimum import price system was not being enforced in a
manner which would qualify it as a restriction within the meaning of Article
XI:1 (Ibid., para. 4.9).
598 AG/W/2 and "Information on Measures Affecting Trade" in the
series AG/FOR/�
599 Reports of Committee II - Programme for expansion of
international trade - Agricultural protection: Second Report, BISD 9S/110, 116
(paragraph 13(b)); Third Report, BISD 10S/135, 137 (Committee's "General
Findings", at paragraph 6); Report of Committee II on the consultation with the
European Economic Community - L/1910 ( "Technical Discussion" of variable levy
and import reference prices at pp.5 to 33 - report adopted 16 November 1962:
SR.20/12). Agriculture Committee (1967-1973): COM.AG/W/68/Add.3 and COM.AG/W/84
and Addenda thereto ("Import Measures -Variable Levies and Other Special
Charges"). Committee on Trade in Agriculture (1983-1986): AG/W/2 and AG/FOR/REV
- country by country series - "Information on Measures Affecting Trade";
AG/W/12, paras. 22 to 31.
600 The international markets used for the calculation of the PBS
are, according to Chile's response to questions 9(c) and (e) of the Panel, Hard
Red Winter No. 2 on the Kansas Exchange, f.o.b Gulf, for wheat, and Crude Soya
Bean Oil on the Chicago Exchange, f.o.b. Illinois.
601 Chile's first submission, para. 15(h).
602 With respect to wheat, these "markets of concern" include
Argentina, Australia, and Canada. Chile's response to question 9(c) of the
Panel.
603 Chile's response to question 9(d) of the Panel.
604 Chile's response to question 10(e) of the Panel. However, in
contrast to this response, in its comments on the draft descriptive part of this
report, Chile requested the following text to be inserted:
The reference price is published weekly on the webpage of
the Chilean Customs Service. It is also distributed to all Chilean Customs
branches and Customs Chambers (formed by Customs Agents) through official
communications.* [a newly inserted footnote referred to www.aduana.cl.]
Nowhere in its submissions or answers did Chile provide this
information. Argentina, however, appears to confirm that the daily Reference
Prices are currently available on the referenced website, in a footnote to the
Panel's last question to Argentina (see Argentina's response to question 53 of
the Panel). We have no means of knowing, though, as of when this information
would have been made available through the internet.
605 Article 12 of Law 18.525.
606 Chile's response to question 9(f) of the Panel. Emphasis
added.
607 In its response to the Panel's question regarding this
matter, Chile has indicated that the import price can nevertheless go
below the lower threshold in two instances. First, when international freight
costs decrease sharply. Second, when the import price is lower than the
Reference Price. This reply by Chile, however, does not invalidate our view that
the lower threshold operates generally as a minimum import price. First, we had
asked Chile whether "goods [have] entered the Chilean market at prices below the
lower end of price band", and, if so, "to identify as many instances as
possible, and provide supporting documentation" (Question 46). Chile, however,
has not provided us with any such evidence. Second, Chile's reply to Question 46
refers to two hypothetical instances which merely confirm that the purpose of
the measure is to function as a type of minimum import price and that this
measure, if implemented "correctly", in fact operates that way. The first
scenario results only from the requirement of Article 12 of Law 18.525 that
freight costs be estimated. If Chilean authorities make a wrong estimation, it
appears possible that the actual c.i.f price might be a little lower than the
lower PBS threshold. This scenario, however, is contingent upon the Chilean
authorities themselves not adequately making the estimation required by law. The
second scenario would only arise either if Chilean authorities fail to identify
the lowest f.o.b. price on the markets of concern, or in the equally marginal
hypothesis that an exporter from a market other than those of concern to Chile
would export to Chile at a price below the Reference Price. Exporters from
markets of concern to Chile cannot, by definition, undercut the lowest price set
by themselves.
608 Chile has stated that the total applied duties exceeded the
bound rate only "on occasion", and that the circumstances leading to this
exceeding of its bound rate were of "an extraordinary nature". See para. 4.9 of
our report. In such exceptional instances, it is possible that the imported
product comes in at a total import cost below the lower threshold of the PBS.
However, even then, a cap at any level, whether it be 80, 50 or 31.5 per cent
may ameliorate the inhibition of the transfer of world market prices into the
Chilean market which results from the PBS, but it cannot eliminate it.
609 This can be expressed mathematically in the following way:
Where Imp = Import price; CIF = c.i.f. price; PB = lower
threshold of the Price Band; RP = Reference Price; r = applied ad valorem
rate; (PB - RP) = Price Band duties:
(a) Imp = CIF + (PB - RP) + (CIF x r)
(b) Imp + RP = CIF + PB + (CIF x r)
(c) CIF �
RP
(d) Therefore, after removing CIF and RP from the equation:
Imp �
PB + (CIF x r)
610 Chile's response to question 10(d) of the Panel.
611 For example, if prices on the international market were
stable or rose during the first four years of the 60 month period, and have
steadily declined during the last year of the 60 month period, to a price level
below the lowest price in any of the first four years, the values corresponding
to that last year would all be discarded in application of the 25 per cent rule.
As a result, if the trend of decreasing prices continues or even simply halts
without rebounding during the period immediately following the 60 month period,
all imports during that period will nevertheless be subject to PBS duties
equalling the difference between current international prices and much higher
international prices of more than a year earlier.
612 See footnote 604.
613 Chile's response to question 43(a) of the Panel.
614 We consider that the fact that the PBS operates symmetrically
by rebating import duties when world prices are relatively high is not a
relevant consideration for the purposes of our examination of whether the PBS is
a measure of the kind prohibited under Article 4.2.
615 See para. 7.24 above.
616 Responses by Argentina and Chile to question 2 of the Panel.
617 We also note in this regard that an earlier draft text of the
Agreement on Agriculture by the Chairman used the phrase "normal customs duties"
("Framework Agreement on Agriculture Reform Programme, Draft Text by the
Chairman", MTN.GNG/NG5/W/170, para. 12). The fact that the drafters of the
Agreement on Agriculture subsequently replaced "normal" with "ordinary" confirms
in our view that the phrase "ordinary customs duties" in Article 4.2 of the
Agreement on Agriculture was drawn from Article II:1(b) of GATT 1994 and
intended to have the same meaning.
618 According to the Report of the Review Session Working Party
on "Schedules and Customs Administration" (L/329, adopted 26 February 1955,
3S/205, 209, para. 7), "[i]t is considered that the language of this sentence [,
the second sentence of Art II:1(b),] is all-inclusive [�]". A WTO panel
considered as "duties or charges of any kind" certain interest charges, costs
and fees. See Panel report on United States - Import Measures on Certain
Products from the European Communities, WT/DS165/R and Add.1, adopted 10
January 2001, as modified by the Appellate Body report, WT/DS165/AB/R. GATT
working parties and panels have considered as "duties or charges of any kind"
certain import surcharges, interest charges and costs in connection with the
lodging of an import deposit, and charges imposed by import monopolies. See
Contracting Parties Decision, French Special Temporary Compensation Tax on
Imports ("France - Compensation Tax "), 17 January 1955, BISD 3S/26;
Panel report, EEC - Programme of Minimum Import Prices, Licences and Surety
Deposits for Certain Processed Fruits and Vegetables ("EEC - Minimum
Import Prices "), adopted 18 October 1978, BISD 25S/68; Panel Report,
Republic of Korea - Restrictions on Imports of Beef - Complaint by Australia,
New Zealand, and the United States ("Korea - Beef "), adopted 7
November 1989, BISD 36S/202. We also note that the Report of the Working Party
on the accession of the Democratic Republic of the Congo states that "revenue
duties", which were levied only on imports, at the border and in addition to the
regular customs duties, were to be considered an "other duty or charge of any
kind" (L/3541, adopted 29 June 1971, paras. 8-10).
619 The New Shorter Oxford English Dictionary (L. Brown, Ed.),
4th edition, at 2018.
620 Collins Spanish-English Dictionary, 14th edition, at 201.
621 Le Petit Robert Dictionnaire de la Langue Fran�aise (J.
Rey-Debove and A. Rey, Eds.), 2nd edition, at 2022.
622 We note that the panel in Canada - Patent Protection of
Pharmaceutical Products ("Canada -Pharmaceutical Patents") was
confronted with an analogous situation when examining the various dictionary
meanings of the term "normal":
As so defined, the term can be understood to refer either
to an empirical conclusion about what is common within a relevant community,
or to a normative standard of entitlement. The Panel concluded that the word
"normal" was being used in Article 30 in a sense that combined the two
meanings.
Panel report, Canada - Pharmaceutical Patents,
WT/DS114/R, adopted 7 April 2000, para. 7.54 in fine.
623 We also note that the Attachment to Annex 5 to the Agreement
on Agriculture ("Guidelines for the Calculation of Tariff Equivalents for the
Specific Purpose Specified in Paragraphs 6 and 10 of this Annex") provides, in
its paragraph 1, that "[t]he calculation of the tariff equivalents, whether
expressed as ad valorem or specific rates, shall be made using �."
624 We do not believe, however, that, conversely, the fact that a
duty ultimately is labelled as an ad valorem or specific duty necessarily
qualifies that duty as an ordinary customs duty. As a matter of fact, quite some
"other duties or charges", registered as such in the "other duties and charges"
column of Members' Schedules, appear to be expressed in specific or ad
valorem terms. Put another way, a duty or charge can be expressed either in
ad valorem or specific terms, but nevertheless not constitute an
"ordinary" customs duty.
625 Chile has stated that the position expressed by the European
Communities "may be correct". Chile's response to question 5 of the Panel.
626 Oral Statement by the European Communities, para. 38 in
fine.
627 Ibid., para. 36 in fine: "[�] measures that are
'ordinary customs duties' in the sense of Article II:1(b), as interpreted by the
Appellate Body [�]". In the preceding paragraphs the European Communities
provided its reading of the Appellate Body report on Argentina - Textiles and
Apparel.
628 Appellate Body report on Argentina - Textiles and Apparel,
para. 46. Emphasis in original.
629 Ibid., para. 50.
630 (original footnote) Preambular paragraph 1.
631 (original footnote) Preambular paragraph 2.
632 (original footnote) Preambular paragraph 3. Emphasis added.
633 (original footnote) Punta del Este Declaration, Ministerial
Declaration on the Uruguay Round, MIN.DEC, 20 September 1986, p. 6.
634 Panel report on Canada - Dairy, paras. 7.25-7-26.
635 Punta del Este Declaration, Ministerial Declaration on the
Uruguay Round, MIN.DEC, 20 September 1986, p. 6. (Emphasis added). We recall
that the objectives of the Punta del Este Declaration are explicitly referenced
in the first tiret of the Preamble to the Agreement on Agriculture.
636 Panel report, Turkey - Restrictions on Imports of Textile
and Clothing Products ("Turkey - Textiles"), WT/DS34/R, adopted 19
November 1999, as modified by the Appellate Body report, WT/DS34/AB/R, paras.
9.63-9.65. Emphasis added.
637 This can include both quantitative restrictions and certain
price-based border measures. See our discussion at para. 7.32 above.
638 In addition, in light of the object and purpose of the
Agreement on Agriculture, we consider that a measure such as the Chilean PBS
may be considerably less amenable to negotiated reduction than an ordinary
customs duty, in particular in the absence of an effective "cap". In the case
before us, Chile has at an advanced stage in the proceedings argued that a
recent legislative amendment constitutes such a "cap" on the Chilean PBS. We do
not need to decide, however, whether or not the Chilean PBS would therefore
become more amenable to progressive reduction, as we consider that several
aspects of the structure and operation of the Chilean PBS quite clearly
distinguish this measure from an ordinary customs duty.
639 It is not a combined duty either, which is a straightforward
ad valorem duty plus a specific duty levied simultaneously. We also note
that, although Chile calls the PBS duty a "specific" duty when the Reference
Price falls below the lower PBS threshold, the applicable PBS rebate is
expressed ad valorem when the Reference Price is higher than the upper
PBS threshold.
640 Chile's response to question 9(e) of the Panel.
641 We also note that Chile uses different markets to determine
the PBS values, on the one hand, and the Reference Price, on the other.
Normally, fluctuations of international prices can be most adequately measured
by making inter-temporal comparisons of prices on one and the same international
market. Although the products to the Chilean PBS are commodities, it cannot be
entirely excluded that the prices observed on the Kansas or Chicago Exchanges
(used for the calculation of the PBS values) are different from those observed
on the "markets of concern to Chile" (used for the calculation of the Reference
Price). Indeed, the evidence before us is that Argentina is often the most
important designated "market of concern to Chile", not the United States.
Consequently, it cannot be entirely excluded that a low Reference Price today
may not be fully reflected in the PBS values 60 months later, faulting the
inter-temporal comparison of international prices.
642 Chile's response to question 4 of the Panel.
643 Chile's response to question 5 of the Panel.
644 European Communities' Oral Statement, para. 38.
645 We note that Chile has invoked Article XIX of GATT 1994 with
respect to Argentina's claims regarding Article II:1(b) of GATT 1994, but that
it has not done so with respect to Argentina's claim under Article 4.2 of the
Agreement on Agriculture.
646 Appellate Body report on EC - Bananas III, para. 155.
647 Appellate Body report, US - Gasoline, WT/DS2/AB/R,
adopted 20 May 1996, at 21.
648 MTN.TNC/W/FA, para. 1 of Part B, Annex 3, Section A, at L.25.
Emphasis added.
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