WORLD TRADE WT/DS2/10
10January 1997
ORGANIZATION(97-0071)
Original: English
UNITED STATES -STANDARDS FOR REFORMULATED
AND CONVENTIONAL GASOLINE
Status Report bytheUnited States
Thefollowing communication, dated 9January 1997, fromthePermanent Mission oftheUnited
StatestothePermanentMissionsofBrazilandVenezuelaandtotheDisputeSettlementBodyiscirculated
attherequest oftheUnited States.
_______________
Status Report Regarding Implementation oftheRecommendations andRulings in
theDispute Regarding United States -Standards forReformulated andConventional Gasoline
Panel report (WT/DS2/R) andAppellate Body report (WT/DS2/AB/R)
On19June1996, theUnited States informed theDispute Settlement Body (“DSB”)ofits
intention tomeetitsobligations under theWTO withrespect tothisdispute. Atthattime, theUnited
States alsoadvised theDSBthata“reasonable period oftime”would berequired tocomplete the
rulemaking process andthatwewould bemeeting withVenezuela andBrazil todiscuss thismatter
further. Since thattimemeetings havebeenheldwithbothparties onnumerous occasions toexplain
therulemaking process andthetimeperiods involved. InJuly1996, theUnited States andthe
Government ofVenezuela reached agreement on15months asareasonable period forimplementation.
Therefore, asprovided forinArticle 21:6oftheUnderstanding onRules andProcedures Governing
theSettlement ofDisputes, thisfirstreport onthestatus ofourimplementation isbeing presented.
TheU.S.Environmental Protection Agency (EPA) hasinitiated aprocess which willexamine
anyandalloptions forcompliance. Thisexamination hasbeenandwillcontinue tobeanopenprocess.
Inevaluating options, akeycriterion willbefullyprotecting public health andtheenvironment.
Tobegintheimplementationprocess,theU.S.EnvironmentalProtectionAgencyissuedanotice,
thatwassigned on20June1996 andpublished inourFederal Register on28June1996, offering all
interested parties anopportunity forinput andsetting outtheconsiderations thatwillguide themand
theissues thatmustbeaddressed. Inparticular, parties wereinvited topropose implementation options
andtoprovide information relevant totheassessment ofoptions. Acopyofthenotice isattached.
Theclosing date forcomments inresponse toEPA’sinvitation forcomment was
26September 1996. Abroad range ofresponses wasreceived frominterested parties, including foreign
refiners, domestic refiners, gasoline marketers, service station dealers, anagricultural association and
regional airmanagement associations. These submissions areavailable forpublic inspection atEPA’s
headquarters inWashington, D.C.. After thesubmissions were received, EPAstaffsynopsized theWT/DS2/10
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various responses andbriefed senior management. Thenextstepintheprocess wasforvarious units
within EPAtoreview andassess allthesubmissions.
Atpresent EPA iscontinuing itsassessment ofsubmissions andisevaluating options for
compliance. These deliberations areamulti-step process, involving several different parts ofEPA
aswellasreview andconsideration byanumber ofmanagement levels.
AttachmentWT/DS2/10
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
40CFR Part80
[FRL-5528-2]
WorldTradeOrganization(WTO)DecisiononGasolineRule(ReformulatedandConventionalGasoline)
61FR33703
DATE: Friday, June28,1996
ACTION: Invitation forPublic Comment.
SUMMARY: EPAisinitiating aprocess toidentify andevaluate anyandalloptions available tomeet
U.S.international obligations, inresponse toarecent decision bytheWorld Trade Organization (WTO).
TheWTO decision concerns oneaspect ofrulesissued under theClean AirActforconventional and
reformulated gasoline. Inparticular itrelates tothebaseline usedinthese programs todetermine the
requirements forimported gasoline. EPA'sgoalistoidentify anyandallfeasible options consistent
withEPA'scommitment tofullyprotect public health andtheenvironment. Comments areinvited
from allinterested parties onthese matters.
DATES: Comments must bereceived onorbefore September 26,1996.
ADDRESSES: Interested parties maysubmit written comments (intriplicate ifpossible) forEPA
consideration. Thecomments aretobeaddressed to:EPAAirandRadiation Docket, Attention: Docket
No.A-96-33, Room M-1500, Mailcode 6102, U.S. EPA, 401MStreet, S.W., Washington, D.C.
20460. Thedocket isopenforpublic inspection from8:00a.m.until5:30p.m.Monday through Friday,
except ongovernmental holidays. Asprovided in40CFR Part2,areasonable feemaybecharged
forcopying docket materials. Should acommenter wishtoprovide confidential business information
toEPA, suchinformation should notbeincluded withtheinformation senttothedocket. Materials
senttothedocket should, however, indicate thatconfidential business information wasprovided to
EPA.
FORFURTHERINFORMATIONCONTACT:KarenSmith,U.S.EPA,401MStreet,S.W.(Mailcode
6406J), Washington, D.C. 20460, telephone (202) 233-9674.
SUPPLEMENTARY INFORMATION: TheWorld Trade Organization recently adopted thereport
ofitsAppellate Body concerning oneaspect ofrulesissued under theClean AirActforconventional
andreformulated gasoline. Thedispute initiated byVenezuela andBrazil involves thebaseline used
tosettheemissions requirements inthese programs forimported gasoline. TheWTO concluded that
EPA'srules inthismatter were inconsistent withU.S.obligations under theGeneral Agreement on
Tariffs andTrade (GATT) because theyunjustifiably discriminated against imported gasoline. Itis
important tonotethattheClean AirActwasnotatissue inthisdispute.
TheU.SGovernment isdisappointed withtheresults ofthisdecision, butisgratified thatit
fully recognized acountry 'sright toadopt appropriate measures toprotect public health andthe
environment. Inaddition, theWTO decision clearly recognizes thatclean airisanexhaustible natural
resource, andthatconservation ofthisresource iscovered bytheprovisions ofArticle XX(g) ofthe
GATT.
EPA isinitiating aprocess toidentify andevaluate alloptions available totheagency in
responding tothisdecision. EPA'sgoalistoidentify anyandallfeasible options consistent withEPA's
commitment tofullyprotect public health andtheenvironment, andatthesame timeconsistent with
theobligations oftheUnited States under theWTO. Before deciding whatcourse totake,EPAintends
tofullyevaluate alloptions identified inthispublic process. Thisinvitation forpublic comment is
designed toinform EPA'sevaluation oftheoptions.WT/DS2/10
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Thefollowing description oftherelevant regulatory provisions andrelated issues isprovided
tohelpthepublic inpreparing comments. Asnoted above, theconventional gasoline program contains
emissions requirements designed toensure thatgasoline doesnotdegrade inquality from1990levels
inways thatwould adversely affect thelevels ofairpollution from motor vehicles. TheClean Air
Actcallsforconventional gasoline produced orimported byarefiner orimporter tostayasclean as
itwasin1990. Seesection 211(k)(8) oftheAct.Tomeetthisrequirement, EPAregulations require
thatdomestic refiners establish abaseline thatreflects thequality ofthegasoline theyproduced in1990.
Theemission requirements forconventional gasoline arekeyed tothese individual baselines. Forthe
conventional gasoline program, see40CFR80.90 -93,80.101(b). Individual baselines playalimited
roleinthereformulatedgasolineprogram.From1995through1997,certainoftheemissionrequirements
forreformulated gasoline areexpressed interms ofindividual baselines. After thatdate, individual
baselines arenotusedintheRFG program. See40CFR 80.41(h), (j).
Based onthelimited ability ofimporters anddomestic blenders todetermine thequality of
thegasoline theyproduced orimported in1990, inalmost allcases theyareassigned thestatutory
baselineinsteadofanindividualbaseline.Thestatutorybaselinewasdesignedtoapproximatethenational
average for1990gasoline quality. There isnoprovision intheregulations under which aforeign refiner
mayestablish anindividual baseline, noraretheyassigned thestatutory baseline. Imported gasoline
isregulatedthroughtheimporter,nottheforeignrefiner,andforeignrefinerymodellinginformation/data
maynotbeusedbyanimporter toestablish animporter baseline.
Therulemaking record fortheconventional andreformulated gasoline program contains
information regarding theenvironmental, cost, verification andenforcement issues associated with
setting thebaseline rulesfordomestic andimported gasoline. Forfurther discussion ofthese matters,
see59FR7716 (February 16,1994); 59FR22800 (May 3,1994).
Onebaseline issue considered during therulemakings noted above involves allowing foreign
refiners topetition EPAforapproval ofanindividual baseline foraforeign refinery. Thisissue was
alsoraised during theWTO dispute settlement proceedings. Inthisrespect, theAppellate Body identified
twoomissions oftheUnited States: (1)theUnited States hadnotsufficiently explored ways of
overcoming itsadministrative concerns withrespect toimported gasoline and(2)theUnited States
hadconsidered thecosts ofcompliance withthestatutory baseline fordomestic refiners buthadnot
adequately considered them forforeign refiners. Itisimportant tonotethatEPAisinviting comment
onallfeasible options thattheagency should consider. Commenters should notlimitthemselves to
consideration ofindividual baselines forforeign refiners. EPAisinterested inevaluating anyalternative
approach thatwould achieve theenvironmental benefits associated withthesegasoline programs while
treating domestic andimported gasoline inamanner consistent withU.S.obligations under theWTO.
Some oftheissues thatarerelevant toindividual baselines andmayalsoberelevant toother
options include thefollowing:
Howwould EPAbeabletoaccurately establish areliable andverifiable individual baseline
foraforeign refiner? Thiswould include consideration ofthetechnical problems associated with
determining thequality andvolume forgasoline imported intotheU.S.fromaforeign refinery in1990,
determining therefinery oforigin forgasoline imported in1990, andconsideration oftheroleof
independent verification inestablishing anaccurate baseline.
How would EPA beabletoadequately monitor compliance andenforce anybaseline
requirements? Thiswould include consideration oftheability toaudit andinspect bothforeign and
domestic facilities, andtheability toenforce against foreign refiners andimporters.WT/DS2/10
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Howwould EPAbeabletoeffectively determine therefinery oforigin ofimported gasoline,
soastodetermine theappropriate baseline toapply totheimported product? Thiswould include
consideration ofthekindoftracking andsegregation needed toensure effective determination ofrefinery
oforigin.
Commentersshouldaddresstheseissuestotheextentrelevanttotheoption(s)theyareaddressing.
Commenters should identify thepotential environmental impacts fromimplementation ofany
suggested option. Forexample, forthose commenters thatmight propose individual baselines, this
would include consideration ofthenumber offoreign refiners thatcould seekandbeabletoestablish
anindividual baseline, theindividual baseline levels thatcould beestablished, thevolume ofimported
gasoline thatcould besubject tosuchabaseline, theareas ofthecountry inwhich thisgasoline would
beused, thelength oftimethataforeign refiner could useanindividual baseline, andtheregulatory
programs inwhich suchabaseline wasallowed, e.g.conventional orreformulated gasoline.1
Inaddition, EPAinvites anyother comments relevant tothetwoissues raised bytheappellate
body initsreport asomissions onthepartoftheUnited States-exploring adequately themeans of
mitigating theadministrative problems identified inEPA'searlier rulemaking, andconsidering the
costs forforeign refiners thatmight result from theuseofthestatutory baseline forimports.
Akeycriterion inevaluating anyoptions presented inresponse tothisnotice willbefully
protecting thepublic health andtheenvironment. Thereformulated andconventional gasoline programs
areimportant components inthestrategy forachieving thatgoal. EPAinvites comment thatwould
allow EPAtobetter quantify orcharacterize potential environmental impacts ofanyoptions proposed
bycommenters, aswellasfeasible options toaddress anysuchpotential impacts.
Asnoted above, EPA'sgoalininviting public comment istoobtain information thatwillhelp
theagency identify anyandallfeasible options consistent withEPA'scommitment tofullyprotect
public health andtheenvironment, andatthesame timeconsistent withtheobligations oftheUnited
States under theWTO. EPArequests thatcommenters provide information andanalysis onthepublic
health andenvironmental impact associated withanyoption presented forconsideration. Commenters
should alsoidentify theeconomic andother impacts associated withanysuggested option, anddiscuss
therelationship oftheoption totheUnited States 'obligations under theWTO.
Dated: June20,1996.
Mary D.Nichols,
Assistant Administrator forAirandRadiation.
[FRDoc. 96-16541 Filed 6-27-96; 8:45am]
BILLING CODE 6560-50-P
1Commenters should beaware thatEPA iscurrently prohibited bylawfrom taking anyfurther action on
itsMay 1994 proposed rulethatwould have allowed theestablishment ofindividual baselines forforeign refiners
foruseinthefederal reformulated gasoline program. Omnibus Consolidated Recissions andAppropriations Act
of1996, Pub. L.No.104-134, section 101(e), 142Cong. Rec. H3922 (daily ed.April 25,1996); 59Fed. Reg.
22800 (May 3,1994).