WT/DS431/R  
WT/DS432/R  
WT/DS433/R  
 
26 March 2014  
(14-1756)  Page: 1/257  
  Original: English  
 
 CHINA – MEASURES RELATED TO THE EXPORTATION OF  
RARE EARTHS, TUNGSTEN, AND MOLYBDENUM  
REPORTS OF THE PANEL 
 
   
 
  
 
  
 
   
 
  
 
  
 
   
 
  
Note by the Secretariat: 
 
These Panel Reports are in the form of a single document constituting three separate Panel 
Reports: WT/DS431/R, WT/DS432/R and WT/DS433/R. The cover page, preliminary pages, 
sections 1 through 7 are common to the three Repo rts. The page header throughout the document 
bears the three document symbols WT/DS431/R, WT/DS432/R and WT/DS433/R, with the following exceptions: section 8 on pages USA-252 and USA-253, which bears the document 
symbol for and contains the Panel's conclusions and recommendations in the Panel Report 
WT/DS431/R; section 8 on pages EU-254 and EU-255 contains the Panel's conclusions and recommendations in the Panel Report WT/DS432/R; and section 8 on pages JPN-256 and JPN-257, 
which bears the document symbol for and contains the Panel's conclusions and recommendations 
in the Panel Report WT/DS433/R. The annexes, which are a part of the Panel Reports, are circulated in a separate document (WT/DS431/R/Add.1, WT/DS432/R/Add.1 and 
WT/DS433/R/Add.1). 
 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 2 - 
 
  TABLE OF CONTENTS 
 
1  INTRODUC TION ................................................................................................ 21  
1.1  Complaints by the United Stat es, the European Un ion, and Japan .............................. 21 
1.2  Panel establishm ent and comp osition ..................................................................... 21 
1.3  Panel proceedings ............................................................................................... 21 
1.3.1  General ............................................................................................................. 21 
1.3.2  Request for enhanc ed third-party rights ................................................................. 22 
1.3.3  Request for a preliminary ruling on the availability of a defence under Article XX 
of the GATT 1994 for a violation of Paragrap h 11.3 of China's Ac cession Pr otocol ......... 22 
2  FACTUAL ASPECTS ............................................................................................ 23  
2.1  The products at issue .......................................................................................... 23 
2.2  The measur es at issue ......................................................................................... 24 
2.2.1  Export duties ...................................................................................................... 24 
2.2.2  Export quotas ..................................................................................................... 24 
2.2.3  Export quota admini stration and allocation ............................................................. 25 
3  PARTIES' REQUESTS FOR FI NDINGS AND RECOMMENDATIONS ........................ 30  
4  ARGUMENTS OF THE PARTIES ........................................................................... 31  
5  ARGUMENTS OF THE THIRD PARTIES ................................................................ 31  
6  INTERIM REVIEW ............................................................................................. 31  
6.1  Comments on the Pane l's interim findings .............................................................. 32 
6.1.1  General ............................................................................................................. 32 
6.1.2  Specific comments .............................................................................................. 34 
6.1.2.1  Export duties ...................................................................................................... 34 
6.1.2.2  Export quotas ..................................................................................................... 34 
6.2  Allegations of violation of conf identiality of the Interim Re ports ................................. 36 
7  FINDIN GS ......................................................................................................... 36  
7.1  Request for enhanced  third-party rights ................................................................. 36 
7.2  Evidence submi tted on 17 July 2013 ...................................................................... 39 
7.3  Export duties ...................................................................................................... 43 
7.3.1  Introduction and claim under Paragr aph 11.3 of China's A ccession Protocol ................. 43 
7.3.1.1  The obligation in Paragraph 11.3 of China's Acce ssion Prot ocol .................................. 43 
7.3.1.2  The meas ures at issue ......................................................................................... 44 
7.3.1.3  Conclusion ......................................................................................................... 47 
7.3.2  China's defence under Article XX(b) of the GATT 1994 .............................................. 47 
7.3.2.1  Whether the obligation in Paragraph 11.3 of China's Accession Protocol is 
subject to the general exceptions  in Article XX of the GATT 1994 ............................... 48 
7.3.2.2  The application of Article XX(b) of the GATT 1994 with respect to China's export 
duties ................................................................................................................ 72 
7.3.3  Overall conclusion on clai ms relating to export duties ............................................... 83 
7.4  Export quotas ..................................................................................................... 83 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 3 - 
 
  7.4.1  Introduction and Claims of viol ation of Article XI:1 of the GATT 1994 and 
Paragraphs 162 and 165 of Ch ina's Working Pa rty Report ......................................... 83 
7.4.1.1  Burden of proof and manageme nt of the evidence by the Panel ................................. 84 
7.4.1.2  Description of Chin a's export quot a measur es ......................................................... 85 
7.4.1.3  Application of  the quota system ............................................................................ 86 
7.4.1.4  Series of measures .............................................................................................. 89 
7.5  China's defence under Article XX(g) of the GATT 1994 .............................................. 90 
7.5.1  Intr oducti on ....................................................................................................... 90 
7.5.2  Interpretation of Ar ticle XX(g) of the GATT 1994 ..................................................... 91 
7.5.2.1  Meaning of "relating to the conser vation of exhaustible natural reso urces" .................. 91 
7.5.2.2  Meaning of "made effective in co njunction with restrictions on domestic 
production or consumption" ................................................................................ 101  
7.5.2.3  The "even-hand edness" requ irement ................................................................... 105  
7.5.3  Interpretation of the chapea u of Article XX of the GATT 1994 .................................. 110  
7.5.3.1  Intr oduction  ..................................................................................................... 110  
7.6  Application of Article XX(g) to Ch ina's export quota on  rare earths ........................... 116  
7.6.1  Introd uction ..................................................................................................... 116  
7.6.2  Application of subparagraph (g) to  China's rare earth export quota .......................... 116  
7.6.2.1  First part: whether China's export quota on rare earths "relates to the 
conservation of exhaustibl e natural reso urces" ...................................................... 116  
7.6.2.2  Second part: whether China's export quota on rare earths is made effective in 
conjunction with restrictions on domestic production or consumption ........................ 143  
7.6.2.3  Conclusion on subparagraph (g) .......................................................................... 166  
7.6.3  Application of the chapeau of Article XX  to China's export quot a on rare earths .......... 169  
7.6.3.1  Whether China has demonstrated that its export quota on rare earths was not 
applied in a manner that constituted arbitrary or unjustifiable discrimination or a disguised restriction on international trade............................................................ 169
 
7.6.3.2  Whether the rationale for the discrimination or the disguised restriction on trade 
created by the application of China's export quota on rare earths is concerned with conservation .............................................................................................. 178
 
7.6.3.3  WTO-consiste nt alternatives ............................................................................... 179  
7.6.3.4  Conclusion ....................................................................................................... 183  
7.6.4  Overall conclusion on China's export quota on rare earths ....................................... 183  
7.7  Application of Article XX(g) to China's export quot a on tung sten .............................. 183  
7.7.1  Introd uction ..................................................................................................... 183  
7.7.2  Application of subparagraph (g) to China's export quota on tungsten ........................ 183  
7.7.2.1  First part: whether China's export quota on tungsten relates to the conservation 
of exhaustible natural resources .......................................................................... 183  
7.7.2.2  Second part: whether China's export quota on tungsten is made effective in 
conjunction with restrictions on domestic production or consumption ........................ 192  
7.7.2.3  Even-handedness .............................................................................................. 205  
7.7.2.4  Conclusion ....................................................................................................... 206  
7.7.3  Application of the chapeau of Article XX to China's export quota on tungsten ............. 207  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 4 - 
 
  7.7.3.1  Whether China has demonstrated that its export quota on tungsten was not 
applied in a manner that constitutes arbitrary or unjustifiable discrimination or a disguised restriction on international trade............................................................ 207
 
7.7.3.2  Whether the rationale for the discrimination or the disguised restriction on 
international trade created by the application of China's export quota on 
tungsten is concerned with conservation .............................................................. 210  
7.7.3.3  WTO-consiste nt alternatives ............................................................................... 211  
7.7.3.4  Conclusion ....................................................................................................... 212  
7.7.4  Overall conclusion on Chin a's export quota on tungst en .......................................... 212  
7.8  Application of Article XX(g) to China's export quota on molybdenum ......................... 212  
7.8.1  Application of subparagraph (g) to China's export quota on molybdenum .................. 212  
7.8.1.1  Intr oduction  ..................................................................................................... 212  
7.8.1.2  First part: Whether China's export quota on molybdenum "relates to the 
conservation of exhaustibl e natural reso urces" ...................................................... 212  
7.8.1.3  Second part: whether China's export quota on molybdenum is made effective in 
conjunction with restrictions on domestic production or consumption ........................ 218  
7.8.1.4  Even-handedness .............................................................................................. 228  
7.8.1.5  Conclusion ....................................................................................................... 228  
7.8.2  Application of the chapeau of Arti cle XX of the GATT 1994 to China's export 
quota on mo lybdenum ....................................................................................... 230  
7.8.2.1  Whether China has demonstrated that its export quota on molybdenum was not 
applied in a manner that constitutes arbitrary or unjustifiable discrimination or a 
disguised restriction on international trade............................................................ 230  
7.8.2.2  Whether the rationale for the discrimination or the disguised restriction on trade 
created by the application of China's export quota on molybdenum is concerned 
with conservation .............................................................................................. 232  
7.8.2.3  WTO-consiste nt alternatives ............................................................................... 233  
7.8.2.4  Conclusion ....................................................................................................... 234  
7.8.3  Overall conclusion on Chin a's export quota on molybdenum .................................... 234  
7.9  Trading rights ................................................................................................... 234  
7.9.1  Introd uction ..................................................................................................... 234  
7.9.2  Claims under Paragraph 5.1 of China's Accession Protocol and Paragraphs 83 
and 84 of China's Work ing Party Report ............................................................... 235  
7.9.2.1  The obligations in Paragraph 5.1 of China's Accession Protocol and 
Paragraphs 83 and 84 of China's Working Party Report ........................................... 236  
7.9.2.2  The measur es at issue ....................................................................................... 238  
7.9.2.3  Conclusion ....................................................................................................... 243  
7.9.3  Defence under Articl e XX(g) of the GATT 1994 ...................................................... 243  
7.9.3.1  Whether China's commitments in Paragraphs 83 and 84 are subject to the 
general exceptions in Article XX because these commitments like those in Paragraph 5.1 are qualified by Chin a's right to regu late tr ade .................................. 243
 
7.9.3.2  Whether the breaches of China's trading rights commitments are justified 
pursuant to Article XX( g) of the GATT 1994  .......................................................... 247  
7.9.3.3  Conclusion ....................................................................................................... 249  
7.9.4  The European Union's additional claim under Paragraph 84(b) of China's 
Working Party Report ........................................................................................ 250  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 5 - 
 
  7.9.4.1  Intr oduction  ..................................................................................................... 250  
7.9.4.2  Obligation under Paragraph 84(b) of China's Working Party Report ........................... 250  
7.9.4.3  The meas ure at issue ........................................................................................ 250  
7.9.4.4  Conclusion ....................................................................................................... 251  
8  CONCLUSIONS AND RECOMMENDAT IONS ....................................................... 252  
8.1  Complaint by the Unit ed States (D S431) ......................................................... US-252  
8.1.1  Conclusions ................................................................................................. US-252  
8.1.2  Nullification an d impairment .......................................................................... US-253  
8.1.3  Recommendations ........................................................................................ US-253  
8.2  Complaint by the Euro pean Union (D S432) ...................................................... EU-254 
8.2.1  Conclusions ................................................................................................. EU-254  
8.2.2  Nullification an d impairment .......................................................................... EU-255  
8.2.3  Recommendations ........................................................................................ EU-255  
8.3  Complaint by  Japan (D S433)  ........................................................................ JPN-256 
8.3.1  Conclusions ................................................................................................ JPN-256 
8.3.2  Nullificatio n and impairment ......................................................................... JPN-257 
8.3.3  Recommendations ....................................................................................... JPN-257 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 6 - 
 
  LIST OF ANNEXES 
ANNEX A 
WORKING PROCEDURES OF THE PANEL 
Contents Page 
Annex A-1 Working Procedures of the Panel A-2 
 
 
ANNEX B 
ARGUMENTS OF THE PARTIES 
Contents Page 
Annex B-1 Integrated executive summary of the arguments of the United States B-2 
Annex B-2  Integrated executive summary of the arguments of the European Union  B-24 
Annex B-3  Integrated executive summary of the arguments of Japan  B-47 
Annex B-4 Integrated executive summary of the arguments of China B-68 
 
 
ANNEX C 
ARGUMENTS OF THIRD PARTIES 
Contents Page 
Annex C-1 Integrated executive summary  of the arguments of Argentina C-2 
Annex C-2 Integrated executive summary of the arguments of Australia C-4 
Annex C-3 Integrated executive summary of the arguments of Brazil C-7 
Annex C-4 Integrated executive summary of the arguments of Canada C-8 
Annex C-5 Integrated executive summary of the arguments of Colombia C-11 
Annex C-6 Integrated executive summary of the arguments of the Republic of Korea C-13 
Annex C-7 Integrated executive summary of the arguments of Norway C-15 
Annex C-8 Integrated executive summary of the arguments of Peru C-16 
Annex C-9 Integrated executive summary of th e arguments of the Russian Federation C-18 
Annex C-10 Integrated executive summary of the argu ments of the Kingdom of Saudi Arabia C-20 
Annex C-11 Integrated executive summary of the arguments of Turkey C-23 
 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 7 - 
 
  CASES CITED IN THESE REPORTS 
Short Title Full Case Title and Citation 
Argentina – Hides and 
Leather Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and 
Import of Finished Leather , WT/DS155/R and Corr.1, adopted 
16 February 2001, DSR 2001:V, 1779 
Argentina – Textiles and 
Apparel Appellate Body Report, Argentina – Measures Affect ing Imports of Footwear, 
Textiles, Apparel and Other Items , WT/DS56/AB/R and Corr.1, adopted 
22 April 1998, DSR 1998:III, p. 1003 
Argentina – Textiles and 
Apparel Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, 
Apparel and Other Items , WT/DS56/R, adopted 22 April 1998, as modified by 
Appellate Body Report WT/D S56/AB/R, DSR 1998:III, p. 1033 
Brazil – Desiccated Coconut Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut , 
WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, p. 167 
Brazil – Desiccated Coconut Panel Report, Brazil – Measures Affecting Desiccated Coconut , WT/DS22/R, 
adopted 20 March 1997, upheld by Appellate Body Report WT/DS22/AB/R, DSR 1997:I, p. 189 
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded 
Tyres , WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, 1527 
Brazil – Retreaded Tyres Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres , 
WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body Report WT/DS332/AB/R, DSR 2007:V, 1649 
Canada – Aircraft Appellate Body Report, Canada – Measures Affectin g the Export of Civilian 
Aircraft , WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377 
Canada – Aircraft Panel Report, Canada – Measures Affecting th e Export of Civilian Aircraft , 
WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report WT/DS70/AB/R, DSR 1999:IV, p. 1443 
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive 
Industry , WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, 
DSR 2000:VI, 2985 
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry , 
WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, 3043 
Canada – Renewable Energy / 
Canada – Feed-in Tariff 
Program  Appellate Body Reports, Canada – Certain Measures  Affecting the Renewable 
Energy Generation Sector / Canada – Measures Relating to the Feed-in Tariff 
Program , WT/DS412/AB/R / WT/DS426/AB/R, adopted 24 May 2013 
Canada – Renewable Energy / 
Canada – Feed-in Tariff Program Panel Reports, Canada – Certain Measures Affecting the Renewable Energy 
Generation Sector / Canada – Measures Relating to the Feed-in Tariff Program , WT/DS412/R / WT/DS426/R / and Add.1, adopted 24 May 2013, as 
modified by Appellate Body Reports WT/DS412/AB/R / WT/DS426/AB/R  
Chile – Alcoholic Beverages Appellate Body Report, Chile – Taxes on Alcoholic Beverages , WT/DS87/AB/R, 
WT/DS110/AB/R, adopted 12 January 2000, DSR 2000:I, 281 
Chile – Alcoholic Beverages Panel Report, Chile – Taxes on Alcoholic Beverages , WT/DS87/R, 
WT/DS110/R, adopted 12 January 2000, as modified by Appellate Body Report WT/DS87/AB/R, WT/DS110/AB/R, DSR 2000:I, 303 
China – Auto Parts Appellate Body Reports, China – Measures Affectin g Imports of Automobile 
Parts, WT/DS339/AB/R / WT/DS340/AB /R / WT/DS342/AB/R, adopted 
12 January 2009, DSR 2009:I, 3 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 8 - 
 
  Short Title Full Case Title and Citation 
China – Auto Parts Panel Reports, China – Measures Affecting Im ports of Automobile Parts , 
WT/DS339/R / WT/DS340/R / WT/DS342/R / and Add.1 and Add.2, adopted 
12 January 2009, upheld (WT/DS339/R) and as modified (WT/DS340/R / WT/DS342/R) by Appellate Body Repo rts WT/DS339/AB/R / WT/DS340/AB/R 
/ WT/DS342/AB/R, DSR 2009:I, 119-DSR 2009:II, 625 
China – Publications and 
Audiovisual Products Appellate Body Report, China –  Measures Affecting Trading Rights and 
Distribution Services for Certain Publ ications and Audiovisual Entertainment 
Products , WT/DS363/AB/R, adopted 19 January 2010, DSR 2010:I, 3 
China – Publications and 
Audiovisual Products Panel Report, China –  Measures Affecting Trading Rights and Distribution 
Services for Certain Publications and Audiovisual Entertainment Products , 
WT/DS363/R and Corr.1, adopted 19 January 2010, as modified by Appellate Body Report WT/DS363/AB/R, DSR 2010:II, 261 
China – Raw Materials Appellate Body Reports, China – Measures Related to the Exportation of 
Various Raw Materials , WT/DS394/AB/R / WT/DS395/AB/R / 
WT/DS398/AB/R, adopted 22 February 2012 
China – Raw Materials  Panel Reports, China – Measures Related to the Exportation of Various Raw 
Materials , WT/DS394/R / WT/DS395/R / WT/DS398/R / and Corr.1, adopted 
22 February 2012, as modified by Appellate Body Reports WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R 
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices and Restrictions on Ports of Entry , 
WT/DS366/R and Corr.1, adopted 20 May 2009, DSR 2009:VI, p. 2535 
Dominican Republic – 
Safeguard Measures Panel Report, Dominican Republic – Safeguard Measures on Imports of 
Polypropylene Bags and Tubular Fabric , WT/DS415/R, WT/DS416/R, 
WT/DS417/R, WT/DS418/R, adopted 22 February 2012 
EC – Approval and Marketing 
of Biotech Products Panel Reports, European Communities – Measures  Affecting the Approval and 
Marketing of Biotech Products , WT/DS291/R / WT/DS292/R / WT/DS293/R, 
Add.1 to Add.9, and Corr.1, adopted 21 November 2006, DSR 2006:III, 
p. 847 
EC – Asbestos  Appellate Body Report, European Communities – Measures Affecting Asbestos 
and Asbestos-Containing Products , WT/DS135/AB/R, adopted 5 April 2001, 
DSR 2001:VII, p. 3243 
EC – Asbestos Panel Report, European Communitie s – Measures Affecting Asbestos and 
Asbestos-Containing Products , WT/DS135/R and Add.1, adopted 5 April 2001, 
as modified by Appellate Body Report WT/DS135/AB/R, DSR 2001:VIII, 
p. 3305 
EC – Bananas III Appellate Body Report, European Communities – Regi me for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 
1997, DSR 1997:II, 591 
EC – Bananas III (Ecuador) Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Ecuador , WT/DS27/R/ECU, adopted 
25 September 1997, as modified by Appellate Body Report WT/DS27/AB/R, 
DSR 1997:III, p. 1085 
EC – Bananas III 
(Article 21.5 – US) Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article 21.5 of the DSU by the United States , WT/DS27/RW/USA and Corr.1, adopted 22 December 2008, upheld by 
Appellate Body Report WT/DS27/AB/RW/USA, DSR 2008:XIX, p. 7761 
EC – Chicken Cuts Appellate Body Report, European  Communities – Customs Classification of 
Frozen Boneless Chicken Cuts , WT/DS269/AB/R, WT/DS286/AB/R, adopted 
27 September 2005, and Corr.1, DSR 2005:XIX, p. 9157 
EC – Chicken Cuts (Brazil) Panel Report, European  Communities – Customs Classification of Frozen 
Boneless Chicken Cuts, Complaint by Brazil , WT/DS269/R, adopted 
27 September 2005, as modified by Appellate Body Report WT/DS269/AB/R, WT/DS286/AB/R, DSR 2005:XIX, p. 9295 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 9 - 
 
  Short Title Full Case Title and Citation 
EC – Computer Equipment Appellate Body Report, European Communities – Customs Classification of 
Certain Computer Equipment , WT/DS62/AB/R, WT/DS67/AB/R, 
WT/DS68/AB/R, adopted 22 June 1998, DSR 1998:V, p. 1851 
EC – Computer Equipment Panel Report, European Communities – Customs Classification of Certain 
Computer Equipment , WT/DS62/R, WT/DS67/R, WT/DS68/R, adopted 
22 June 1998, as modified by Appellate Body Report WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, DSR 1998:V, p. 1891 
EC – Export Subsidies on 
Sugar Appellate Body Report, European Communities – Ex port Subsidies on Sugar , 
WT/DS265/AB/R, WT/DS266/AB/R, WT /DS283/AB/R, adopted 19 May 2005, 
DSR 2005:XIII, p. 6365 
EC – Export Subsidies on 
Sugar (Australia) Panel Report, European Communities – Export Subsidies on Sugar, Complaint 
by Australia , WT/DS265/R, adopted 19 May 2005, as modified by Appellate 
Body Report WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, DSR 2005:XIII, p. 6499 
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, 
DSR 1998:I, p. 135 
EC – Hormones (Canada) Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), 
Complaint by Canada , WT/DS48/R/CAN, adopted 13 February 1998, as 
modified by Appellate Body Repo rt WT/DS26/AB/R, WT/DS48/AB/R, 
DSR 1998:II, p. 235 
EC and certain member 
States – Large Civil Aircraft Appellate Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/AB/R, adopted 
1 June 2011, DSR 2011:I, p. 7 
EC and certain member 
States – Large Civil Aircraft Panel Report, European Communities and Certai n Member States – Measures 
Affecting Trade in Large Civil Aircraft , WT/DS316/R, adopted 1 June 2011, as 
modified by Appellate Body Report, WT/DS316/AB/R, DSR 2011:II, p. 685 
EC – Sardines Appellate Body Report, European Communities – Trade Description of 
Sardines , WT/DS231/AB/R, adopted 23 Octo ber 2002, DSR 2002:VIII, 3359 
EC – Sardines Panel Report, European Communities – Trade Description of Sardines , 
WT/DS231/R and Corr.1, adopted 23 October 2002, as modified by Appellate Body Report WT/DS231/AB/R, DSR 2002:VIII, 3451 
EC – Seal Products Panel Reports, European Communities – Measures Prohibiting the Importation 
and Marketing of Seal Products , WT/DS400/R / WT/DS401/R and Add.1, 
circulated on 25 November 2013 
EC – Tariff Preferences Appellate Body Report, European Communities – Conditions for the Granting 
of Tariff Preferences to Developing Countries , WT/DS246/AB/R, adopted 20 
April 2004, DSR 2004:III, p. 925 
EC – Tariff Preferences Panel Report, European Communities – Conditions  for the Granting of Tariff 
Preferences to Developing Countries , WT/DS246/R, adopted 20 April 2004, as 
modified by Appellate Body Report WT/DS246/AB/R, DSR 2004:III, p. 1009 
Dominican Republic – 
Safeguard Measures Panel Report, Dominican Republic – Safeguard Measures on Imports of 
Polypropylene Bags and Tubular Fabric , WT/DS415/R, WT/DS416/R, 
WT/DS417/R, WT/DS418/R, adopted 22 February 2012 
India – Quantitative 
Restrictions Appellate Body Report, India – Quantitative Rest rictions on Imports of 
Agricultural, Textile and Industrial Products , WT/DS90/AB/R, adopted 
22 September 1999, DSR 1999:IV, 1763 
India – Quantitative 
Restrictions Panel Report, India – Quantitative Restrictions on Imports of Agricultural, 
Textile and Industrial Products , WT/DS90/R, adopted 22 September 1999, 
upheld by Appellate Body Report WT/DS90/AB/R, DSR 1999:V, 1799 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 10 - 
 
  Short Title Full Case Title and Citation 
Japan – Film Panel Report, Japan – Measures Affecting Cons umer Photographic Film and 
Paper , WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, 1179 
Japan – Semi-Conductors  GATT Panel Report, Japan – Trade in Semi-Conductors , L/6309, adopted 
4 May 1988, BISD 35S, p. 116 
Korea – Various Measures on 
Beef Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled 
and Frozen Beef , WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 
2001, DSR 2001:I, 5 
Korea – Various Measures on 
Beef Panel Report, Korea – Measures Affecting Import s of Fresh, Chilled and Frozen 
Beef, WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by 
Appellate Body Report WT/DS161/AB/R, WT/DS169/AB/R, DSR 2001:I, 59 
Korea – Alcoholic Beverages Appellate Body Report, Korea – Taxes on Alcoholic Beverages , 
WT/DS75/AB/R, WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, 
p. 3 
Korea – Alcoholic Beverages Panel Report, Korea – Taxes on Alcoholic Beverages , WT/DS75/R, 
WT/DS84/R, adopted 17 February 1999, as modified by Appellate Body 
Report WT/DS75/AB/R, WT/DS84/AB/R, DSR 1999:I, p. 44 
Thailand – Cigarettes 
(Philippines) Appellate Body Report, Thailand – Customs and Fiscal  Measures on Cigarettes 
from the Philippines , WT/DS371/AB/R, adopted 15 July 2011, DSR 2011:IV, 
p. 2203 
Thailand – Cigarettes 
(Philippines) Panel Report, Thailand – Customs and Fiscal Me asures on Cigarettes from the 
Philippines , WT/DS371/R, adopted 15 July 2011, as modified by Appellate 
Body Report WT/DS371/AB/R, DSR 2011:IV, p. 2299 
Turkey – Textiles Appellate Body Report, Turkey – Restrictions on Imports of Textile and 
Clothing Products , WT/DS34/AB/R, adopted 19 November 1999, 
DSR 1999:VI, 2345 
Turkey – Textiles Panel Report, T u r k e y  –  R e s t r i c t i o n s  o n  I m p o rts of Textile and Clothing 
Products , WT/DS34/R, adopted 19 November 1999, as modified by Appellate 
Body Report WT/DS34/AB/R, DSR 1999:VI, 2363 
US – 1916 Act Appellate Body Report, United States – Anti-Dumping Act of 1916 , 
WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, 
DSR 2000:X, p. 4793 
US – 1916 Act (EC) Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the 
European Communities , WT/DS136/R and Corr.1, adopted 26 September 
2000, upheld by Appellate Body Report WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, p. 4593 
US – 1916 Act (Japan) Panel Report, United States – Anti-Dumping Act of 1916, Complaint by Japan , 
WT/DS162/R and Add.1, adopted 26 September 2000, upheld by Appellate 
Body Report WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, p. 4831 
  
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain 
Corrosion-Resistant Carbon Stee l Flat Products from Germany , 
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 
p. 3779 
US – Carbon Steel Panel Report, United States – Countervailing Duties on Certain 
Corrosion-Resistant Carbon Stee l Flat Products from Germany , WT/DS213/R 
and Corr.1, adopted 19 December 2002, as modified by Appellate Body Report WT/DS213/AB/R, DSR 2002:IX, p. 3833 
US – Clove Cigarettes Appellate Body Report, United States – Measures Affecting the Production and 
Sale of Clove Cigarettes , WT/DS406/AB/R, adopted 24 April 2012 
US – Clove Cigarettes Panel Report, United States – Measures Affecting the Production and Sale of 
Clove Cigarettes , WT/DS406/R, adopted 24 April 2012, as modified by WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 11 - 
 
  Short Title Full Case Title and Citation 
Appellate Body Report WT/DS406/AB/R 
US – COOL Appellate Body Reports, United States – Certain Country of Origin Labelling 
(COOL) Requirements , WT/DS384/AB/R / WT/DS386/AB/R, adopted 23 July 
2012 
US – COOL Panel Reports, United States – Certain Country  of Origin Labelling (COOL) 
Requirements , WT/DS384/R / WT/DS386/R, adopted 23 July 2012, as 
modified by Appellate Body Reports WT/DS384/AB/R / WT/DS386/AB/R 
US – Continued Suspension Appellate Body Report, United States – Continued Suspension of Obligations 
in the EC – Hormones Dispute , WT/DS320/AB/R, adopted 14 November 2008, 
DSR 2008:X, 3507 
US – Continued Suspension Panel Report, United States – Continued Suspension of Obligations in the EC – 
Hormones Dispute , WT/DS320/R, adopted 14 November 2008, as modified by 
Appellate Body Report WT/DS320/AB/R, DSR 2008:XI, 3891-DSR 2008:XIII, 4913 
US – Continued Zeroing Appellate Body Report, United States – Continued Ex istence and Application of 
Zeroing Methodology , WT/DS350/AB/R, adopted 19 February 2009, 
DSR 2009:III, 1291 
US – Continued Zeroing Panel Report, United States – Continued Existence and Application of Zeroing 
Methodology , WT/DS350/R, adopted 19 February 2009, as modified as 
Appellate Body Report WT/DS350/ AB/R, DSR 2009:III, 1481- DSR 2009:IV, 
1619 
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 
p. 1619 
US – FSC Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" , 
WT/DS108/R, adopted 20 March 2000, as modified by Appellate Body Report WT/DS108/AB/R, DSR 2000:IV, p. 1675 
US – FSC 
(Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 
p. 55 
US – FSC 
(Article 21.5 – EC) Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" 
– Recourse to Article 21.5 of the DSU by the European Communities , 
WT/DS108/RW, adopted 29 January 2002, as modified by Appellate Body Report WT/DS108/AB/RW, DSR 2002:I, p. 119 
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border 
Supply of Gambling and Betting Services , WT/DS285/AB/R, adopted 
20 April 2005, DSR 2005:XII, p. 5663 (Corr.1, DSR 2006:XII, p. 5475) 
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of 
Gambling and Betting Services , WT/DS285/R, adopted 20 April 2005, as 
modified by Appellate Body Report WT /DS285/AB/R, DSR 2005:XII, p. 5797 
US – Gasoline Appellate Body Report, United States – Standard s for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 
US – Gasoline Panel Report, United States – Standards for Reformulated and Conventional 
Gasoline , WT/DS2/R, adopted 20 May 1996, as  modified by Appellate Body 
Report WT/DS2/AB/R, DSR 1996:I, 29 
US – Large Civil Aircraft (2nd 
complaint) Appellate Body Report, United States – Measures Affecting Trade in Large 
Civil Aircraft (Second Complaint) , WT/DS353/AB/R, adopted 23 March 2012 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 12 - 
 
  Short Title Full Case Title and Citation 
US – Large Civil Aircraft (2nd 
complaint) Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) , WT/DS353/R, adopted 23 March 2012, as modified by 
Appellate Body Report WT/DS353/AB/R 
US – Oil Country Tubular 
Goods Sunset Reviews Appellate Body Report, United States – Sunset Reviews of Anti-Dumping 
Measures on Oil Country Tubular Goods from Argentina , WT/DS268/AB/R, 
adopted 17 December 2004, DSR 2004:VII, 3257 
US – Oil Country Tubular 
Goods Sunset Reviews Panel Report, United States – Sunset Reviews of Anti-Dumping Measures on 
Oil Country Tubular Goods from Argentina , WT/DS268/R and Corr.1, adopted 
17 December 2004, as modified by Appellate Body Report W/DS/268/AB/R, DSR 2004:VIII, 3421 
US – Section 211 
Appropriations Act Appellate Body Report, United States – Section 211 Omnibus Appropriations 
Act of 1998 , WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, 589 
US – Section 211 
Appropriations Act Panel Report, United States – Section 211 Omnibus Appropriations Act of 
1998, WT/DS176/R, adopted 1 February 2002 , as modified by Appellate Body 
Report WT/DS176/AB/R, DSR 2002:II, 683 
US – Section 301 Trade Act Panel Report, United States – Sections 301-310 of the Trade Act of 1974 , 
WT/DS152/R, adopted 27 January 2000, DSR 2000:II, p. 815 
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp 
and Shrimp Products , WT/DS58/AB/R, adopted 6 November 1998, 
DSR 1998:VII, 2755 
US – Shrimp Panel Report, U n i t e d  S t a t e s  –  I m p o r t  P r o h i b ition of Certain Shrimp and 
Shrimp Products , WT/DS58/R and Corr.1, adopted 6 November 1998, as 
modified by Appellate Body Report WT/DS58/AB/R, DSR 1998:VII, 2821 
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada , 
WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, p. 571 
US – Softwood Lumber IV Panel Report, United States – Final Countervai ling Duty Determination with 
Respect to Certain Soft wood Lumber from Canada , WT/DS257/R and Corr.1, 
adopted 17 February 2004, as modified by Appellate Body Report 
WT/DS257/AB/R, DSR 2004:II, p. 641  
US – Stainless Steel (Mexico) Appellate Body Report, United States – Final Anti-Dumping Measures on 
Stainless Steel from Mexico , WT/DS344/AB/R, adopted 20 May 2008, 
DSR 2008:II, 513 
US – Stainless Steel (Mexico) Panel Report, United States – Final Anti-Dumping Measures on Stainless Steel 
from Mexico , WT/DS344/R, adopted 20 May 2008, as modified by Appellate 
Body Report WT/DS344/AB/R, DSR 2008:II, 599 
US – Tuna II (Mexico) Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products , WT/DS381/AB/R, adopted 
13 June 2012 
US – Tuna II (Mexico) Panel Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products , WT/DS381/R, adopted 
13 June 2012, as modified by Appellate Body Report WT/DS381/AB/R 
US – Tyres (China) Appellate Body Report, United States – Measures A ffecting Imports of Certain 
Passenger Vehicle and Light Truck Tyres from China , WT/DS399/AB/R, 
adopted 5 October 2011, DSR 2011:IX, p. 4811 
US – Tyres (China) Panel Report, United States – Measures A ffecting Imports of Certain 
Passenger Vehicle and Light Truck Tyres from China , WT/DS399/R, adopted 
5 October 2011, upheld by Appellate Body Report WT/DS399/AB/R , DSR 
2011:IX, p. 4945 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 13 - 
 
  Short Title Full Case Title and Citation 
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure A ffecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R, adopted 23 May 1997, 
and Corr.1, DSR 1997:I, p. 323 
US – Wool Shirts and Blouses Panel Report, United States – Measure Affe cting Imports of Woven Wool 
Shirts and Blouses from India , WT/DS33/R, adopted 23 May 1997, upheld by 
Appellate Body Report WT/DS33/AB/R, DSR 1997:I, p. 343 
 
 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 14 - 
 
  TABLE SHOWING THE SHORT TITLES OF FREQUENTLY CITED MEASURES, EVIDENCE,  
AND OTHER INSTRUMENTS REFERRED TO IN THESE REPORTS 
Short Title Full Title 
2008 Export Licence Administration 
Measures Measures for the Administration of  Licence for the Export of Goods 
(Order of the Ministry of Commerce (2008) No. 11, promulgated 
on 7 June 2008, effective on 1 July 2008) (No Chinese Exhibit, Exhibit JE-51) 
2010 Amendment of Measures for 
Administration of Licensing Entities  2010 Decision of the Ministry of Commerce on Amending the 
Measures for the Administration of the Organs for Issuing the 
Licenses of Import and Export Commodities (Order (2010) No. 3, 
promulgated by MOFCOM on 12 September 2010) (No Chinese 
Exhibit, Exhibit JE-53) 
2012 Application Qualifications and 
Application Procedures for Molybdenum Export Quota Public Notice on 2012 Application Qualifications and Application 
Procedures for Indium, Molybdenum and Tin Export Quota, Notice 
(2011) No. 79, promulgated by MOFCOM on 11 November 2011 (Exhibits CHN-107, JE-63) 
2012 Application Qualifications and 
Application Procedures of Tungsten Export 
(or Supply) Enterprises  Public Notice on 2012 Application Qualifications and Application 
Procedures of the Tungsten, Anti mony and Silver State Trading 
Export Enterprises, and Tungsten  and Antimony Export Supply 
Enterprises, Notice (2011) No. 80, promulgated by MOFCOM on 
11 November 2011 (Exhibits CHN-100, JE-62) 
2012 Application Qualifications and 
Procedures for Rare Earth Export Quotas Public Notice on 2012 Application Qualifications and Application 
Procedures for Rare Earth Export Quota, Notice (2011) No. 77, promulgated by MOFCOM on 11 November 2011 (Exhibits CHN-38, JE-61) 
2012 Circular on Admission to Rare Earth 
Industry 2012 Circular on Admission to Rare Earth Industry (Ministry of 
Industry and Information Technology, (2012) No. 33, 26 July 
2012) (Exhibit CHN-16, No Joint Exhibit) 
2012 Export Licensing Catalogue  Notice on "2012 Export Licensing Management Commodities List" 
(Ministry of Commerce and General Administration of Customs, Notice (2011) No. 98, promulgated on 30 December 2011, effective on 1 January 2012) (Exhibits CHN-8, JE-48) 
2012 Export Quota Amounts Notice Regarding 2012 Export Quota Amounts for Agricultural and 
Industrial Products (Ministry of Commerce, Notice (2011) No. 71, 
promulgated on 31 October 2011, effective on 1 January 2012) 
(Exhibits CHN-97, JE-58) 
2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals Notice Regarding the 2012 List of Export (Supply) Enterprises and 
First Batch Export Quotas of Tungsten, Antimony and Other Nonferrous Metals (Ministry of Commerce, shangmaohan, (2011) No. 1131, 26 December 2011) (Exhibits CHN-99, JE-59) 
2012 First Batch of the Directive 
Production Plan of Rare Earths Circular on Distributing the First Batch of the Directive Production 
Plan of Rare Earth for 2012 (Ministry of Industry and Information 
Technology, gongxinbuyuan (2012) No.17, 13 January 2012) 
(Exhibit CHN-22, No Joint Exhibit) 
2012 First Batch Rare Earth Export 
Quotas  Notice Regarding the 2012 List of Rare Earth Export Enterprises 
and First Batch of Rare Earth Export Quotas (Ministry of Commerce, shangmaohan, (2011) No. 1133, 27 December 2011) (Exhibits CHN-56, JE-55) 
2012 First Batch Rare Earth Export 
Quotas (Supplement) Notice Regarding the Supplement to the 2012 First Batch of Rare 
Earth Export Quotas (Ministry of  Commerce, shangmaopi, (2012) 
No. 618, 16 May 2012) (Exhibits CHN-57, JE-56) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 15 - 
 
  Short Title Full Title 
2012 List of Enterprises for the Export 
(or/and Supply) of Tungsten, and List of Enterprises for the Export of Molybdenum Notice Publishing the List of the State Trading Export Enterprises of 
Tungsten, Antimony and Silver, the Enterprises Exporting and 
Supplying Tungsten and Antimony, and the Enterprises Qualified to 
Apply for the Export Quotas for Indium and Molybdenum in 2012, 
(Ministry of Commerce, 14 December 2011) (Exhibits CHN-98, JE-65) 
2012 List of Enterprises for the Export of 
Rare Earths Notice Publishing the List of En terprises Applying for the Export 
Quota for the Rare Earth and Coke in 2012 (Ministry of Commerce, 
14 December 2011) (Exhibits CHN-55, JE-66) 
2012 Second Batch Export Quotas of 
Tungsten, Antimony and Other Non-Ferrous Metals Notice on Distributing the 2012 Second Batch Export Quotas of 
Tungsten, Antimony and Other Nonferrous Metals (Ministry of Commerce, shangmaohan, (2012) No. 513, 19 July 2012) (Exhibits CHN-165, JE-60) 
2012 Second Batch of the Directive 
Production Plan of Rare Earths Circular on Distributing the Second Batch of the Directive 
Production Plan of Rare Earth for 2012 (Ministry of Industry and 
Information Technology, gongxinbuyuan (2012) No.269, 8 June 
2012) (Exhibit CHN-23, No Joint Exhibit) 
2012 Second Batch Rare Earth Export Quotas  Notice on Distributing the 2012 Second Batch of Rare Earth Export 
Quotas (Ministry of Commerce, shangmaohan, (2012) No. 627, 16 August 2012) (Exhibits CHN-58, JE-57) 
2012 Tariff Implementation Plan (General 
Administration of Customs) Circular of the General Administration of Customs on the 2012 
Tariff Implementation Plan (2011) No. 79, promulgated on 
23 December 2011, effective on 1 January 2012 (No Chinese 
Exhibit, Exhibit JE-47) 
2012 Tariff Implementation Program (Customs Tariff Commission) Notice Regarding the 2012 Tariff Implementation Program (State 
Council Customs Tariff Commission, shuiweihui (2011) No. 27, promulgated on 9 December 2011, effective on 1 January 2012) (No Chinese Exhibit, Exhibit JE-45) 
2012 Total Extraction Controlling Quota of 
Tungsten, Antimony and Rare Earth Ores Circular on Total Extraction Controlling Quota of Tungsten, 
Antimony and Rare Earth Ore for 2012 (Ministry of Land and 
Resources, guotuzifa (2012) No. 228, 19 April 2012) 
(Exhibit CHN-19, No Joint Exhibit) 
2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) Circular on Total Extraction Quotas of Tungsten, Antimony and 
Rare Earth Ore for 2012 (the First Batch) (Ministry of Land and Resources, guotuzifa (2011) No. 227) (Exhibit CHN-20, No Joint Exhibit) 
Administration Measures of the Export 
Operations of Tungsten and Tungsten 
Products Provisional Measures on Administrati on of the Export Operations of 
Tungsten and Tungsten Products and of Antimony and Antimony 
Products (Ministry of Foreign Trade and Economic Cooperation, 
waijingmaoguanfa (2000) No. 649, promulgated on 4 December 
2000) (Exhibit CHN-101, No Joint Exhibit) 
Administration of Di rective Production 
Plan of Rare Earths Provisional Measures on the Administration of the Directive 
Production Plan of Rare Earth (Min istry of Industry and Information 
Technology, gongxinbuyuan (2012) No. 285, 13 June 2012) (Exhibit CHN-21, No Joint Exhibit) 
Administration of Exploration and Mining 
of the Specified Minerals Provisional Measures for the Administration of Exploration and 
Mining of the Specified Minerals of which the Protective Mining is 
Prescribed (guotuzifa (2009) No. 165, Promulgated by the Ministry 
of Land and Resources on 24 November 2009) (Exhibit CHN-18, 
No Joint Exhibit) 
Administration of Registration of Mining of Mineral Resources Measures for the Administration of Registration of Mining of Mineral 
Resources (Promulgated by the State Council on 12 February 
1998, Order 241) (Exhibit CHN-15, No Joint Exhibit) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 16 - 
 
  Short Title Full Title 
Administration of the Quota for the 
Minerals Subject to the Total Extraction 
Quantity Control Notice on Printing and Distributing the Provisional Measures on the 
Administration of the Quota for the Minerals Subject to the Total 
Extraction Quantity Control (Ministry of Land and Resources 
guotuzifa (2012) No. 44, 2 March 2012) (Exhibit CHN-43, No Joint 
Exhibit) 
Amendment of the Provisional Regulations 
on Resource Tax Decision of the State Council to Amend the Provisional Regulations 
of the People's Republic of Chin a on Resource Tax (State Council 
(2011) No. 605), 30 September 2011) (Exhibit CHN-26, No Joint Exhibit) 
Circular on Adjusting the 
Applicable Tax Rate of Resource Tax for 
Tin and Other Ores Circular on Adjusting the Applicab le Tax Rate of Resource Tax for 
Tin and Other Ores (Ministry of Finance and the State 
Administration on Taxation caishu i (2012) No. 2, 1 February 2012) 
(Exhibit CHN-112, No Joint Exhibit) 
Circular on Environmental Protection 
Inspection of Rare Earth Industry Circular on Environmental Protec tion Inspection of Rare Earth 
Industry (Ministry of Environmental Protection, (2011) No. 362, 
6 April 2011) (Exhibit CHN-33, No Joint Exhibit) 
Circular on Environmental Protection 
Inspection of Tung sten and Molybdenum 
Enterprises  Circular on Environmental Protecti on Inspection of Tungsten and 
Molybdenum Enterprises (General Office of Ministry of 
Environmental Protection, huanbaohan (2013) No. 442, 
24 April 2013) (Exhibit CHN-217, No Joint Exhibit) 
Circular on Establishing Team of Mining 
Zone Assistant Administrators for Ore Districts of Rare Earths and Other Materials Circular on Establishing Team of Mining Zone Assistant 
Administrators for Ore Districts of Rare Earths and Other Materials (General Office of Ministry of Land and Resources, guotuzitinghan (2010) No.52, 27 July 2010) (Exhibit CHN-85, No Joint Exhibit) 
  
Circular on Listing Tungsten, Tin, Antimony and Ionic Rare Earth Minerals as Specified Minerals under National Protective Mining Circular of the State Council on Listing Tung sten, Tin, Antimony 
and Ionic Rare Earth Minerals as Specified Minerals under National 
Protective Mining, guofa (1991) No. 5 (State Council, 15 January 1991) (Exhibits CHN-12, JE-72) 
Circular on Overall Rectification and 
Standardization of Mineral Resources 
Development Order  Circular on Overall Rectification and Standardization of Mineral 
Resources Development Order (State Council, guofa (2005) 
No. 28), 18 August 2005) (Exhibit CHN-215, No Joint Exhibit) 
Conditions for Admission to the Molybdenum Industry Conditions for Admission to the Molybdenum Industry (Ministry of 
Industry and Information Technology Announcement (2010) No. 30, 17 July 2010) (Exhibit CHN-108, No Joint Exhibit) 
Conditions for Admission to Tungsten 
Industry Circular on Conditions for Ad mission to Tungsten Industry 
(National Development and Reform Commission (2006) No. 94, 
22 December 2006) (Exhibit CHN-93, No Joint Exhibit) 
Customs Law Customs Law of the People's  Republic of China (adopted at the 
19th Meeting of the Standing Co mmittee of the Sixth National 
People's Congress on 22 January 1987, amended 8 July 2000) (No Chinese Exhibit, Exhibit JE-54) 
Declaration On the Setting Of 2012 Export 
Quotas on Rare Earth Products Declaration On the Setting Of 2012 Export Quotas on Rare Earth 
Products (Zhang Chenyang, Ministry of Commerce, 14 December 
2012) (Exhibit CHN-63, No Joint Exhibit) 
Developments in Rare Earth-Using Industries Dr David Humphreys (Report)  D e ve l o pm e n t s  i n  R a re  E a rt h - U s i n g 
Industries . April 2013 (CHN-163, No Joint Exhibit) 
Emission Standards of Pollutants from 
Rare Earths Industry Emission Standards of Pollutan ts from Rare Earths Industry 
(Ministry of Environmental Protection, GB 26451—2011, 
24 January 2011) (Exhibit CHN-31, No Joint Exhibit) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 17 - 
 
  Short Title Full Title 
Explanation for the Compilation of 
Emission Standards of Pollutants from Rare Earths Industry (Draft for Comments) Explanation for the Compilation of "Emission Standards of 
Pollutants from Rare Earths Indu stry" (Draft for Comments) June 
2009 (No Chinese Exhibit, Exhibit JE-99) 
Export Duties as a Means to Address 
Environmental Externalities Professor Gene M. Grossman: Export Duties as a Means to Address 
Environmental Externalities ( No Chinese Exhibit, JE-136) 
Export Quota Administration Measur es Measures for the Administration  of Export Commodities Quotas 
(Order of the Ministry of Foreign Trade and Economic Cooperation (2011) No. 12, adopted at the 9th ministerial office meeting of the Ministry of Foreign Trade and Economic Cooperation of 2001, effective on 1 January 2002) (Exhibits CHN-96, JE-52) 
First Batch of the 2012 Directive 
Production Plan of Rare Metals Circular on Distributing the Fi rst Batch of the 2012 Directive 
P r o d u c t i o n  P l a n  o f  R a r e  M e t a l s  ( M i n i s t r y  o f  I n d u s t r y  a n d  
Information Technology, gongxinbuyuan (2012) No. 19, 
13 January 2012) (Exhibit CHN-94, No Joint Exhibit) 
Foreign Trade Law Foreign Trade Law of the People's Republic of China (adopted at 
the 7th Session of the Standing Committee of the Eighth National People's Congress on 12 May 1994, and amended at the 8th Session of the Standing Committee of the Tenth National People's 
Congress on 6 April 2004, effective on 1 July 2004) (Exhibits CHN-11, JE-49) 
Foreign Trade Law (1994 Version) Original Version of the Foreign Trade Law of the People's Republic 
of China, (Adopted at the 7th Se ssion of the Standing Committee 
of the Eighth National People's Congress and Promulgated on 
12 May 1994) (Exhibit CHN-61, No Joint Exhibit) 
Guidance for Enhancing the Management 
of Raw Materials Industries Guidance for Enhancing the Management of Raw Materials 
Industries (Ministry of Industry and Information Technology (2009) 
No. 294) (No Chinese Exhibit, Exhibit JE-12) 
Guideline on Gradual Establishment of 
Responsibility System for Mine 
Environmental Management and 
Ecological Recovery Guideline on Gradual Establishment of Responsibility System for 
Mine Environmental Management and Ecological Recovery (Ministry 
of Finance, Ministry of Land and Resources and State 
Environmental Protection Administration, caijian (2006) No. 215, 
10 February 2006) (Exhibit CHN-216, No Joint Exhibit) 
Guiding Opinions of Jiangxi Province on the Development of the Rare Earth Industry Guiding Opinions of Jiangxi Province on the Development of the 
Rare Earth Industry (2007) (The Office of the Development and Reform Commission of Jiangxi, ganfagaigongyezi (2007) No.32, 15 January 2007) (No Chinese Exhibit, Exhibit JE-18) 
Implementation Rules for the Provisional 
Regulations on Resource Tax Detailed Rules for the Implementation of the Provisional 
Regulations of the People's Republic of China on Resource Tax, 
(Ministry of Finance No. 66, 28 October 2011) (Exhibit CHN-27, No 
Joint Exhibit) 
Inclusion of VAT Invoices Issued by Rare Earth Enterprises into "VAT Anti-Fake System" P u b l i c  N o t i c e  o n  I n c l u s i o n  o f  V A T  I n v o i c e s  I s s u e d  b y  R a r e  E a r t h  
Enterprises into "VAT Anti-Fake System", (State Administration of Taxation (2012) No. 17, 16 May 2012) (Exhibit CHN-45, No Joint Exhibit) 
Inner Mongolia Autonomous Region 
"Twelfth Five Year" High-Tech Industries 
Development Plan Inner Mongolia Autonomous Region "Twelfth Five Year" High-Tech 
Industries Development Plan (Promulgated by the Development 
and Reform Commission of Inner Mongolia Autonomous Region, 13 
December 2011) (No Chinese Exhibit, Exhibit JE-29) 
Measures Limiting the Export of Certain of High-Energy-Consuming, High-Polluting and Resource-Related Products  Circular on Measures Limiting the Export of Certain of High-
Energy-Consuming, High-Polluting and Resource-Related Products (National Development and Reform Commission, fagaijingmao(2005) No.2595, 9 December 2005) (Exhibit CHN-62, No Joint Exhibit) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 18 - 
 
  Short Title Full Title 
Mineral Resources Law Mineral Resources Law of the People 's Republic of China, Order No. 
74 of the President of the People's Republic of China, promulgated 
by the National People's Congre s s  S t a n d i n g  C o m m i t t e e  o n  2 9  
August 1996 (Exhibit CHN-10, No Joint Exhibit) 
Monthly Reporting of the Implementation 
of the Rare Earths Extraction Controlling Quota  Notice on Monthly Reporting of the Implementation of the Rare 
Earths Extraction Controlling Quota (General Office of Ministry of 
Land and Resources, guotuzitinghan (2011) No. 791, 2 September 2011) (Exhibit CHN-44, No Joint Exhibit) 
Notice on Adjusting the Tax Refund Rates 
(2006) Notice on Adjusting the Tax Refu nd Rates of Certain Commodities 
and Supplementing the Catalogue of Prohibited Commodities in 
Processing Trade, caishui (2006) No.139 (Ministry of Finance, 
National Development and Reform Commission, Ministry of 
Commerce, General Administration of Customs, State 
Administration of Taxation ) (No Chinese Exhibit, Exhibit JE-75) 
Notice on Adjusting the VAT Refund of 
Certain Products (2005) Notice on Adjusting the VAT Refund of Certain Products 
(Department of Finance and the State Administration of Taxation, caishui (2005) No.75, 29 April 2005) (No Chinese Exhibit, Exhibit JE-83) 
Notice on Issuing "Export Catalogue of 
High and New Technology Products" Notice on Issuing "Export Catalogue of High and New Technology 
Products" (Ministry of Science and Technology, Ministry of Finance, 
and State Administration of Taxation, guokefajizi (2000) No. 328 
(No Chinese Exhibit, Exhibit JE-155) 
Notice on Issuing "Management of Special 
Fund for Rare Earth Industry Adjustment and Improvement" Notice on Issuing "Management of  Special Fund for Rare Earth 
Industry Adjustment and Improvement" (Ministry of Industry and Information Technology, Ministry of Finance, caiqi (2012) No. 375, 9 November 2012) (Exhibits CHN-212, JE-114) 
Notices Ordering Enterprises Producing 
Over Quota to Cease Production 15 Notices Ordering Enterprises Producing Over Quota to Cease 
Production (Commission of Industry and Information Technology of 
Jiangxi Province) (Exhibit CHN-113, No Joint Exhibit) 
Opinions on Enhancing the Ecological Protection and Restoration of Mines Opinions on Enhancing the Ecologic al Protection and Restoration of 
Mines (Ministry of Environmental Protection, huanfa (2011) No. 48, 
20 April 2011) (Exhibit CHN-32, No Joint Exhibit) 
Opinions on the Rectification of Metal 
Mines and Non-Metal Mines according to 
Law Circular on Forwarding the "Opini ons on the Rectification of Metal 
Mines and Non-Metal Mines according to Law" Proposed by the 
State Administration of Work Safety and othe r Departments 
(General Office of State Council, guofaban (2012) No. 54, 4 
November 2013) (Exhibit CHN-218, No Joint Exhibit) 
Preferential Policies Encouraging 
Investments for Fujian (Longyan) Rare Earth Industrial Zone Notice Regarding the Preferential Policies Encouraging Investments 
for Fujian (Longyan) Rare Earth Industrial Zone, longzhengzo (2010) No. 388, 27 September 2010 (No Chinese Exhibit , Exhibit JE-152) 
Program of the Rectification of Metal and 
Non-metal Mines in Hebei Province Circular on Issuing the Program of the Rectification of Metal and 
Non-metal Mines in Hebei Province (General Office of the People's 
Government of Hebei Province, banzi (2012) No. 138, 26 
December 2012) (Exhibit CHN-220, No Joint Exhibit) 
"Rare Earth Elements: A Review of Production, Processing, Recycling, and Associated Environmental Issues" Environmental Protection Agency (EPA), "Rare Earth Elements: A 
Review of Production, Processing, Recycling, and Associated Environmental Issues", August 2012 (Exhibit CHN 72, No Joint 
Exhibit). 
Rare Earth Elements Roderick G. Eggert: Rare Earth Elements , 25 April 2013 (No 
Chinese Exhibit, JE-129,) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 19 - 
 
  Short Title Full Title 
Regulations on Import and Export Duties Regulations of the People's Republic of Ch ina on Import and Export 
Duties (Order of the State Council (2003) No. 392, adopted at the 26th executive meeting of the State Council on 29 October 2003, effective on 1 January 2004) (No Chinese Exhibit, Exhibit JE-46) 
Regulations on the Administration of the 
Import and Export of Goods Regulation of the People's Republic  of China on the Administration 
of the Import and Export of Goods (Order of the State Council No. 
332, adopted at the 46th executive meeting of the State Council 
on 31 October 2001, effective on 1 January 2002) (Exhibits CHN-
54, JE-50) 
Rules for Implementation of the Mineral 
Resources Law Rules for Implementation of the Mineral Resources Law of the 
People's Republic of China (Promu lgated by the Decree No. 152 of 
the State Council of the People's Republic of China on 26 March 1994, and effective as of the date of promulgation) (Exhibit CHN-14, No Joint Exhibit) 
Second Batch of the 2012 Directive 
Production Plan of Rare Metals Circular on Distributing the Second Batch of the 2012 Directive 
Production Plan for Rare Meta ls, (Ministry of Industry and 
Information Technology, gongxinbuyuan (2012) No.321), 
4 July 2012) (Exhibit CHN-95, No Joint Exhibit) 
Selected Economic Issues Regarding 
Export Quotas and Production Quotas Professor Jaime de Melo, Selected Economic Issues Regarding 
Export Quotas and Production Quotas , April 2013 (CHN-157, No 
Joint Exhibit) 
Several Opinions of the State Council on 
Promoting the Sustainable and Sound 
Development of the Rare Earth Industry Several Opinions of the State Council on Promoting the Sustainable 
and Sound Development of the Rare Earth Industry (guofa [2011] 
No. 12), 10 May 2011 (Exhibit CHN-13, No Joint Exhibit) 
Study on Rare Earths and their Recycl ing Schuler et al., “Study on Rare  Earths and their Recycling, Final 
Report for The Greens/EFA Group in the European Parliament,  Darmstadt, January 2011 (CHN-30, No Joint Exhibit) 
Twelfth Five-Year Development Plan for 
New Materials Industry  Twelfth Five-Year Development Pl an for New Materials Industry 
(Ministry of Industry and Inform ation Technology, 4 January 2012) 
(No Chinese Exhibit, Exhibit JE-28) 
Verification and Rectification of Illegal 
Conducts in Rare Earth Industry Notice on Verification and Rectification of Illegal Conducts in Rare 
Earth Industry (The Ge neral Office of Minist ry of Industry and 
Information Technology, gongxintingyuanhan (2012) No. 773, 11 October 2012) (Exhibit CHN-42, No Joint Exhibit) 
 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 20 - 
 
  ABBREVIATIONS USED IN THESE REPORTS 
Abbreviation Description 
AoA Agreement on Agriculture 
Anti-Dumping Agreement Agreement on Implementation of Article VI of the General Agreement on Tariffs 
and Trade 1994 
APT Ammonium paratungstate 
ASEAN Association of South East Asian Nations  
China's Accession Protocol Protocol on the Accessio n of the People's Republic of China to the WTO, 
WT/L/432 
China's Working Party 
Report Report of the Working Party on the Ac cession of China, WT/ACC/CHN/49 and 
Corr.1 
Customs Valuation 
Agreement Agreement on Implementation of Article VII of the General Agreement on Tariffs 
and Trade 1994 
DSB Dispute Settlement Body 
DSU Understanding on Rules and Procedures  Governing the Settlement of Disputes 
Final Act the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade 
Negotiations 
GATS General Agreement on Trade in Services  
GATT 1994 General Agreement on Tariffs and Trade 1994 
HS Harmonized System  
ICSID International Centre for Settle ment of Investment Disputes 
Import Licensing Agreement Agreement on Import Licensing Procedures 
MFN Most-Favoured-Nation treatment 
MIIT Ministry of Industry and Information Technology 
MLR Ministry of Land and Resources 
REO Rare Earth Ore  
SCM Agreement Agreement on Subsidies an d Countervailing Measures 
SPS Agreement Agreement on the Application of Sanitary and Phytosanitary Measures 
TBT Agreement Agreement on Technical Barriers to Trade 
TRIMs Agreement Agreement on Trade-Related Investment Measures 
TRIPS Agreement Agreement on Trade-Related Aspects of Intellectual Property Rights 
VAT Value-Added Tax 
Vienna Convention Vienna Convention on the Law of Treaties 
WTO Agreement Marrakesh Agreement Establ ishing the World Trade Organization  
WTO World Trade Organization WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 21 - 
 
  1  INTRODUCTION 
1.1  Complaints by the United States, the European Union, and Japan 1.1.  On 13 March 2012, the United States, th e European Union, and Japan each requested 
consultations with China pursuant to Articles 1 and 4 of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes (DSU) and Article XXII of the General Agreement 
on Tariffs and Trade 1994 (GATT 1994) with respect to the measures and claims set out below.
1 
1.2.  Consultations were held on 25-26 April 2012. These consultations did not resolve the dispute. 
1.2  Panel establishment and composition 
1.3.  On 27 June 2012, the United States, the European Union, and Japan each requested the 
establishment of a panel pursuant to Article 6 of the DSU with standard terms of reference.2 At its 
meeting on 23 July 2012, the Dispute Settlement Body (DSB) established a single panel pursuant 
to the requests of the United States, the European  Union, and Japan in accordance with Article 9.1 
of the DSU.3 
1.4.  The Panel's terms of reference are the following: 
To examine, in the light of the relevant pr ovisions of the covered agreements cited by 
the parties to the dispute, the matter referred to the DSB by the United States in document WT/DS431/6, the European Union in document WT/DS432/6, and Japan in 
document WT/DS433/6 and to make such findings as will assist the DSB in making 
the recommendations or in giving the rulings provided for in those agreements.
4 
1.5.  On 12 September 2012, the United States , the European Union, and Japan requested the 
Director-General to determine the composition of the panel, pursuant to Article 8.7 of the DSU. On 
24 September 2012, the Director-General accordingly composed the Panel as follows: 
Chairperson: Mr Nacer Benjelloun-Touimi 
 
Members:  Mr Hugo Cayrús 
   Mr Darlington Mwape  
1.6.  Argentina, Australia, Brazil, Canada, Colombia, the European Union (with respect to 
WT/DS431 and WT/DS433), India, Indonesia, Japan (with respect to WT/DS431 and WT/DS432), the Republic of Korea, Norway, Oman, Peru, the Russian Federation, the Kingdom of Saudi Arabia, Chinese Taipei, Turkey, the United States (with respect to WT/DS432 and WT/DS433), and 
Viet Nam notified their interest in participating in the Panel proceedings as third parties. 
1.3  Panel proceedings 1.3.1  General 
1.7.  After consultation with the partie s, the Panel adopted its Working Procedures
5 and timetable 
on 18 October 2012. 
1.8.  The Panel held a first substantive meeting with the parties on 26-28 February 2013. A 
session with the third parties took place on 27 February 2013. The Panel held a second substantive 
meeting with the parties on 18-19 June 2013. The Panel sent questions to the parties both before and after the substantive meetings, the question s were sent on 13 February 2013, 1 March 2013, 
11 April 2013, 30 May 2013, and 21 June 2013. 
                                               
1 See WT/DS431/1, WT/DS432/1, and WT/DS433/1. 
2 WT/DS431/6, WT/DS432/6, and WT/DS433/6. 
3 See WT/DSB/M/320. 
4 WT/DS431/7, WT/DS432/7, and WT/DS433/7. 
5 See the Panel's Working Procedures in Annex A-1. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 22 - 
 
  1.9.  On 31 July 2013, the Panel issued the descripti ve part of its Reports to the parties. The Panel 
issued its Interim Reports to the parties on 23 October 2013. The Panel issued its Final Reports to the parties on 13 December 2013. 
1.3.2  Request for enhanced third-party rights 
1.10.  On 9 October 2012, Canada requested enhanced third-party rights, including third-party 
access to the entirety of both substantive meetin gs and all written submissions, and the right to 
make an oral statement at the second substantive meeting. After considering Canada's request 
and consulting the parties on the request, the Panel informed Canada on 19 October 2012 that it 
had decided to decline its request. The Panel concluded that the reasons Canada raised were not among those that would justify departing from the third-party rights established in paragraphs 2 and 3 of Article 10 of the DSU, paragraph 6 of Appendix 3 to the DSU and subsequent panel 
practice regarding enhanced third-party rights. In  its communication, the Panel indicated that it 
would provide the reasons for its reasoning on this matter in its Reports.
6 
1.3.3  Request for a preliminary ruling on the availability of a defenc e under Article XX of 
the GATT 1994 for a violation of Paragrap h 11.3 of China's Accession Protocol 
1.11.  On 20 December 2012, in its first written submission, China requested that the Panel make 
a preliminary ruling on a substantive legal issue: whether the obligation in Paragraph 11.3 of 
China's Accession Protocol is subject to the general exceptions contained in Article XX of the 
GATT 1994. China requested that the Panel rule on this issue on an expedited basis. On 10 
January 2013, the Panel informed the parties that it expected to send its decision on China's request for a preliminary ruling by Monday, 11 February 2013.
7 The complainants submitted their 
response to China's preliminary ruling request on 21 January 2013. China filed its comments on 
the complainants' responses on 25 January 2013 and the complainants submitted comments on China's comments on 30 January 2013.
8 On 1 February 20139, the Panel informed the parties and 
third parties that it had decided not to issue a ruling on this issue prior to the first Panel meeting. 
The Panel further stated that if China intended to present a substantive defence under Article XX of 
the GATT 1994 with respect to Paragraph 11.3 of its Accession Protocol, it should provide a written 
submission presenting this defence no later than 15 February 2013 so as to allow the parties and 
third parties to have a meaningful opportunity to respond at the first Panel meeting. 
1.12.  On 6 February 201310, China requested the Panel to make a preliminary ruling on this issue 
prior to the first meeting. On 8 February 201311, the Panel reiterated its decision not to issue a 
preliminary ruling on this issue prior to the first Panel meeting and recalled its statement in its 
letter of 1 February concerning the date by which China should present a substantive defence under Article XX of the GATT 1994 with respect to Paragraph 11.3 of its Accession Protocol. 
1.13.  On 15 February 2013, China submitted its substantive defence under Article XX of the 
GATT 1994 with respect to Paragraph 11.3 of its Accession Protocol. 
1.14.  At the first substantive meeting with the parties, the Panel informed the parties that it 
would not issue a preliminary ruling on this matter. The Panel stated that the reasons were that 
the request concerned a complex issue of substa nce as opposed to an issue of procedure or 
jurisdiction and the Panel required sufficient time to carefully consider the extensive argumentation of the parties and third parties. Th e Panel indicated that it would address the issue 
in its Reports.  
                                               
6 See section 7.1 below. 
7 E-mail communication from the Panel dated 10 January 2011. 
8 Several third parties also addressed the substant ive and procedural aspect s of China's preliminary 
ruling request, in the context of th eir third-party writ ten submissions. 
9 Panel's letter to the parties of 1 February 2013. 
10 China's letter to the Panel of 6 February 2013. 
11 Panel's letter to the parties of 8 February 2013. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 23 - 
 
  2  FACTUAL ASPECTS 
2.1.  This dispute concerns China's use of export quotas and export duties on various forms of rare 
earths, tungsten, and molybdenum. The complainants also challenge the administration and allocation, including through export licensing, of the export quotas. 
2.1  The products at issue 
2.2.  The products at issue in this dispute are rare earths, tungsten, and molybdenum. The raw 
materials at issue are either naturally occurring minerals or materials that have undergone some 
initial processing.  
2.3.  "Rare earths" is the common name for a group of 15 chemical elements in the periodic table 
with atomic numbers 57 to 71. These elements are part of the so-called "lanthanide group", composed of: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, 
gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium. Two other 
rare earth elements are included in the scope of this dispute, namely, scandium (atomic No. 21) and yttrium (atomic No. 39).
12  
2.4.  China divides this group of products into light and medium/heavy rare earths. China 
considers the following rare earth elements to be medium/heavy rare earths: scandium (atomic No. 21), yttrium (atomic No. 39), samarium, europium, gadolinium, terbium, dysprosium, 
holmium, erbium, thulium, ytterbium, and lutetium (atomic Nos. 62-71).
13 The complainants state 
that the rare earths from lanthanum to europium (atomic Nos. 57-63) are often called light rare earths and that the elements from gadolinium to lutetium (atomic Nos. 64-71), along with yttrium 
(atomic No. 39), are often referred to as heavy rare earths.
14 
2.5.  Once mined, rare earth ores can be processed into concentrates, individual oxides/mixtures 
of oxides15, salts and then metals. Rare earth metal can be alloyed with other elements, depending 
on its intended end-use.16 
2.6.  Tungsten is the name given to the element with the atomic number 74. Tungsten is primarily 
found in two ores: wolframite and scheelite. Once mined, ores containing tungsten can be processed to produce tungsten concentrates, ammonium paratungstate (APT), and a number of 
other intermediate products, such as tungsten oxide. Tungsten oxide can also be reduced to form 
tungsten powder and tungsten carbide.
17 
2.7.  Molybdenum is a silvery metallic element with the atomic number 42. Molybdenum is mined 
from ore containing molybdenite, which is often recovered as a by-product of copper mining. 
Molybdenite can be concentrated and then roasted to form roasted molybdenite (MoO3) 
concentrate (Technical Mo Oxide). Roasted molybdenite (MoO3) concentrate can be smelted into 
                                               
12 China's first written submission, para. 12, referri ng to footnote 5; United States' first written 
submission, para. 38; European Union's first written submission, paras. 26-27; and Japan's first written 
submission, paras. 21-22. 
13 China's first written submission, para. 12 referring to 2012 Export Licensing Catalogue (Exhibits CHN-
8, JE-48). See also United States' first written subm ission, paras. 38-39, Europe an Union's first written 
submission, paras. 27-28, and Japan's first written submission, paras. 21-22. 
14 United States' first written submission, para. 38, European Union's first writ ten submission, para. 27, 
and Japan's first written submission, para. 21, referring to " The Mining Journal: Rare Earths " (Exhibit JE-30). 
15 According to China, the concentrated rare earths or es are in different forms depending on the type of 
ores: (i) rare earths concen trates produced from iron ores (one type  of ores containing mainly light rare 
earths); and (ii) a mixture of rare earth oxides produced "in-si tu" concentrated from ion- absorption-clays (ores 
abundant in medium/heavy rare earth elements). 
16 United States' first written submission, para. 40; European Union's fi rst written submission, 
paras. 29-30; Japan's first written submission, para. 24,  referring to (Exhibit JE-30); Annex 2 of China's 
second written submission. 
17 United States' first written submission, paras. 43-44; European Union's first written submission, 
paras. 36-39; Japan's first written submission, paras. 41-44, referring to (Exhibits JE-33, 34, 35); China's 
responses to the Panel's question No. 100(a). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 24 - 
 
  ferromolybdenum, further processed into various molybdenum chemicals, or reduced into 
molybdenum metal.18 
2.2  The measures at issue 2.8.  The United States, the European Union, and Japan identified a number of different 
instruments in their panel requests in connection with their claims concerning export duties, export 
quotas, and the administration and allocation of the export quotas. 
2.2.1  Export duties 
2.9.  The complainants assert that China subjects various forms of rare earths, tungsten, and 
molybdenum to export duties and that those materials are not listed in Annex 6 of China's Accession Protocol. The complainants indicate that these Chinese measures are reflected in the following: 
 Customs Law of the People's Republic of China  
 Regulations of the People's Republic of China on Import and Export Duties  
 Announcement No. 27 Issuing the "2012 Tariff Implementation Program"  
 Announcement No. 79 Regarding the "2012 Tariff Implementation Program"  
 as well as any annexes or schedules thereto, amendments, supplements, or extensions 
and implementing measures.
19 
2.10.  The European Union and Japan also made claims in respect of replacement measures and 
renewal measures. 
2.2.2  Export quotas  2.11.  The complainants assert that China subjects  the exportation of various forms of rare earths, 
tungsten, and molybdenum to quantitative restrictions such as quotas. The complainants indicate 
that these Chinese measures are reflected in the following: 
 Foreign Trade Law of the People's Republic of China  
 Regulation of the People's Republic of China on the Administration of the Import and 
Export of Goods  
 Measures for the Administration of Export Commodities Quotas  
 Measures for the Administration of the Organs for Issuing the Licences of Import and 
Export Commodities   
 Measures for the Administration of Licensing for the Export of Goods   
 Working Rules on Issuing Export Licences  
 Rules on the Administration of Import and Export Licence Certificates  
 Notice on Issuing the "2012 Export Licensing Management Commodities List"  
 Announcement Issuing the "2012 Graded Licence-Issuing List of Commodities Subject to 
Export Licence Administration"  
                                               
18 United States' first written submission, paras. 47-48; European Union's first written submission, 
paras. 40-41; Japan's first written submission, paras. 49-50, referring to (Exhibits JE-38, 39, 40 and 41). 
19 The United States' panel request refers to "implementing measures in force to date". WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 25 - 
 
   2012 Notice on the Total Export Quota Quantity  for Agricultural and Industrial Products 
in 2012  
 Notice Publishing the List of Enterprise Applying for the Export Quota for Rare Earths and 
Coke in 2012  
 Notice Publishing the List of the State Trading Export Enterprises of Tungsten, Antimony 
and Silver, the Enterprises Exporting and Supplying Tungsten and Antimony, and the Enterprises Applying for the Export Quot as for Indium and Molybdenum in 2012  
 2012 Notice on List of Rare Earth Export Enterprises and First-batch Rare Earth Export 
Quota  
 2012 Notice on List of Export (Supply) Enterprises and First-batch Export Quota of 
Tungsten, Antimony and Other Nonferrous Metals  
 Announcement on 2012 Application Conditions and Procedures for Qualification for Rare 
Earth Export Quota  
 Announcement Regarding the Qualification Standards of State Owned Tungsten, 
Antimony and Silver Trade and Enterprises, Tungsten and Antimony Export and Supply 
Enterprises and Declaration Procedures in 2012  
 Announcement on Application Conditions and Procedures for 2012 Indium, Molybdenum 
and Tin Export Quotas  
 Notice on the Supplement to the 2012 First Batch of Rare Earth Export Quota  
 as well as any annexes or schedules thereto, amendments, supplements, or extensions 
and implementing measures.
20 
2.12.  The European Union and Japan also made claims in respect of replacement measures and 
renewal measures. 
2.2.3  Export quota administration and allocation 
2.13.  In their requests for establishment of a panel, the complainants made claims relating to an 
alleged lack of uniform, impartial, or reasonable administration of the export quotas. The complainants did not develop any argumentation in relation to these claims in their first written 
submissions, and in response to a Panel question , the complainants confirmed to the Panel that 
they were no longer pursuing the claims.
21 
2.14.  The complainants assert that China imposes restrictions on the trading rights of enterprises 
seeking to export various forms of rare earths and molybdenum, such as prior export performance 
and minimum registered capital requirements. The complainants indicate that these Chinese 
measures are reflected in the following: 
 Foreign Trade Law of the People's Republic of China  
 Regulation of the People's Republic of China on the Administration of the Import and 
Export of Goods  
 Measures for the Administration of Export Commodities Quotas  
 Measures for the Administration of Licensing for the Export of Goods  
                                               
20 The United States' panel request refers to "implementing measures in force to date". 
21 United States' response to Panel question No. 62 of 11 April 2011; European Union's response to 
Panel question No. 62 of 11 April 2011, Japan's response to Panel question No. 62 and Japan's second written 
Submission, footnote 1. See also Japan's response to Panel question No. 138, para. 103.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 26 - 
 
   Measures for the Administration of the Organs for Issuing the Licences of Import and 
Export Commodities  
 Working Rules on Issuing Export Licences  
 Rules on the Administration of Import and Export Licence Certificates  
 Notice on Issuing the "2012 Export Licensing Management Commodities List"  
 Announcement Issuing the "2012 Graded Licence-Issuing List of Commodities Subject to 
Export Licence Administration"  
 2012 Notice on the Total Export Quota Quantity  for Agricultural and Industrial Products 
in 2012  
 Notice Publishing the List of Enterprise Applying for the Export Quota for Rare Earths and 
Coke in 2012  
 Notice Publishing the List of the State Trading Export Enterprises of Tungsten, Antimony 
and Silver, the Enterprises Exporting and Supplying Tungsten and Antimony, and the Enterprises Applying for the Export Quot as for Indium and Molybdenum in 2012  
 2012 Notice on List of Rare Earth Export Enterprises and First-batch Rare Earth Export 
Quota  
 2012 Notice on List of Export (Supply) Enterprises and First-batch Export Quota of 
Tungsten, Antimony and Other Nonferrous  
 Announcement on 2012 Application Conditions and Procedures for Qualification for Rare 
Earth Export Quota  
 Announcement on Application Conditions and Procedures for 2012 Indium, Molybdenum 
and Tin Export Quotas  
 Notice on the Supplement to the 2012 First Batch of Rare Earth Export Quota  
 as well as any annexes or schedules thereto, amendments, supplements, or extensions 
and implementing measures.
22 
2.15.  The European Union and Japan also made claims in respect of replacement measures and 
renewal measures. 
2.16.  The following chart23 identifies the particular raw mate rials at issue in this dispute by 
category, product name, product name short fo rm, and in the case or rare earths, the 
classification of whether the products are light or heavy rare earths24, 2012 Chinese Commodity 
Codes25 (the basis for the export quotas), Chinese HS Number26 (the basis for the export duties), 
and the corresponding export duty rate.27 
                                               
22 The United States' panel request refers to "implementing measures in force to date". 
23 See (Exhibit JE-3). 
24 See para. 2.4. 
25 See Annex 1 to 2012 Export Licensing Catalogue (Exhibits CHN-8, JE-48). "N/A" is indicated where 
the particular Chinese Commodity Code is no t included in the quota for rare earths. 
26 See 2012 Tariff Implementation Program (Customs Tariff Commission) , Annex 6 (Exhibit JE-45). 
27 Chart of raw materials subject to  export duties (JE-6), see also 2012 Tariff Implementation Program 
(Customs Tariff Commission) , Annex 6 (Exhibit JE-45). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 27 - 
 
  Rare earths 
 
Raw 
Material Product Name Product Name 
(Short Form) Heavy 
or 
Light28 Export 
Quota Export Duty 
Chinese 
Commodity 
Code Chinese HS 
Code "Temporary" 
Export Duty 
Rate for 2012 
Rare Earths Ores of rare 
earth metals Rare earth ores Heavy 2530902010 2530.9020 15% 
Light 2530902090 
Thorium ores 
and concentrates
29 Thorium Heavy 2612200000 2612.2000 10% 
Neodymium Neodymium Light 2805301100 2805.3011 25% 
Dysprosium Dysprosium Heavy 2805301200 2805.3012 25% 
Terbium Terbium Heavy 2805301300 2805.3013 25% 
Lanthanum Lanthanum Light 2805301400 2805.3014 25% 
Cerium Cerium Light 2805301510 2805.3015 25% Light 2805301590 
Praseodymium Praseodymium Light 2805301600 2805.3016 25% 
Yttrium Yttrium Heavy 2805301700 2805.3017 25% 
Other rare-
earth metals, scandium and yttrium, not intermixed or interalloyed Other rare earth 
metals Heavy 2805301913 
2805.3019 25% 
Heavy 2805301914 
Heavy 2805301915 
Light 2805301990 
Battery quality 
rare-earth metals, scandium and 
yttrium, 
intermixed or interalloyed Battery quality 
rare earth metals Heavy 2805302110 
2805.3021 25% 
Light 2805302190 
Other rare-
earth metals, scandium and yttrium, intermixed or interalloyed Other mixed rare 
earth metals Heavy 2805302910 
2805.3029 25% 
Light 2805302990 
Cerium oxide Cerium oxide Light 2846101000 2846.1010 15% 
Cerium 
hydroxide Cerium hydroxide Light 2846102000 2846.1020 15% 
Cerium 
carbonate Cerium carbonate Light 2846103000 2846.1030 15% 
Other cerium 
compounds Other cerium 
compounds Light 2846109010 2846.1090 15% 
2846109090 
Yttrium oxide Yttrium oxide Heavy 2846901100 2846.9011 25% 
Lanthanum 
oxide Lanthanum oxide Light 2846901200 2846.9012 15% 
Neodymium 
oxide Neodymium oxide  Light 2846901300 2846.9013 15% 
Europium oxide Europium oxide Heavy 2846901400 2846.9014 25% 
Dysprosium 
oxide Dysprosium oxide Heavy 2846901500 2846.9015 25% 
                                               
28 See Exhibit JE-3. JE-3 indicates that the basis for th e classification of light or heavy rare earths is 
China's "2012 Export Licensing Management Commodities List" (i.e. 2012 Export Licensing Catalogue  
(Exhibits CHN-8, JE-48)). 
29 The 2012 Export Licensing Management Commodities  List includes thorium in the category of 
medium/heavy rare earths. In its second written submis sion, the United States argu ed that thorium is not a 
rare earth element: see United States' second written submission, para. 144. China did not contest this statement until its Comments on the Complainants' Comments on the Interim Reports of the Panels, where it contended that "thorium" is a chemical element whereas "thorium ores and concentrates" are mineral products 
consisting of thorium and also  rare earths: see para. 2. Since China' s export quota for medium/heavy rare 
earths includes thorium, in these Reports references to rare earths and medium/heavy rare earths include 
thorium.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 28 - 
 
  Raw 
Material Product Name Product Name 
(Short Form) Heavy 
or 
Light28 Export 
Quota Export Duty 
Chinese 
Commodity 
Code Chinese HS 
Code "Temporary" 
Export Duty 
Rate for 2012 
Terbium oxide Terbium oxide Heavy 2846901600 2846.9016 25% 
Praseodymium oxide Praseodymium 
oxide Light 2846901700 2846.9017 25% 
 
Other rare earth 
oxides (except for luminescent red phosphors) Other rare earth 
oxides Heavy 2846901920 
2846.9019 15%  Heavy 2846901930 
 Heavy 2846901940 
 Heavy 2846901970 
 Heavy 2846901980 
 Heavy 2846901991 
 Heavy 2846901992 
 Light 2846901999 
 Terbium 
chloride Terbium chloride Heavy 2846902100 2846.9021 25% 
Dysprosium 
chloride Dysprosium 
chloride Heavy 2846902200 2846.9022 25% 
Lanthanum 
chloride Lanthanum 
chloride Light 2846902300 2846.9023 25% 
 Neodymium 
chloride Neodymium 
chloride Light 2846902400 2846.9024 15% 
Praseodymium 
chloride- Praseodymium 
chloride Light 2846902500 2846.9025 15% 
Yttrium chloride Yttrium chloride Heavy 2846902600 2846.9026 15% 
 Mixed rare 
earth chlorinates Mixed rare earth 
chlorinates Heavy 2846902810 2846.9028 15% 
 Light 2846902890 
 Other unmixed 
rare earth chlorinates Other unmixed 
rare earth chlorinates Heavy 2846902900 2846.9029 15% 
 Terbium fluoride Terbium fluoride Heavy 2846903100 2846.9031 15% 
 Dysprosium 
fluoride Dysprosium 
fluoride Heavy 2846903200 2846.9032 15% 
 Lanthanum 
fluoride Lanthanum 
fluoride Light 2846903300 2846.9033 15% 
 Neodymium 
fluoride Neodymium 
fluoride Light 2846903400 2846.9034 15% 
 Praseodymium 
fluoride Praseodymium 
fluoride Light 2846903500 2846.9035 15% 
 Yttrium fluoride Yttrium fluoride Heavy 2846903600 2846.9036 15% 
 Other rare earth 
fluorides Other rare earth 
fluorides Light 2846903900 2846.9039 15% 
 Lanthanum 
carbonate Lanthanum 
carbonate Light 2846904100 2846.9041 15% 
 Terbium 
carbonate Terbium 
carbonate Heavy 2846904200
  2846.9042 25% 
 Dysprosium 
carbonate Dysprosium 
carbonate Heavy 2846904300
  2846.9043 25% 
 Neodymium 
carbonate Neodymium 
carbonate Light 2846904400 2846.9044 15% 
 Praseodymium 
carbonate Praseodymium 
carbonate Light 2846904500 2846.9045 15% 
 Yttrium 
carbonate Yttrium carbonate  Heavy 2846904600 2846.9046 15% 
 
Mixed rare 
earth carbonate Mixed rare earth 
carbonate Heavy 2846904810 2846.9048 15% 
 Light 2846904890 
 Other unmixed 
rare earth carbonate Other unmixed 
rare earth carbonate Heavy 2846904900 2846.9049 15% WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 29 - 
 
  Raw 
Material Product Name Product Name 
(Short Form) Heavy 
or 
Light28 Export 
Quota Export Duty 
Chinese 
Commodity 
Code Chinese HS 
Code "Temporary" 
Export Duty 
Rate for 2012 
 Other 
lanthanum compounds Other lanthanum 
compounds Light 2846909100 2846.9091 25% 
 Other 
neodymium compounds Other 
neodymium compounds Light 2846909200 2846.9092 25% 
 Other terbium 
compounds Other terbium 
compounds Heavy 2846909300 2846.9093 25% 
 Other 
dysprosium compounds Other dysprosium 
compounds Heavy 2846909400 2846.9094 25% 
 Other 
praseodymium compounds Other 
praseodymium compounds Light 2846909500 2846.9095 25% 
 Other yttrium 
compounds Other yttrium 
compounds Heavy 2846909600 2846.9096 25% 
 
Other rare earth 
compounds, yttrium and scandium Other rare earth 
compounds Heavy 2846909910 2846.9099 25% 
 Light 2846909990 
 Rapid setting 
neodymium-iron-boron (NdFeB) magnet film NdFeB magnet 
film N/A N/A 7202.9911 20% 
 Other NdFeB 
alloys Other NdFeB 
alloys N/A N/A 7202.9919 20% 
 Ferroalloy 
containing rare earths with weight of more than 10% Ferroalloy 
containing rare earths Heavy 7202999110 7202.9991 25% 
 Light 7202999191 
 Light 7202999199 
 Other ferroalloy Other ferroalloys N/A N/A 7202.9999 20% 
 
Tungsten 
 
Raw 
Material Product Name Product Name 
(Short Form) Export 
Quota Export Duty 
Chinese 
Commodity 
Code Chinese 
HS Code "Temporary" 
Export Duty 
Rate for 2012 
Tungsten Tungsten ore Tungsten ore 2611000000 N/A30 N/A 
Ash and residues 
containing mainly tungsten Tungsten ash 2620991000 2620.9910 10% 
Tungsten acid Tungsten acid 2825901100
  2825.9011 5% 
Tungsten trioxide Tungsten trioxide 2825901200 2825.9012 5% 
Other tungsten 
oxides and hydroxides Other tungsten 
oxides and hydroxides 2825901910 2825.9019 5% 
Ammonium 
paratungstate APT 2841801000 2841.8010 5% 
Sodium tungstate Sodium tungstate 2841802000 2841.8020 5% 
Calcium tungstate Calcium tungstate 2841803000 2841.8030 5% 
Ammonium 
metatungstate Ammonium 
metatungstate 2841804000 2841.8040 5% 
Other tungstates Other tungstates N/A 2841.8090 5% 
                                               
30 Tungsten ore is indicated with "N/A" because it is listed in Annex 6 of China's Accession Protocol, and 
the complainants have not asserted that the export duty  rate exceeds the maximum level listed in the Annex. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 30 - 
 
  Raw 
Material Product Name Product Name 
(Short Form) Export 
Quota Export Duty 
Chinese 
Commodity 
Code Chinese 
HS Code "Temporary" 
Export Duty 
Rate for 2012 
 Tungsten carbide Tungsten  carbide 2849902000 2849.9020 5% 
Ferro-tungsten Ferro-tungsten N/A 7202.8010 20% 
 Ferro-silico-
tungsten Ferro-silico-tungsten N/A 7202.8020 20% 
 Tungsten powder Tungsten powder 8101100010 8101.1000 5%  8101100090 
 Unwrought 
tungsten Unwrought tungsten 8101940000 8101.9400 5% 
 Tungsten waste and 
scrap Tungsten waste  8101970000 8101.9700 15% 
 
Molybdenum 
 
Raw 
Material Product Name Product Name 
(Short Form) Export 
Quota Export Duty 
Chinese 
Commodity 
Code Chinese 
HS Code31 "Temporary" 
Export Duty 
Rate for 2012 
Molybdenum Roasted 
molybdenum ores & concentrates Roasted molybdenum 
ores & concentrates 2613100000 2613.1000 15% 
Other molybdenum 
ores & concentrates  Other molybdenum 
ores & concentrates  2613900000 2613.9000 15% 
Molybdenum oxides 
and hydroxides Molybdenum oxides 
and hydroxides 2825700000 2825.7000 5% 
Ammonium 
molybdate Ammonium 
molybdate 2841701000 2841.7010 5% 
Other molybdates Other molybdates 2841709000 2841.7090 5% 
Ferro-molybdenum Ferro-molybdenum 7202700000 7202.7000 20% 
Molybdenum 
powder Molybdenum powder 8102100000 8102.1000 5% 
Unwrought 
molybdenum Unwrought 
molybdenum 8102940000 8102.9400 5% 
Molybdenum waste 
and scrap Molybdenum scrap 8102970000 8102.9700 15% 
 
3  PARTIES' REQUESTS FOR FI NDINGS AND RECOMMENDATIONS 
3.1.   The United States, the European Union, and Japan request that the Panel find that: 
a. In respect of export duties, the measures reflected in the instruments listed under 
section 2.2.1 above are inconsistent with China's obligations under Paragraph 11.3 of Part I of the Accession Protocol.  
b. In respect of export quotas, the measures reflected in the instruments listed under 
section 2.2.2 above are inconsistent with Article XI:1 of the GATT 1994 and China's obligations under the provisions of Paragrap h 1.2 of Part I of the Accession Protocol, 
which incorporates commitments in Paragraphs 162 and 165 of the Working Party 
Report on the Accession of China. 
c. In respect of export quota administration and allocation, the measures reflected in the 
instruments listed under section 2.2.3 above are inconsistent with Paragraph 5.1 of Part 
I of the Accession Protocol, as well as China's obligations under the provisions of 
paragraph 1.2 of Part I of the Accession Protocol, which incorporates commitments in paragraphs 83 and 84 of the Working Party Report.  
3.2.  China requests the Panel to find that: 
                                               
31 As indicated in Table 6 to 2012 Tariff Implementation Program (Customs Tariff Commission) 
(Exhibit JE-45). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 31 - 
 
  a. The general exceptions of Article XX of the GATT 1994 are available to China to defend a 
potential violation of Paragraph 11.3 of China's Accession Protocol, and the export duties on rare earths, tungsten, and molybdenum are justified under Article XX(b) of the GATT 1994.  
b. The 2012 export quotas on rare earths, tungsten, and molybdenum are justified under 
Article XX(g) of the GATT 1994. 
c. The trading rights commitments in Paragraph 5.1 of China's Accession Protocol and 
Paragraphs 83 and 84 of the Working Party Repo rt do not prevent the use of prior export 
performance and minimum register ed capital requirements as criteria to administer the 
rare earths and molybdenum export quotas.  
3.3.  The United States, the European Union, and Japan further request, pursuant to Article 19.1 of 
the DSU, that the Panel recommend that China brings its measures into conformity with its WTO 
obligations. 
4  ARGUMENTS OF THE PARTIES 
4.1.  The arguments of the parties are reflecte d in their executive summaries, provided to the 
Panel in accordance with paragraph 18 of the Working Procedures adopted by the Panel (see 
Annexes B-1 to B-4). 
5  ARGUMENTS OF THE THIRD PARTIES 
5.1.  The arguments of Argentina, Australia, Brazil, Canada, Colombia, the Republic of Korea, 
Norway, Oman, Peru, the Russian Federation, th e Kingdom of Saudi Arabia, and Turkey are 
reflected in their executive summaries, provided in accordance with paragraph 19 of the Working 
Procedures adopted by the Panel (see Annexes C-1 to C-11).
32 Chinese Taipei, India, Oman and 
Viet Nam did not submit written or oral arguments to the Panel. Indonesia submitted a written submission and made an oral statement. However,  it did not provide an executive summary of its 
arguments for inclusion in the Panel report. 
6  INTERIM REVIEW 6.1.  On 22 October 2013, the Panel issued its Interim Reports to the parties. On 
14 November 2013, China, the United States, the European Union, and Japan submitted written 
requests for review of precise aspects of the Inte rim Reports pursuant to Article 15.2 of the DSU. 
On 21 November 2013, China, the United Stat es, the European Union, and Japan submitted 
written comments on each other's requests for in terim review. No party requested an additional 
meeting with the Panel.  
6.2.  The numbering of paragraphs and footnotes in the Final Reports has changed from the 
Interim Reports. The text below refers to the paragraph numbers in the Final Reports. References 
to paragraph numbers include a reference to relevant footnotes. The Panel notes that this section 
forms an integral part of its findings in this matter. The Panel notes the highly complex nature of many of the legal and factual issues in this dispute. It has thoroughly reviewed the parties' 
comments, their original arguments, and its own interim findings before issuing these Final 
Reports. 
                                               
32 The Panel's working procedures set 21 March 2013 as the deadline for the third parties to submit  
integrated executive summaries of their arguments. On 23 May 2013, Peru requested the Panel to consider its oral statement as its executive summar y.  The Panel asked for parties' an d third parties comments' on Peru's 
request. On 24 May 2013, the United States noted th at "delegations may for any number of reasons on 
occasion provide a document after the deadline".  Accord ingly, the United States "do[es] not have any difficulty 
with Peru's request in this particular  instance". On 27 May, the European st ated that it is "firmly attached to 
the strict observance of timelines in WTO dispute settlement" but trusted "that the panel will exercise its 
discretion when addressing Peru's request accordingly". Peru's integrated executive summary was accepted by 
the Panel on 30 May 2013. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 32 - 
 
  6.1  Comments on the Panel's interim findings 
6.1.1  General 6.3.  Throughout its comments on the Interim Reports, China alleges that the Panel has acted 
inconsistently with Article 11 of the DSU by failing to make an objective assessment of the matter, 
including of the facts of the case. The Panel has seriously and attentively considered each one of 
China's allegations in this regard, as they go to the integrity of the Panel and the quality of its Reports. In the end, the Panel believes that each  of China's allegations under Article 11 is based 
either on a disagreement with the Panel's assessm ent of the evidence, or with the way in which 
the Panel has clarified and applied the applicable provisions of the WTO Agreement. In light of China's allegations under Article 11, the Panel feels it appropriate to make some comments on the standard that it is required to apply. 
6.4.  First, Article 11 requires a Panel to "determine the facts of the case and to arrive at factual 
findings".
33 In fulfilling this mandate, a panel must "consider all the evidence presented to it, 
assess its credibility, determine its weight, and ensure that its factual findings have a proper basis 
in that evidence".34 As the trier of facts in the WTO dispute settlement system, a panel is required 
to treat all the evidence "even-handedly"35 and may not apply a double standard of proof.36 The 
Panel must also be careful not to disregard or ignore evidence that is relevant to one or another 
party's case.37 Having said that, it is well-established that "panels enjoy a margin of discretion in 
their assessment of the facts"38, and this discretion includes the prerogative both to "decide which 
evidence it chooses to utilize in making its findings" and "how much weight to attach to the various items of evidence placed before it by the parties".
39 As long as a panel provides "reasoned and 
adequate explanations"40 as to its decisions in this respect, it will not violate Article 11 merely 
because one or more of the parties disagrees with its treatment of the evidence or would have liked the panel to come to a different conclusion . In this regard, we recall the Appellate Body's 
finding that panels "are not required to accord to factual evidence of the parties the same meaning 
and weight as do the parties".
41 
6.5.  Second, the Panel notes that, according to th e Appellate Body, an allegation that a Panel has 
acted inconsistently with Article 11 must "stand on its own", and parties to a dispute should not 
simply "recast" their arguments "under the guise of an Article 11 claim" where they are unhappy with the panel's findings and disposition.
42 In this regard, a party should not allege a violation of 
Article 11 as a "subsidiary argument" merely in support of an assertion that a panel erred in its 
application of a provision.43  
6.6.  As is evident in the following paragraphs, th e Panel has carefully considered all of the parties' 
assertions regarding the Panel's appreciation of the facts and the relevant legal provisions, and 
adjusted its Reports where appropriate. The Panel of course respects the right of the parties to 
comment at the interim review stage, and is grateful for the helpful clarification provided by all parties.  Nevertheless, the Panel is of the view that China's comments regarding the Panel's failure 
to act consistently with Article 11 constitute subs idiary arguments in support of an assertion that 
the Panel has erred in its application of the relevant provisions.  
6.7.  The Panel also notes that it has revised the text in footnote 32 to reflect more accurately the 
timing of third parties' submissions. 
6.8.  The Panel will now proceed to discuss the pa rties' comments on the Panel's Interim Reports. 
                                               
33 Appellate Body Report, Korea – Dairy , para. 137. 
34 Appellate Body Reports, US – COOL , para. 299. 
35 Appellate Body Report, EC – Fasteners , para. 441. 
36 Appellate Body Report, EC – Fasteners , para. 441. 
37 Appellate Body Report, EC – Fasteners , para. 441. 
38 Appellate Body Reports, China – Raw Materials , para. 341.  
39 Appellate Body Report, US – Tuna II (Mexico) , para. 272. 
40 Appellate Body Reports, Philippines – Distilled Spirits , para. 136. 
41 Appellate Body Reports, US – COOL, para. 403.  
42 Appellate Body Report, EC – Fasteners , para. 442.  
43 Appellate Body Reports, US – COOL , para. 301.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 33 - 
 
  6.9.  The parties submitted several editorial revisions as well as other linguistic changes, which 
were not contested by the other parties. We have made these adjustments. The Panel also made minor editorial and non-substantive consequential changes as a result of other adjustments. The Panel has also corrected typographical and other non-substantive errors throughout the Report, 
including those identified by the parties. These are not referred to specifically below. 
6.10.  In addition to minor typographical errors, the parties pointed to a number of wording and 
numbering errors in the Panel's findings. The Panel has adjusted its Reports accordingly and also 
made related changes, including in footnote 77 of paragraph 7.30 and paragraphs 7.57, 7.60, 
7.85, 7.98, 7.266, 7.268, 7.271, 7.276, 7.321, 7.322, 7.326, 7.327, 7.332, 7.336, 7.353, 7.354, 7.356, 7.357, 7.375, 7.380 (including footnote 580), 7.423(b), 7.436, footnote 689 of paragraph 7.445, 7.473, 7.486, 7.495, 7.509, 7.510, 7.518, 7.520, 7.524, 7.526, 7.528, 7.555, 7.587, 
7.588, 7.589, 7.591, 7.593, 7.600, 7.603, 7.610, 7.611, 7.612, 7.622, 7.625, 7.630, 7.633, 
7.643, 7.646, 7.648, 7.650, 7.652, 7.656, 7.662, 7.683, footnote 1030 of paragraph 7.695, 7.798, 7.809, 7.828, 7.829, 7.835, 7.926, 7.935, 7.953, 7.956, 7.960, 7.981, 7.985, 7.1008, and 
footnote 1359 of paragraph 7.1037. The title of section 7.6.2.2.2.3 has been adjusted to better 
reflect its contents. Finally, in order to ensure consistency in its Reports, the panel has inserted a new title at 7.8.1.3.1.6. 
6.11.  All parties requested that the Panel adjust its Reports to more fully and/or accurately reflect 
their arguments on specific points. The Panel has generally accepted these requests, and has also made related changes including at paragraphs 7.3 (concerning the United States' arguments on enhanced third party rights), footnote 77 of paragraph 7.30 (concerning whether any of the 
products concerned is listed in Annex 6 of China's Accession Protocol), 7.87 and 7.90, (concerning 
China's argument on the existence of a link be tween the WTO Agreement and GATT 1994 and its 
Accession Protocol and Working Party Report), 7.172 (concerning China's argument on the 
relationship between its export duties and its resource tax and Deposit for Ecological Recovery, 
and other environmental regulations), 7.184 (conce rning the United States' argument regarding 
China's implementation of alternative measures), 7.302 (concerning one of China's arguments on 
the meaning of "work together"), 7.372 (concern ing one of China's arguments as to how its 
conservation policy restricts extraction of rare earths), 7.380 (including footnote 580) (concerning China's signalling argument in the context of tungsten), 7.386 (including footnote 595), 7.399, 7.405, and 7.407 (concerning China's argument on the nature of the various instruments that form 
part of and/or relate to its conservation poli cy on rare earths), 7.413 (concerning China's 
"domestic supply squeeze" argument), footnote  699 of paragraph 7.450 (concerning Japan's 
argument on the use of export quotas as a sa feguard), 7.479 (including footnote 745), 7.481 
(including footnote 749) and 7.482 (including foot note 750) (concerning China's allocation of its 
export quota in "light" and "medium/heavy" rare  earths), 7.484, 7.485, and 7.654 (concerning the 
formula by which China allocates export quota shares), 7.495, 7.743, and 7.885 (concerning 
China's arguments on the benefits of consolidation in the mining industry), 7.545 (concerning 
China's argument that domestic consumption cannot exceed the production quota minus actual exports), 7.550 (concerning China's argument on the method by which it sets the level of its extraction and production quotas), 7.651 (concerning the different product scopes of China's 
various quotas), 7.725 (concerning China's argument on signalling), 7.830 and 7.955 (concerning 
the reliability of data from Metal Pages ), 7.1000 (concerning the Panel's agreement with China's 
argument on the non-existence of pre-conditions in the revised Foreign Trade Law ).  
6.12.  The parties requested that the Panel clarify some of its descriptions (including in the 
descriptive part) and factual conclusions. The Panel has adjusted its Reports accordingly and made a number of related revisions, including at f ootnote 29 of paragraph 2.16, paragraph 7.210 
(concerning penalties related to the obligation to return unused export quota shares), 7.252 
(concerning China's argument on the meaning of conservation), 7.292 (clarifying that the quota 
system under consideration is the one challenged by the complainants), f ootnote 611 of paragraph 
7.398 (concerning the different versions of China's Foreign Trade Law ), 7.440 (concerning China's 
signalling argument in the context of rare eart hs), 7.473 (concerning the alleged simultaneity of 
China's quotas), footnote 797 of paragraph 7.50 9, 7.510 and 7.550, (concerning the method by 
which China allegedly set the level of its extrac tion and production quotas), footnote 863 of 
paragraph 7.543, 7.549, 7.612, and 7.779 (including footnote 1127) (concerning China's VAT 
rebate system), 7.554 (concerning China's evidence on Baiyun Obo ores), 7.547 (concerning the existence of a volume restriction on domestic consumption), 7.574 and 7.579 (concerning the 
timing of China's first and second export quota batches), 7.596, (concerning the goals of China's 
export quota on rare earths), 7.668, 7.676, and 7.677 (concerning proposed alternative measures WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 34 - 
 
  to China's rare earths export quota), 7.672 (concerning China's allegation that certain alternative 
measures proposed by the complainants would impose administrative costs),  7.748, 7.889 (concerning access conditions) , 7.629 (concerning the United States' argument about the division of China's rare earth export quota into two categories), 7.695 (concerning the European Union's 
argument that China's export quota on tungsten does not "relate to" its conservation policy), 
7.759 (concerning sanctions on over-quota produc tion), 7.765, 7.771  (concerning the tungsten 
extraction and production quotas), 7.829 (concern ing price differences for tungsten), and 7.989 
(including footnote 1316) (concerning China's trading rights requirements). 
6.13.  The parties requested the Panel to clarify some provisions of its findings. The Panel has 
adjusted its Reports accordingly, and made a number of related revisions, including at paragraphs. 7.186 (concerning alternative measures under Article XX(b)), 7.256 and 7.451 (concerning the 
Panel's understanding of "conservation"),  7.322 and 7.323 (concerning the Panel's use of 
jurisprudence and concepts developed in other in ternational legal systems), 7.333 (concerning the 
meaning of "even-handed"), footnote 515 of 7.335  (concerning the use of "even-handedness" in 
recent WTO jurisprudence), footnote 723 of paragraph 7.462 (concerning the positive and 
negative signalling effects of export quotas), 7. 453 (concerning the Appellate Body's interpretation 
of Article XI.2 of the GATT 1994), 7.487 (concerning China's right to pursue industrial policies 
within the limits of its conservation programme), 7.510, 7.526, and 7.528 (concerning whether or 
not China's extraction and/or production quotas were "restrictive"), 7.798 (concerning the Panel's assessment of the implications of China's setting different levels in different quotas), and 7.885 (concerning the Panel's assessment of China's access restrictions). 
6.1.2  Specific comments 
6.1.2.1  Export duties 6.14.  The United States requested that the Panel delete the paragraphs in its Interim Reports 
discussing the legal value of the Appellate Body's decision in China – Raw Materials on the 
applicability of Article XX of the GATT 1994 to Arti cle 11.3 of China's Accession Protocol, which is 
again at issue in this dispute. The Panel believes that it is important to have regard to earlier 
findings of the Appellate Body that are directly relevant to the dispute. The Panel's discussion in 
section 7.3.2.1.1 is therefore appropriate, and we have maintained it in our Final Reports.  
6.1.2.2  Export quotas 6.15.  The parties requested the Panel to revise its reference to the relevance of simultaneity in its 
discussion of the legal test relating to "work together" and in its description of China's export 
quota. The Panel has adjusted its Reports accordingly, including at paragraphs 7.300 and 7.473.  
6.16.  China requested the Panel to review its description of the reasons why China allocates its 
export quota on rare earths in two broad catego ries. The complainants disagreed in part with 
China's request. The Panel has adjusted its findings taking into account the parties' interim comments, and has made adjustments as appropriate, including in paragraphs 7.479, 7.481, and 
7.482.  
6.17.  All parties requested the Panel to review its description of the export quota system with 
particular reference to the fact that unused quota shares are required to be returned to the Chinese authorities by 31 October each year and may not be exchanged among or between 
exporters. The Panel has reviewed its findings and made some adjustments, including at 
paragraphs 7.488, 7.594, 7.627, 7.656, 7.659, 7.661, 7.734, 7.808, 7.835, 7.926, 7.956 and 7.960. To reflect these changes, the Panel has also adjusted titles at 7.6.2.1.3.9, 7.7.2.1.3.3, and 
7.8.1.2.3.2. 
6.18.  China requested that its argument on industrial relocation be discussed more extensively by 
the Panel. The Panel has accepted this request, and modified its findings accordingly, including in 
section 7.6.3.1.2.  
6.19.  China claimed that no evidence in the record would support the Panel's conclusion that 
"exporting firms tend to deal in one or a few pr oducts". According to China, "[i]t is obvious and 
logical that theoretical and speculative potential problems do not constitute evidence of actual WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 35 - 
 
  problems".44 The Panel agrees with China that a Panel must not reach a conclusion purely on the 
basis of speculation. We have not done so. Our conclusions are based on evidence and analysis,  of the design, structure, and architecture of the measures at issue, considered in light of the 
relevant economic environment. The Panel's view that because some firms, for whatever reason 
(including specialization, technical capacity, and/or business strategy) may not export every 
product contained in the light and/or medium/heavy categories – coupled with the fact that exporters cannot exchange their export licences inter se  – could lead to discrimination even 
though the overall export quota is unfilled, is, as  the European Union observed, a conceptual and 
structural analysis based on the parties' arguments and evidence. It is also based on China's explanations regarding the export quota's structure and operation, and is supported by the parties' 
descriptions of the rare earths market and associated practices.  
6.20.  In paragraphs 50 and 51 of its comments on the Panel's Interim Reports, China argued for 
the first time that "exporting firms, even if not allowed to sell export quota shares among themselves, can always purchase individual rare earths elements that are in demand on the 
market and export until their quota share is filled". According to China, "[i]f exporters consider 
that a particular type of rare earth is needed more than another element by their clients, it is undisputed that they can buy this rare earth elemen t on the market and export it to clients". This 
new argument was not supported by any reference or other evidence. For this reason, the Panel 
cannot, in keeping with its obligations under Article 11 of the DSU, properly assess the implications of China's statement that exporters can always purc hase individual products on the market without 
reopening its investigation, asking further questions, and allowing the parties to debate further on 
this issue.  Nevertheless, we take note of China's point, and we have adjusted our reasoning so 
that it will be clear that our findings are not based on the Panel's understanding that some exporters may not export all products. Section 7.6.2.2.2.3 of the Interim Reports has been 
partially revised and merged into section 7.6.3.1.1. of the Final Reports. Additionally, in light of 
the parties' comments, the Panel has modified paragraphs 7.926 and 7.927 concerning the Panel's understanding of the molybdenum export quota. Re garding the United States' request to extend 
this analysis to tungsten, the Panel has declined to accept the United States' request, since the 
export quota on tungsten was more fully used. The Panel has also made consequential adjustments to paragraphs 7.638 (including footnote 962), 7.639 (including footnote 963), 7.640, 7.641, 7.642, 7.643, 7.646, and 7.648. 
6.21.  China asked the Panel to deal more directly with its arguments concerning industrial 
relocation under the chapeau of Article XX. The Panel has accepted China's request, and has adjusted its descriptions and findings as necessary and in light of the comments made by all the 
parties on this issue, including at paragraphs 7.621, 7.622, 7.623, 7.632, 7.633, 7.634, and 
7.635. The Panel has also adjusted other of its findings that relate to relocation, including paragraph 7.444. 
6.22.  China complained that it had not been asked to clarify its pricing analysis on molybdenum. 
In this connection, the Panel recalls that on 17 June 2013 at 17.00, on the eve of the second 
meeting, the Panel sent an email to the parties  inter alia , revising the scope of question No. 85 – 
which originally referred to price information on rare earths - to include price information on 
tungsten and molybdenum. The revised question sent in the email was in the following terms: 
To China:  The analysis of price differences for rare earth products, tungsten and 
molybdenum that China provides in Annex 1 of its second written submission appears 
to suggest that in some cases, domestic prices are higher than adjusted foreign prices 
(examples include specific periods for Ceri um oxide, Dysprosium metal, Europium 
oxide, Europium metal, Terbium oxide, Terbium metal. Yttrium metal, Praseodymium 
metal). Could China explain how domestic prices of exported goods can be higher than 
foreign prices? 
6.23.  The Panel recalls that China made reference to this revised question at the second meeting 
with the Panel. 
6.24.  It was evident that one of the objects of the email of 17 June was to extend the scope of 
question 85 to include tungsten and molybdenum. China responded to the Panel's question in writing on 8 July 2013. China's discussion in its response is very general, and, especially at 
                                               
44 China's comments on the interim reports of the Panel, paras. 47, 48 and 171. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 36 - 
 
  paragraphs 71, 72, and 73, made a number of ge neral observations, including on the relevance 
and reliability of data from Metal Pages . Since China has relied on data from Metal Pages  with 
respect to all three products, the Panel was entitled to understand that these observations concerned the three products, and not just rare earths. The Panel was therefore entitled to 
conclude that China's response to question No. 85, and especially in paragraphs 71, 72, and 73, 
referred to all products at issue.  
6.25.  If, at this late stage, China suggests that it intentionally declined to answer the Panel's 
question with regard to tungsten and molybdenum, the Panel is still entitled to raise the same 
doubts with respect to the reliability of the Metal Pages data on those products as it raised with 
respect to the data on rare earths. This is because, as we explained in the preceding paragraph, Metal Pages  contains data on all three products, and China has relied on Metal Pages  data in its 
arguments on all three products. Therefore, the Pane l maintains the same position on this issue.  
6.26.  Moreover, there is nothing in these paragr aphs to suggest that China's answer was limited 
to rare earths and was not relevant to tungsten or molybdenum as well. 
6.27.  Finally, the Panel recalls that the burden of proof is on China, since it raised the absence of 
price discrimination to demonstrate the complianc e of its export quotas with the chapeau of 
Article XX of the GATT 1994.  
6.28.  In light of the above, the Panel has slightly modified its language in paragraphs 7.830 and 
7.955, and added text to footnotes 1165 and 1287.  
6.2  Allegations of violation of co nfidentiality of the Interim Reports 
6.29.  We would like to address the issue of the confidentiality of the Interim Reports. When we 
transmitted our Interim Reports to the parties on 23 October 2013, we clearly indicated that such 
Reports were confidential. In addition, paragraph 23 of the Panel's working procedures clearly states that "The interim reports as well as the final reports before translation shall be kept strictly 
confidential and shall not be disclosed". Theref ore, we are very concerned that information 
concerning the Interim Reports or their contents appears to have been disclosed by one or more parties. Based on the information subsequently pr ovided to us by the parties, it appears that 
aspects of the Interim Reports were leaked to the press.
45 The Panel does not have any evidence 
as to the source of this leak to the press. The Panel also notes that one party to the dispute alleged that an official of another party to the dispute leaked details of the Interim Reports.  
Ultimately, while the Panel is not in a position to take any action regarding these leaks, it wishes 
to emphasize its disappointment and concern that the confidentiality of the Interim Reports was 
not respected.  
7  FINDINGS
46 
7.1  Request for enhanced third-party rights 
7.1.  On 9 October 2012, Canada requested47 the following rights for itself and the other third 
parties in these proceedings: (i) to receive copies  of the parties' written submissions, their oral 
statements, rebuttals, and answers to questions from  the Panel and each other, through all stages 
of the proceedings; (ii) to be present for the enti rety of all substantive meetings of the Panel with 
the parties; (iii) to make a second written submission, and/or to present an oral statement, in a special session set aside for this purpose, during  the second substantive meeting, should such a 
special session be held; and (iv) to review the draft summary of its own arguments in the 
descriptive part of the Panel Report. After considering Canada's request and consulting the parties on this request, the Panel informed Canada on 19 October 2012 that it had decided to decline its 
request. The Panel concluded that the reasons Canada raised were not among those that would 
                                               
45 China's Comments on the Interim Reports of the Pane l, para. 5. Comments of  the United States on 
the Comments of China on the Interim Report s of the Panel, paras. 4 and 5. See also  European Union's 
comments on China's requests to revi ew precise aspects of the Panel's In terim Reports, para. 3; Comments of 
Japan on China's comments on the Interim Reports of the Panel, paras. 4 and 5. 
46 In this section and throughout these Reports, the Panel will refer to the main arguments advanced by 
the parties. 
47 Letter from Canada dated 9 October 2012.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 37 - 
 
  justify departing from the third-party rights established in paragraphs 2 and 3 of Article 10 of DSU, 
paragraph 6 of Appendix 3 to the DSU and panel practice regarding enhanced third-party rights. In its communication, the Panel indicated that it would provide its reasoning on this matter in its Reports. Our reasons are provided below.  
7.2.  Canada argues that it has, along with the other third parties, "significant direct legal and 
systemic interests" in the outcome of this disput e, given both the "nature" of the measures at 
issue (i.e. export restrictions), and the provisions of the WTO Agreement under which these 
measures are challenged. Canada argues that it, along with the other third parties, is a significant 
producer and consumer of the materials in this dispute, "or of other resources that are similar or analogous to these", such that the Panel's interpretation of the WTO obligations in question may have "significant and sustained implications" for their economic interests. Canada notes that the 
Panel's interpretation of the availability and application of defences under the GATT 1994 may 
affect its own rights and obligations. Canada stresses that arguments on this point may not receive attention until the late stages of the dispute, to which third parties are not given access under 
standard Working Procedures. Canada also makes systemic arguments in favour of its position. 
Canada argues that negotiations on amending th e DSU, though incomplete, demonstrate a "broad 
consensus" that the traditional framework for third party participation is inadequate, and that such 
inadequacy is evident from the increasing tendency  of panels to grant enhanced third-party rights 
on an ad hoc  basis. Canada cites the panel reports in Canada – Renewable Energy / Canada – 
Feed-In Tariff Program , US – COOL , EC – Tariff Preferences  and EC – Export Subsidies on Sugar  as 
evidence of this tendency, and argues that th ese cases are unified by the recognition of the 
"inherent and significant interests" of third parties in each case. Canada argues that granting its 
request would not disturb the balance between parties and third parties.
48 
7.3.  All parties request that the Panel deny Canada's request for enhanced third-party rights. The 
United States asserts that under Article 12.1 of the DSU, any departure from the Working 
Procedures in Appendix 3 to the DSU should only be decided "after consulting the parties to the dispute." The United States considers that with the agreement of the parties granting a request for 
enhanced third-party rights could be seen as cont ributing to securing a positive solution to the 
dispute. However, the United States asserts that as the parties had not agreed to support Canada's request in this dispute, the Panel should  decline that request. In addition, the United 
States argues that neither Canada – Renewable Energy / Canada – Feed-In Tariff Program  nor US 
– COOL provides reasoning that supports Canada's request, given that the Reports in Canada – 
Renewable Energy / Canada – Feed-In Tariff Program  had yet to be circulated as of the time of 
Canada's request in these proceedings, and that the panel in US – COOL provided no explanation 
of why it granted enhanced third-party rights, thus rendering impossible an evaluation of either 
panel's reasoning. The United States also distinguishes the reports in EC – Tariff Preferences and 
EC – Export Subsidies on Sugar , on the basis that enhanced third-party rights were granted in 
those cases to Members that were at risk of losing the benefits of the EC measures at issue, such 
that "their interests could almost be characterized as those of co-responding parties", which is not the case in this dispute. The United States disagrees with the other assertions made by Canada in support of its request. The United States argues that the DSU already provides certain rights for 
Members with a substantial interest in a dispute, and articulates which opportunities they shall 
enjoy. The United States disputes Canada's assertion that its rights and obligations might be implicated by this dispute, given that Canada is not a party to this dispute and therefore any DSB 
recommendations and rulings cannot affect Canada's rights and obligations. Finally, the United 
States argues that Canada's arguments would tend to justify the granting of third-party rights in most, if not all, disputes, and if Canada advocates such a model for enhanced third-party rights, it 
should do so through DSU negotiations rather than pre-empting them and adopting a model not 
agreed to by Members.
49 
7.4.  The European Union submits that Canada cannot demonstrate that it will experience direct 
legal and economic consequences as a result of this dispute, thus distinguishing this case from EC 
– Export Subsidies on Sugar and EC – Bananas III , in which third parties were granted enhanced 
rights. The European Union argues that Canada's concerns are shared by at least the majority of WTO Members, such that their interest does no t substantially exceed the interests of other 
Members. Moreover, the granting of such ri ghts would unduly interfere with the smooth 
                                               
48 Letter from Canada dated 9 October 2012. 
49 Letter from the United States dated 16 October 2012. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 38 - 
 
  functioning of the dispute, considering the complexities associated with having three co-
complainants and 19 third parties.50 
7.5.  Japan did not make written submissions to the Panel regarding Canada's request. However, 
at the organizational meeting of the parties on 11 October 2012, Japan expressed its opposition to 
the granting of enhanced rights to Canada. 
7.6.  China notes that Canada already has, under existing procedures, the opportunity to articulate 
its views to the Panel, and that Canada retains the right to initiate its own dispute. However, 
China's primary opposition to Canada's request is based on the additional burden that the granting 
of enhanced third-party rights would place on China's participation in this dispute. China faces time, cost, and resource burdens in responding to the evidence and arguments of three separate complainants. Such burdens are magnified by the "extraordinary" number of third parties, which 
increase the burden on China, the complaining parties, and the Secretariat. China submits that the 
basis for Canada's request would render it "difficult" for the Panel to grant such enhanced rights without granting similar rights to the other third parties given that all parties have a systemic 
interest in, for example, the interpretation of Article XX of the GATT 1994. China therefore 
expresses concern that it will be required to respond to the first and second submissions of all 19 
third parties, thus creating a "significant additional burden on China at a time in the proceedings 
when its resources will already be fully deployed". China submits that the consequence of granting 
such rights is that China requires an addition al 30 days to prepare for the second substantive 
meeting.
51 
7.7.  The Panel recalls that Articles 10.2 and 10.3 of the DSU and paragraph 6 of Appendix 3 of 
the DSU provide for the rights of third parties in a dispute. It is well established that these are 
minimum guarantees, and that a panel may exercise the discretion afforded to it under Article 12.1 of the DSU to grant "enhanced" third-pa rty rights in a dispute, provided that such 
enhanced rights are consistent with the provisions of the DSU and the principles of due process.
52 
Panels have exercised this discretion in granting enhanced rights in several disputes. Although the Panel considers that this should be done on a case-by-case basis, we think that our decision on 
whether or not to grant such enhanced rights should nonetheless be informed by the same factors 
considered in previous disputes. We also recall the need to maintain the distinction drawn in the DSU between parties and third parties.
53 
7.8.  Enhanced third-party rights have been granted on the basis of a number of factors including 
the following: (i) whether the third parties enjoyed certain economic benefits that were directly 
implicated by the measure at issue54; (ii) the economic and social impact of the measures in third 
countries55; (iii) whether enhanced third-party rights had been granted in previous disputes 
relating to the measure56; (iv) the impact of the dispute on other Members maintaining similar 
measures57; (v) the similarity of the dispute to related disputes58; and/or (vi) the imperative of 
avoiding repetition.59 Conversely, in previous cases, enhanced third-party rights were denied on 
the basis of one or more of the following: (i) the failure of the third party to demonstrate that it 
participates in the market sector in question60; (ii) the failure of the third party to demonstrate 
that it maintains measures analogous to those in dispute61; (iii) the failure of the third party to 
demonstrate that its systemic interest in the interpretation of the WTO provisions in question is 
different from that of any other Member62; (iv) the delay that would be caused by granting 
                                               
50 Letter from the European Union dated 16 October 2012. 
51 Letter from China dated 16 October 2012. 
52 Appellate Body Reports, US – 1916 Act , para. 150, EC – Hormones , para. 154, and US – FSC 
(Article 21.5 – EC) , para. 243. 
53 Panel Reports, US – 1916 Act (EC) , para. 6.33, and US – 1916 (Japan) , para. 6.33, and EC – Export 
Subsidies on Sugar , para. 2.5. 
54 Panel Reports, EC – Bananas III , para. 7.8, and EC – Tariff Preferences , Annex A, para. 7(a). 
55 Panel Reports, EC – Bananas III , para. 7.8, EC – Export Subsidies on Sugar , para. 2.5, and EC – 
Bananas  III (Article 21.5  – US), para. 7.722. 
56 Panel Reports, EC – Bananas III , para. 7.8. 
57 Panel Report, EC – Tariff Preferences , Annex A, para. 7(b). 
58 Panel Reports, EC – Bananas III , para. 7.8. 
59 Panel Report, EC – Hormones (Canada) , para. 8.18. 
60 Panel Report, US – Large Civil Aircraft (2nd complaint) , para. 7.167. 
61 Panel Report, US – Large Civil Aircraft (2nd complaint) , para. 7.167. 
62 Panel Report, US – Large Civil Aircraft (2nd complaint) , para. 7.167. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 39 - 
 
  enhanced rights63; (v) the unanimous rejection of the request by the parties to the dispute64; (vi) 
the imposition of additional burd ens on the parties to the dispute65; and (vii) the risk of blurring 
the distinction between parties and third parties.66  
7.9.  In the Panel's view, and taking all of these factors into account, Canada has not identified 
grounds that warrant the granting of enhanced third-party rights in this dispute. Notably, although 
Canada may have a "direct legal and systemic interest" in the provisions of the WTO Agreement under which this measure is challenged, such an interest does not distinguish Canada from any 
other third party to this case, or indeed any other WTO Member. Even accepting that Canada is a 
"significant" producer and consumer of the materials in dispute, "or of other resources that are similar or analogous to these", this does not necessarily distinguish Canada from the other third parties, such that the Panel would as a matter of due process be required to extend similar rights 
to at least some, if not all, third parties. Given that there are 19 third parties in this proceeding, 
that would seriously impede the prompt settlement of this dispute, and create undue additional 
burdens for the parties. The Panel also notes the disputing parties' unanimous objection to 
Canada's request. 
7.10.  For these reasons, the Panel declines Canada's request.
67 
7.2  Evidence submitted on 17 July 2013 
7.11.  Before proceeding to analyse the main issues in this matter, there is an important issue that 
the Panel must address. This relates to China's re quest regarding certain exhibits submitted by the 
complainants together with their responses to the Panel's questions after the second meeting on 17 July 2013. On 18 July 2013, China wrote the Pane l expressing its "strong objection" to this 
evidence, which consists of 10 exhibits
68 including four expert reports69, and asked the Panel to 
reject it and the arguments that are based on it.  
7.12.  On 20 July 2013, the Panel wrote to the parties regarding China's letter. The Panel noted 
that the relevant exhibits were submitted together with the complainants' comments on China's 
responses to the Panel's questions after the second  meeting, rather than with the complainants' 
answers to those questions. The Panel also extend ed to China the option of responding to the 
exhibits by 17.00 on 24 July 2013, but reserved its right to decide whether the relevant exhibits 
should be considered as late evidence under WTO law in its final reports.  
7.13.  On 22 July 2013, the complainants jointly sent a response to China's letter and the Panel's 
communication. In their letter, the complainants asked the Panel to reject China's request. They 
noted that the Working Procedures in this dispute specifically provide that parties may submit 
evidence for purposes of rebuttal or comments on answers provided by other parties, and argued 
that each exhibit submitted by them together with their comments on China's responses to the 
Panel's questions after the second meeting was in accordance with the said Working Procedures.  
7.14.  Finally, on 24 July 2013, China submitted it s comments on the complainants' exhibits, and 
repeated its contention that all of the exhibits should have been submitted earlier. China also 
explained that it had not had sufficient time to resp ond to all of the points raised by the exhibits, 
and claimed that the time period provided by the Panel was too short.  
                                               
63 Panel Reports, China – Raw Materials , para. 1.7, and Dominican Republic – Safeguard Measures , 
para. 1.8. 
64 Panel Reports, Dominican Republic – Safeguard Measures , para. 1.8. 
65 Panel Reports, Dominican Republic – Safeguard Measures , para. 1.8. 
66 Panel Reports, Dominican Republic – Safeguard Measures , para. 1.8. 
67 Among the "enhanced" third-party rights requested by Canada is the right to review the draft 
summary of its own arguments in the de scriptive part of the Panel Report. This has not been afforded to any 
other party in any previous dispute and we do not consider that it falls within the type of concerns usually addressed in the grant of enhanced third- party rights. See, e. g. Panel Reports, EC – Bananas III , para. 7.9, 
and US – Large Civil Aircraft (2
nd complaint) , footnote 1025. 
68 See the Table of Exhibits included in Complainants' Comments of 17 July 2013. 
69 Prof. L Alan Winters, Comments on China's replies to Questions 76 and 87 , (Exhibit JE-193); Prof. L 
Alan Winters, Comments on China's replies to Questions 78 and 86 , (Exhibit JE-194); Prof. L Alan Winters, 
Response to Prof. De Melo , Exhibit CHN-206 and certain points in China's Answers of 8 July 2013, 
(Exhibit JE-195); and Prof. Gene Grossman, Response to Prof. Jaime de Melo , (Exhibit JE-197). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 40 - 
 
  7.15.  The exhibits challenged by China are: 
a. Web-Published Notice on the 2013 Initial Approval  List of Enterprises Qualified to Export 
Rare Earths in the Annual Review  (Ministry of Commerce, Department of Foreign Trade, 
December 17, 2012), (Exhibit JE-188).  
b. Sina.com.cn, Rare Earth Mining Controls said to "mig ht as well not exist", real production 
remains over-quota every year  (April 1, 2011), (Exhibit JE-189). 
c. Yancheng Evening News, Rare Earth Industry Reorganizing, Guandong Staking an Early 
Claim  (February 28, 2012), (Exhibit JE-190). 
d. Xinhuanet.com, China Minmetals Proposes Production Freeze, Revealing Unspoken Rules 
inside RE Industry , (Exhibit JE-191). 
e. Quotes from China's Export Quotas and Measures Promoting Downstream Industries , 
(Exhibit JE-192). 
f. Professor L Alan Winters: Comments on China's replies to Questions 76 and 87 , 
(Exhibit JE-193). 
g. Professor L Alan Winters: Comments on China's replies to Questions 78 and 86,  
(Exhibit JE-194). 
h. Professor L Alan Winters: Response to Professor De Melo, Exhibit CHN-206 and certain 
points in China's Answers of 8th July 2013, (Exhibit JE-195).  
i. Dudley Kingsnorth, " Rare Earths: An Industry Undergoing Rejuvenation ," June 2013, 
published jointly by Curtin University and IMCOA, (Exhibit JE-196). 
j. Professor Gene Grossman: Response to Professor Jaime de Melo , (Exhibit JE-197).  
7.16.  The Panel will now proceed to determine whet her or not it should accept China's request to 
reject the relevant exhibits. The Panel begins by recalling that, pursuant to paragraph 7 of its Working Procedures,  
Each party shall submit all factual evidence to the Panel no later than during the first 
substantive meeting, except with respect to evidence necessary for purposes of rebuttal, answers to questions or comments on answers provided by the other 
party(ies). Exceptions to this procedure shall be granted upon a showing of good 
cause. Where such exception has been gr anted, the Panel shall accord the other 
party(ies) a period of time for comment, as appropriate, on any new factual evidence submitted after the first substantive meeting.  
7.17.  The Panel acknowledges that, ideally, panel proceedings should progress in two stages: "the 
complaining party should set out its case in chief, including a full presentation of the facts on the basis of submission of supporting evidence, during  the first stage. The second stage is generally 
designed to permit 'rebuttals' by each party of the arguments and evidence submitted by the other 
parties".
70 After the first meeting, the submission of new evidence is generally not acceptable, 
although rebuttal evidence may be admitted. Thus, the Panel considers that there is no absolute 
bar against the submission of new evidence. In a finding that was not appealed, the panel in 
Canada – Aircraft  held that:  
[A]n absolute rule excluding the submission of evidence by a complaining party after 
the first substantive meeting would be inappropriate, since there may be 
circumstances in which a complaining party is required to adduce new evidence in 
                                               
70 Appellate Body Reports, Argentina – Textiles and Apparel , paras. 79-81 and Thailand – Cigarettes 
(Philippines) , para. 149.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 41 - 
 
  order to address rebuttal arguments made by the respondent…[W]e are not bound to 
exclude the submission of new allegati ons after the first substantive meeting.71  
7.18.  Moreover, the Panel is aware that in the context of a dispute where the respondent invokes 
Article XX, the first meeting may be the first occasion for the complainant to learn about the 
respondent's arguments and evidence related to th at defence. As such, it may, depending on the 
circumstances, be appropriate to allow the submissi on of new evidence after the first meeting, in 
order to allow the complainants sufficient opportunity to file evidence in response. 
7.19.  Nevertheless, as a general rule, panels have  a degree of discretion on questions relating to 
the admission of evidence, though they must constantly bear in mind that their role is to make an "objective assessment of the facts of the case".
72 It seems to this Panel that, with respect to 
questions regarding the admission of evidence cha llenged by one party for lateness, due process is 
the vitally important general principle by which panels must be guided. As the Appellate Body 
explained in Thailand – Cigarettes (Philippines) :  
Due process is a fundamental principle of  WTO dispute settlement. It informs and 
finds reflection in the provisions of the DS U. In conducting an objective assessment of 
a matter, a panel is bound to ensure that due process is respected. Due process is intrinsically connected to notions of fairness, impartiality, and the rights of parties to 
be heard and to be afforded an adequate o pportunity to pursue their claims, make out 
their defences, and establish the facts in the context of proceedings conducted in a balanced and orderly manner, according to established rules. The protection of due process is thus a crucial means of guaranteeing the legitimacy and efficacy of a rules-
based system of adjudication.
73 
7.20.  In the Panel's opinion, due process in this case requires that the exhibits submitted by the 
complainants with their comments on China's resp onses to the Panel's questions after the second 
meeting not be admitted. This is so for a number of reasons. 
7.21.  First, the Panel believes that the vast majori ty of this evidence could and should have been 
submitted at an earlier date. For instance, the Panel does not understand why the complainants 
waited until the middle of July to submit Yangcheng Evening News, Rare Earth Industry 
Reorganizing, Guandong Staking an Early Claim, (Exhibit JE-190), since that document was published on 28 February 2012. The same is true of  Sina.com.cn, Rare Earth Mining Controls Said 
to "Might As Well Not Exist", Real Production Remains Over-Quota Every Year, (Exhibit JE-189), 
which was published on 1 April 2011, and of Xinhuanet.com, China Minmetals Proposes Production 
Freeze, Revealing Unspoken Rules inside RE Indu stry, (Exhibit JE-191), which was published on 2 
August 2011. Finally, the Web-Published Notice on  the 2013 Initial Approval List of Enterprises 
Qualified to Export Rare Earths in the Annual Review, (JE-188) was released by MOFCOM on 17 
December 2012.  
7.22.  The complainants have alleged that these exhibits rebut new arguments made by China at 
the second meeting with the Panel. We disagree. The Panel is rather of the view that these 
exhibits contain facts and evidence supporting the complainants' statements at the second 
meeting. It is not clear why the complainants did not submit these exhibits with their responses to the Panel's questions after the second meeting,  rather than with their comments on China's 
responses to those questions.  
7.23.  The Panel notes that, in Thailand – Cigarettes (Philippines) , the Appellate Body stated that 
"[d]ue process may be of particular concern in cases where a party raises new facts  at a late stage 
of the panel proceedings".
74 As the Panel will explain further below, it does not believe that any of 
the exhibits submitted by the complainants on 17 July 2013 contain "new facts". Nevertheless, the 
Panel considers that even where challenged evidence does not contain new facts, the submission 
by any party of a large bundle of evidence at a ve ry late stage in the proceedings, especially when 
such evidence could have been provided earlier, raises due process issues for the opposing party 
                                               
71 Panel Report, Canada – Aircraft , paras. 9.73 and 9.74. 
72 DSU, Article 11.  
73 Appellate Body Report, Thailand – Cigarettes (Philippines) , para.  147. 
74 Appellate Body Report, Thailand – Cigarettes (Philippines) , para. 149 (emphasis in original). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 42 - 
 
  (here, China), whose opportunity to make its defence could be undermined, and complicates a 
panel's task of resolving disputes in a timely manner. 
7.24.  Second, the Panel is concerned by the submi ssion of new expert reports at this late stage. 
The Panel understands the complainants' desire to rebut China's arguments as effectively as 
possible. However, as is recognized in Article 3. 3 of the DSU, the "prompt settlement" of disputes 
is "essential to the effective functioning" of the WTO dispute resolution system, and panels have an interest in seeing that cases are "brought to a close" in a timely manner.
75 In the Panel's 
opinion, allowing the submission of new expert reports at this late stage in the proceedings could 
prolong the dispute unnecessarily, since China would no doubt wish to submit expert reports of its own that the complainants would then wish to rebut with new expert reports, and so on. Endless rounds of expert reports, while they may "rebut" each other, are not in the interests of prompt 
dispute settlement.  
7.25.  Finally, the Panel notes that Quotes from China's Export Quotas and Measures Promoting 
Downstream Industries, (Exhibit JE-192) consists, as its name suggests, entirely of quotes from 
exhibits already submitted as evidence to the Panel.  With respect to this exhibit, the Panel recalls 
that Paragraph 7 of the Panel's Working Proc edures does not allow the submission of any rebuttal 
evidence.  Instead, the paragraph is explicit that only evidence "necessary for purposes of rebuttal" 
should be admitted. In the Panel's opinion, Exhibi t JE-192 adds nothing substantial to the evidence 
already submitted. It does not change the outcome of the case or the Panel's analysis. Accordingly, the Panel does not consider that it is "necessary for purposes of rebuttal".  
7.26.  Indeed, and more generally, the Panel considers that none of the challenged exhibits are 
"necessary for purposes of rebuttal". In the Panel's opinion, the media reports and complainants' 
new expert reports, the Web-Published Notice on  the 2013 Initial Approval List of Enterprises 
Qualified to Export Rare Earths in the Annual Review, and as we have said, the compilation of 
quotations generally restate arguments or evidence that is already stated elsewhere. As such, the 
Panel does not consider that these exhibits are "necessary" to enable the complainants to rebut China's case. While they may be helpful or confirmatory, this, in the Panel's opinion, does not rise 
to the required level of necessity.  
7.27.  In sum, the Panel believes that the releva nt exhibits were submitted too late; they could 
have been submitted earlier and in a manner consistent with due process. Additionally, these exhibits do not supplement the evidence already acce pted by the Panel. They do not, as far as the 
Panel can see, say anything substantially new or different from what is said in the exhibits that the 
complainants submitted prior to 17 July 2013.  
7.28.  In conclusion, the Panel accepts China' s request that the exhibits submitted by the 
complainants on 17 July 2013 be rejected. The Panel will therefore proceed to analyse this dispute 
without reference to such exhibits.
76  
                                               
75 Appellate Body Report, Thailand – Cigarettes (Philippines) , para. 150. 
76 The Panel notes that, in its comments on China's responses to the Panel's questions following the 
second meeting, the European Union expressed its "surprise[]" that China submitted Exhibit CHN-217, which is a circular entitled "Environmental Protection Inspec tion of Tungsten and Molybdenum" and is one of the 
environmental measures that China argues constitutes a restriction on domestic production, "at this late stage in the proceedings" (para. 106), i.e. after the Panel's se cond meeting. Later on in its comments, the European 
Union also states that Exhibit CHN-219 is "very late". In the Panel's opinion, these remarks do not constitute a formal challenge for lateness, and th e European Union has not asked the Panel to exclude these exhibits from 
consideration. Nevertheless, pursuant to its obligation to make an "objective assessment" of the matter, the Panel has considered whether Exhibits CHN-217 and CHN-219 should be excluded for lateness.  
 The Panel recalls first that Paragraph 7 of the Pa nel's Working Procedures, which provide that"[e]ach 
party shall submit all factual evidence to the Panel no later than during the first substantive meeting, except with respect to evidence necessary for purposes of rebuttal, answers to  questions or comments on answers 
provided by the other party(ies)." Seco nd, we note that these exhibits were  not filed during the first meeting, 
but were filed in support of China's response to on e of the Panel's questions. In the Panel's opinion, 
Exhibits CHN-217 and 219 should not be excluded from consideration for lateness. This is for two reasons. 
First, unlike the complainants' exhibits challenged by China for lateness, Exhibits CHN-217 and CHN-219 were 
both included in China's responses to the Panel's questions, rather than in China's comments on the complainants' responses. This means that the complainants  had a full opportunity in their comments on China's WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 43 - 
 
  7.3  Export duties 
7.3.1  Introduction and claim under Paragr aph 11.3 of China's Accession Protocol  
7.29.  Paragraph 11.3 of China's Accession Protocol states that "China shall eliminate all taxes and 
charges applied to exports unless specifically provided for in Annex 6 of this Protocol or applied in 
conformity with the provisions of  Article VIII of the GATT 1994."  
7.30.  The complainants assert that, in 2012, China imposed export duties on 363 products, 
including 58 rare earths products, 15 tungsten products77, and nine molybdenum products.78 The 
complainants submit that these latter 82 products are not identified in Annex 6 of China's 
Accession Protocol, and that China's imposition of  export duties on these products is therefore 
inconsistent with Paragraph 11.3 of its Accession Protocol.  
7.31.  China does not dispute the complainants' allegation that it has acted inconsistently with 
Paragraph 11.3 of its Accession Protocol.79 However, China argues that the obligation in 
Paragraph 11.3 is subject to the general exceptio ns in Article XX of the GATT 1994, and submits 
that the export duties at issue are justified und er Article XX(b) of the GATT 1994 because they are 
"necessary to protect human, animal or plant life or health".  
7.32.  The complainants respond that the obligation in Paragraph 11.3 of China's Accession 
Protocol is not subject to the general exceptions  in Article XX of the GATT 1994, and that China 
has in any event failed to demonstrate that its export duties are necessary to protect human, 
animal or plant life or health. 
7.33.  The Panel will begin by determining whethe r the measures at issue are inconsistent with 
Paragraph 11.3 of China's Accession Protocol, and will then turn to China's defence under 
Article XX(b) of the GATT 1994.  
7.34.  The Panel will begin its analysis with a brief review of the obligation contained in 
Paragraph 11.3 of China's Accession Protocol. The Pa nel will then review the evidence provided by 
the complainants in support of their claim, which is uncontested by China, that China has imposed 
export duties in violation of this obligation.  
7.3.1.1  The obligation in Paragraph 11.3 of China's Accession Protocol  
7.35.  When China was negotiating its accession to the WTO, some Members raised concerns over 
taxes and charges that China applied exclusively to exports.80 As a result, the following legal 
obligation was included in Paragraph 11.3 of China's Accession Protocol: 
                                                                                                                                               
responses to rebut these exhibits. Therefore, they do not raise due process concerns, as do the complainants' 
late exhibits.  
 Secondly, unlike the complainants' exhibits, which the Panel does not consider to be necessary for the 
purposes of rebutting China's arguments, CHN-217 is a lega l instrument that, according to China, forms part of 
its conservation policy. Exhibit CHN-219 is related to China's enforcement "on the ground". In the Panel's opinion, this evidence is "necessary" under Paragraph 7 of the Panel's Working Procedures to enable China to rebut the complainants' arguments. Indeed, these exhibits  respond directly to questions asked to China by the 
Panel. The Panel also believes that consideration of these exhibits is important in discharging its obligation under Article 11 of the DSU to make an "objective assessment of the matter". Exhibit CHN-217 is not a media report or an expert opinion offering an interpretation of the facts, but a part of the regulatory structure that 
forms context to the challenged measures. The Panel therefor e considers that it is appropriate to refer to it in 
its findings. 
77 The complainants exclude China's application of an  export duty on tungsten ores and concentrates 
(HS No. 2611.00) from the scope of their claim, on the gro unds that this product is identified in Annex 6 of 
China's Accession Protocol and that the export duty rate  does not exceed the maximum level listed in Annex 6. 
See European Union's first written su bmission, para. 48, Japan's first wri tten submission, footnote 77, and the 
United States' first writte n submission, footnote 76. 
78 The individual products at issue are specified below at para. 7.46. 
79 China's response to Panel question No. 9.  
80 Paragraphs 155 and 156 of China's Working Party Report read as follows: WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 44 - 
 
  China shall eliminate all taxes and charges applied to exports unless specifically 
provided for in Annex 6 of this Protocol or applied in conformity with the provisions of Article VIII of the GATT 1994. 
7.36.  In China – Raw Materials , the Appellate Body saw no ambiguity in the text of 
Paragraph 11.3 of China's Accession Protocol: 
By its terms, Paragraph 11.3 of China's Accession Protocol requires China to 
"eliminate all taxes and charges applied to exports" unless one of the following 
conditions is satisfied: (i) such taxes and charges are "specifically provided for in 
Annex 6 of [China's Accession] Protocol"; or (ii) such taxes and charges are "applied in conformity with the provisions of Article VIII of the GATT 1994".
81 
7.37.  Thus, Paragraph 11.3 of China's Accession Protocol requires China to eliminate taxes and 
charges applied to exports unless such taxes and charges are "specifically provided for in Annex 6" 
of China's Accession Protocol. Annex 6 in turn "specifically provides for" maximum export duty levels on 84 listed products. Annex 6 is entitled "Products Subject to Export Duty". It contains a 
table listing the 84 different products (each identi fied by an eight-digit Harmonized System (HS) 
number and product description), and specifies a maximum export duty rate for each.  
7.38.  Following the table listing the 84 different products that are subject to the continued 
imposition of export duties, Annex 6 includes the following text (Note to Annex 6): 
China confirmed that the tariff levels in this Annex are maximum levels which will not 
be exceeded. China confirmed furthermore that it would not increase the presently applied rates, except under exceptional circumstances. If such circumstances 
occurred, China would consult with affected members prior to increasing applied tariffs 
with a view to finding a mutually acceptable solution. 
7.39.  In China – Raw Materials , the Appellate Body confirmed th e ordinary meaning of the terms 
of the Note to Annex 6: 
The Note to Annex 6 clarifies that the maximum rates set out in Annex 6 "will not be 
exceeded" and that China will "not increase the presently applied rates, except under 
exceptional circumstances". The Note theref ore indicates that China may increase the 
"presently applied rates" on the 84 products listed in Annex 6 to levels that remain within the maximum levels listed in the Annex.
82  
7.40.  The second sentence of Paragraph 1.2 of Chin a's Accession Protocol states that provisions of 
the Protocol are "an integral part of the WTO Agreement". Thus, the provisions of the Accession 
Protocol, including Paragraph 11.3, are enforceable in WTO dispute settlement proceedings.83  
7.3.1.2  The measures at issue  
7.41.  The measures at issue in this dispute are the so-called temporary export duties that China 
imposed on various rare earths, tungsten, and molybdenum products for 2012. China's system of export duties is composed of framework legislation, implementing regulations, other applicable 
laws and the specific annual measures imposing th e export duties. The Panel recalls in this respect 
that the panel and the Appellate Body in China – Raw Materials  also made findings on a series of 
                                                                                                                                               
Some members of the Working Party raised concer ns over taxes and charges applied exclusively 
to exports. In their view, such taxes and charges should be eliminated unless applied in conformity with GATT Article VIII or list ed in Annex 6 to the Draft Protocol. 
 The representative of China noted that the majo rity of products were free of export duty, 
although 84 items, including tungsten ore, fe rrosilicon and some aluminum products, were 
subject to export duties. He noted that the cust oms value of exported goods was the F.O.B. price 
of the goods. 
81 Appellate Body Reports, China – Raw Materials , para. 280. 
82 Appellate Body Reports, China – Raw Materials , para. 284. 
83 See, e.g. Panel Reports, China – Raw Materials , para. 7.114. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 45 - 
 
  measures.84 Accordingly, the Panel will make findings and recommendations with respect to the 
series of measures comprising the relevant framework legislation, the implementing regulation(s), other applicable laws and the specific annual measures imposing the export duties existing at the date of the Panel's establishment. 
7.42.  Chapter V, Article 53 of the Customs Law of People's Republic of China  gives China's 
Customs the authority to collect export duties.
85   
7.43.  The Regulations on Import and Export Duties86 provide that China's Customs authority shall 
"collect import or export duties on all goods permitted by the People's Republic of China to be 
imported into or exported out of the Customs territory".87 The Tariff Commission of China, which is 
established by the State Council, has various responsibilities referred to specifically in the Regulations on Import and Export Duties. According to Article 4 of the Regulations on Import and 
Export Duties , the Tariff Commission is responsible for adjusting and interpreting tariff items and 
duty rates, as well as for "determining the goods subject to temporary duty rates" and "determining the application of duty rates under special circumstances". Article 9 of the 
Regulations on Import and Export Duties  states that "[d]uty rates on export goods are designed to 
collect export duty. Temporary duty rates may apply to export goods within a specific time limit". 
Article 11 states further that: "[w]here there are temporary duty rates on export goods to which 
the export duty rates are applicable, such temporary duty rates shall apply". Thus, the Regulations 
on Import and Export Duties  envisage at least three types of export duty rates in China: (i) 
"regular" export duty rates which are generally applicable; (ii) "temporary" export duty rates 
which are established for a limited period of time
88; and (iii) "special" export duty rates, which are 
established under special circumstances.89 
7.44.  On 9 December 2011, the Tariff Commission issued the 2012 Tariff Implementation 
Program (Customs Tariff Commission) . The 2012 Tariff Implementation Program (Customs Tariff 
Commission)  took effect on 1 January 2012. The 2012 Tariff Implementation Program (Customs 
Tariff Commission)  outlines adjustments to export duties, providing that in 2012 the "export tariff" 
export tax rates in effect fo r 2011 will remain unchanged.90 Annex 6 of the 2012 Tariff 
Implementation Program (Customs Tariff Commission)  is entitled "Table of Duty Rates for 
Exported Commodities".  
7.45.  On 23 December 2011, the Customs Administration issued the 2012 Tariff Implementation 
Plan (General Administration of Customs) .91 This instrument came into effect on 1 January 2012, 
and implemented the aforementioned 2012 Tariff Implementation Program (Customs Tariff 
Commission) .92 The export duties imposed on rare earths, tungsten, and molybdenum are identical 
in the two measures. 
7.46.  The Table of Duty Rates for Exported Commodities  contained in Annex 6 of the 2012 Tariff 
Implementation Program  identifies, by HS number, 363 products subject to export duties 
beginning 1 January 2012.93 The complainants have provided a copy of the relevant parts of the 
Table of Duty Rates for Exported Commodities in the form of Exhibit JE-45. The complainants have 
also reproduced the relevant information therein in a "Chart of Raw Materials Subject to Export Duties", submitted as Exhibit JE-6. These exhibits set forth the 'temporary' export duty rates imposed on 58 rare earths products, 15 tungsten products
94, and nine molybdenum products. 
                                               
84 Panel Reports, China – Raw Materials , para. 7.33; see  also Appellate Body Reports, China – Raw 
Materials , para. 266. 
85 Customs Law of the People's Republic of China, adopted at the 19th Meeting of the Standing 
Committee of the Sixth National People's Congress on 22 January 1987, amended 8 July 2000, Exhibit JE-54. 
86 Regulations of the People's Republic of China on Import and Export Duties  (Order of the State Council 
No. 392, adopted at the 26th Executive Meeting of the State Council on 29 October 2003, effective 1 January 
2004), (Exhibit JE-46). 
87 Regulations on Import  and Export Duties,  Article 2 (Exhibit JE-46). 
88 Regulations on Import  and Export Duties,  Articles 4, 9 and 11 (Exhibit JE-46).  
89 Regulations on Import  and Export Duties,  Article 4 (Exhibit JE-46).  
90 2012 Tariff Implementation Program (Customs Tariff Commission) , Section A in the second part 
(Exhibit JE-45). 
91 2012 Tariff Implementation Plan (Gen eral Administration of Customs) , (Exhibit JE-47). 
92 2012 Tariff Implementation Program (Customs Tariff Commission) , (Exhibit JE-45).  
93 2012 Tariff Implementation Program (Customs Tariff Commission) , Annex 6 (Exhibit JE-45). 
94 A s  w e  h a v e  a l r e a d y  n o t e d ,  t h e  complainants exclude China's appl ication of an export duty on 
tungsten ores and concentrates (HS No. 2611.00) from the scope of their claim, because this product is WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 46 - 
 
  These 82 products, along with the individual rates ranging from 5 to 25% ad valorem , are as 
follows: 
Raw Material Duty List 
Item No. Product Name (Short Form) HS Code "Temporary" Export 
Duty Rate for 2012 
Rare Earths  29 Rare earth ores 2530.9020 15% 
47 Thorium 2612.2000 10% 
87 Neodymium 2805.3011 25% 
88 Dysprosium 2805.3012 25% 
89 Terbium 2805.3013 25% 
90 Lanthanum 2805.3014 25% 
91 Cerium 2805.3015 25% 
92 Praseodymium 2805.3016 25% 
93 Yttrium 2805.3017 25% 
94 Other rare earths 2805.3019 25% 
95 Battery quality rare earths 2805.3021 25% 
96 Other mixed rare earths 2805.3029 25% 
123 Cerium oxide 2846.1010 15% 
124 Cerium hydroxide 2846.1020 15% 
125 Cerium carbonate 2846.1030 15% 
126 Other cerium compounds 2846.1090 15% 
127 Yttrium oxide 2846.9011 25% 
128 Lanthanum oxide 2846.9012 15% 
129 Neodymium oxide 2846.9013 15% 
130 Europium oxide 2846.9014 25% 
131 Dysprosium oxide 2846.9015 25% 
132 Terbium oxide 2846.9016 25% 
133 Praseodymium oxide 2846.9017 25% 
134 Other rare earth oxides 2846.9019 15% 
135 Terbium chloride 2846.9021 25% 
136 Dysprosium chloride 2846.9022 25% 
137 Lanthanum chloride 2846.9023 25% 
138 Neodymium chloride 2846.9024 15% 
139 Praseodymium chloride 2846.9025 15% 
140 Yttrium chloride 2846.9026 15% 
141 Mixed rare earth chlorinates  2846.9028 15% 
142 Unmixed rare earth chlorinates 2846.9029 15% 
143 Terbium fluoride 2846.9031 15% 
144 Dysprosium fluoride 2846.9032 15% 
145 Lanthanum fluoride 2846.9033 15% 
146 Neodymium fluoride 2846.9034 15% 
147 Praseodymium fluoride 2846.9035 15% 
148 Yttrium fluoride 2846.9036 15% 
149 Other rare earth fluorides 2846.9039 15% 
150 Lanthanum carbonate 2846.9041 15% 
151 Terbium carbonate 2846.9042 25% 
152 Dysprosium carbonate 2846.9043 25% 
153 Neodymium carbonate 2846.9044 15% 
154 Praseodymium carbonate 2846.9045 15% 
155 Yttrium carbonate 2846.9046 15% 
156 Mixed rare earth carbonate 2846.9048 15% 
157 Unmixed rare earth carbonate 2846.9049 15% 
158 Other lanthanum compounds 2846.9091 25% 
159 Other neodymium compounds 2846.9092 25% 
160 Other terbium compounds 2846.9093 25% 
161 Other dysprosium compounds 2846.9094 25% 
162 Other praseodymium compounds 2846.9095 25% 
163 Other yttrium compounds 2846.9096 25% 
164 Other rare earth compounds 2846.9099 25% 
232 NdFeB magnet film 7202.9911 20% 
 233 Other NdFeB alloys 7202.9919 20% 
                                                                                                                                               
identified in Annex 6 of China's Accession Protocol an d the export duty rate does not exceed the maximum 
level listed in Annex 6.   WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 47 - 
 
  Raw Material Duty List 
Item No. Product Name (Short Form) HS Code "Temporary" Export 
Duty Rate for 2012 
 234 Ferroalloy containing rare earths 7202.9991 25% 
 235 Other ferroalloys 7202.9999 20% 
Tungsten  70 Tungsten ash 2620.9910 10% 
105 Tungsten acid 2825.9011 5% 
106 Tungsten trioxides 2825.9012 5% 
107 Other tungsten oxides and 
hydroxides 2825.9019 5% 
118 APT 2841.8010 5% 
119 Sodium tungstate 2841.8020 5% 
120 Calcium tungstate 2841.8030 5% 
121 Ammonium metatungstate 2841.8040 5% 
122 Other tungstates 2841.8090 5% 
165 Tungsten carbide 2849.9020 5% 
227 Ferro-tungsten 7202.8010 20% 
228 Ferro-silico-tungsten 7202.8020 20% 
347 Tungsten powder 8101.1000 5% 
348 Unwrought tungsten 8101.9400 5% 
349 Tungsten waste  8101.9700 15% 
Molybdenum  48 Roasted molybdenum ores & 
concentrates 2613.1000 15% 
49 Other molybdenum ores & 
concentrates  2613.9000 15% 
104 Molybdenum oxides and hydroxides 2825.7000 5% 
116 Ammonium molybdate 2841.7010 5% 
117 Other molybdates 2841.7090 5% 
226 Ferro-molybdenum 7202.7000 20% 
350 Molybdenum powder 8102.1000 5% 
351 Unwrought molybdenum 8102.9400 5% 
352 Molybdenum scrap 8102.9700 15% 
 
7.47.  The Panel considers that these export duti es constitute, by definition, "taxes and charges 
applied to exports" within the meaning of Paragraph 11.3 of China's Accession Protocol. China has not argued otherwise. The Panel observes that none of the 82 products at issue are included 
among the 84 products identified by HS number in Annex 6 of China's Accession Protocol. The 
Panel notes that China does not dispute the complainants' assertions or evidence regarding the application of these "temporary" export duties, and that China does not dispute that the measures 
at issue are inconsistent with Paragraph 11.3 of its Accession Protocol. 
7.3.1.3  Conclusion 7.48.  In the light of the foregoing, the Panel co ncludes that in 2012, China imposed export duties 
ranging from 5 to 25% ad valorem on 58 rare earths products, 15 tungsten products, and nine 
molybdenum products.
95 The Panel concludes that these products are not included in Annex 6 of 
China's Accession Protocol. Accordingly, the Panel finds that China's imposition of export duties96 
on those products is inconsistent with Paragraph 11.3 of its Accession Protocol.  
7.3.2  China's defence under Article XX(b) of the GATT 1994  
7.49.  China argues that the obligation in Paragrap h 11.3 of its Accession Protocol is subject to the 
general exceptions in Article XX of the GATT 1994, an d that the export duties at issue are justified 
under Article XX(b) of the GATT 1994 because they are necessary to protect human, animal or 
plant life or health.  
7.50.  The complainants respond that the obligation in Paragraph 11.3 of China's Accession 
Protocol is not subject to the general exceptio ns in Article XX of the GATT 1994, and that the 
export duties at issue are in any event not just ified under Article XX(b) of the GATT 1994 because 
                                               
95 These products are specified above at para. 7.46. 
96 In view of the nature of the export duty system de scribed above, the Panel's fi nding is with respect to 
the series of measures comprising the relevant framewo rk legislation, the implem enting regulations, other 
applicable laws and the specific annual measures imposing the export duties existing at the date of the Panel's 
establishment. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 48 - 
 
  China has failed to demonstrate that they are necessary to protect human, animal or plant life or 
health. 
7.51.  The Panel will begin by considering whet her the obligation in Paragraph 11.3 of China's 
Accession Protocol is subject to the general exceptions in Article XX of the GATT 1994.  
7.52.  The parties have submitted extensive arguments on this issue. The Panel also received 
extensive arguments on this same issue from the third parties. Argentina97 and the Russian 
Federation98 take the position that the obligation in Paragraph 11.3 of China's Accession Protocol is 
subject to the general exceptions in  Article XX of the GATT 1994. Australia99, Canada100, 
Norway101, and Turkey102 agree with the complainants' position. Korea103 and Saudi Arabia104 
submit that the Panel should be guided by th e relevant findings of the Appellate Body in China – 
Raw Materials . Brazil considers that while "restrictions on the Member's right to promote its 
sustainable development cannot be presumed or inferred"105, it "takes no definite position"106 on 
the issue, and clarifies that "it does not necessari ly disagree with the ultimate conclusions of the 
Panel and the Appellate Body in China-Raw Materials  on the application of Article XX in that 
case".107 Colombia "takes no definitive position on the issue of whether Paragraph 11.3 of China's 
Accession Protocol is subject to Article XX", and considers that "there are compelling arguments to rule on either way".
108  
7.3.2.1  Whether the obligation in Paragrap h 11.3 of China's Accession Protocol is 
subject to the general exceptions  in Article XX of the GATT 1994  
7.3.2.1.1  Adopted panel and Appellate Body reports addressing the same legal issue  
7.53.  In China – Raw Materials , the complainants in that case109 claimed that China imposed 
export duties on certain raw materials, and that  this violated Paragraph 11.3 of its Accession 
Protocol. In response, China argued that the obligation in Paragraph 11.3 is subject to the general exceptions in Article XX of the GATT 1994. Following a lengthy analysis of this issue, the panel 
concluded that "there is no basis in China's Accession Protocol to allow the application of Article XX 
of the GATT 1994 to China's obligations in Paragraph 11.3 of the Accession Protocol".
110 China 
appealed that finding. Following its own lengthy analysis of this issue, the Appellate Body 
ultimately found that "a proper interpretation of  Paragraph 11.3 of China's Accession Protocol does 
not make available to China the exceptions und er Article XX of the GATT 1994", and accordingly 
upheld the panel's finding that "there is no basis in China's Accession Protocol to allow the application of Article XX of the GATT 1994 to China's obligations in Paragraph 11.3 of the 
Accession Protocol".
111 The DSB adopted the Appellate Body reports in China – Raw Materials , and 
the Panel Reports as modified by the Appellate Body, on 22 February 2012.112   
7.54.  In the present dispute, China requests that  the Panel re-examine the same question of law, 
and find that Article XX of the GATT 1994 is availabl e to justify a violation of Paragraph 11.3 of its 
Accession Protocol.113 In support of its position, China presents arguments that are, in its view, 
"new arguments that have not been asserted prev iously, or arguments which were neither argued 
nor addressed fully by the panel and the Appellate Body in China – Raw Materials ".114 In the light 
of these arguments, China asks the Panel to "und ertake its own independent interpretation" of the 
                                               
97 See, e.g. Argentina's response  to Panel question No. 1.  
98 Russian Federation's oral statement.  
99 See, e.g. Australia's response  to Panel question No. 1.  
100 See, e.g. Canada's response  to Panel question No. 1. 
101 See Norway's oral statement.  
102 See, e.g. Turkey's oral statement.  
103 Korea's oral stat ement, para. 12. 
104 Saudi Arabia's response to Panel question No. 1.  
105 Brazil's response to Panel question No. 1.  
106 Brazil's response to Panel question No. 1. 
107 Brazil's oral stat ement, para. 4.  
108 Colombia's oral statement, para. 33. 
109 The complainants in China – Raw Materials  were the European Union, Me xico, and the United States.  
110 Panel Reports, China – Raw Materials , para. 7.159.  
111 Appellate Body Reports, China – Raw Materials , para. 307.  
112 WT/DSB/M/112, para. 125. 
113 China's first written submission, paras. 408-461. 
114 China's first written submission, paras. 416 and 460. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 49 - 
 
  issue.115 In this respect, China asked the Panel to issue a preliminary ruling on the availability, to 
China, of general exceptions enshrined in the GA TT 1994, more specifically the general exceptions 
enshrined in Article XX of the GATT 1994, to excuse a potential violation of Paragraph 11.3 of China's Accession Protocol. China requested the Panel to make such a ruling on an "expedited 
basis".
116 We declined China's request for a prelimin ary ruling on the grounds that the request 
concerned a complex issue of substance as opposed to an issue of procedure or jurisdiction, and we required sufficient time to carefully consider the extensive argumentation of the parties and 
third parties. Having now considered carefully the argumentation, we set out our ruling on this 
matter below. 
7.55.  At the outset, the Panel recalls that, according to Article 17.14 of the DSU, "[a]n Appellate 
Body report shall be adopted by the DSB and un conditionally accepted by the parties to the 
dispute" unless the DSB decides by consensus not to adopt it. In US – Stainless Steel (Mexico) , 
the Appellate Body stated that "absent cogent reasons, an adjudicatory body will resolve the same 
legal question in the same way in a subsequent case". In that case, the Appellate Body expressed 
its deep concern over the panel's decision to depart from prior Appellate Body rulings on the same 
question of law: 
Ensuring "security and predictability" in the dispute settlement system, as 
contemplated in Article 3.2 of the DSU, implies that, absent cogent reasons, an 
adjudicatory body will resolve the same legal question in the same way in a subsequent case.
117 
In the hierarchical structure contemplated in the DSU, panels and the Appellate Body 
have distinct roles to play. In order to strengthen dispute settlement in the 
multilateral trading system, the Uruguay Round established the Appellate Body as a standing body. Pursuant to Article 17.6 of th e DSU, the Appellate Body is vested with 
the authority to review "issues of law covered in the panel report and legal 
interpretations developed by the panel". Accordingly, Article 17.13 provides that the Appellate Body may "uphold, modify or reverse" the legal findings and conclusions of 
panels. The creation of the Appellate Body by WTO Members to review legal 
interpretations developed by panels shows that Members recognized the importance of consistency and stability in the interpretation of their rights and obligations under the covered agreements. This is essential to  promote "security and predictability" in 
the dispute settlement system, and to ensure the "prompt settlement" of disputes. 
The Panel's failure to follow previously ad opted Appellate Body reports addressing the 
same issues undermines the development of a coherent and predictable body of 
jurisprudence clarifying Members" rights and obligations under the covered 
agreements as contemplated under the DSU. Clarification, as envisaged in Article 3.2 of the DSU, elucidates the scope and me aning of the provisions of the covered 
agreements in accordance with customary rules of interpretation of public 
international law. While the application of a provision may be regarded as confined to the context in which it takes place, the relevance of clarification contained in adopted 
                                               
115 China's first written submission, para. 460. 
116 China's first written submission, paras. 6 and 409. See section 1.3.3 above. 
117 (footnote original ) See H. Lauterpacht, "The so-called An glo-American and Continental Schools of 
Thought in International Law" (1931) 12 British Yearbook of International Law 53, who points out that 
adherence to legal decisions "is imperative if the law is to fulfil one of its primary functions, i.e. the maintenance of security and stability". Consistency of ju risprudence is valued also in dispute settlement in 
other international fora. In this respect we note the Decision of the International Criminal Tribunal for the 
Former Yugoslavia, Case No. IT-95-14/1-A, Prosecutor v. Aleksovski , Judgement of 24 March 2000, para. 113, 
which states that "the right of appeal is ... a component of the fair trial requirement, which is itself a rule of customary international law and gives rise to the right of the accused to have like cases treated alike. This will not be achieved if each Trial Chamber is free to disreg ard decisions of law made by  the Appeals Chamber, and 
decide the law as it sees fit." Furthermore, we note the Decision of 21 March 2007 of the ICSID (International Centre for Settlement of Investment Disputes) Arbitration Tribunal, Case No. ARB/05/07, Saipem S.p.A. v. The 
People's Republic of Bangladesh , ICSID IIC 280 (2007), p. 20, para. 67, which states that "[t]he Tribunal 
considers that it is not bound by previous decisions. At the same time, it is of the opinion that it must pay due consideration to earlier decisions of international tribun als. It believes that, subject to compelling contrary 
grounds, it has a duty to adopt solutions established in a series of consis tent cases. It also believes that, 
subject to the specifics of a given treaty and of the circumstances of the actual case, it has a duty to seek to 
contribute to the harmonious development of investment law and thereby to meet the legitimate expectations of the community of States and investors towards certainty of the rule of law." WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 50 - 
 
  Appellate Body reports is not limited to the application of a particular provision in a 
specific case. 
We are deeply concerned about the Panel's decision to depart from well-established 
Appellate Body jurisprudence clarifying the interpretation of the same legal issues. 
The Panel's approach has serious implications for the proper functioning of the WTO 
dispute settlement system, as explained above.118 
7.56.  In US – Continued Zeroing , the Appellate Body reiterated that ensuring "security and 
predictability" in the dispute settlement system requires an adjudicatory body, absent "cogent 
reasons", to "resolve the same legal question in the same way in a subsequent case".119 
7.57.  The Panel is well aware of the "distinct roles"120 that panels and the Appellate Body play, 
and is mindful of the fact that China's request fo r a re-examination of the issue comes shortly after 
the DSB adopted the Appellate Body's ruling on the same legal issue.121 The Panel has therefore 
given very careful consideration to how it should proceed in these circumstances and has been guided by the following considerations.  
7.58.  First, where a party asks a panel to deviate from a prior Appellate Body finding on a 
question of law on the basis of novel legal argu ments, a full exploration of those arguments may 
assist the Appellate Body in the event of an appeal, particularly where those arguments raise 
complex legal issues. In this regard, there have been cases in which the Appellate Body found that 
it could not resolve certain complex legal issues on appeal in the absence of a "full exploration of the issues" before the Panel.
122 Insofar as its full exploration of novel legal arguments presented 
by a party could assist the Appellate Body in the event of an appeal, a panel might thereby "assist 
the DSB in making the recommendations or in giving the rulings provided for in the covered 
agreements" as mandated by Article 11 of the DSU.  
7.59.  Second, in deciding how to proceed, the Panel has taken into account the following 
particular circumstances of this dispute: (i) no party or third party has argued that the Panel is 
legally precluded from re-examining this issue; (ii) the parties to this dispute are not identical to the parties in China – Raw Materials (which did not include Japan but did include another 
Member); (iii) this legal issue is "a central aspect of this dispute" that is "of fundamental systemic 
importance"
123, as evidenced by the extensive argumentatio n of the issue by the parties as well as 
many of the third parties in this dispute; and (iv) it is the Panel's view that China's argument regarding the systemic relationship between the pr ovisions of its Accession Protocol and those of 
the GATT 1994 is a new argument, and one that raises complex legal issues.  
7.60.  The foregoing considerations have led the Pa nel to thoroughly examine the issue in the light 
of the specific arguments developed by China in the context of this dispute. However, none of 
these considerations lead the Panel to view its role as conducting a so-called de novo
124 
determination of the issue, in the sense of according zero deference to the panel and Appellate Body reasoning, and ultimate finding, in China – Raw Materials . Such an approach would be 
difficult to reconcile with the "distinct roles"
125 that panels and the Appellate Body play. Thus, in 
re-examining this issue, the Panel will generally confine its analysis to the specific arguments that have been presented to us by China in this disp ute. Furthermore, in the context of addressing 
those specific arguments, we will attempt to discern whether they are the same arguments that 
were already presented to, and rejected by, the panel and the Appellate Body in China – Raw 
Materials . In addressing these specific arguments, some of which are new and some of which 
appear to be similar to those addressed by the panel and the Appellate Body in China – Raw 
Materials , we may be led to repeat some of the same points made by the panel and the Appellate 
                                               
118 Appellate Body Report, US – Stainless Steel (Mexico) , paras. 160-162. 
119 Appellate Body report, US – Continued Zeroing , para. 362. 
120 Appellate Body Report, US – Stainless Steel (Mexico) , para. 161. 
121 China's request for a preliminary ruling is contained in its first written submission of 20 December 
2012, and the DSB adopted the Appellate Body Reports in China – Raw Materials  earlier in the same year, on 
22 February 2012. WT/DSB/M/112, para. 125. 
122 See, e.g. Appellate Body Reports, EC – Asbestos , para. 82, EC – Export Subsidies on Sugar , 
footnote 537 to para. 339, and Canada – Renewable Energy / Feed-in Tariff Program , paras. 5.224 and 5.244.  
123 See, e.g. Argentina's third-party submission, para. 4, and Brazil's third-party oral statement. 
124 China's first written submission, para. 448. 
125 Appellate Body Report, US – Stainless Steel (Mexico) , para. 161. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 51 - 
 
  Body in China – Raw Materials . The fact that we may refer to certain elements of the panel or 
Appellate Body reasoning in China – Raw Materials , but not others, should not be understood to 
reflect any disagreement with those other elements of the reasoning. We see nothing that would be gained if we were to reproduce all of th e reasoning of the panel and Appellate Body in China – 
Raw Materials  in the context of responding to the specific arguments presented by China in this 
dispute. 
7.61.  Finally, when reviewing China's specific arguments, we consider the relevant legal question 
to be whether those arguments present "cogent reasons" for departing from the prior adopted 
finding, by the Appellate Body, on the same questi on of law presented to this Panel. The Appellate 
Body has not attempted to define the concept of "cogent reasons". The word "cogent" means 
"[a]ble to compel assent or belief; esp. (of an argument, explanation, etc.) persuasive, expounded 
clearly and logically, convincing".
126 The Panel considers that the expression "cogent reasons" may 
be understood as referring generally to a high threshold.127 
7.3.2.1.2  Overview of China' s arguments in this dispute 
7.62.  In its first written submission, China argues that while there is no explicit textual language 
linking Paragraph 11.3 of its Accession Protocol to Article XX of the GATT 1994, "such textual silence does not mean that it was the Members' common intention that no such defence should be 
available to China".
128 China then presents three specific arguments in support of its position that 
the obligation in Paragraph 11.3 of its Accession Protocol is subject to the general exceptions in Article XX of the GATT 1994. China presents its arguments under the following headings: (i) "Paragraph 11.3 of China's Accession Protocol  has to be treated as an integral part of the 
GATT 1994"
129; (ii) "The terms 'nothing in this Agreement' in the chapeau of Article XX of the 
GATT 1994 do not exclude the availability of Article XX to defend a violation of Paragraph 11.3 of China's Accession Protocol "
130; and (iii) "An appropriate holistic interpretation, taking due account 
                                               
126 Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University 
Press, 2002), Vol. 1, p. 443. 
127 We note that the Appellate Body introduced the concept of "cogent reasons" in US – Stainless Steel 
(Mexico) , and the footnote accompanying this passage of the Appellate Body report (reproduced at 
footnote 117 above) referred to the Judgement of the Appeals Chamber of the International Criminal Tribunal for the Former Yugoslavia in Prosecutor v. Aleksovski. While the Appeals Chamber in that case did not attempt 
to define the concept of "cogent reasons" in the abst ract, the following passage from that judgement suggests 
that the threshold is high: 
 
Instances of situations where cogent reasons in the interests of justice require a departure from 
a previous decision include cases where the previo us decision has been de cided on the basis of a 
wrong legal principle or cases where a previous decision has been given per incuriam , that is a 
judicial decision that has been  "wrongly decided, usually because the judge or judges were ill-
informed about the applicable la w." (Appeals Chamber of the International Criminal Tribunal for 
the Former Yugoslavia, Case No. IT-95-14/1-A, Prosecutor v. Aleksovski , Judgement of 24 March 
2000, para. 108 (internal footnote omitted).)  Likewise, it appears that the European Court of Hu man Rights has adopted a high threshold for finding 
that "cogent reasons" exist for it to depart  from one of its prior decisions. In the Cossey Case , the Court stated 
that: 
 It is true that … the Court is not bound by its previous judgments … However, it usually follows 
and applies its own precedents, such a course be ing in the interests of legal certainty and the 
orderly development of the Conven tion case-law. Nevertheless, this would not prevent the Court 
from departing from an earlier decision if it wa s persuaded that there we re cogent reasons for 
doing so. Such a departure might, for example,  be warranted in orde r to ensure that the 
interpretation of the Convention reflects societ al changes and remains in line with present-day 
conditions. (European Court of Human Rights, Cossey Judgement of 27 September 1990, Series A, vol. 184, para. 35.) 
128 China's first written submission, para. 411. 
129 China's first written submission, Section V.C, paras. 422-435. See also China's rebuttal submission 
on the availability of Article XX of  the GATT 1994, Sectio n III, paras. 13-34. 
130 China's first written submission, Section V.D, pa ras. 436-444. See also China's rebuttal submission 
on the availability of Article XX of the GATT 1994, Section IV, paras. 35-42. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 52 - 
 
  of the object and purpose of the WTO Agreement , confirms that China may justify export duties 
through recourse to Article XX of the GATT 1994".131  
7.3.2.1.3  China's argument regarding the in terpretation of omissions in the covered 
agreements  
7.63.  In its first written submission, China "accepts the Appellate Body's findings in China – Raw 
Materials  that there is no explicit textual link  in China's Accession Protocol  that would make the 
exceptions of Article XX of the GATT 1994 avai lable for excusing a potential violation of 
Paragraph 11.3 of China's Accession Protocol ".132 However, China argues that while there is no 
explicit textual link between Paragraph 11.3 of its Accession Protocol and Article XX of the 
GATT 1994, "such textual silence does not mean that it was the Members' common intention that no such defence should be available to China".
133 In this regard, China quotes the following 
passage from the Appellate Body report in US – Carbon Steel : 
[T]he task of ascertaining the meaning of a treaty provision with respect to a specific 
requirement does not end once it has been determined that the text is silent on that 
requirement. Such silence does not exclud e the possibility that the requirement was 
intended to be included by implication.134 
7.64.  China has elsewhere referred to this passage from US – Carbon Steel in its submissions to 
this Panel.135 China has also made various statements to the same effect. For example, it has 
argued that "[t]he mere fact" that Paragraph 11.3 of its Accession Protocol does not explicitly reference Article XX of the GATT 1994 "is not a sufficient basis" to deny its applicability.
136 In its 
third-party submission, Brazil comments on "s ome aspects regarding the interpretation of 
omissions in the covered agreements", and likewi se refers to various panel and Appellate Body 
reports interpreting omissions and silences in the covered agreements, including this same passage from the Appellate Body report in US – Carbon Steel.
137 Brazil submits that "the mere 
fact" that there is no specific reference to the right of a member to regulate trade in a manner 
consistent with its WTO obligations "should not be automatically assumed" to mean that Article XX is not available to China.
138 China states that it agrees with Brazil's statement that whether there 
is an explicit reference in Paragraph 11.3 of China's Accession Protocol to the WTO Agreement is 
not "dispositive" of whether China may invoke Ar ticle XX of the GATT 1994 to justify a potential 
violation of its export-duty commitments.139 In this regard, China submits that "[i]t cannot be 
stressed often enough that textual silence in a treaty provision is not, in and of itself, 
dispositive".140  
7.65.  The Panel observes that in China – Raw Materials , the Appellate Body did not refer to its 
approach to interpreting "silence" in US – Carbon Steel . In the interest of undertaking a full 
exploration of the issues raised by China's specif ic arguments, we have undertaken a review of the 
Appellate Body's analysis in China – Raw Materials  in the light of the Appellate Body's analysis in 
US – Carbon Steel . We have done so to determine whether there is any incompatibility, as the 
argument of China implies, between the Appellate Body's position in China – Raw Materials  and US 
– Carbon Steel . In the Panel's view, there is none.  
7.66.  In US – Carbon Steel , the Appellate Body stated that "[t]he task of ascertaining the 
meaning of a treaty provision with respect to a sp ecific requirement does not end once it has been 
determined that the text is silent on that requirement … [s]uch silence does not exclude the 
possibility that the requirement was intended to be included by implication."141 In China – Raw 
Materials , the Appellate Body did not reach its conclusi on on the non-availability of Article XX of 
                                               
131 China's first written submission, Section V.E, paras. 445-458. See also China's rebuttal submission 
on the availability of Article XX of the GATT 1994, Section IV, paras. 43-55. 
132 China's first written submission, para. 411. (emphasis original) 
133 China's first written submission, para. 411. 
134 Appellate Body Report, US – Carbon Steel , para. 65. 
135 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 26. 
136 China's first written submission, para. 415.  
137 Brazil's third-party submission, paras. 5-21. 
138 Brazil's third-party submission, para. 18. 
139 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 27. 
140 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 26. 
141 Appellate Body Report, US – Carbon Steel , para. 65. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 53 - 
 
  the GATT 1994 to Paragraph 11.3 of China's Accessi on Protocol by treating the absence of an 
express reference to Article XX as "dispositive". Rather, the Appellate Body explained that this 
conclusion followed from an analysis that proceeded in a "holistic manner".142 In the course of its 
analysis, the Appellate Body expressly considered: (i) the rules of treaty interpretation that apply 
to China's Accession Protocol143; (ii) a prior Appellate Body Report that provided guidance on the 
availability of Article XX as a defence to claims under China's Accession Protocol (i.e. China – 
Publications and Audiovisual Products144); (iii) the ordinary meaning of the terms of 
Paragraph 11.3145, including the fact that Paragraph 11.3 refers to justifications under GATT 
Article VIII but not GATT Article XX; (iv) the ordina ry meaning of the terms of Annex 6 of China's 
Accession Protocol146; (v) China's argument regarding the applicability of Article XX to Article VIII 
of the GATT, which is referenced in Paragraph 11.3147; (vi) the context provided by the wording of 
other provisions of China's Accession Protocol, incl uding Paragraphs 5.1, 11.1 and 11.2, as well as 
the context provided by other provisions of China's Working Party Report, including Paragraphs 155, 156, 169, and 170
148; (vii) the context provided by other provisions of the 
WTO Agreement149; and (viii) the preamble of the WTO Agreement.150 Thus, the Appellate Body 
did not treat the absence of an express reference to Article XX as "dispositive". 
7.67.  In fact, upon closer examination, there are some striking parallels between the Appellate 
Body's reasoning in the earlier US – Carbon Steel case and its reasoning in China – Raw Materials . 
First, both cases involved a similar problem of treaty interpretation. In US – Carbon Steel , the 
question was whether the de minimis  standard contained in Article 11.9 of the SCM Agreement, 
which applies to the investigation phase of a countervailing duty proceeding, is applicable to 
Article 21.3 of the SCM Agreement, which applies to sunset reviews, even though Article 21.3 does 
not expressly refer to Article 11.9; the Appellate Body ultimately found that it is not. In China – 
Raw Materials , the question was whether the general exce ptions contained in Article XX of the 
GATT 1994 are applicable to Paragraph 11.3 of China's Accession Protocol, even though 
Paragraph 11.3 does not expressly refer to Article XX; the Appellate Body ultimately concluded that they are not.  
7.68.  Second, the analysis in both cases began with the text of the provision at issue. In US – 
Carbon Steel , the Appellate Body commenced by observing that the text of Article 21.3 of the SCM 
Agreement does not make any express reference to the de minimis  standard set forth in 
Article 11.9 of the SCM Agreement.
151 In China – Raw Materials , the Appellate Body began by 
determining whether there is language in Paragraph 11.3 or Annex 6 of China's Accession Protocol 
that could be read as indicating that China can have recourse to the provisions of Article XX of the GATT 1994.
152  
7.69.  Third, the analysis in both cases attached weight to the technique of cross-referencing as 
reflected in other provisions of the instrument in question. In US – Carbon Steel , the Appellate 
Body observed that "the technique of cross-referencing is frequently used in the SCM Agreement", 
and explained that "[t]hese cross-references sugge st to us that, when the negotiators of the SCM 
Agreement intended that the disciplines set forth in one provision be applied in another context, they did so expressly"; the Appellate Body observed that Article 11.9 is specifically referred to in 
Article 15.3 of the SCM Agreement, and noted that the provisions of Article 11 more generally are 
referred to in a number of other provisions of the SCM Agreement; the Appellate Body reasoned 
that "[i]n the light of the many express cross-re ferences made in the SCM Agreement, we attach 
significance to the absence of any textua l link between Article 21.3 reviews and the de minimis  
standard set forth in Article 11.9."
153 In China – Raw Materials , the Appellate Body agreed with the 
panel that "WTO Members have, on occasion, 'incorporated, by cross-reference, the provisions of Article XX of the GATT 1994 into other covered agreements'" and identified examples of several 
                                               
142 Appellate Body Reports, China – Raw Materials , para. 307.  
143 Appellate Body Reports, China – Raw Materials , para. 278. 
144 Appellate Body Reports, China – Raw Materials , para. 304.  
145 Appellate Body Reports, China – Raw Materials , paras. 279-280. 
146 Appellate Body Reports, China – Raw Materials , paras. 281-287. 
147 Appellate Body Reports, China – Raw Materials , paras. 288-290. 
148 Appellate Body Reports, China – Raw Materials , paras. 291-299. 
149 Appellate Body Reports, China – Raw Materials , para. 303. 
150 Appellate Body Reports, China – Raw Materials , paras. 305-306. 
151 Appellate Body Report, US – Carbon Steel , para. 64.  
152 Appellate Body Reports, China – Raw Materials , paras. 279-284.  
153 Appellate Body Report, US – Carbon Steel , para. 69. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 54 - 
 
  provisions in China's Accession Protocol and the WTO covered agreements, such as Article 3 of the 
TRIMs Agreement, that expressly cross-reference Article XX of the GATT 1994; the Appellate Body reasoned that "we attach significance to the fact  that Paragraph 11.3 of China's Accession Protocol 
expressly refers to Article VIII of the GATT 1994, but does not contain any reference to other 
provisions of the GATT 1994, including Article XX".
154   
7.70.  Fourth, the analysis in both cases involved  an inference drawn from the absence of a cross-
reference in one paragraph of an article that is contained in one or more immediately adjacent 
paragraphs of the same article. In US – Carbon Steel , and as part of its analysis of the use of 
cross-references in the SCM Agreement, the Appellate Body drew an inference from the cross-reference contained in Article 21.4, a paragraph of Article 21 that formed part of the "immediate context" of Article 21.3, the provision at issue.
155 In China – Raw Materials , the Appellate Body 
drew an inference from the inclusion of an express cross-reference to the GATT 1994, found in 
both Paragraphs 11.1 and 11.2 of China's Accession Protocol, but not in Paragraph 11.3.156 
7.71.  Finally, the analysis in both cases explained why consideration of the need to strike an 
overall balance between WTO rights and obligations did not provide specific guidance on the 
interpretative problem at issue. In US – Carbon Steel , the Appellate Body concluded that Part V of 
the SCM Agreement "is aimed at striking a balance" between the right to impose countervailing 
duties to offset subsidization that is causing injury, and the obligations that Members must respect 
in order to do so, but that "[w]hile Part V strikes such a balance, this alone does not assist us" in the task of determining whether the 1% de minimis standard in Article 11.9 is intended to be 
applied in reviews carried out pursuant to Article 21.3.
157 In China – Raw Materials , the Appellate 
Body concluded that the WTO Agreement "reflect [s] the balance struck by WTO Members between 
trade and non-trade-related concerns", but that "none of the objectives listed above, nor the balance struck between them, provides specific gu idance" on the question of whether Article XX of 
the GATT 1994 is applicable to Paragraph 11.3 of China's Accession Protocol.
158  
7.72.  In the light of the foregoing, we fail to see any incompatibility between the Appellate Body's 
analysis in China – Raw Materials  and its earlier analysis in US – Carbon Steel. Rather, we find 
striking similarities.  Accordingly, the Panel finds that China's reliance on US – Carbon Steel is 
misplaced and its argument that "textual silence in a treaty provision is not, in and of itself, dispositive" cannot be regarded as a "cogent reason" for departing from the Appellate Body's finding that the obligation in Paragraph 11.3 of China's Accession Protocol is not subject to the 
general exceptions in Article XX of the GATT 1994.  
7.3.2.1.4  China's argument regarding the sy stemic relationship between the provisions 
of China's Accession Protocol and those of the GATT 1994  
7.73.  China's next specific argument is based on the systemic relationship between the provisions 
of post-1994 accession protocols and the GATT 1994.  
7.74.  In China – Raw Materials , the panel and the Appellate Body both engaged in an in-depth 
analysis of the series of arguments that China presented in support of its position that Article XX of 
the GATT 1994 is available as a defence for measures found to be inconsistent with Paragraph 11.3 of its Accession Protocol. In the context of its analysis, the panel in China – Raw 
Materials  remarked that Members "could have agreed that China's export duty commitments were 
an integral part of China's commitments under the GATT 1994", for example "by incorporating 
China's export duties commitments into China's GATT 1994 Schedule", in which case Article XX would have been applicable.
159  
7.75.  In this case, China presents the novel argument that Members did make Paragraph 11.3, 
along with various other provisions of its Accession Protocol, an "integral part" of the 
                                               
154 Appellate Body Reports, China – Raw Materials , para. 303. 
155 Appellate Body Report, US – Carbon Steel , para. 72.  
156 Appellate Body Reports, China – Raw Materials , para. 293.  
157 Appellate Body Report, US – Carbon Steel , para. 74.  
158 Appellate Body Reports, China – Raw Materials , para. 306.  
159 Panel Reports, China – Raw Materials , para. 7.140. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 55 - 
 
  GATT 1994.160 In presenting this argument, China initially argued that Paragraph 11.3 is an 
integral part of the GATT 1994 on the grounds that  it has an "intrinsic relationship" with the 
GATT 1994. China subsequently elaborated on the basis for its argument, in the context of responding to the complainants' arguments that China's "intrinsic relationship" theory lacked any 
basis in the text of the covered agreements, and in China's responses to questions from the Panel. 
In this regard, China identified two textual bases for its view that provisions of an accession protocol can be deemed as integral parts of on e or more of the Multilateral Trade Agreements 
annexed to the Marrakesh Agreement (in this case, the GATT 1994). According to China, the first 
textual basis in support of its overall argument regarding the relationship between Paragraph 11.3 and the GATT 1994 is Paragraph 1.2 of is Accession  Protocol, which states that "[t]his Protocol, 
which shall include the commitments referred to in paragraph 342 of the Working Party Report, 
shall be an integral part of  the WTO Agreement ".
161 China's second textual basis in support of its 
overall argument is Article XII:1 of the Marrakesh Agreement, which provides that a State or separate customs territory possessing full autonomy in the conduct of its external commercial 
relations "may accede to this Agreement, on te rms to be agreed between it and the WTO. Such 
accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto." 
7.76.  The Panel recalls that China argues that "Paragraph 11.3 of China's Accession Protocol  has 
to be treated as an inte gral part of the GATT 1994"
162, and therefore the relevant question before 
the Panel is the relationship between Paragrap h 11.3 of China's Accession Protocol and the 
GATT 1994. However, as explained above, China arrives at this conclusion by invoking two 
provisions that relate to the relationship between accession protocols and the "WTO Agreement" 
more generally. China's overall argument can usefully be broken down into the following 
underlying premises: 
a. The legal effect of Paragraph 1.2 of China's Accession Protocol and Article XII:1 of the 
Marrakesh Agreement is to make China's Accession Protocol an "integral part" of the 
Marrakesh Agreement, and also to make each of the Accession Protocol-specific 
provisions163 an integral part of one of the Multilateral Trade Agreements (e.g. 
GATT 1994) annexed to the Marrakesh Agreement. 
b. The determination of which  Multilateral Trade Agreement(s) (e.g. GATT 1994) a 
particular provision of the Accession Protocol is an "integral part" must be based on an 
evaluation of which Multilateral Trade Agreement(s) the provision at issue is 
"intrinsically" related to. Paragraph 11.3 of China's Accession Protocol contains an 
obligation regarding trade in goods, and in particular regulating the use of export duties. Therefore, it is "intrinsically related" to the GATT 1994, and in particular the provisions 
of GATT 1994 regulating the use of export duti es – which, in China's view, are Articles II 
and XI of the GATT 1994. Accordingly, Paragraph 11.3 must be treated as an "integral part" of the GATT 1994. Paragraph 11.3 is ther efore subject to the general exceptions in 
GATT Article XX unless there is explicit treaty language to the contrary. 
7.77.  It is through this chain of reasoning that China arrives at the conclusion that Paragraph 11.3 
of its Accession Protocol is an integral part of the GATT 1994. Accordingly, in order to resolve the 
issue of whether Paragraph 11.3 is an integral part of the GATT 1994, the Panel needs to analyse 
the premises above. The Panel will begin by co nsidering the first premise of China's argument 
above, which concerns the relationship between  accession protocols and the WTO Agreement in 
general. This first premise is that the legal effect of Paragraph 1.2 of China's Accession Protocol 
and Article XII:1 of the Marrakesh Agreement is to make China's Accession Protocol an "integral 
part" of the Marrakesh Agreement, and also to make each of the Accession Protocol-specific 
provisions an integral part of one of the Multilateral Trade Agreements (e.g. GATT 1994) annexed 
to the Marrakesh Agreement. For the reasons that fo llow, the Panel is unable to agree with China.  
                                               
160 China's first written submission, Section V.C, paras. 422-435. See also China's rebuttal submission 
on the availability of Article XX of  the GATT 1994, Sectio n III, paras. 13-34. 
161 Emphasis added.  
162 China's first written submission, Section V.C, paras. 422-435. See also China's rebuttal submission 
on the availability of Article XX of  the GATT 1994, Sectio n III, paras. 13-34. 
163 China and others have call ed this sort of provision a "WTO-plus" provision.  In this panel report, the 
Panel will rather use the expression "accession Protocol-specific provision". WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 56 - 
 
  7.78.  As regards Paragraph 1.2 of its Accession Protocol, China argues that the reference to "the 
WTO Agreement" in Paragraph 1.2 means the Marra kesh Agreement, and the Multilateral Trade 
Agreements annexed thereto. In contrast, the complainants argue that the reference to "the WTO Agreement" means the Marrakesh Agreement.  
7.79.  Paragraph 1.2 of China's Accession Protocol states that: "This Protocol, which shall include 
the commitments referred to in paragraph 342 of the Working Party Report, shall be an integral part of the WTO Agreement." The Preamble of  China's Accession Protocol refers to the 
"WTO Agreement" as "the Marrakesh Agreement Establishing the World Trade Organization." The 
Decision of the Ministerial Conference of 10 November 2001 (WT/L/432) provides that: "The 
People's Republic of China may accede to the Marrakesh Agreement Establishing the World Trade 
Organization on the terms and conditions set out in the Protocol annexed to this decision." In 
contrast, Paragraph 1.3 of China's Accession Protocol refers explicitly to "the Multilateral Trade 
Agreements annexed to the WTO Agreement".  
7.80.  The Panel is of the view that the terms "the WTO Agreement", in the second sentence of 
Paragraph 1.2, means that China's Accession Protocol is made an integral part of the Marrakesh 
Agreement. Article II:2 of the Marrakesh Agreement states that the annexed Multilateral Trade Agreements are integral parts of the WTO Agreem ent. This does not mean that the Multilateral 
Trade Agreements annexed to the Marrakesh Agreemen t are integral parts of one another, or that 
individual provisions of one Multilateral Trade Ag reement are integral parts of another Multilateral 
Trade Agreement. The Panel considers that individual  provisions of China's Accession Protocol 
could  als o be  made  an inte g ral p art of one  or more  of the Mult ilate ra l T rad e  Ag re e me nts  (e .g. 
GATT 1994). However, this would not occur as a result of Paragraph 1.2. Rather, it would occur if 
and where such language is contained in the individual provision. The Appellate Body in China – 
Raw Materials  states that:  
We note, as did the Panel, that WTO Members have, on occasion, "incorporated, by 
cross-reference, the provisions of Article XX of the GATT 1994 into other covered agreements".
164 For example, Article 3 of the Agreement on Trade-Related Investment 
Measures  (the " TRIMs Agreement ") explicitly incorporates the right to invoke the 
justifications of Article XX of the GATT 1994, stating that "[a]ll exceptions under GATT 1994 shall apply, as appropriate, to th e provisions of this Agreement". In the 
present case , we attach significance to the fact that Paragraph 11.3 of China's 
Accession Protocol expressly refers to Ar ticle VIII of the GATT 1994, but does not 
contain any reference to other provisions of the GATT 1994, including Article XX.
165 
7.81.  An example, discussed further below, is Paragraph 1 of Part II of China's Accession Protocol, 
which contains language that, when read together with Article II:7 of the GATT 1994, makes the 
Schedules annexed to China's Accession Protocol an "integral part" of the GATT 1994. The Panel is persuaded of this interpretation for the following reasons.  
7.82.  First, the ordinary meaning of the words used in Paragraph 1.2 does not support the 
interpretation that this language makes the individual  provisions of the Accession Protocol integral 
parts of different Multilateral Trade Agreements. Th e second sentence of Paragraph 1.2 provides – 
in the singular – that " This Protocol , which shall include the commitments referred to in 
paragraph 342 of the Working Party Report, shall be an integral  part of the WTO Agreement". The 
ordinary meaning is that the Accession Protocol in its entirety  is made an integral part of one other 
agreement, i.e. that the Accession Protocol as a whole is made an integral part of the Marrakesh 
Agreement. The ordinary meaning is not consistent with the view that, in addition, the individual 
provisions  thereof are also made integral parts of other agreements  annexed to the Marrakesh 
Agreement. Support for this interpretation is found in the context offered by other "integration" 
provisions in the covered agreements. For exam ple, Article II:2 of the Marrakesh Agreement 
provides that the Multilateral Trade Agreements  annexed to the Marrakesh Agreement are made 
an integral part of the Marrakesh Agreement.  This language suggests that each of those 
instruments, in its entirety, is made an integral part of one other agreement, i.e. the Marrakesh 
Agreement.  
                                               
164 (footnote original ) Panel Reports, para. 7.153.  
165 Appellate Body Reports, China – Raw Materials , para. 303.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 57 - 
 
  7.83.  Second, paragraph 1 of the GATT 1994 specifies what the GATT 1994 "shall consist of".166 
Paragraph 1 of the GATT 1994 appears to be an exhaustive, closed list. Paragraph 1(b)(ii) refers specifically to the provisions of protocols of accession "that have entered into force under the GATT 1947 before the date of entry into force of the WTO Agreement". This is consistent with the 
fact that the Uruguay Round Agreements went beyo nd trade in goods and, as a result, post-1994 
accession protocols cover services and intellectual  property issues not covered by the GATT 1994. 
China's interpretation that Paragraph 11.3 of Chin a's Accession Protocol has to be treated as an 
integral part of the GATT 1994 is difficult to reco ncile with the express terms of paragraph 1, and 
in particular paragraph 1(b)(ii) of the GATT 1994. 
7.84.  Third, Paragraph 1 of Part II of China's A ccession Protocol provides that "[t]he Schedules 
annexed to this Protocol shall become the Schedule of Concessions and Commitments annexed to 
the GATT 1994 and the Schedule of Specific Co mmitments annexed to the GATS relating to 
China". Article II:7 of the GATT 1994 provides that  [t]he Schedules annexed to this Agreement are 
hereby made an integral part of Part I of th is Agreement". Read together, these provisions 
expressly make "[t]he Schedules annexed to this Protocol" an "integral part" of the GATT 1994. 
There would have been no need to state this explicitly if all GATT-related provisions of the Accession Protocol were implicitly made an "integral part" of the GATT 1994. Moreover, the 
wording of Paragraph 1 of Part II refers only to "[t]he Schedules annexed to this Protocol", which 
does not include the obligation contained in Paragraph 11.3 of China's Accession Protocol.  
7.85.  Fourth, prior panel and Appellate Body report s do not support China's interpretation that the 
t e r m  " t h e  W T O  A g r e e m e n t "  a s  u s e d  i n  P a r a g r a p h 1.2 of China's Accession Protocol refers to 
something other than the Marrakesh Agreement. Although this is the first occasion on which a 
panel or the Appellate Body has been called upon  to interpret the meaning of the terms "the 
WTO Agreement" as used in Paragraph 1.2 of China's Accession Protocol, we observe that in all 
prior cases involving the interpretation and application of China's Accession Protocol, panels and 
the Appellate Body have proceeded on the assumption that Paragraph 1.2 has the following functions: (i) to make the obligations of China's A ccession Protocol (and specified provisions of the 
Working Party Report) enforceable under the DSU; and (ii) to ensure that those obligations are 
interpreted in accordance with the "customary rule s of interpretation of public international law" 
                                               
166 Paragraph 1 reads as follows: 
1. The General Agreement on Tariffs and Trade 1994 (GATT 1994) shall consist of:  (a) the provisions in the General Ag reement on Tariffs and Trade, dated 
30 October 1947, annexed to the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Na tions Conference on Trade and Employment 
(excluding the Protocol of Provisional Application), as rectified, amended or modified by the 
terms of legal instruments which have entered into  force before the date of entry into force of 
the WTO Agreement;  (b) the provisions of the legal instruments set forth below that ha ve entered into force 
under the GATT 1947 before the date of entry into force of the WTO Agreement:  
(i) protocols and certifications re lating to tariff concessions;  
(ii) protocols of accession (excluding the provisions ( a) concerning provisional 
application and withdrawal of provisional application and ( b) providing that Part II 
of GATT 1947 shall be applied provisionally to the fullest extent not inconsistent with legislation existing on the date of the Protocol);  (iii) decisions on waivers granted under Article XXV of GATT 1947 and still in force on the date of entry into force of the WTO Agreement; (iv) other decisions of the CONTRACTING PARTIES to GATT 1947; 
   (c) the Understandings set forth below:  
(i) Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994; (ii) Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs and Trade 1994; (iii) Understanding on Balance-of-Payments Provisions of the General Agreement on 
Tariffs and Trade 1994; (iv) Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994; (v) Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994; 
(vi) Understanding on the Interpretation of  Article XXVIII of the General Agreement on 
Tariffs and Trade 1994; and 
(d) the Marrakesh Protocol to GATT 1994.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 58 - 
 
  pursuant to Article 3.2 of the DSU.167 These two functions are fully achieved in interpreting "the 
WTO Agreement" as a reference to the Marrakesh Agreement. This is because the Marrakesh Agreement is listed in Appendix 1 to the DSU as an agreement covered by the DSU, and hence that agreement, and any instrument that is an "integral part" of it, is enforceable under the 
DSU.
168 For the same reason, the Marrakesh Agreement and any instrument that is an integral 
part thereof must be interpreted in accordance with  the "customary rules of interpretation of public 
international law", pursuant to Article 3.2 of the DSU. The interpretation of Paragraph 1.2 
advocated by China in this dispute appears to depart significantly from the understanding of the 
legal effect of this provision, as reflected in prior panel and Appellate Body reports.  
7.86.  Fifth, accepting China's interpretation of the term "the WTO Agreement" as used in 
Paragraph 1.2 of its Accession Protocol would render redundant  the explicit language throughout 
the Accession Protocol and Working Party Report specifically making Article XX exceptions 
applicable in the case of certain WTO commitments. In such case, there would be no need for an explicit textual reference to such exceptions in specific provisions of China's Accession Protocol and 
Working Party Report. However, there are several such explicit cross-references, including the 
introductory language to Paragraph 5.1 of the Accession Protocol and the language in 
Paragraphs 162 and 165 of the Working Party Report. In deed China itself relies on such an explicit 
reference as the legal basis for invoking Article XX(g) of the GATT 1994 as a defence to the 
complainants' claims regarding export qu otas and export quota administration.
169 Moreover, the 
explicit reference in Paragraph 5.1 was the basis for the Appellate Body's finding, in China – 
Publications and Audiovisual Products , that China could invoke Article XX of the GATT 1994 as a 
defence to a claim under Paragraph 5.1.170 Following a detailed analysis, the Appellate Body 
concluded: 
For all these reasons, we consider that the provisions that China seeks to justify have 
a clearly discernable, objective link to Ch ina's regulation of trade in the relevant 
products. In the light of this relationship between provisions of China's measures that are inconsistent with China's trading rights commitments, and China's regulation of 
trade in the relevant products, we find that China may rely upon the introductory 
clause of paragraph 5.1  of its Accession Protocol and seek to justify these provisions 
as necessary to protect public morals in China, within the meaning of Article XX(a) of the GATT 1994.
171 
7.87.  In its response to Panel question No. 3, China provides detailed explanations as to why 
certain provisions in China's Accession Protocol and Working Party Report contain explicit textual references to the WTO Agreement and/or the GATT 1994 and why other provisions do not. 
Essentially, China argues that there are some prov isions in China's Accession Protocol and Working 
Party Report for which it was necessary for the drafters to include an explicit textual reference to the WTO Agreement and/or the GATT 1994, whereas for other provisions, including Paragraph 
11.3, such an explicit reference would have merely restated the obvious and would thus have been 
redundant. According to China, the reason why such an explicit reference would have merely 
restated the obvious and been redundant in the case of Paragraph 11.3 is that this provision is an "integral part" of the GATT 1994. The Panel is unable to accept this distinction, because for the 
reasons set forth above and below, the Panel does not agree that Paragraph 11.3 is an "integral 
part" of the GATT 1994. 
7.88.  Finally, the Panel observes that China's interpretation of the term "the WTO Agreement" 
squarely contradicts the view of the panel in China – Raw Materials . In that dispute, the panel 
observed that China and WTO Members could have agreed that China's export duty commitments 
were "an integral part of China's commitments under the GATT 1994", but "this is not what China 
and WTO Members chose to do". The panel explained: 
                                               
167 Panel Report, China – Auto Parts , paras. 7.652, 7.740-7.741; Appellate Body Report, China – Auto 
Parts, paras. 213-214; Panel Report, China – Publications and Audiovisual Products , para. 7.555; Panel 
Reports, China – Raw Materials , paras. 7.64, 7.113-7.115, 7.621, 7.647, 7.962; Appellate Body Reports, China 
– Raw Materials , para. 278; and Appellate Body Report, US – Tyres (China) , para. 118. 
168 See responses of the complainants and th ird parties to Panel question No. 7.  
169 China's first written submission, paras. 256, 270, and 275.  
170 Appellate Body Report, China – Publications and Audiovisual Products , paras. 216-233. 
171 Appellate Body Report, China – Publications and Audiovisual Products , para. 233. (emphasis added) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 59 - 
 
  If China and WTO Members wanted the defences of GATT Article XX to be available to 
violations of China's export duty commitments, they could have said so in Paragraph 11.3 or elsewhere in China's Accession Protocol.
172 In addition, China and 
the WTO Members could have agreed that China's export duty commitments were an 
integral part of China's commitments under the GATT 1994. For instance, WTO 
Members could have done this by incorporating China's export duties commitments into China's GATT 1994 Schedule. If China's export duties commitments were part of 
China's GATT 1994 Schedule, the general defences of Article XX of the GATT 1994 
would be available to justify potential violations. However, this is not what China and WTO Members chose to do.
173    
7.89.  For these reasons, the Panel agrees with the complainants that the term "the 
WTO Agreement", in the second sentence of Paragraph 1.2 of China's Accession Protocol, means 
that China's Accession Protocol is made an integr al part of the Marrakesh Agreement, and not that, 
in addition, the individual provisions thereof are also integral parts of Multilateral Trade 
Agreements annexed to the Marrakesh Agreement.  
7.90.  Turning now to Article XII:1 of the Marrake sh Agreement, the second provision invoked by 
China in support of its broader argument that China's Accession Protocol is an integral part of the 
GATT 1994, this provision stipulates that any St ate or customs territory "may accede to this 
Agreement, on terms to be agreed between it an d the WTO. Such accession shall apply to this 
Agreement, and to the Multilateral Trade Agre ements annexed thereto". China argues that, 
contrary to the covered agreements annexed to the WTO Agreement, post-1994 accession 
protocols are not self-contained and that by virtue of the accession process, there is an intrinsic 
link between the provisions contained in post-199 4 accession protocols on the one side and those 
enshrined in the WTO Agreement and the Multilat eral Trade Agreements annexed thereto on the 
other. China contends that Article XII:1 "provides a strong textual basis requiring panels dealing 
with a provision in a post-1994 accession protocol, including 'WTO-plus' provisions, to examine which covered agreement a given provision intrinsically relates to"
174 and argues that this 
language confirms China's view that its Accession Protocol "merely serves to specify , including by 
means of "WTO-plus" commitments, China's obligations under the WTO Agreement  and the 
multilateral trade agreements annexed thereto".175   
7.91.  In our view, China misconstrues the import  of Article XII:1. By its terms, Article XII:1 
provides for States and customs territories to accede to the WTO Agreement and stipulates that 
when this occurs, such accession must apply across the board, and not just with respect to one or some WTO Agreements. Thus, in acceding to the WTO, an acceding Member is subject to all of the 
obligations of all the Multilateral Trade Agreemen ts – a new Member is not entitled to pick and 
choose which particular Agreements it will accede to.
 We see nothing in Article XII:1 to support 
China's position that "respective protocol provision[s]  must be considered as an integral part of the 
specific covered agreement to which it intrinsically relates."176 N o r  d o  w e  f i n d  i n  A r t i c l e  X I I : 1  
language to support China's assertion that its Accession Protocol is not a self-contained agreement and that it "merely serves to specify" Chin a's obligations under the WTO Agreement and the 
Multilateral Trade Agreements annexed thereto. In our view, China's Accession Protocol does 
indeed specify the obligations China undertook as well as the rights it was accorded upon 
a c c e s s i o n ,  a n d  t h u s  i t  i s  t o  t h e  P r o t o c o l  t h a t  w e  m u s t  l o o k  t o  f i n d  h o w  t h e y  a r e  l i n k e d  t o  t h e  WTO Agreement and the Multilateral Trade Agreements annexed thereto. In considering China's 
argument regarding Article XII:1 of the Marrakesh Agreement, the Panel also has some difficulty 
understanding the proposition that Accession Protocol-specific commitments in an Accession Protocol, which by definition go beyond the obligations contained in the Multilateral Trade 
Agreements annexed to the Marrakesh Agreement, "merely serve to specify" a Member's 
obligations under the existing provisions of the Multilateral Trade Agreements annexed to the Marrakesh Agreement. In the case of Paragraph 11.3 of China's Accession Protocol, all of the 
parties in this case agree that there is no obligation in the GATT 1994 (or elsewhere in the covered 
                                               
172 (footnote original ) As discussed, the WTO Members and Ch ina did make such a reference to the 
availability of GATT Article XX to justify export quotas. 
173 Panel Reports, China – Raw Materials , para. 7.140. 
174 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 18. 
175 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 17.  
176 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 18. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 60 - 
 
  agreements) to "eliminate export duties".177 China itself argues that this obligation is a so-called 
"WTO-plus" obligation, and is "uniquely onerous".178 
7.92.  In the Panel's view, there is a third difficult y with China's argument that Article XII:1 of the 
Marrakesh Agreement means that an accession protocol "merely serves to specify , including by 
means of Accession Protocol-specific commitments, China's obligations under the WTO Agreement  
and the multilateral trade agreements annexed thereto". Assuming for the sake of argument that this were correct, it would not follow, as a matter of logic or law, that the individual provisions of 
an accession protocol would thereby, and for that reason, automatically become an "integral part" 
of the Multilateral Trade Agreements annexed to the Marrakesh Agreement. In this regard, the 
Panel observes that many of the Multilateral Agreements on Trade in Goods can be said to "serve to specify" the obligations under the GATT 1994. To offer but a few examples, the Anti-Dumping 
Agreement serves to specify Members' obligations under Article VI of the GATT 1994 (the full title 
of this agreement is the "Agreement on Implementa tion of Article VI of the General Agreement on 
Tariffs and Trade 1994"); the Customs Valuation Agreement serves to specify Members' 
obligations under Article VII of the GATT 1994 (the full title of this agreement is the "Agreement 
on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994"); the SCM Agreement serves to specify Members' obligations under Articles VI and XVI of the 
GATT 1994; and the Agreement on Safeguards serves to specify Members' obligations under 
Article XIX of the GATT 1994. This does not mean  that the individual provisions of these 
agreements are automatically "integral parts" of the GATT 1994.  
7.93.  In sum, and based on the foregoing considerations, the Panel concludes that the legal effect 
of the second sentence of Paragraph 1.2 is to make China's Accession Protocol, in its entirety, an 
"integral part" of the Marrakesh Agreement, and no t that, in addition, the individual provisions 
thereof are also integral parts of Multilateral Trade Agreements annexed to the Marrakesh 
Agreement. The Panel has also rejected China's ar gument based on Article XII:1 of the Marrakesh 
Agreement.  
7.94.  The Panel therefore disagrees with the firs t main premise of China's argument regarding the 
systemic relationship between its Accession Prot ocol and the GATT 1994, i.e. that the Accession 
Protocol-specific provisions in post-1994 accession protocols that relate to trade in goods, including Paragraph 11.3 of China's Accession Protocol, automatically became an "integral part" of the GATT 1994. Accordingly, it is not strictly necessary for the Panel to address the remaining 
elements of China's argument, which include th e propositions that (i) the obligation in 
Paragraph 11.3 is "intrinsically" related to Articles II and XI of the GATT 1994; and (ii) assuming that Paragraph 11.3 is an "integral part" of the GATT 1994, Paragraph 11.3 is therefore subject to 
the general exceptions in Article XX of the GATT 1994 "unless there is explicit treaty language" to 
the contrary. However, the Panel considers it useful to offer the following observations in the interest of providing a full exploration of the issues raised by China's specific arguments.  
7.95.  As for the proposition that the obligation in Paragraph 11.3 is "intrinsically" related to 
Articles II and XI of the GATT 1994, the Panel observes that there is no provision of the GATT 1994 that requires Members to eliminate export duties. Article II:7 of the GATT 1994 
provides that the schedules annexed to the GATT 1994 are an integral part thereof. It would 
appear to be possible for Members to include commitments regarding the use of export duties in 
such schedules. Indeed, some Members have done so.
179 However, the export duty commitments 
at issue were not inscribed in China's schedule. With respect to Article XI:1, we note that this 
provision concerns prohibitions or restrictions on the exportation (or importation) of any product 
"other than duties, taxes or other charges". The obligation in Paragraph 11.3 of China's Accession Protocol does not relate to the same subject- matter as Articles II or XI of the GATT 1994.  
7.96.  The Panel offers the following observations on China's argument that there is no "explicit 
treaty language" in Paragraph 11.3 indicating that the general exceptions in Article XX of the GATT 1994 do not apply. First, China advanced the same argument in China – Raw Materials . 
Before the panel in that case, China framed the issue in terms of there being no "explicit 
language" in Paragraph 11.3 that "excludes" the applicability of Article XX.
180 Before the Appellate 
                                               
177 See also below, para. 7.95. 
178 China's first written submission, paras. 421, 427, and 459. 
179 See, e.g. WTO Analytical Index, 3rd edition  (Cambridge: 2012), Volume 1, page 136, para. 135. 
180 Panel Reports, China – Raw Materials , para. 7.155 and Annex D-5,  Page D-36, para. 11.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 61 - 
 
  Body, China again argued that Article XX of the GATT 1994 is nonetheless available as a defence 
to a claim under Paragraph 11.3. China again framed the issue in terms of the absence of language excluding the availability of Article XX , stating that "the appropriate interpretative 
question" is whether Paragraph 11.3 "explicitly excludes" the Article XX exceptions, and "not 
whether the language explicitly reaffirms this right".
181 Neither the panel nor the Appellate Body 
found China's argument persuasive. 
7.97.  Second, it appears to the Panel that there is such "explicit treaty language" in 
Paragraph 11.3.  Specifically,  Paragraph 11.3 states that "China shall eliminate all taxes and 
charges applied to exports unless specifically provided for in Annex 6  of this Protocol or applied in 
conformity with the provisions of Article V III of the GATT 1994" (emphasis added). The word 
"unless" means "[e]xcept for, with the exception of" and is "[u]sed before a statement expressing 
a case in which an exception to a preceding statement may or will exist".182 The word "specifically" 
means "clearly or explicitly defined; precise, exac t; definite" and, when used as an adverb, as is 
the case here, "in a clearly defined manner, definitely, precisely".183 Thus, the text of 
Paragraph 11.3 is not "silent" on whether the obligation therein is subject to exceptions: it sets 
forth a general rule (i.e. to eliminate export duti es), followed immediately by two exceptions, the 
first of which is introduced by the words "unless specifically provided for". In addition, the Note to 
Annex 6 contains further "explicit treaty langua ge". Annex 6 of China's Accession Protocol is 
entitled "Products Subject to Export Duty". As no ted further above, it sets out a table listing 84 
different products (each identified by an eight-digit HS number and product description), and a maximum export duty rate for each product. Following the table, Annex 6 includes the following 
Note: 
China confirmed that the tariff levels in this Annex are maximum levels which will not 
be exceeded. China confirmed furthermore that it would not increase the presently 
applied rates, except under exceptional circumstances. If such circumstances 
occurred, China would consult with affected members prior to increasing applied tariffs with a view to finding a mutually acceptable solution. 
7.98.  Thus, Annex 6 provides that for the products listed therein, China may increase the 
"presently applied" rate up to the "maximum rate" set forth in Annex 6, but only under "exceptional circumstances". In its arguments before the Panel, China argues that "it would be particularly unfortunate if China's far-reaching 'WTO-plus' commitments, such as those on export 
duties, would be enforced without any consideration of whether exceptional circumstances  may 
exist to justify a deviation from those commitments".
184 China reiterates that it "rejects the view 
that China has not only assumed uniquely onerous obligations regarding export duties on goods, 
but that it has also abandoned its right to use export duties under exceptional circumstances  to 
promote fundamental non-trade interests explicitly recognized by the WTO Agreement ."185 The 
language of the Note to Annex 6, which was analysed by the Appellate Body in China – Raw 
Materials186, seems to contradict China's argument that in "exceptional circumstances", China may 
impose export duties on products not specified in Annex 6, or on those products specified in 
Annex 6 above  the specified maximum rate. In other words, it appears from the language of 
Annex 6 and the Note to Annex 6 that China and WTO Members did foresee that China would need 
an "exception" clause  for the commitment it had taken as regards export duties. The drafters 
included an exception clause, built in to Annex 6 itself, in the form of the Note to Annex 6. This Note states, in explicit language, what China may do in "exceptional circumstances". Thus, the 
Panel considers that Paragraph 11.3 of China's Accession Protocol does contain "explicit treaty 
language" contemplating precisely which exceptions are applicable to the obligation contained therein.  
7.99.  In the light of the foregoing, the Panel fi nds that China's argument regarding the systemic 
relationship between its Accession Protocol and the GATT 1994 is not a "cogent reason" for 
                                               
181 Appellate Body Reports, China – Raw Materials , paras. 39, 300.  
182 Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University 
Press, 2002), Vol. 2, p. 3451. 
183 Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University 
Press, 2002), Vol. 2, p. 2946. 
184 China's first written submission, para. 456. (emphasis added) 
185 China's first written submission, para. 459. (emphasis added) 
186 Appellate Body Reports, China – Raw Materials , para. 284. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 62 - 
 
  departing from the Appellate Body's finding that the obligation in Paragraph 11.3 of China's 
Accession Protocol is not subject to the general exceptions in Article XX of the GATT 1994.  
7.3.2.1.5  China's argument regarding the terms "nothing in this Agreement" in 
Article XX of the GATT 1994 
7.100.  We turn to China's next specific argument, which is that "[t]he terms "nothing in this 
Agreement" in the chapeau of Article XX of th e GATT 1994 do not exclude the availability of 
Article XX to defend a violation of Paragraph 11.3 of China's Accession Protocol ".187 In this regard, 
China submits that the exceptions under Article XX of the GATT 1994 are also available to excuse 
violations of what it labels intrinsically GATT-related "WTO-plus" provisions contained in post-1994 accession protocols. China clarifies that what it terms "intrinsically GATT-related 'WTO-plus' provisions contained in post-1994 accession protocols" consists of "those provisions that are not 
part of the text of the GATT 1994 as it entered into force on 1 January 1995 but that nevertheless 
have to be treated as an integral part  of the latter as set out above and in relevant parts of China's 
First Written Submission".
188 China clarifies that it "does not argue that the phrase 'nothing in this 
Agreement' makes the exceptions of Article XX of the GATT 1994 available to violations of 
provisions contained in (i) other multilateral agreements on trade in goods, (ii) China's Accession Protocol taken as a whole, or (iii) the WTO Agreement as a whole."
189 China "acknowledges that, 
at least at first sight, there seem to be strong in dicators that the exceptions enshrined in Article XX 
of the GATT 1994 are not available in the same manner across all multilateral agreements on trade in goods listed in Annex 1A of the WTO Agreement ."
190 
7.101.  The Panel recalls that the chapeau of Arti cle XX of the GATT 1994 provides that nothing in 
"this Agreement" prevents the adoption or enfo rcement of certain measures. In the context of 
Article XX of the GATT 1994, the ordinary meaning of the term "this Agreement" is the GATT 1994. 
In this regard, we agree with the panel in China – Raw Materials  that "the reference to this 
'Agreement' suggests that the exceptions therein relate only to the GATT 1994, and not to other 
agreements".191 We note that interpreting the term "this Agreement" in accordance with its 
ordinary meaning is consistent with the Appellate Body's statement, in US – Shrimp , that the 
general exceptions in Article XX are "exceptions to substantive obligations established in the 
GATT".192 
7.102.  The Panel does not understand China to argue that the term "this Agreement" in the 
chapeau of Article XX of the GATT 1994 should be interpreted to mean the WTO Agreement 
including all of its Annexes, or to anything beyond the GATT 1994. Rather, China's argument is 
that the terms "this Agreement" should be in terpreted to mean the GATT 1994, which must 
include any provisions of post-1994 accession prot ocols that are legally an "integral part" of the 
GATT 1994. In the course of this proceeding, China has clarified that it is not arguing that the term 
"this Agreement" means anything beyond the GATT 1994, or provisions of post-1994 accession protocols that are not legally an " integral part " of the GATT 1994. For example, in response to a 
question from the Panel, China clarifies that: 
China reiterates that,  despite tireless efforts by the Complainants to misrepresent 
China's nuanced argument on this important issue, China does not argue that the 
phrase "nothing in this Agreement" make s the exceptions of Article XX of the 
GATT 1994 available to violations of provisions contained in (i) other multilateral 
agreements on trade in goods, (ii) China's Accession Protocol  taken as a whole, or (iii) 
the WTO Agreement  as a whole. … While China does not take any firm position on this 
issue in the present dispute, China acknowle dges that, at least at first sight, there 
seem to be strong indicators that the exceptions enshrined in Article XX of the 
                                               
187 China's first written submission, section V.D, paras. 436-444. See also China's rebuttal submission 
on the availability of Article XX of the GATT 1994, section IV, paras. 35-42. 
188 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 39. (emphasis 
added). 
189 China's rebuttal submission on the availability of Article XX of the GATT 1994, para. 42. 
190 China's response to Panel question No. 15, para. 83.  
191 Panel Reports, China – Raw Materials , para. 7.153. 
192 Appellate Body Report, US – Shrimp , para. 121. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 63 - 
 
  GATT 1994 are not available in the same manner across all multilateral agreements on 
trade in goods listed in Annex 1A of the WTO Agreement .193 
7.103.  Thus, China's argument regarding the term "this Agreement" in the chapeau of Article XX 
of the GATT 1994 is predicated on the presumption th at what it labels "WTO-plus" provisions in 
post-1994 accession protocols that relate to trade in goods are an " integral part " of the 
GATT 1994. We recall that the Panel has found that  Paragraph 11.3 of China's Accession Protocol 
(an Accession Protocol-specific provision regarding export duties) is not an "integral part" of the 
GATT 1994; China's Accession Protocol is – according to its Paragraph 1.2 – an integral part of the 
WTO Agreement.194   
7.104.  Based on the foregoing, the Panel finds that China's argument regarding the terms 
"nothing in this Agreement" in the chapeau of Article XX of the GATT 1994 is moot as a 
consequence of the Panel's finding that Paragraph 11.3 of China's Accession Protocol (an Accession 
Protocol-specific provision regarding export duties) is not an "integral part" of the GATT 1994; 
China's Accession Protocol is – according to its Paragraph 1.2 – an integral part of the 
WTO Agreement. Accordingly, the Panel finds that  China's argument cannot be regarded as a 
"cogent reason" for departing from the Appellate Body's finding that the obligation in Paragraph 11.3 of China's Accession Protocol is not subject to the general exceptions in Article XX 
of the GATT 1994.  
7.3.2.1.6  China's argument relating to th e object and purpose of the WTO Agreement  
7.105.  China argues that the result of the Appellate Body's ruling in China – Raw Materials  on the 
non-applicability of Article XX as a defence to a violation of Paragraph 11.3 is that "trade 
liberalization must be promoted at whatever cost – including forcing Members to endure 
environmental degradation and the exhaustion of their scarce natural resources".
195 China 
considers this result to be inconsistent with the object and purpose of the WTO Agreement. China 
argues that "[a]n appropriate holistic interpretation, taking due account of the object and purpose 
of the WTO Agreement , confirms that China may justify export duties through recourse to 
Article XX of the GATT 1994".196  
7.106.  We note that China advanced the same argument before the panel and the Appellate Body 
in China – Raw Materials . For example, in the prior dispute China argued that "Members have 
always had the right to promote fundamental soci etal interests besides trade liberalization under 
the WTO Agreement "197; in this dispute, China argues that "the international trade obligations 
Members have assumed do not prevent them from taking measures to promote other fundamental 
societal interests recognized in the covered agreements".198 In the prior dispute, China argued that 
"China rejects the view that China has not only assumed uniquely onerous obligations regarding 
export duties on goods, but that it has also abandoned its right to use export duties under 
exceptional circumstances to promote fundamental non-trade interests explicitly recognized by the WTO Agreement "
199; in this dispute, China argues that "China finds repugnant the argument that it 
has not only assumed uniquely onerous obligations, but also that it is denied its 'inherent power' to 
take measures in relation to these uniquely onerous obligations to promote other fundamental interests, such as conservation and public health."
200 
7.107.  In China – Raw Materials , the Appellate Body rejected China's argument relating to the 
object and purpose of the WTO Agreement. The Appellate Body reasoned as follows: 
                                               
193 China's comments on the complaining parties' responses to Panel question No. 15.  
194 In paragraph 427 of its first written submission, China states that "…China's Accession Protocol, in 
which its export duty commitments are stipulated, has become an integral part of the WTO Agreement – not 
an integral part of the GATT 1994. This conclusion necessarily follows from the fact that the Accession Protocol contains commitments not only with regard to goods but al so with regard to services and intellectual property". 
195 China's first written submission, para. 455.  
196 China's first written submission, section V.E, para s. 445-458. See also China's rebuttal submission on 
the availability of Article XX of the GATT 1994, section IV, paras. 43-55. 
197 China's first written submission, para. 414.  
198 Panel Reports, China – Raw Materials , Annex D-5, Page D-36, para. 9. 
199 China's first written submission, para. 459. 
200 Panel Reports, China – Raw Materials , Annex D-2, Page D-17, para. 24. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 64 - 
 
  China refers to language contained in the preambles of the WTO Agreement, the 
GATT 1994, and the Agreement on the App lication of Sanitary and Phytosanitary 
Measures (the "SPS Agreement"), Agreement on Technical Barriers to Trade (the "TBT Agreement"), the Agreement on Import Licensing Procedures (the "Import 
Licensing Agreement"), the GATS, and the Agreement on Trade-Related Aspects of 
Intellectual Property Rights (the "TRIPS Ag reement") to argue that the Panel distorted 
the balance of rights and obligations established in China's Accession Protocol by 
assuming that China had "abandon[ed]" its right to impose export duties "to promote 
fundamental non-trade-related interests, such  as conservation and public health."   
The preamble of the WTO Agreement lists various objectives, including "raising 
standards of living", "seeking both to protect and preserve the environment" and 
"expanding the production of and trade in goods and services, while allowing for the 
optimal use of the world's resources in accordance with the objective of sustainable development." The preamble concludes with the resolution "to develop an integrated, 
more viable and durable multilateral trading system". Based on this language, we 
understand the WTO Agreement, as a whole, to reflect the balance struck by WTO Members between trade and non-trade-rela ted concerns. However, none of the 
objectives listed above, nor the balance struck between them, provides specific 
guidance on the question of whether Article XX of the GATT 1994 is applicable to Paragraph 11.3 of China's Accession Protocol. In the light of China's explicit commitment contained in Paragraph 11.3 to eliminate export duties and the lack of 
any textual reference to Article XX of the GATT 1994 in that provision, we see no basis 
to find that Article XX of the GATT 1994 is applicable to export duties found to be inconsistent with Paragraph 11.3.
201  
7.108.  In this case, China argues that the Appellate Body's "summary dismissal of the 
interpretative value of the WTO's fundamental objectives without any further explanation" does not rise to the level of a proper objective assessment of legal issues before it.
202 In asking this 
Panel to reverse the Appellate Body's finding that the obligation in Paragraph 11.3 of China's 
Accession Protocol is not subject to the general exceptions in Article XX of the GATT 1994, China 
explains that it is presenting arguments that, in its view, are "new arguments that have not been asserted previously, or arguments which were neit her argued or addressed fully by the panel and 
the Appellate Body in China – Raw Materials ".
203 We understand China's argument relating to the 
object and purpose of the WTO Agreement to fall into  the latter category, i.e. an argument that, in 
China's view, was not "addressed fully by the panel and the Appellate Body" in the prior dispute.  
7.109.  In our view, the Appellate Body's analysis in China – Raw Materials  cannot be 
characterized as a "summary dismissal of the interpretative value of the WTO's fundamental objectives without any further explanation". However, in the interest of providing a full exploration 
of the issues raised by China's specific arguments, and in the light of China's view that the 
Appellate Body did not fully address its argument related to the object and purpose of the WTO Agreement, we provide the following observations.  
7.110.  China's argument related to the object and purpose of the WTO Agreement rests on a key 
premise: that the result of the Appellate Body's ruling on the non-applicability of Article XX as an 
exception to the obligation in Paragraph 11.3 is that "trade liberalization must be promoted at whatever cost – including forcing Members to endure environmental degradation and the 
exhaustion of their scarce natural resources".
204 China argues that this result is inconsistent with 
the object and purpose of the WTO Agreement. More  specifically, China argues that such a result 
cannot be reconciled with the requirement to interpret treaties in a "holistic manner"205, with the 
requirement to give due meaning to a treaty's "object and purpose"206, with the specific reference 
                                               
201 Appellate Body Reports, China – Raw Materials , paras. 305-306. 
202 China's first written submission, para. 448.  
203 China's first written submission, paras. 416 and 460. 
204 China's first written submission, para. 455.  
205 See, e.g. China's first written submission, para. 446. 
206 See, e.g. China's first written submission, para. 447. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 65 - 
 
  to "the objective of sustainable developmen t" in the preamble of the WTO Agreement207, and the 
need to "balance trade liberalization with non-trade-related objectives".208 
7.111.  The Panel agrees with China that an interpretation of the covered agreements that resulted 
in sovereign States209 being legally prevented from taking measures that are necessary to protect 
the environment or human, animal or plant life or health would likely be inconsistent with the 
object and purpose of the WTO Agreement. In the Panel's view, such a result could even rise to the level of being "manifestly absurd or unreasonable".  
7.112.  However, the Panel considers that the premise underlying China's argument is false. The 
Appellate Body found that the obligation in Paragraph 11.3 of China's Accession Protocol is not subject to the general exceptions in Article XX of the GATT 1994. Paragraph 11.3 of China's Accession Protocol concerns one type of instrument only – export duties. Thus, the only result that 
follows from this finding is that when seeking to address environmental concerns and protect the 
life and health of its population, China must use instruments and means other than export duties to do so (unless those export duties are imposed on products within the maximum rates 
"specifically provided for" in Annex 6 of China's Accession Protocol). Such alternative instruments 
and means include the entire universe of instruments and means that governments maintain to protect the environment and human health, and that do not violate WTO obligations - or that may 
violate one or more WTO obligations, but which may be justified under Article XX of the 
GATT 1994.  
7.113.  In the Panel's view, assuming for the sake of argument
210 that there could be situations in 
which the imposition of export duties could make a material contribution to addressing 
environmental concerns and to protecting the life and health of a population, China, 
notwithstanding its extensive argumentation on th e applicability of Article XX of the GATT 1994 to 
Paragraph 11.3 in this dispute, has never presen ted any argument in support of the premise that 
export duties are the only type of instrument and means that can be used to address 
environmental concerns and protect the life and heal th of its population. Indeed, in response to a 
question from the Panel, China itself indicated that it "would find it difficult to conceive that export 
duties are the  only instrument  that can be used to protect the environment or to conserve 
exhaustible natural resources and China's position is indeed not based on such an assumption."211  
7.114.  In sum, the Panel agrees with China that an interpretation of the covered agreements that 
resulted in sovereign States being legally prevented from taking measures that are necessary to 
protect the environment or human, animal or plant life or health would likely be inconsistent with 
the object and purpose of the WTO Agreement. Howe ver, the Panel disagrees with China that this 
is the result of the Appellate Body's finding that the obligation in Paragraph 11.3 of China's 
Accession Protocol is not subject to the genera l exceptions in Article XX of the GATT 1994. 
Accordingly, the Panel finds that China's argument cannot be regarded as a "cogent reason" for departing from that finding.  
7.3.2.1.7  Conclusion 
7.115.  In its prior adopted reports in China – Raw Materials , the Appellate Body found that there 
is no basis in China's Accession Protocol to allow the application of Article XX of the GATT 1994 to China's obligations in Paragraph 11.3 of China's Accession Protocol.
212. For the reasons set forth 
                                               
207 See, e.g. China's first written submission, paras. 449-454. 
208 See, e.g. China's first written submission, para. 454. 
209 We agree with the panel in China – Raw Materials  that the principle of pe rmanent sovereignty over 
natural resources is a relevant rule of international law that may be taken into account when interpreting the 
WTO covered agreements. (Panel Reports, China – Raw Material s, paras. 7.377-7.383.) However, China has 
not referred to this principle in the context of arguing th at Paragraph 11.3 of its Accession Protocol is subject to 
Article XX of the GATT 1994, or in the context of arguing that its export duties are justified under Article XX(b) of the GATT 1994. Rather, China invokes the principle in  the context of defending its export quotas under 
Article XX(g) of the GATT 1994. The Pane l will therefore address China's arguments regarding the principle of 
permanent sovereignty over natural resources when addressing China' s defence under Article XX(g).  
210 The Panel notes that in the context of addressing  the merits of China's Article XX(b) defence for 
export duties, we conclude that Chin a has not demonstrated that its export duties are apt to make a material 
contribution to the achievement of the stated objective. See paras. 7.172 to 7.179 below.  
211 China's response to Panel question No. 5.  
212 Appellate Body Reports, China – Raw Materials , para. 362(c). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 66 - 
 
  above, the Panel concludes that China has not presented this Panel with any cogent reason for 
departing from the Appellate Body's finding. Accordingly, the Panel finds that the obligation in Paragraph 11.3 of China's Accession Protocol is not subject to the general exceptions in Article XX of the GATT 1994.  
7.116.  The Panel wishes to emphasize two points. The first is the narrow scope of this finding. The 
question that has been presented to the Panel, an d the only question that we have addressed, is 
the applicability of Article XX of the GATT 1994 to  the obligation contained in Paragraph 11.3 of 
China's Accession Protocol. The Panel has not expresse d, in this respect, any view, and its findings 
should not be understood as implying any vi ew, on whether Article XX of the GATT 1994 is 
applicable to other provisions of China's Accessi on Protocol, other provisions of other Members' 
protocols of accession, or other provisions contained in the Multilateral Trade Agreements annexed 
to the WTO Agreement.  
7.117.  Second, the Panel wishes to underscore how limited the implications of this finding are in 
terms of China being able to adopt and maintain measures to protect the environment and the life 
and health of its population. When seeking to ad dress environmental concerns and protect the life 
and health of its population, China must, according to Paragraph 11.3 of its Accession Protocol, use instruments and means other than export duties to do so (except to the extent it has provided 
for in its Accession Protocol). That is the only implication of this finding. In our view, this finding in 
no way impairs China's ability to pursue those legitimate objectives.  
7.3.2.1.8  Separate opinion by one panelist  7.118.  One panelist is unable to agree with some  of the findings and conclusions contained in 
paragraphs 7.63 to 7.117 above. This section reflects the views of that panelist. 
7.119.  I agree with the ultimate conclusion reac hed by this Panel that, in this dispute, China 
cannot justify its export duties on rare earths, tungsten, and molybdenum products pursuant to 
Article XX(b) of the GATT 1994 (GATT Article XX(b)). However, contrary to the finding made by 
the Panel's majority, I believe that a proper interpretation of the relevant provisions at issue leads to the conclusion that the obligations in Paragr aph 11.3 of China's Accession Protocol are subject 
to the general exceptions in Article XX of the GATT 1994.  
7.120.  I am well aware of the findings of  the Panel and the Appellate Body in the China – Raw 
Materials dispute regarding the availability of Article XX of the GATT 1994 (GATT Article XX) to 
justify violations of Paragraph 11.3 of China's Accession Protocol. In my view, China has submitted 
new arguments in this dispute that have helped the Panel to appreciate the legal complexity of this 
issue. The Panel's majority has undertaken a long and careful evaluation of the parties' arguments concerning this matter. I agree with many parts of the Panel's majority's analysis of this issue and 
I respect this Panel's majority decision. Nonetheless, I respectfully disagree with certain key 
aspects of its reasoning and findings. I offer, below,  my different views on some of the legal issues 
concerned with this Panel's conclusion.  
7.3.2.1.8.1  The structur e of the WTO Agreement 
7.121.  China admits that its export duties on rare earths, tungsten, and molybdenum are 
inconsistent with Paragraph 11.3 of its Accession Protocol.
213 The disagreement between the 
parties concerns the availability of Article XX of GATT to a violation of a WTO-plus provision i.e. 
Paragraph 11.3 of China's Accession Protocol regarding export duties. In my view, a proper 
determination of the availability of GATT Articl e XX to justify violations of Paragraph 11.3 of 
China's Accession Protocol must begin with an und erstanding of the components and functioning of 
the WTO Agreement as a Single Undertaking.  
7.122.  There are different components to what are considered to be the "Results of the Uruguay 
Round Negotiations".  
a. First, there is the Final Act Embodying the Re sults of the Uruguay Round of Multilateral 
Trade Negotiations (Final Act) that was signed by representatives of the Members in 
                                               
213 China's response to Panel question No. 9. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 67 - 
 
  Marrakesh in April 1994; its main text is a six-paragraph document that describes the 
results of the Uruguay Round negotiations. Attached to the Final Act are (a) the Marrakesh Agreement Establishing the World Trade Organization and all its components discussed below, and (b) Ministerial Decisions and Declarations and finally (c) the 
Understanding on Commitments on Financial Services.  
b. The second component is the Marrakesh Agreement Establishing the World Trade 
Organization (which is referred to as the "WTO Agreement"), an agreement that 
establishes the WTO as a new international organization. . The first 16 Articles of the 
WTO Agreement (made up of Articles I to XVI), I will call the "Marrakesh Agreement". Article II:2 of the Marrakesh Agreement prov ides that the agreements and associated 
legal instruments (referred to as the "Multilateral Trade Agreements") included in its 
Annexes 1, 2 and 3 of that WTO Agreement are "integral parts" of the Marrakesh 
Agreement. According to Article II:3, the legal instruments included in Annex 4 (referred to as Plurilateral Trade Agreements) are also  part of the Marrakesh Agreement for those 
Members that have accepted them. In my discussion, I use the term Marrakesh 
Agreement to refer to the institutional ag reement of the WTO entitled the Marrakesh 
Agreement Establishing the World Trade Organization, which contains Articles I to XVI. 
When I use the term Marrakesh Agreement, I do not include its Annexes 1, 2 and 3 or 
the Plurilateral Agreements (Annex 4). The Members' schedules of commitments are also an integral part of the WTO agreements – for example, the schedules on trade in goods are an integral part of the GATT 1994 and the schedules on services commitments are 
integral parts of the General Agreement on Tr ade in Services (GATS). All these elements 
are integral parts of what we refer to as the WTO Agreement.  
7.123.  This dispute is concerned, inter alia , with the provisions of a WTO protocol of accession. In 
that context, I note that Article XII of the Marrakesh Agreement provides that a Member's 
accession shall apply to "this Agreement and the Multilateral Trade Agreements annexed thereto". I also note that Paragraph 1.2 of China's Accession Protocol provides that the Protocol "shall be an 
integral part" of the WTO Agreement. Therefor e, in my discussion I will use the term the 
"WTO Agreement" to refer to the overall agreemen t that constitutes the entirety of the WTO legal 
treaty provisions and which includes the Marrakesh Agreement, its four annexes, Members' schedules of commitments, and the commitments included in WTO accession protocols.
214 When I 
use the term "WTO agreements" without a capital "A", I refer to the legal instruments in Annexes 
1, 2, 3 or 4. When I refer to "a specific WTO agreement" within the WTO Agreement, I mention the name of the agreement concerned. Finally, in my discussion about the relationship between the 
provisions of China's Accession Protocol, in part icular Paragraph 11.3, and GATT Article XX, I refer 
to the provisions of the existing GATT 1994, or th e existing WTO Agreement. I do so to distinguish 
conceptually the provisions of the GATT 1994 or  the WTO Agreement from the new and additional 
provisions of China's Accession Protocol that are now integral parts of the WTO Agreement. 
7.124.  The Appellate Body has made it clear that  the WTO Agreement is a "Single Undertaking" - 
that is, a single treaty for which there are no reservations and where all WTO provisions are generally simultaneously and cumulatively applicable.
215 In that regard, a single measure may be 
subject, at the same time, to several WTO provisions imposing different disciplines.216 Moreover, 
as noted by the United States217, within the WTO Agreement, provisions of different multilateral 
agreements may overlap in application, while ot her WTO provisions are mutually exclusive. The 
WTO treaty has rules regarding conflicts in the application of specific provisions218, and the 
jurisprudence has clarified the conflict rules between WTO provisions. It has also been determined 
                                               
214 I will not discuss here whether secondary acts of bodi es established pursuant to the WTO Agreement 
are an integral part of the WTO Agreement. 
215 Appellate Body Report, Brazil – Desiccated Coconut , p. 12.  
216 For instance, there are measures that involve a se rvice relating to a particular good or a service 
supplied in conjunction with particular goods. Therefor e, the measure in question could be scrutinized under 
both the GATT 1994 and the GATS. See also, Appellate Body Report, EC – Bananas III,  para. 221. 
217 United States' second written submission, para. 24. 
218 For instance, General interpretative note to Annex 1A provides as follows: 
"In the event of conflict between a provision of  the General Agreement on Tariffs and Trade 1994 
and a provision of another agreement in Annex 1A to the Agreement Establishing the World 
Trade Organization […], the provision of the othe r agreement shall prevail to the extent of the 
conflict." WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 68 - 
 
  that the provisions of Members' schedules are to be interpreted as treaty provisions219 but they 
can only develop and yield to – and not contradict – related provisions of the GATT, the Agreement on Agriculture (AoA) or the GATS.
220 
7.125.  Finally, in WTO law, only provisions of the "covered agreements" can form the basis of a 
claim of violation that can be brought before the DSB in the form of a request for establishment of 
a panel to examine the issues between the parties in  dispute. Appendix 1 of the DSU lists which of 
the agreements of the WTO Agreement are "covered  agreements" for the purposes of the DSU. It 
includes the Marrakesh Agreement and the multilateral agreements contained in Annex 1 and the 
DSU found in Annex 2. Accession protocols are not mentioned directly in Appendix 1 of the DSU. 
Nonetheless, no party in this dispute has expressed any doubt that violations of China's Accession Protocol commitments, and in particular violations of Paragraph 11.3 of China's Accession Protocol, 
can be taken to the DSB and be the subject of  a request for the establishment of a panel.
221 
Therefore, this implies that all parties consider that Paragraph 11.3 is an integral part of one of the WTO covered agreements.  
7.126.  However, the parties disagree whether Paragraph 11.3 is integrated into, and part of, the 
GATT 1994, as suggested by China, or whether it is  to be interpreted and applied as part of the 
Marrakesh Agreement per se,  or, alternatively, as an integral part of the overall WTO Agreement 
but outside the GATT 1994, either as a stand-alone provision or as part of an accession agreement 
such that, upon China's entry into the WTO, it  became a new annex to the WTO Agreement. For 
China, Paragraph 11.3 is concerned with a GATT issue – the use of tariffs at its borders – and has thus become an integral part of the GATT 1994. Ch ina is of the view that it can therefore invoke 
GATT Article XX to justify violations of Paragraph 11.3, as Article XX is available to justify all 
otherwise-inconsistent breaches to all provisions of the GATT.
222 For the complainants, 
Paragraph 11.3 cannot be interpreted as forming an integral part of the GATT 1994.223 For 
example, the United States argues that China's Accession Protocol is akin to a new annexed 
multilateral agreement, parallel to Annexes 1A, 1B, and 1C, and an integral part of the WTO Agreement.
224  
7.3.2.1.8.2  The relationship between the te rms of an accession package and provisions 
of the WTO Agreement  
7.127.  To appreciate how the provisions of China's Accession Protocol, and in particular 
Paragraph 11.3, interact with the provisions of the existing WTO Agreement (including the 
Marrakesh Agreement, the GATT 1994 and the othe r Multilateral Trade Agreements), and of which 
covered agreement(s) they are an integral part, it is necessary to understand the nature of WTO accession protocols. 
7.128.  In this discussion, I use the term "accessi on package" to refer to the results of a WTO 
accession process. An accession package includes at least four documents: a protocol of accession, a working party report, different schedules, and a decision of the Ministerial Conference/General 
Council confirming that the Members agree to the accession on the terms set out in the other 
three documents. 
7.129.  The Protocol of Accession is annexed to th e decision of the Ministerial Conference and the 
working party report is attached to the Protocol of Accession. An accession protocol stipulates the 
terms under which a new Member accedes to the WTO. According to Article XII:1 of the Marrakesh 
Agreement, "[s]uch accession shall apply to this Agreement and the Multilateral Trade Agreements 
annexed thereto ". In other words, a WTO accession protocol serves to specify the terms of 
application of the WTO Agreement to the acceding Member, in particular those of the Marrakesh 
Agreement and the Multilateral Trade Agreements annexed thereto.
225 A working party report 
contains a summary of proceedings leading to the accession and the conditions of entry, some of 
                                               
219 See also Appellate Body Report, EC – Computer Equipment , para. 84. 
220 See also Appellate Body Report, EC – Export Subsidies on Sugar, paras. 220-223, Appellate Body 
Report, EC – Bananas III, paras. 155-158.  
221 See also parties and third parties' responses and comments to Panel question No. 7. 
222 China's second written submission, paras. 207-210. 
223 United States' responses to the Panel question No. 64; European Union's second written submission, 
paras. 329-333; Japan's second written submission, para. 237. 
224 United States' responses to the Panel question No. 64, para. 27. 
225 China's Rebuttal Submission Regarding its Re quest for a Preliminary Ruling, paras. 13-28. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 69 - 
 
  which are binding commitments when incorporated into the protocol of accession, while other 
provisions are explanations and statements provided by the acceding Member and the working party. The obligations contained in the working party report overlap with, or complement, those contained in the accession protocol. In the case of China's accession, Paragraph 1.2 of its 
Accession Protocol provides that the commitments embodied in those paragraphs referred to in 
paragraph 342 of the Working Party Report are incorporated into the Protocol. Provisions of China's Accession Protocol and its Working Party Report have been agreed to by the WTO pursuant 
to Article XII of the Marrakesh Agreement thro ugh the Decision adopted by the Ministerial 
Conference or the General Council.
226 
7.130.  Each term of an accession package calls for a distinct interpretation analysis and the 
determination of each term's relationship with provisions of the WTO Agreement requires a specific 
analysis. In some cases, it may be that an acceding Member and WTO Members wanted a 
provision of an accession package to become an integral part of a specific WTO agreement because they wanted that accession provision to be interpreted and applied together with, and as 
an integral part of, the balance of rights and obligations of that specific WTO agreement. In other 
cases, it may be that an acceding Member and th e WTO Members wanted a specific provision of an 
accession package to be a stand-alone provision within the WTO Agreement while other provisions 
of an accession package would have a horizontal application.  
7.131.  There are various ways for the acceding Member and WTO Members to express their 
common intention on the relationship between a provision of the accession package and the 
WTO Agreement, or a specific WTO agreement or provision. Some provisions of accession 
protocols have explicitly been made part of a specific existing WTO agreement. This is the case 
with the goods and agriculture schedules of acceding Members, which are considered to be integral parts of the GATT 1994. In the case of China's accession package, I observe that some of its 
provisions reiterate obligations already included in the Multilateral Trade Agreements and thus 
overlap with them. For instance, Paragraph 96 of the Working Party Report, which sets out China's 
obligations with respect to "other duties and char ges", reaffirms certain obligations embodied in a 
similar language under GATT 1994. Some provisio ns of an accession package may clarify and 
elaborate on specific obligations of the Multilat eral Trade Agreements. For example, Paragraphs 92 
and 93 of the Working Party Report of China's accession package set out China's commitments 
with respect to the tariff treatment of certain pr oducts. Some provisions of an accession package 
may go beyond the WTO Members' basic obligations and rights set out in the Marrakesh 
Agreement and the Multilateral Trade Agreements. All parties agree that this is the case with 
Paragraph 11.3 of China's Accession Protocol, which sets out China's obligations with respect to 
export duties. I consider that Paragraph 11.3 is a WTO-plus provision  regarding export 
tariffs/duties. Further, as I will explain hereafter, this additional obligation on export tariffs/duties 
exists and works in conjunction with other existing WTO obligations applicable to trade in goods, 
including provisions of the GATT 1994, and in particular those related to border tariff measures.  
7.132.  I agree with China that, when a dispute involves a WTO-plus provision of a WTO accession 
protocol, the Panel has to determine, in light of the subject matter and the underlying rationale of 
a given accession commitment, whether the WTO-plus provision has become (i) an integral part of 
a specific WTO agreement, like the GATT 1994; or (ii) a new provision that is part of the 
Marrakesh Agreement itself or the Member's schedules, or (iii) is somehow within the WTO Agreement, meaning the entire package of WTO rights and obligations. As argued by all 
parties, the determination of whether GATT Article XX can be invoked to justify a breach of a 
provision of an accession protocol is to be determined on a case-by-case basis. Thus, it is for the interpreter to determine the common intention of the parties as to how the WTO-plus provision of 
an accession package interacts with existing WTO provisions. It is only after this analysis that the 
interpreter can determine of which covered agreement, if any, the specific WTO-plus provision is an integral part. Taking into account the institutional principles of the WTO Single Undertaking discussed above, I am of the view that the dete rmination of whether Paragraph 11.3 of China's 
Accession Protocol is an integral part of GA TT 1994, and can therefore benefit from the GATT 
Article XX exceptions, requires a holistic interpretation of the concerned provisions.  
                                               
226 Pursuant to WTO/L/93. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 70 - 
 
  7.3.2.1.8.3  The relationship between Paragr aph 11.3 of China's Accession Protocol and 
the GATT 1994 
7.133.  Paragraph 11.3 of China's Accession Protocol sets out China's obligation in relation to trade 
in goods and, in particular, commitments to eliminate all taxes and charges applied to exports 
unless specifically provided for in Annex 6 of its Accession Protocol. It is worth noting that 
Paragraphs 155 and 156 China's Working Party Report include provisions that use language similar to that of Paragraph 11.3 and which reflect th e Working Party and China's discussion on this 
subject. Paragraphs 155 and 156 are found under the subheading, "Customs Tariffs, Fees and 
Charges for Services Rendered, Application of Intern a l  T a x e s  t o  E x p o r t " ,  a s  p a r t  o f  P a r t  I V  o f  
China's Working Party Report entitled "Policies Affecting Trade in Goods". Annex 1A of the WTO Agreement establishes disciplines on trade in goods.  
7.134.  All parties agree that China is bound by the provisions of Paragraph 11.3 and those of the 
existing GATT 1994 Agreement. Moreover, all parties agree that Paragraph 11.3 adds to the existing GATT obligations, including the GATT disciplines on tariffs; that is why it is often referred 
to as a WTO-plus provision, the term I have already used above. Paragraph 11.3 of China's 
Accession Protocol prohibits the use of export duties, except for certain listed products which are subject to prescribed maximum levels. As distinguished from Russia's Accession Protocol, where its 
export duty commitments are included in its goods schedule and considered to be an integral part 
of GATT 1994
227, China's Accession Protocol is silent as to which WTO covered agreement, if any, 
is considered to include Paragraph 11.3.  
7.135.  I also note that, other than referring to GATT Article VIII, the text of Paragraph 11.3 is 
silent on its relationship with the provisions of GATT 1994. However, as submitted by Brazil, the 
Appellate Body has stated in previous WTO disputes that omissions in different contexts may have different meanings, and an omission, in and of itself, is not necessarily dispositive.
228 For instance, 
although for different reasons, no party in this dispute has any doubt that China must comply with 
GATT Article I (MFN), even though there is no  reference to Article I of the GATT 1994 in 
Paragraph 11.3 of China's Accession Protocol.229 Therefore, to address the availability of GATT 
Article XX to justify violations of Paragraph 11.3, I am of the view that other contextual elements 
of Paragraph 11.3 should be examined, taking into account the object and purpose of the WTO Agreement. As I have said before, only a holistic interpretation of the relevant provisions can resolve such a fundamental issue. 
7.136.  As observed by Argentina
230, the obligation with respect to export duties under 
Paragraph 11.3 is specific to China. This specific obligation modifies the general rule contained in GATT Article XI:1 – that is, China waived its right to apply export duties except on those products 
listed in Annex 6 of its Accession Protocol. I also note that China's export tariff commitments under 
Paragraph 11.3, by their nature, expand China's obligations in the area of trade in goods; in particular, Paragraph 11.3 adds to the provisions of Articles II and XI:1 of the GATT 1994, which 
deal, inter alia , with the overlapping subject matter of border tariff duties. Paragraph 11.3 of 
China's Accession Protocol expands China's obligat ions in respect of these two GATT provisions. 
Given the close relationship between these provisions, I believe that, for the purpose of determining China's rights and obligations, Arti cles II and XI of the GATT 1994 must be read 
together with Paragraph 11.3 of China's Accession Protocol. It seems to me that provisions from 
an accession protocol prohibiting border export tariffs must be interpreted and applied together 
with the GATT provision allowing Members to use them. Interpreting and applying rights and 
obligations of an accession package together with the related provisions of an existing WTO 
                                               
227 Report of the Working Party on the Accession of the Russian Federation to the World Trade 
Organization, para. 638. 
In its oral statement at the first substantive meeting of the Panel with the third parties, Russia recalled 
its accession negotiation history with respect to the availability of the WTO Agreement exceptions to acceding Members. In response to Panel question No. 49, the Pane l received parties' and othe r third parties' comments 
on the oral statement made by Russia.  
228 Brazil's third party's submission, para. 11; Brazil's oral statement at the first substantive meeting of 
the Panel with the third parties, paras. 11-12. 
229 See parties and third parties' responses and commen ts to the Panel's question No. 6; complainants 
argue that China's export duties not prohibited by Pa ragraph 11.3 of China's Accession Protocol must be in 
conformity with Article I of the GATT 1994. China comments that the applicability of Article I of the GATT 1994 
to China's use of export duties confirms the intrinsi c relationship between Paragraph 11.3 and the GATT 1994.  
230 Argentina's third party's submission, paras. 17-18.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 71 - 
 
  agreement facilitates the coherent implementa t i o n  o f  a n  a c c e d i n g  M e m b e r ' s  o b l i g a t i o n s .  
Consequently, in my view, Paragraph 11.3 of China's Accession Protocol  became, upon accession, 
an integral part of the GATT 1994 as GATT 199 4 applies between China and the WTO Members.231 
In other words, China must comply with all GATT-related provisions of its Accession Protocol as 
they operate together with the existing relevant provisions of the GATT 1994 (such as GATT 
Article I), in a simultaneous and cumulative manne r. When China implements its WTO tariff-border 
measures, it must interpret and implement together  all of its associated obligations relating and 
applicable to border tariffs, included those wi thin the WTO Agreement – no matter whether such 
obligations stem from its Accession Protocol , or from the existing GATT 1994. Under the 
circumstances, I believe that it was the common intention of the parties to treat the provisions of Paragraph 11.3 as an integral part of the GATT 1994 system of rights and obligations applicable to 
export tariffs – and thus as an integral part of the GATT 1994 covered agreement.  
7.137.  I am also of the view that the defences provided in the GATT 1994 are automatically 
available to justify any GATT-related obligations, including border tariff-related obligations - unless 
a contrary intention is expressed by the acceding Member and WTO Members.
232 In light of the 
preamble of the WTO Agreement, which embodies  the purpose and objective of the WTO, the 
fundamental importance of the flexibilities provided in GATT Article XX, GATT Article XXI, GATT 
Article XXIV and GATT Article XVIII(C) is incontrovertible. These provisions strike a balance 
between the policy space governments enjoy to pursue legitimate objectives and their obligations under the GATT 1994. It may be possible to have situations where an acceding Member waives its rights to have recourse to the exception provisions contained in a specific WTO covered 
agreement. For instance, in Paragraph 7.3 of China's Accession Protocol,  China explicitly agrees 
not to have recourse to notification and transitional arrangements under Article 5 of the TRIMs Agreement. In my view, if China and WTO Memb ers had wanted to exclude a benefit generally 
provided with respect to all GATT obligations, they could and should have done so explicitly. 
Members did not provide in Paragraph 11.3 or else where that GATT Article XX was not available to 
justify violations of Paragraph 11.3 obli gations. Therefore, I agree with China
233, Argentina234, 
Brazil235 and Russia236 that if it had been the common intention of China and the WTO Members 
that China should not have access to Article XX  of the GATT 1994 to defend a violation of an 
integral element of the GATT 1994, namely Paragr aph 11.3 of its Accession Protocol, they would 
have said so explicitly. I see nothing in China's Accession Protocol that clearly indicates that it was 
the negotiating parties' common intention that China should not have access to the general 
exceptions of Article XX of the GATT 1994 to defend violations of the export duty commitments it made upon acceding to the WTO. In that context, I believe that the flexibilities provided in GATT 
Article XX, GATT Article XXI, GATT Article XVIII( C), or GATT Article XXIV, which are generally 
applicable to GATT violations, can in principle be invoked to justify violations of Paragraph 11.3. 
7.138.  In sum, I believe that Paragraph 11.3 of China's Accession Protocol is an integral part of 
China's obligations on trade in goods in the sense that it adds to the basic obligations of the 
GATT 1994 relating to border tariffs. A proper interpretation on the availability of Article XX of the GATT 1994 to Paragraph 11.3 of China's Accession Prot ocol should take into account the fact that 
Paragraph 11.3 must be read cumulatively and simultaneously with related GATT Articles II and XI 
and as an integral part of the GATT system of ri ghts and obligations. Therefore, in my view, unless 
China explicitly gave up its right to invoke Article XX of GATT 1994, which it did not, the general exception provisions of the GATT 1994 are available to China to justify a violation of 
                                               
231 With respect to the relationship between the GATT 1994 and the other goods agreements in 
Annex 1A, the Appellate Body in Brazil – Desiccated Coconut stated that "[such a relationship] is complex and 
must be examined on a case-by-case basis." The Appell ate Body also noted that "t he general in terpretative 
note to Annex 1A was added to reflect that the other goods agreements in Annex 1A, in many ways, represent 
a substantial elaboration of the provisions of the GATT 1994 […]." It is not my intention to elaborate further on this issue; however, I am  convinced that the fact that Paragraph 11.3 of China's Accession Protocol  establishes 
an obligation of China in respect of trade in goods builds  a solid ground upon which to consider the relationship 
between Paragraph 11.3 of the Protocol and the GATT 1994.  
232 The Working Party Report for Russia's accession expresses a similar view; see oral statement of 
Russia at the first substantive meeting of the Panel with the third parties;  
See also Brazil's third-party's submission, para. 18;  Argentina's third-party's submission, para. 26, 
integrated executive summary, paras. 6 and 11.  
233 China's second written submission, para. 210. 
234 Argentina's third-party's submission, para. 26. 
235 Brazil's third-party's submission, para. 18. 
236 Russia's oral statements at th e first substantive meeting of the Panel with the third parties, 
paras. 8-9. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 72 - 
 
  Paragraph 11.3 of its Accession Protocol. I see nothing in China's Accession Protocol that clearly 
indicates such a waiver. In my view, finding that the obligation in Paragraph 11.3 is subject to the general exceptions in Article XX of the GATT 19 94 allows China to exercise its rights and 
obligations with a view to favouring its sustainable development. This concludes my separate 
opinion. 
7.3.2.2  The application of Ar ticle XX(b) of the GATT 1994 with respect to China's export 
duties 
7.139.  China argues that the export duties at issue are justified under Article XX(b) of the 
GATT 1994 because they are "necessary to protect human, animal or plant life or health". The 
complainants disagree. 
7.140.  The Panel has found that the obligation in Paragraph 11.3 of China's Accession Protocol is 
not subject to the general exceptions in Article XX of the GATT 1994.
237 In China – Raw Materials , 
the panel addressed the merits of China's Article XX defence for export duties, even after having 
found that the obligation in Paragraph 11.3 of China's Accession Protocol was not subject to the 
general exceptions in Article XX of the GATT 1994.238 While this case is distinguishable in certain 
respects, we consider it appropriate to proceed in the same manner, i.e. on an arguendo  basis for 
the majority of the Panel.  
7.141.  In seeking to defend its export quotas under Article XX(g) of the GATT 1994, China has 
separately analysed the three groups of produc ts at issue, i.e. rare earths, tungsten, and 
molybdenum. When analysing whether China's export quotas are justified under Article XX(g), we have taken a similar approach in our Report. In contrast, China has not separately addressed 
these three groups of products when seeking to ju stify under Article XX(b) its imposition of export 
duties. We will follow suit and not separately analyse these three groups of products either. In this regard, our approach takes into account the fact that, as mentioned, China did not provide a 
separate analysis of the three groups of products in its defence under Article XX(b), the relative 
brevity of China's arguments under Article XX(b)
239, and the fact that the parties' arguments on 
export duties are virtually identical with resp ect to rare earths, tungsten, and molybdenum. Of 
course, insofar as it is necessary to our analysis, we will identify any evidence or argumentation 
that is specific to only one of these three groups of products.  
7.142.  The Panel will begin its analysis with a brief review of the exception contained in 
Article XX(b) of the GATT 1994. We will then address each of the specific arguments advanced by 
China, in the order advanced by China, in support of its position that the challenged export duties 
are necessary to protect human, animal or plant life or health within the meaning of Article XX(b).  
7.3.2.2.1  The interpretation of  Article XX(b) of the GATT 1994 
7.143.  Article XX(b) of the GATT 1994 reads as follows: 
General Exceptions 
Subject to the requirement that such measures are not applied in a manner 
which would constitute a means of arbitrary or unjustifiable discrimination between 
countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be  construed to prevent the adoption or 
enforcement by any contracting party of measures: 
… 
(b) Necessary to protect human, animal or plant life or health; 
                                               
237 As explained above, one panelist is of the view that the obligation in Paragraph 11.3 of China's 
Accession Protocol is subject to the general exceptions in Article XX of the GATT 1994.  
238 Panel Reports, China – Raw Materials , paras. 7.229-7.230. 
239 After submitting a brief defence of its export duties under Article XX(b) of the GATT 1994 on 
15 February 2013, China did not advance any additional ar guments on this issue in its oral statement at the 
first meeting with the Panel, nor in its second written submission, nor in its oral statement at the second 
meeting with the Panel. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 73 - 
 
  7.144.  To be justified under Article XX(b) of the GATT 1994, a measure must be "necessary to 
protect human, animal or plant life or health" and it must also meet the requirements of the chapeau of Article XX. It is well established that the party invoking Article XX(b), in this case China, bears the burden of demonstrating that th e challenged measure is "necessary to protect 
human, animal or plant life or health" and complies with the chapeau of Article XX. 
7.145.  In examining a defence under Article XX(b) of the GATT 1994, the first issue is whether 
the challenged measure falls within the range of  policies designed to protect human, animal or 
plant life or health.
240 Panels and the Appellate Body have  examined both the "design" and 
"structure" of a challenged measure to decide whether its "objective" is the protection of life and health, generally showing a degree of deference to  Members' policies designed to "protect human, 
animal or plant life or health". A broad range of policies have been recognized as protecting 
human, animal, and plant life or health.  
7.146.  If a panel finds that the objective of the challenged measure is to protect human, animal 
or plant life or health, the next issue is whether the measure is "necessary" to fulfil this policy 
objective. Article XX(b) of the GATT 1994 requires that a challenged measure be "necessary" to 
achieve the objective it pursues. In Brazil – Retreaded Tyres , the Appellate Body explained that 
"[i]n order to determine whether a measure is 'necessary' within the meaning of Article XX(b) of 
the GATT 1994, a panel must consider the relevant  factors, particularly the importance of the 
interests or values at stake, the extent of the contribution to the achievement of the measure's 
objective, and its trade restrictiveness."
241 The Appellate Body concluded that a measure is apt to 
contribute to the achievement of its objective "w hen there is a genuine relationship of ends and 
means between the objective pursued and the measure at issue242," and explained that a measure 
is necessary if it is "apt to make a material contribution to the achievement of its objective".243 In 
this regard, the Appellate Body report in Brazil – Retreaded Tyres  distinguished between two types 
of measures: those that "bring[] about" a materi al contribution to th e achievement of their 
objective; and those that are "apt to produce" a material contribution to the objective pursued.244 
In China – Publications and Audiovisual Products, the Appellate Body emphasized again that "the 
greater the contribution a measure makes to the objective pursued, the more likely it is to be 
characterized as 'necessary'".245 The Appellate Body also accepted that a measure could be 
considered "necessary" even if the contribution of the measure "is not immediately observable".246 
The Appellate Body has observed that "certain complex public health or environmental problems 
may be tackled only with a comprehensive policy comprising a multiplicity of interacting 
measures".247 With respect to such complex problems, the Appellate Body has left open the 
possibility that a "necessary" measure could contribute to one of the objectives protected under 
Article XX(b) as part of a policy framework comp rising different measures, resulting in possible 
synergies between those measures.248 The Appellate Body in Brazil – Retreaded Tyres  confirmed 
that "in the short-term, it may prove difficult to isolate the contribution to public health or 
environmental objectives of one specific measure from those attributable to the other measures 
that are part of the same comprehensive policy".249 The Appellate Body explained that the 
contribution of the measure can be demonstrated quantitatively and/or qualitatively: 
Such a demonstration can of course be made by resorting to evidence or data, 
pertaining to the past or the present, that establish that the import ban at issue 
makes a material contribution to the protection of public health or environmental 
                                               
240 For instance, the panel in EC – Tariff Preferences  set out the requirements of Article XX(b) of the 
GATT 1994 in this way: "Following this jurisprudence, th e Panel considers that, in order to determine whether 
the Drug Arrangements are justified under Article XX(b),  the Panel needs to examine: (i) whether the policy 
reflected in the measure falls within the range of po licies designed to achieve the objective of or, put 
differently, whether the policy  objective is for the purpose of, 'protect [ing] human … life or health'. In other 
words, whether the measure is one designed to achiev e that health policy objective ...". Panel Report, EC – 
Tariff Preferences, para. 7.199. 
241 Appellate Body Report, Brazil – Retreaded Tyres , para 178 . 
242 Appellate Body Report, Brazil – Retreaded Tyres , para. 145. 
243 Appellate Body Report, Brazil – Retreated Tyres,  para 150, 151. 
244 Appellate Body Report, Brazil – Retreaded Tyres,  para. 151. 
245 Appellate Body Report, China – Publications and Audiovisual Products , para. 251; Appellate Body 
Report, Korea – Various Measures on Beef , para. 163. 
246 Appellate Body Report, Brazil – Retreaded Tyres , para. 151. 
247 Appellate Body Report, Brazil – Retreaded Tyres , para. 151. 
248 Appellate Body Report, Brazil – Retreaded Tyres , para. 172. 
249 Appellate Body Report, Brazil – Retreaded Tyres , para. 151. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 74 - 
 
  objectives pursued. This is not, however, the only type of demonstration that could 
establish such a contribution. .… [A] demonstration could consist of quantitative projections in the future, or qualitative reasoning based on a set of hypotheses that are tested and supported by sufficient evidence.
250  
7.147.  Where the analysis described above results in a preliminary conclusion that the measure is 
necessary, the next step is to compare the challenged measure with possible alternative measures identified by the complainants.
251 The US – Gambling  and Brazil – Retreaded Tyres  disputes 
established how the burden of proof would be allocated when examining whether a reasonably 
available alternative exists. In the first instance, the burden is upon the complaining party to identify possible alternatives to the measure at issue that the responding Member could have taken; the burden then shifts to the responding party to demonstrate that the measure proposed 
by the complaining party is not a genuine alternative or is not "reasonably available", taking into 
account the interests or values being pursued and the responding Member's desired level of protection.
252 As the Appellate Body has recently confirmed, in the context of addressing the 
necessity requirement in Article 2.2 of the TB T Agreement, a comparison of the challenged 
measure with possible alternative measures is not required when the challenged measure makes no contribution to the achievement of the stated objective.
253  
7.148.  Finally, for a measure to be justified under Article XX(b) of the GATT 1994, the measure 
must comply with the chapeau of Article XX. The chapeau requires that the measure not be applied in a manner which would constitute a means of "arbitrary or unjustifiable discrimination between countries where the same conditions prevail", or "a disguised restriction on international 
trade". As regards the first requirement, "arbit rary or unjustifiable discrimination between 
countries where the same conditions prevail", the chapeau of Article XX covers not only MFN-type discrimination among different countries to which an exported product is destined (for example 
whether export duties on rare earths accord Japan less favourable treatment than the United 
States), but also national treatment-type discrimination arising from the difference in treatment accorded to the like product when destined for export, as compared with the treatment of the like 
product when destined for domestic consumption. The Panel understands China to agree with this 
view.
254  
7.3.2.2.2  The measures at issue  7.3.2.2.2.1  Harm arising from the mining an d production of the products at issue   
7.149.  China asserts that the mining and production of rare earths, tungsten, and molybdenum 
cause grave harm to the environment and, as a consequence, to the health of humans, animals 
and plants in China. The European Union and the Un ited States do not dispute that the mining and 
processing of the materials at issue can cause environmental damage; Japan "defers to the Panel" 
on whether the mining and processing of rare earths, tungsten, and molybdenum have a negative 
effect on the environment.
255  
7.150.  The Panel considers that China has prov ided the Panel with sufficient evidence to 
substantiate this assertion that the mining and production of rare earths, tungsten, and molybdenum have caused grave harm to the environm ent in China, and, as a consequence, to the 
health of humans, animals and plants in China. We review the evidence provided by China below, 
                                               
250 Appellate Body Report, Brazil – Retreaded Tyres , para. 151. 
251 Appellate Body Reports, US – Gambling , para. 311. 
252 Appellate Body Report, Brazil – Retreaded Tyres , para. 156.  
253 Appellate Body Reports, US – COOL , footnote 748, and US – Tuna II (Mexico) , footnote 647. 
254 China's response to Panel question No. 47. Specifically, the Panel put the following question to 
China: "Complainants argue that discr imination between "countries" within the chapeau of Article XX of the 
GATT 1994 includes not only MFN-type discrimination, but also NT-type discrimination (see, e.g. paragraph 54 of the European Union's oral statement at the first su bstantive meeting). Does China agree?" China responded 
that it "agrees that the requirement not to apply an ex port quota system in a manner that would constitute 
'arbitrary discrimination' also covers arbitrary di scrimination between domestic and foreign consumers." 
255 Parties' responses to Panel question No. 45. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 75 - 
 
  beginning with the evidence related to rare earths and then turning to China's evidence that is 
more specific to tungsten and molybdenum.256  
7.151.  China explains that the different environm ental risks that may occur along the production 
chain of rare earth products are described in detail in a 2011 Study for The Greens/EFA Group in 
the European Parliament257, as well as in a 2012 Study by the United States' Environmental 
Protection Agency.258 Rare earth production starts with mining of crude ore, which is next milled 
into fine powder. In order to separate the valuable rare earth metals from the rest of the ore, this 
powder is floated on water to which chemicals are added. Flotation creates large waste streams, 
called "tailings", which lead to large ponds called "impoundment areas".259 These tailings contain 
toxic substances, including radioactive substances (such as uranium and thorium), fluorides, sulphites, acids, and heavy metals and constitute a major environmental health risk.
260 In 
particular, if the ponds are not sufficiently leak-proof, the tailing ponds may pollute groundwater, 
affecting humans, animals, and plants in the areas that rely on this water.261 Moreover, tailing 
ponds may flood when exposed to heavy storm water or when dams collapse, thus polluting the 
surrounding soil and water.262 Water pollution may also arise from exposure of waste rock 
stockpiles, and the mining pit, to rainwater.263   
7.152.  In addition to water pollution, air may al so be polluted due to toxic and radioactive dust 
from the tailings and waste rock stockpiles.264 The air pollution may occur long after the mining 
site is closed if the site is not adequately cleaned up and tailings and stockpiles remain.265 Analysis 
of the plants and soil of the Bayan Obo area, where the world's largest rare earths mine is located, showed that radioactivity was 32 times higher in plants and 1.7 times higher in soil.
266 Research 
also found that 61.8 tonnes of radioactive dust is emitted each year as a result of the milling of the 
ores.267 Radioactive elements, including thorium, cause cancers of the lungs and pancreas as well 
as leukaemia.268 Reports indicate that in areas near rare earth mines, plants grow more slowly, 
flower poorly, and bear bad fruits or no fruits at all; animals get sick; and humans suffer from 
bone and chest illnesses.269   
7.153.  Rare earth separation and refining through a process called "saponification" produces 
further wastewater. Studies have found that the entire rare earth refining industry in China 
annually produces approximately 20,000 to 25,000 tonnes of wastewater, containing toxic ammonia nitrogen concentrations ranging between 300mg/L and 5000 mg/L.
270 The rare earth 
elements themselves also have a negative impact on human health. For instance, cerium oxide 
and cerium compounds negatively affect the human heart and lungs.271 Inhalation of lutetium 
creates lesions of the lungs.272 The use of gadolinium increases the risk of skin diseases.273 Chronic 
exposure to lanthanum may affect the central nervous system.274   
                                               
256 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
paras. 3-13.  
257 D. Schuler et al., "Study on Rare Earths  and their Recycling ", January 2011 (Exhibit CHN-30). 
258 EPA, " Rare Earth Elements: A Review of Producti on, Processing, Recycling, and Associated 
Environmental Issues ", August 2012 (Exhibit CHN-72). 
259 D. Schuler et al., "Study on Rare Earths  and their Recycling ", January 2011, pp. 42-43 
(Exhibit CHN-30). 
260 Ibid. p. 44. 
261 Ibid. p. 44 and EPA, " Rare Earth Elements : A Review of Production, Processing, Recycling, and 
Associated Environmental Issues ", August 2012, pp. 6-6 and 6-7 (Exhibit CHN-72). 
262 D. Schuler et al., "Study on Rare Earths  and their Recycling ", January 2011, p. 44 (Exhibit CHN-30). 
263 Ibid. p. 45. 
264 EPA, " Rare Earth Elements: A Review of Producti on, Processing, Recycling, and Associated 
Environmental Issues ", August 2012, pp. 6-8 and 6-9 (Exhibit CHN-72). 
265 D. Schuler et al., "Study on Rare Earths  and their Recycling ", January 2011, p. 45 (Exhibit CHN-30). 
266 Ibid. p. 50. 
267 D. Schuler et al., "Study on Rare Earths  and their Recycling ", January 2011, p. 50 (Exhibit CHN-30). 
268 Rare-earth mining in China comes at a heavy cost for local villages , The Guardian , 7 August 2012 
(Exhibit CHN-114). 
269 Ibid. 
270 EPA, " Rare Earth Elements: A Review of Producti on, Processing, Recycling, and Associated 
Environmental Issues ", August 2012, pp. 4-8 (Exhibit CHN-72). 
271 Ibid. p. 6-15. 
272 Ibid. p. 6-16. 
273 Ibid. p. 6-18. 
274 Ibid. p. 6-19. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 76 - 
 
  7.154.  China submits that the risks to human, an imal or plant life or health and the costs of 
controlling such risks are key reasons why rare earth production was shut down outside China. In this regard, China submits that companies outside of China that were producing, or had the capability to produce, rare earths were not ready to bear the high costs of implementing 
technology that would tackle environmental harm  and meet national re gulatory environmental 
requirements. For instance, according to China, the Mountain Pass rare earths mine in the United States ceased production in 2002, largely as a result of environmental damage that had occurred 
as well as cost issues resulting from the requ irement to use environment-friendly technologies.
275 
7.155.  With respect to tungsten and molybdenum, China refers to a number of mining studies in 
China showing that production of those minerals entails significant environmental risks. One study found that every year 2.2 million cubic meters of solid waste are dumped into rivers by tungsten 
ore processors, and that dozens of tonnes of arsenicum are discharged with the waste water from 
producing tungsten alloys/materials.
276 Another study on molybdenum mining activities in 
Northeast China found that concentrations of he avy metals in river sediments around the mines 
are significantly higher than the reference values.277 
7.156.  Based on the foregoing, the Panel considers that China has demonstrated that the mining 
and production of rare earths, tungsten, and molybdenum have caused grave harm to the 
environment and to the life and health of humans, animals, and plants in China. However, this 
does not suffice to demonstrate that the export duties are necessary to protect human, animal or plant life or health. To answer that question, the Panel must consider China's specific arguments and evidence regarding the design and structure of the export duties, whether they are apt to 
make a material contribution to their stated objective, and whether there are alternative measures 
available to China.   
7.3.2.2.2.2  The design and stru cture of the export duties   
7.157.  In the context of discussing the design and structure of its export duties, China claims that 
its export duties on rare earths, tungsten, and molybdenum products are "an integral part of a comprehensive policy that has the goal to reduce pollution and protect the health of China's 
population, its animals and plants".
278  
7.158.  China asserts that its export duties are part of its "comprehensive policy to protect the 
environment".279 This policy, according to China, includes a number of other measures besides 
export duties. It includes environmental requirem ents on the treatment of these materials when 
they are being processed, requirements for compliance with the Emission Standards of Pollutants 
from Rare Earths Industry , a Deposit for Ecological Recovery  after a mine has stopped operations, 
and a Resource Tax  paid by the mining companies on the materials mined.280  
7.159.  In the Panel's view, the mere assertion by  China that the export duties form part of a 
broader "comprehensive policy for environmental protection" in China is not sufficient to demonstrate that the export duties themselves are measures "designed to achieve" this objective. 
None of the cited elements of China's comprehe nsive environmental policy shows a link between 
export duties and a pollution reduction objective.  
7.160.  The Panel observes that in its defence of certain export duties and quotas in the China – 
Raw Materials dispute, China also asserted that it had a comprehensive environmental framework 
                                               
275 M. Humphries, " Rare Earth Elements: The Global Supply Chain ", Congressional Research Service , 6 
September 2011, p. 14 (Exhibit CHN-6) and EPA, "Rare Earth Elements: A Review of Production, Processing, 
Recycling, and Associated Environmental Issu es", August 2012, pp. 4-9 (Exhibit CHN-72). 
276 J. Wen, "Pollution in Tungsten  Production Shall be Reduced", China Land and Resources News , 14 
June 2005 (Exhibit CHN-115). 
277 C. Yu, "Molybdenum pollution and speciation in Nver River sediments impacted with Mo mining 
activities in Western Li aoning, Northeast China", International Journal of Environmental Research , Winter 2011, 
p. 211 (Exhibit CHN-116). 
278 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
para. 20. 
279 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
para. 22. 
280 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
paras. 22-30. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 77 - 
 
  with respect to the products at issue in that dispute, and offered a number of measures that 
purported to relate to pollution resulting from th e production of the products. However, the panel 
found that China "still need[ed] persuasive evidence of a connection between environmental 
protection standards and export restrictions."281 We have come to the same conclusion with 
respect to China's arguments and evidence in this dispute.  
7.161.  In this dispute, China asserts that its intention to use export duties to protect the 
environment has been consistently expressed by China's Ministry of Finance each time a new list of 
export duties was adopted.282 For instance, China notes that when the list of export duties for 
2009 was adopted in December 2008, the Ministry stated: 
Meanwhile, to further restrict the exports of "high-polluting, high-energy-consuming 
and resource-dependent" products, China will continue with the practice of imposing 
temporary taxes on the exports of coals, crude oil, metallic mineral ores, ferroalloys, 
steel billets, etc.283  
7.162.  On 15 December 2009, when the 2010 duties were adopted, the Ministry announced the 
continuation of this policy: 
In [2010], China will continue with the practice of imposing temporary taxes on the 
exports of petroleum, rare earths, wood pulp, steel billet, etc….284 
7.163.  On 14 December 2010, the Ministry noted: 
In 2011, China will continue with the practice of imposing temporary taxes on the 
exports of "high-polluting, high-energy-co nsuming and resource-dependent" products, 
including coals, crude oil, fertilizers, non-ferrous metals, etc. In order to discipline rare 
earth exports …, export duties for certain rare earth products have been raised.285 
7.164.  When adopting the 2012 export duties, the Ministry stated: 
To promote sustainable development and to contribute to the efforts of building a 
resource-conserving and environment-friendly society, China will continue with the 
practice of imposing temporary taxes on the exports of "high-polluting, high-energy-
consuming and resource-dependent" products, including coals, crude oil, fertilizers, 
ferroalloys, etc.286 
7.165.  In the Panel's view, these extracts from the Ministry of Finance's press releases do not 
demonstrate that the export duties have the object ive of protecting human, animal or plant life or 
health. They simply state that exports of "hig h energy-consumption commodities, high-pollution 
commodities and resource-based commodities" would be taxed. The mere fact that the export of 
such products would be taxed does not demonstrate the existence of a link between such taxes and the goal of reducing pollution. 
7.166.  In this regard, our reasoning and conclusion is similar to that reached by the panel in 
China – Raw Materials  when presented with very similar evidence. That Panel observed that "[t]he 
reference to serious pollution is descriptive of the products affected by the restrictions, but there is 
no explanation of how such measures operate together with export restriction policies on raw 
materials to reduce pollution caused by their production."
287 In addition, that panel observed that 
                                               
281 Panel Reports, China – Raw Materials , para. 7.507. 
282 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
paras. 26-29. 
283 China to Further Adjust Ce rtain Import and Export Ta riffs from 1 January 2009,  Ministry of Finance, 
17 December 2008, http://finance.sina.com.cn/g/20081217/16165649494.shtml (Exhibit CHN-118). 
284 China to Adjust Certain Import and Export Tariffs in 2010 , Ministry of Finance, 15 December 2009, 
http://gss.mof.gov.cn/zhengwuxinxi/zhengcejiedu/200912/t20091215_246832.html#  (Exhibit CHN-119). 
285 China to Adjust Certain Import and Export Tariffs in 2011 , Ministry of Finance, 14 December 2010, 
http://www.mof.gov.cn/zhengwuxinxi/caizhengx inwen/201012/t20101214_372941.html (Exhibit CHN-120). 
286 China to Adjust Certain Import and Export Tariffs in 2012 , Ministry of Finance, 15 December 2011, 
http://www.mof.gov.cn/zhengwuxinxi/caizhengx inwen/201112/t20111215_615746.html (Exhibit CHN-121). 
287 Panel Reports, China – Raw Materials , para. 7.508. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 78 - 
 
  certain documents submitted by China in that dispute "contain language stressing the importance 
of controlling the export of 'highly energy-con suming, highly polluting and resource-intensive' 
products without indicating whether and how controlling the exports will contribute to a decrease in pollution as part of a comprehensive environmental framework".
288 The panel in China – Raw 
Materials  stated that: 
[W]e do not find evidence that the export me asures at issue in this dispute form part 
of any such framework. This is not to say that Members can only succeed in justifying 
their measures under Article XX(b) by producing one or more instruments stating 
explicitly that a challenged measure has been put in place because it is necessary to protect human, animal or plant life or health, or that such instrument details the manner in which its objective will be achieved. However, in our view, a Member must 
do more than simply produce a list of measures referring, inter alia , to environmental 
protection and polluting products.
289   
7.167.  Unlike the press releases from prior years, we note that the announcement for the 2012 
export duties contains the language "to promote sustainable development and to contribute to the 
efforts of building a resource-conserving and en vironment-friendly society". In response to a 
question from the Panel, China did not explain why the press release issued in 2012 by China's 
Ministry of Finance – regarding the export duties China imposes – refers to the conservation of 
resources and sustainable development, while press releases issued in previous years do not.290 In 
any event, the additional language does not support China's contention that the 2012 export duties on rare earths, tungsten, and molybdenum are part of a comprehensive environmental 
policy. Again, the language does not explain how duties can achieve the purported goals of 
"promot[ing] sustainable development and … contribu t[ing] to the efforts of building a resource-
conserving and environment-friendly society". 
7.168.  In addition, the Panel notes that the meas ures imposing export duties on rare earths, 
tungsten, and molybdenum indicate no link between the duties and any environmental or health objective. Neither the 2012 Tariff Implementation Program  issued by the Tariff Commission, nor 
the 2012 Tariff Implementation Program (Customs Tariff Commission)  issued by Customs, 
identifies any objective of protecting life and health. Similarly, the Regulations on Import and 
Export Duties do not state that the export duties serve health or environmental purposes. 
7.169.  Furthermore, some of the evidence submi tted by the complainants seems to indicate that, 
contrary to China's assertions, the export duties at issue are designed and structured to promote 
increased domestic production of high value-added downstream products that use the raw materials at issue in this dispute as inputs. First, the complainants have submitted, as JE-136, an 
expert opinion by Professor Gene M. Grossman on " Export Duties as a Means to Address 
Environmental Externalities". According to this analysis, "a tax on exports of a good generates an 
increase in price in foreign markets, a fall in price in the home market, and an increase in domestic 
consumption that offsets the fall in foreign consumption".
291 Professor Grossman concludes that 
"the expansion of domestic sales that results from an export tax is an undesirable consequence for a policy designed to further environmental goals".
292 Second, the complainants draw the Panel's 
attention to certain statements contained in high-level Chinese documents.293 China's State 
Council acknowledged that the export duties operat e to "support the export of deeply processed 
products with high technology content and high value added".294 China's Ministry of Industry and 
Information Technology also stated that the export  duties are designed to "encourage the export 
of high value-added products and deep processing products and at the same time strictly control 
the export of … rare metal products involved in national strategic security".295 Third, the 
complainants have submitted evidence pointing to the growth in China's downstream products 
                                               
288 Panel Reports, China – Raw Materials , para. 7.510.  
289 Panel Reports, China – Raw Materials , para. 7.511. 
290 China's response to Panel question No. 54. 
291 (Exhibit JE-136), p. 2, para. 2.  
292 (Exhibit JE-136), p. 3, para. 1.  
293 Japan's second written submission, para. 258.  
294 Adjustment and Revitalization Plan for Non-Ferrous Indust ries (State Council 2009), 
para. 3.1 (Exhibit JE-14). 
295 The Ministry of Industry and Information Technology, Guidance for Enhancing the Management of 
Raw Materials Industries  (2009), para. 6 (Exhibit JE-12). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 79 - 
 
  manufactured with rare earths, tungsten, and molybdenum from the early 2000s to 2010.296 
Fourth, the complainants have pointed out that the export duties do not apply to most downstream, value-added products derived from rare earth, molybdenum, or tungsten materials. As a consequence, the complainants argue that the export duties are not a deterrent to overall 
consumption of rare earths, molybdenum, and tungsten; rather, in conjunction with other 
measures maintained by China, the duties serve to incentivize their domestic use for the production of value-added products, as opposed to their exportation.  
7.170.  We do not consider that China has rebutted this evidence.  
7.171.  Based on the foregoing, the Panel finds that China has failed to demonstrate that its export 
duties are designed and structured to protect human, animal or plant life or health. Having reached this conclusion, the Panel could, at this point, end its analysis of China's defence under 
Article XX(b) of the GATT 1994. However, we consider it appropriate to continue and examine the 
remainder of China's arguments.  
7.3.2.2.2.3  Existence of a material contribution  
7.172.  China argues that its export duties are "apt to make a material contribution" to the 
protection of human, animal and plant life and he alth. In this regard, China argues that export 
duties, "in a synergetic relationship with the resource tax and the Deposit for Ecological Recovery , 
as well as the imposition and enforcement of cost ly environmental regulati ons increase the prices 
of these products consumed in China and abroad".  According to China, "[b]y increasing the price of the domestic and foreign-bound products, de mand for these products will decrease and, 
therefore, production of rare earth, tungsten and molybdenum products in China will be reduced, 
resulting in less pollution connected with both mining and production".
297   
7.173.  The Panel understands China's argument to be that if a Member adopts measures that 
increase the price at which a product is sold – both domestically and abroad – then demand for 
that product may well decrease, thereby reducing production, and thereby reducing pollution 
associated with the production of the product. The fact that the intended result is achieved 
indirectly  would not, in and of itself, undermine the validity of this argument. At the same time, 
the Panel notes that China has not provided any evidence in support of its economic theory. We 
recall that in Brazil – Retreaded Tyres, the Appellate Body stated that a demonstration of the 
"material contribution" of the measure to its stated objective should "consist of quantitative 
projections in the future, or qualitative reas oning based on a set of hypotheses that are tested and 
supported by sufficient evidence".298 
7.174.  At any rate, the Panel is unable to accept China's argument in this case for a very simple 
reason: the effect of an export tax is, by definiti on, to increase the price of the products at issue 
when destined for consumption outside  China. China has not identified any corresponding measure 
that it applies to increase the price of the products at issue when destined for consumption inside  
China. The Panel gave China an opportunity to explain its position on this issue by asking China 
why, "If it is true that a price measure could help to internalize the environment cost … China only 
appl[ies] an export duty, which increases the price only for foreign consumers, without any 
corresponding tax on sales to domestic consumers?"299 China's response to this question was as 
follows: 
China uses export duties to increase the price of the products at issue for foreign 
consumers, in order to reduce consumption by these foreign consumers and thus to reduce production of the rare earth, tungsten and molybdenum resources. In turn, 
this will reduce the pollution following from the mining and production of these 
resources. 
                                               
296 Japan's second written submission, para. 259.  
297 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
para. 36. 
298 Appellate Body report, Brazil – Retreaded Tyres,  para. 151. (emphasis added) 
299 Panel question No. 44.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 80 - 
 
  7.175.  We agree with Japan's observation300 that China's answer to this question fails to address 
the Panel's question, and that China has not offere d any explanation why, when its export duties 
are allegedly designed to internalize the environm ental costs of producing the raw materials, China 
imposes export duties which increase prices only for foreign consumers, without any corresponding 
tax on sales to domestic consumers.  
7.176.  In addition, the complainants have repeated ly argued that the imposition of a tax only on 
exports, without any corresponding tax on the like product destined for domestic consumption, will 
not make any contribution to the achievement of China's stated objective. More specifically, the 
complainants argue that the decrease in foreign demand arising from the imposition of export duties results in the diversion of production to the Chinese domestic market. Thus, the complainants argue, the export duty " per se " would in reality lead to a downward pressure on the 
prices of these materials in the Chinese domestic market, relative to the situation without export 
duties. This could offset in the Chinese marketplace the effects of other measures that China claims to have put in place to make the prices of these materials better reflect the environmental 
costs. The complainants argue that this in turn provides an incentive for more intensive use of 
such raw materials by China's domestic downstream industries, making the Chinese economy in the long run even more dependent on the use of such inputs.
301  
7.177.  The Panel also sought to elicit a response from China on these points. China's response to 
this question was as follows: 
As explained in its answer to Question 44, above, and in China's substantive defence 
of the export duties of 15 February 2013, China uses export duties to increase the 
price of the products at issue for foreign consumers. The Complainants have not 
demonstrated that the domestic prices for these products experienced any downward pressure as a consequence of the duties.
302 
7.178.  We agree with the following observations  by the European Union and the United States 
regarding China's answer to this question. First, it is not clear whether China's answer can be characterized as responding to the Panel's question, and thereby to the complainants' arguments. 
Second, as the party invoking Article XX(b) of the GATT 1994, China bears the burden of 
producing evidence and argument to substantiate its defence. In this regard, we recall that it is China that asserts that its export duties are apt to make a material contribution to the achievement of the stated objective, and that in support of this assertion it is China that advances 
the economic theory (unsupported by any evidence) quoted at paragraph 7.172 above.
303 In any 
event, even if the Panel were to reject the United States' observation that "the effect of an export 
restriction on domestic prices is a matter of standard economic principles"304, and require instead 
that the complainants produce evidence on this issue, the complainants have done so. As 
discussed above in the context of addressing the design and structure of the export duties, the 
complainants have submitted, as Exhibit JE-136, an expert opinion by Professor Gene M. 
Grossman on " Export Duties as a Means to Address Environmental Externalities". According to this 
analysis, "a tax on exports of a good generates an increase in price in foreign markets, a fall in price in the home market, and an increase in domestic consumption that offsets the fall in foreign consumption."
305 Professor Grossman concludes that "the expansion of domestic sales that results 
from an export tax is an undesirable consequence for a policy designed to further environmental 
goals."306 China has offered no response to refute this evidence and we see no reason not to 
accept it. More importantly, however, China has not met its burden of proof in asserting that its 
export duties are "apt to make a material contribution" to the protection of human, animal and 
plant life and health. 
7.179.  Based on the foregoing, the Panel finds that China has not demonstrated that its export 
duties are "apt to make a material contribution" to the achievement of the stated objective. 
                                               
300 Japan's comments on China's response to Panel question No. 44.  
301 See, e.g. United States' opening oral statement at the first meeting of the Panel, para. 17; Japan's 
opening oral statement at the first meeting of the Panel, para. 69; the European Union's opening oral 
statement at the first meeting of the Panel, para. 78.  
302 China's response to Panel question No. 46. 
303 European Union's and United States' comments on China's response to Panel question No. 46. 
304 European Union's and United States' comments on China's response to Panel question No. 46. 
305 (Exhibit JE-136), p. 2, para. 2. 
306 (Exhibit JE-136), p. 3, para. 1. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 81 - 
 
  7.3.2.2.2.4  Existence of alternative measures  
7.180.  China argues that the complainants mu st identify reasonably available alternative 
measures that would make the same contribution to the protection of human, animal and plant life or health. China recognizes that "if the complainants identify alternative measures, the burden 
would then be on China to demonstrate that they are not reasonably available or do not make the 
same contribution".
307 
7.181.  For the reasons set forth above, the Pane l has already found that China has failed to 
demonstrate that the objective of the export duties is to protect human, animal or plant life or 
health, or that the export duties are "apt to make a material contribution" to the achievement of that objective.
308 In these circumstances, it may not be necessary for the complainants to identify 
alternative measures.309   
7.182.  In any event, the complaints have identified alternative measures. The European Union 
notes that China has confirmed that it is already using a "diverse range of complementary measures"  to achieve its objective of environmental protection. These measures include its 
requirement of strict compliance with environmental requirements as a condition for access to the 
rare earth, tungsten, and molybdenum industry and for obtaining a share of the production and export quotas; compliance with the Emission Standards of Pollutants from Rare Earths Industry ; 
the requirement for mines to make a deposit for ecological recovery; and the imposition of a 
resource tax. In this regard, the European Union states that China has already enacted an impressive number of legal measures to protect its environment. In the opinion of the European 
Union, "these are the measures that can actually make a 'material contribution' to protect China's 
environment, and consequently the health of human, animal or plant life in China".
310  
7.183.  Japan identifies several alternative measures that China could apply to address the harm 
caused by the mining and production of the products at issue. First, China could increase the 
resource tax on ores significantly enough to deter domestic production. Second, China could 
impose a pollution tax or "Pigouvian tax" wher eby producers are made to pay for each unit of 
pollution they generate, thus matching the social cost of pollution.311 
7.184.  The United States contends that China could increase volume restrictions on mining and 
production or establish effective pollution controls on how mining or production takes place. The United States also refers to China's existing measures, including its existing environmental regulations related to production, such as pollution controls on production, a resource tax, and a 
mining deposit, and notes that China might need to adjust those measures to make them more 
effective. With respect to China's resource tax, the United States argues that "[i]t is unclear why China could not rely upon the resource tax to help ensure that the price of rare earths, tungsten, 
and molybdenum reflects environmental costs, rather  than insisting that only products intended 
for foreign consumers be subject to export duties (that, as the United States noted, are significantly higher than the existing resource tax)."
312 
7.185.  China offered no response to these arguments in its statement at the first meeting of the 
Panel, in its second written submission, or in its statement at the second meeting of the Panel. In its second set of questions, the Panel invited China to comment on the complainants' arguments, and in particular their suggestions that China could (i) increase volume restrictions on mining and 
production; (ii) establish effective pollution controls on mining and production; (iii) impose a 
resources tax on consumption; (iv) impose a pollu tion tax; and (v) develop and impose an export 
licensing system. 
7.186.  In its response to Panel question No. 123, China argued that the alternative measures 
identified by the complainants are not in fact "alternatives", since China already imposes such measures. The Panel accepts that China already imposes such measures. However, China has not 
                                               
307 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
para. 37. 
308 See paras. 7.171 and 7.179 above.  
309 See para. 7.147 above.  
310 European Union's second written submission, para. 362.  
311 Japan's second written submission, paras. 270-272.  
312 United States' second written submission, paras. 67-70. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 82 - 
 
  explained why it could not, as an alternative to the export duties (which the Panel has found are 
WTO-inconsistent and not apt to make a material contribution to the protection of human, animal, or plant life or health), increase  the volume restrictions on mining and production, increase  the 
pollution controls on mining and production, increase  the resource tax, and/or increase  the 
pollution tax. In this regard, the fact that China already imposes these types of measures does not 
explain why increasing the rates  (e.g. on the resource tax) is not an "alternative" to export duties. 
We agree with Japan that "China could increase  the resource tax on ores significantly enough to 
deter domestic production. China has failed to respond to Japan's WTO-consistent alternative of an 
increased resource tax instead of the export duties."
313 
7.187.  Based on the foregoing, the Panel finds that China has not met its burden of 
demonstrating that the alternative measures identified by the complainants are not reasonably 
available to China, or do not make the same contribution as the challenged measure. 
7.3.2.2.2.5  The chapeau of  Article XX of the GATT 1994 
7.188.  China argues that its export duties are a pplied in a manner that satisfies the requirements 
of the chapeau of GATT Article XX.  
7.189.  First, with respect to the question of whether the export duties are applied in a manner 
that constitutes "arbitrary or unjustifiable discrimination between countries where the same 
conditions prevail", China argues that the "export duties do not make a distinction according to the 
destination of the products being exported", and th at "[in the absence of any distinction based on 
origin or destination, there is no cause to consider that the export duty is applied 'in a manner that would constitute arbitrary or unjustifiable discrimination between countries where the same 
conditions prevail'."
314   
7.190.  The Panel agrees with China that the export  duties do not make a distinction according to 
which country the exported  products are destined. However, and as set out above in the context of 
discussing the legal standard under Article XX of the GATT 1994, the terms "arbitrary or 
unjustifiable discrimination between countries wher e the same conditions prevail" in the chapeau 
of Article XX covers not only MFN-type discrimination among different countries to which an 
exported product is destined (for example whether export duties on rare earths accord Japan less 
favourable treatment than the United States), but also national treatment-type discrimination arising from the difference in treatment accorded to the like product when destined for export, as compared with the treatment of the like product when destined for domestic consumption. China 
agrees with this interpretation of the chapeau of Article XX
315 and has advanced no other 
arguments to discharge its burden of demonstratin g that the export duties are not applied in a 
manner that constitutes "arbitrary or unjustifiable discrimination between countries where the 
same conditions prevail".  
7.191.  Second, China argues that its export duties are not applied in a manner that constitutes a 
"disguised restriction on international trade". In support, China advances a one-sentence 
argument that these measures "are tailored to, and are an intrinsic part of, China's policy aimed at 
protecting the environment against the harms following from excessive mining and production of rare earth, tungsten and molybdenum products".
316   
7.192.  In the Panel's view, a mere assertion is not proof and this one-sentence argument fails to 
meet China's burden of proof. In addition, it appe ars to the Panel that the export duties are not 
actually "tailored to" protecting the environmen t against the harm that results from excessive 
mining and production of rare earth, tungsten, and molybdenum products. In this regard, China 
has not provided any explanation of the criteria it has used to set the level of the export duties, or 
to determine what specific effects on production would be expected from a specific duty level. We recall that China imposes export duties on 82 different rare earth, tungsten, and molybdenum 
products, ranging from 5-25% ad valorem . 
                                               
313 Japan's comments on China's response to Panel question No. 123, para. 84.  
314 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
para. 42. 
315 See above, para. 7.148. 
316 China's Substantive Defence of its Export Du ties on Rare Earths, Tungsten and Molybdenum, 
para. 43.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 83 - 
 
  7.193.  Based on the foregoing, the Panel finds that China has not demonstrated that its export 
duties are applied in a manner that satisfies th e requirements of the chapeau of Article XX. 
7.3.2.2.3  Conclusion on the ch apeau of Article XX of the GATT 1994 
7.194.  The Panel concludes that China has demonstrated that the mining and production of rare 
earths, tungsten, and molybdenum have caused grave harm to the environment and to the life 
and health of human, animals, and plants in Chin a. The Panel recognizes that in recent years 
China has considerably enhanced the scope of th e environmental measures it has adopted with a 
view to addressing this harm. In this regard, the Panel recalls the Appellate Body's statement that 
"few interests are more 'vital' and 'important' than  protecting human beings from health risks, and 
that protecting the environment is no less important".317 
7.195.  However, the Panel finds that China has not demonstrated that its export duties are 
designed to address this problem, or that they  are apt to make a material contribution to 
addressing this problem, or that the alternative measures identified by the complainants are not 
reasonably available or would not make the same contribution to addressing this problem. In 
addition, the Panel finds that China has not demonstrated that the measures are applied in a 
manner that satisfies the chapeau of Article XX of the GATT 1994. For these reasons, the Panel finds that China has not demonstrated that its imposition of export duties on the products at issue 
are justified under Article XX(b) as measures necessary to protect human, animal or plant life or 
health.  
7.3.3  Overall conclusion on claims relating to export duties 7.196.  For the reasons set forth above, the Panel fi nds that: (i) China's imposition of export duties 
on the products at issue
318 is inconsistent with Paragraph 11.3 of China's Accession Protocol; (ii) 
the obligation in Paragraph 11.3 is not subject to the general exceptions in Article XX of the GATT 1994
319; and even if it were, (iii) China has not demonstrated that its export duties on the 
products at issue are justified under Article XX(b) of the GATT 1994 as measures necessary to 
protect human, animal or plant life or health. 
7.4  Export quotas 
7.4.1  Introduction and Claims of violat ion of Article XI:1 of the GATT 1994 and 
Paragraphs 162 and 165 of China's Working Party Report 
7.197.  The complainants assert that China subjects various forms of rare earths, tungsten, and 
molybdenum to quantitative restrictions, including quotas. According to the complainants, such 
measures are inconsistent with Article XI:1 of the GATT 1994 and with Paragraph 1.2 of Part I of 
China's Accession Protocol, which incorporates commitments in Paragraphs 162 and 165 of China's Working Party Report
320, because they constitute export restrictions other than duties, taxes, or 
other charges.321 
7.198.  Article XI:1 of the GATT 1994 provides that: 
No prohibitions or restrictions other than duties, taxes, or other charges, whether 
made effective through quotas, import or ex port licences or other measures, shall be 
instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.  
                                               
317 Appellate Body Report, Brazil – Retreaded Tyres , paras. 144 and 179. 
318 These products are specified above at para. 7.46. Th e Panel recalls that in view of the nature of the 
export duty system described above, the Panel's finding is with respect to the series of measures comprising 
the relevant framework legislation, the implementing regu lations, other applicable la ws and the specific annual 
measures imposing the export duties existing at the date of the Panel's establishment. 
319 As explained above, one panelist is of the view that the obligation in Paragraph 11.3 of China's 
Accession Protocol is subject to the general exceptions in Article XX of the GATT 1994.  
320 See Report of the Working Party on the Accession of China  (WT/MIN(01)/3, 10 November 2001). 
321 United States' request for the es tablishment of a panel, part. II. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 84 - 
 
  7.199.  Paragraphs 162 and 165 of China's Working Party Report provide that:  
162. The representative of China confirmed that China would abide by WTO rules in 
respect of non-automatic export licensing and export restrictions. The Foreign Trade Law would also be brought into conformity  with GATT requirements. Moreover, export 
restrictions and licensing would only be app lied, after the date of accession, in those 
cases where this was justified by GATT provisions. The Working Party took note of these commitments.  
165. The representative of China confirmed that upon accession, remaining non-
automatic restrictions on exports would be notified to the WTO annually and would be eliminated unless they could be justified under the WTO Agreement or the Draft Protocol. The Working Party took note of this commitment. 
7.200.  China does not dispute that it imposes export quotas on the products at issue. It also does 
not contest that these quotas violate Article XI:1 of the GATT and Paragraphs 162 and 165 of China's Working Party Report. The Panel therefore finds that China's export quotas on rare earths, 
tungsten, and molybdenum are inconsistent with Article XI:1 of the GATT and Paragraphs 162 and 
165 of China's Working Party Report. China argues, however, that the obligation in Article XI:1 is subject to the general exceptions in Article XX of the GATT 1994, and submits that the export 
quota measures at issue are justified under Article XX(g) of the GATT 1994 because they "relat[e] 
to the conservation of exhaustible natural resources", are "made effective in conjunction with restrictions on domestic production or consumption", and comply with the requirements of the chapeau of Article XX.
322  
7.201.  In the opinion of the complainants, China has failed to demonstrate that its export quotas 
fall within the scope of subparagraph (g) of Article XX, or that they comply with the requirements of the chapeau of Article XX. According to the complainants, China's export quota measures on 
rare earths, tungsten, and molybdenum are primarily designed to serve China's industrial policies.  
7.4.1.1  Burden of proof and manage ment of the evidence by the Panel 
7.202.  Before examining the relevant evidence an d argumentation of the parties with respect to 
China's export quotas on rare earths, tungsten, and molybdenum, the Panel recalls that it is the 
Member invoking Article XX that bears the burden of proof to demonstrate that the measure at issue is justified under that Article.
323 I n  r e l a t i o n  t o  C h i n a ' s  d e f e n c e  o f  i t s  e x p o r t  q u o t a s  u n d e r  
Article XX(g), the Panel has been required to assess a considerable amount of evidentiary material 
(including expert evidence). It is well settled that panels enjoy a broad margin of discretion – as 
the triers of fact – in assessing the value of the evidence before them and in ascribing weight to that evidence.
324 At the same time, panels must respect the standard of review set out in 
Article 11 of the DSU. 
7.203.  With these principles in mind, the Panel proceeds to describe China's export quota 
measures.  
                                               
322 China's first written submission, para. 11. 
323 Appellate Body Report, US – Gasoline , pp. 22-23, DSR 1996:I, 3, p. 20-21. 
324 We agree with the following observations at footnote 637 in Panel Reports, China – Raw Materials : 
If it is clear that panels have exclusive jurisdiction  over the evaluation of factual and expert evidence, 
"precisely how much and precisely what kind of evidence will be required to establish such a presumption will necessarily vary from measure to measure, provision to provision, and case to case" (Appellate Body Report, 
US – Wool Shirts and Blouses , p. 335) as "[the Appellate Body] cannot second-guess the Panel in appreciating 
either the evidentiary value of … studies or the consequences, if any, of alleged defects in [the evidence]". (Appellate Body Report, Korea – Alcoholic Beverages , para. 161). There are, however, no criteria 
or specific standards concerning the credibility and we ight that the Panel should  ascribe to the different 
elements of evidence. Criteria such as "balance of prob abilities" or "preponderance of evidence" were rejected 
in favour of panels' discretion, a di scretion that must nonetheless respect the provisions of Article 11 of the 
DSU for an "objective" assessment of the facts and the law. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 85 - 
 
  7.4.1.2  Description of Chin a's export quota measures 
7.4.1.2.1  China's export quota regime – Ch ina's legal framework for quota imposition 
7.204.  China's Foreign Trade Law  allows for the imposition of restrictions or prohibitions on the 
exportation of goods in pursuance of certain specific objectives, such as protecting human life or 
health, or conserving exhaustible natural resources.325 Article 19 of the Foreign Trade Law  
provides that China may restrict or prohibit exportation through export quotas.326 The Regulations 
on the Administration of the Import and Export of Goods  prescribe rules governing the 
administration of the export and import of goods327, while the Export Quota Administration 
Measures specify further aspects of the administration of export quotas.328 The Annex to the 
Export Quota Administration Measures  excludes its application to certain agricultural products and 
industrial products, such as rare earths. 
7.205.  China's Foreign Trade Law  grants to MOFCOM the authority to administer all Chinese 
export quotas.329   
7.206.  MOFCOM, in collaboration with Customs, is responsible for "formulating, adjusting, and 
publishing" catalogues of goods the import or export of which is restricted or prohibited.330 
MOFCOM also determines and announces the amount of the annual export quota for each restricted product.
331 
7.207.  China's 2012 Export Licensing Catalogue  identifies all goods subject to export quotas.332 
Article 38 of the Regulations on the Administration of the Import and Export of Goods  provides 
that the relevant Ministry shall publish annual quota amounts for products on this list by 31 October of the preceding year.
333  
7.208.  China published the 2012 Export Quota Amounts334 on 31 October 2011. This document 
indicates the total export quota for certain agricultural and industrial products, such as tungsten and molybdenum. 
7.209.  Pursuant to the 2012 Export Licensing Catalogue
335, concentrates and a variety of 
processed and alloyed products of rare earths, tungsten, and molybdenum are all subject to export quota licensing administration. This means that quota shares are directly assigned by MOFCOM 
and require MOFCOM approval. 
7.210.  China maintains a series of criminal and administrative penalties for the exportation of 
restricted goods in a manner inconsistent with the quota regime. Under China's Regulation on 
Import and Export Administration , the holder of an export quota is required to return any unused 
quota volume by 31 October of the year for which the export quotas have been issued.
336 
Exporting enterprises may be subject to sanction if they fail to do so and also fail to fully use their quota by the end of the year.
337 Enterprises may also face sanctions for exporting without 
permission, exceeding the quantitative limitations, or buying or selling quota certificates or other 
                                               
325 Foreign Trade Law , (Exhibit CHN-11, JE-49), Articles 16 and 17. 
326 Foreign Trade Law , (Exhibits CHN-11, JE-49), Article 19; Regulations on the Administration of the 
Import and Export of Goods (Exhibits CHN-54, JE-50), Article 4. 
327 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 36. 
328 Export Quota Administration Measures , (Exhibits CHN-96, JE-52), Article 1. 
329 Foreign Trade Law , (Exhibits CHN-11, JE-49), Article 20. 
330 Foreign Trade Law , (Exhibits CHN-11, JE-49), Article 18; Regulations on the Administration of the 
Import and Export of Goods , (Exhibits CHN-54, JE-50), Article 35; 2008 Export Licence Administration 
Measures , (Exhibit JE-51), Article 3 para. 2. 
331 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50). 
Article 38; Export Quota Admini stration Measures , (Exhibits CHN-96, JE-52), Articles 9-11. 
332 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48). 
333 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 38. 
334 2012 Export Quota Amounts , (Exhibits CHN-97, JE-58). 
335 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48), para. I(iii). 
336 Regulations on the Administration of  the Import and Export of Goods , (Exhibit CHN-54), Article 42. 
337 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 86 - 
 
  documents without approval.338 Sanctions include refusal to handle the offending enterprise's 
Customs inspection;339 revocation of the non-complying enterprise's business licence for foreign 
trade; a reduction in the offending enterprise's quota allocation, and possible criminal punishment.
340 Quota administering authorities that distribute quotas exceeding their authority 
may also be subject to sanction.341 
7.211.  Each qualifying company receives a quota for light or heavy/medium rare earths. An 
export quota holder is free to assign its quota on different rare earth products (light or 
medium/heavy) with the consequence that a quota holder may assign its entire quota to one or 
several rare earth products. In practice, exporting firms may export only a few rare earth products.
342 
7.4.1.3  Application of the quota system 
7.4.1.3.1  Export quotas for rare earths 
7.212.  The 2012 Export Licensing Catalogue  details those rare earth concentrates343 and 
processed or alloyed products that are subject to export quota licensing administration.344 
Accordingly, any firm seeking to export rare eart hs must apply for an export quota share and meet 
certain criteria in order to be eligible.345 Firms approved to export rare earths receive a quota 
certificate. After obtaining a quota certificate, exporters apply to MOFCOM for an export licence, 
which can be presented to the Chinese customs authorities.346 
7.213.  On 26 December 2011, China published the 2012 First Batch Rare Earth Export Quotas , 
announcing that MOFCOM was distributing the "first batch" export quota on rare earths to specific 
enterprises listed therein. According to the notice, the first batch allocation represented 
approximately 80% of the total amount of the 2012 export quota for rare earths.347 In this notice, 
China distinguished the allocation of the more than 50 items covered by the rare earths quota 
between (1) light rare earths and (2) medium/ heavy rare earths. Specifically, China allocated 
9,095 metric tonnes348 of light rare earths and 1,451 tonnes of medium/heavy rare earths in terms 
of gross weight in the first batch. In addition, MOFCOM conditionally allocated an additional 12,605 tonnes of light rare earths and 1,753 tonnes of medium/heavy rare earths to "pending 
enterprises", to be granted on the basis of whet her those enterprises could satisfy by July 2012 
environmental reviews conducted by the Ministry of Environmental Protection.
349 
7.214.  On 16 May 2012, MOFCOM allocated an additional 9,490 tonnes of light rare earths and 
1,190 tonnes of medium/heavy rare earths in gross weight to companies previously labelled as 
                                               
338 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42; Foreign Trade Law , (CHN-11), Articles 64, 65, and 66.  
339 The Panel notes that, according to Articles 61 and 64 of the Foreign Trade Law , (Exhibit CHN-11), 
this sanction only applies to export without permission.  
340 Foreign Trade Law , (Exhibits CHN-11, JE-49), Articles 61 and 64; Regulations on the Administration 
of the Import and Export of Goods , (Exhibits CHN-54, JE-50), Articles 64 and 65. 
341 Export Quota Administration Measures , (Exhibits CHN-96, JE-52), Article 29; 2010 Amendment of 
Measures for Administrati on of Licensing Entities , (Exhibit JE-53), Articles 40 and 41. 
342 See parties' responses to Panel question Nos. 21, 23, 28, and 43; see also United States' opening 
statement at the first meeting of the Panel, para. 51. 
343 China states that its expo rt quota does not cover crude ores of rare earth. See also China's response 
to Panel question No. 141. 
344 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48), Annex 1. 
345 2012 Application Qualifications and Procedures for Rare Earth Export Quotas  (Exhibits CHN-38, 
JE-61). 
346 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Articles 41 and 43. 
347 2012 First Batch Rare Earth Export Quotas  (Exhibits CHN-56, JE-55); 2012 First Batch Rare Earth 
Export Quota (Supplement)  (Exhibits CHN-57, JE-56). 
348 Throughout these Reports, all re ferences to "tonnes" are referenc es to metric tonnes. The Panel 
notes that in its written submissions the United States sometimes uses the spelling "ton" to mean "metric 
tonne". 
349 2012 First Batch Rare Earth Export Quotas  (Exhibits CHN-56, JE-55). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 87 - 
 
  "pending enterprises". According to the notice, th is represented a supplement to the "first batch" 
of the rare earth quota.350 
7.215.  On 16 August 2012, China issued the "second batch" quota allocation for rare earths. 
MOFCOM allocated 8,537 tonnes of light rare earths and 1,233 tonnes of medium/heavy rare 
earths.351 As a result, in total, China's rare earth export quota for 2012 was 30,996 tonnes in 
gross weight. 
7.4.1.3.1.1  Application requiremen ts for manufacturing enterprises 
7.216.  The 2012 Application Qualifications and Procedures for Rare Earth Export Quotas  provide 
that manufacturing enterprises must be registered as a foreign trade operator and have independent legal status. In addition they must obtain the rare earth materials from an eligible mining enterprise and have environmental treatment facilities suitable to the production scale of 
the applicant. Further, enterprises must have  export performance in  each year from 2008-2010 
and for those enterprises who acquired a quota after 2010, they must have export performance in each year up to 2010 (for those enterprises whose export quotas were acquired after 2008, the 
export performance is based on all years from th e year in which the quota was acquired up to 
2010).
352  
7.217.  Annex 1 of the 2012 First Batch Rare Earth Export Quotas  provides that the rare earth 
quota for manufacturing enterprises is to be allocated based on a formula that takes into account a 
manufacturing enterprise's export performance.353 
7.4.1.3.1.2  Application requirements for trading enterprises 7.218.  The 2012 Application Qualifications and Procedures for Rare Earth Export Quotas  provide 
that a trading enterprise applying for quota rights must have export performance from 2008 to 
2010. Trading enterprises are also required to ha ve a minimum registered capital of more than 
RMB 50 million.
354  
7.219.  Annex 1 to the 2012 First Batch Rare Earth Export Quota  provides that the rare earth 
quota for trading enterprises is to be allocated based on a formula that takes into account a trading enterprise's export performance.
355 
7.4.1.3.2  Export quota for tungsten and tungsten products 
7.220.  The 2012 Export Licensing Catalogue  subjects tungsten concentrates356 and a variety of 
processed tungsten products to direct export quota administration in the same manner as rare earths and molybdenum.
357 The Catalogue  requires enterprises seeking to export tungsten and 
tungsten products to apply to MOFCOM under the 2012 Application Qualifications and Application 
Procedures of Tungsten Export (or Supply) Enterprises . According to this regulation, MOFCOM 
directly assigns a share of the export quota to approved enterprises.358 
7.221.  The 2012 Export Quota Amounts359 indicates that the 2012 total annual export quota for 
tungsten is 15,400 tonnes in metal content.360 The export quota for tungsten was further allocated 
in two batches among four categories of tungsten products: (a) tungstic acid and its salts; 
                                               
350 2012 First Batch Rare Earth Export Quota (Supplement)  (Exhibits CHN-57, JE-56). 
351 2012 Second Batch Rare Earth Export Quotas  (Exhibits CHN-58, JE-57). 
352 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , (Exhibits CHN-38, 
JE-61). 
353 2012 First Batch Rare Earth Export Quotas  (Exhibits CHN-56, JE-55). 
354 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , (Exhibits CHN-38, 
JE-61), paras. II(ii)2 and II(ii)(3). 
355 2012 First Batch Rare Earth Export Quotas  (Exhibits CHN-56, JE-55). 
356 China states that its ex port quota does not cover crude ores of  tungsten. See also China's response 
to Panel question No. 141. 
357 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48), Annex 1. 
358 2012 Application Qualifications and Application Procedures of Tungsten Export (or Supply) 
Enterprises , (Exhibits CHN-100, JE-62), Article IV(iv). 
359 2012 Export Quota Amounts  (Exhibits CHN-97, JE-58) 
360 See also Exhibit CHN-223. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 88 - 
 
  (b) tungstic trioxide and blue tungsten oxide; (c) tungsten powder and its products; and (d) 
ammonium metatungstate and paratungstate.361 
7.222.  On 26 December 2011, China published a notice announcing the distribution of 2012 "first 
batch" export quota shares for tungsten, indicating  the specific amount of specific categories of 
tungsten allocated to specific enterprises.362 According to the notice, the "first batch" allocation 
covered approximately 60% of the 2012 quota for non-ferrous metals, including tungsten. MOFCOM allocated, in gross weight, 3,036 tonnes to ammonium metatungstate and paratungstate, 
377 tonnes to tungstic acid and its salts, 5,380 tonnes to tungsten trioxide and blue tungsten 
oxide, and 2,587 tonnes to tungsten powder and its products. 
7.223.  On 19 July 2012, China issued the "second batch" quota allocation for tungsten. MOFCOM 
allocated an additional 7,587 tonnes in gross weight to the tungsten products listed above in 
similar proportions.
363 In total, China's tungsten quota for 2012 was 18,967 tonnes. 
7.224.  In addition, the notice announcing the "second batch" export quota clarified that, as of 
1 August 2012, the export companies allocated quota allowances for specific tungsten products 
may adjust the export quota allowances to apply to tungsten products higher in the industrial 
chain364, without first seeking MOFCOM authorization. According to the notice, such quota shares 
may be freely allocated to tungsten products hi gher in the industrial chain, but may not be 
reallocated to tungsten products with a lesser degree of processing. 
7.4.1.3.3  Export quota for molybdenum 7.225.  Under the 2012 Export Licensing Catalogue , molybdenum concentrates
365 and a variety of 
processed molybdenum products are subject to direct export quota administration.366 Shares of 
the export quota are therefore assigned direct ly by MOFCOM to individual companies whose 
applications for molybdenum quota shares have been approved. 
7.226.  Exporters apply for export quota shares under procedures spelled out by MOFCOM in the 
2012 Application Qualifications and Application Procedures for Molybdenum Export Quota .367 
7.227.  The 2012 Export Quota Amounts 368 indicates that the 2012 total annual export quota for 
all molybdenum products is 25,000 tonnes in metal content. The export quota for molybdenum is 
further allocated among the following three molybdenum product categories: (a) primary raw 
molybdenum; (b) chemical molybdenum products; and (c) molybdenum products.369 
7.228.  On 26 December 2011, China published a notice announcing the distribution of 2012 "first 
batch" export quota shares for molybdenum, indicati ng the specific amount of specific categories 
of molybdenum allocated to the specific enterprises.370 According to the notice, the first batch 
allocation covered approximately 60% of the 2012 quota for non-ferrous metals, including molybdenum. MOFCOM allocated, in gross weight, 19,914 tonnes to primary raw molybdenum, 
                                               
361 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-99, JE-59), annex 2; 2012 Second Batch Export Quotas of Tungsten, Antimony and Other Non-
Ferrous Metals  (Exhibits CHN-165, JE-60); 2012 Export Quota Amounts,  (Exhibits CHN-97, JE-58). 
362 Annex 2 of Exhibits CHN-99 and JE-59. 
363 2012 Second Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-165, JE-60). 
364 The Notice indicates the industrial chain for tungsten proceeds as follows: tungsten oxide  
ammonium paratungstate  tungsten trioxide and blue tungsten oxide  tungsten powder. See 2012 Second 
Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals  (Exhibits CHN-165, JE-60). 
365 China states that its export quota does not cover crude ores of molybdenum. Se e also China's 
response to Panel question No. 141. 
366 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48), annex 1. 
367 2012 Application Qualifications and Application Procedures for Molybdenum Export Quota  
(Exhibits CHN-107, JE-63). 
368 2012 Export Quota Amounts  (Exhibits CHN-97, JE-58). 
369 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-99, JE-59); 2012 Second Batch Export Quotas of Tung sten, Antimony and Other Non-Ferrous 
Metals , (Exhibits CHN-165, JE-60). 
370 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-99, JE-59). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 89 - 
 
  2,353 tonnes to chemical molybdenum products, and 2,250 tonnes to other molybdenum 
products.371 
7.229.  On 19 July 2012, China issued the "secon d batch" quota allocation for the export of 
molybdenum. MOFCOM allocated an additional 16,345 tonnes in gross weight to the molybdenum 
products listed above in similar proportions.372 In total, China's molybdenum quota for 2012 was 
40,862 tonnes in gross weight. 
7.230.  In announcing the second batch export quota for 2012, China indicated that as of 1 August 
2012, the export companies allocated quota allowances for specific molybdenum products may 
adjust the export quota allowances to apply to molybdenum products higher in the industrial chain, without first seeking authorization from MOFCOM.
373 These quota shares may be freely 
allocated to molybdenum products higher in the industrial chain, but may not be reallocated to 
molybdenum products with a lesser degree of processing. 
7.4.1.3.3.1  Application requiremen ts for manufacturing enterprises 
7.231.  The 2012 Application Qualifications and Applic ation Procedures for Molybdenum Export 
Quota provide that, inter alia , an applicant must have approved production that is in compliance 
with current industry policies, be qualified to engage in foreign trade operations, have independent legal status and have acquired an ISO 9000 quality management system certificate. The 
procedures also state that a manufacturing enterprise must have actual export performance from 
2008-2010 if the enterprise had previously acqu ired export quota or, if a new applicant, 
successfully met the production requirements from 2008-2010.
374   
7.232.  The 2012 Application Qualifications and Applic ation Procedures for Molybdenum Export 
Quota  also provide that molybdenum export quota is to be allocated based on a formula that takes 
into account a manufacturing enterprise's ex port performance over a three-year period.375  
7.4.1.3.3.2  Application requirements for trading enterprises 
7.233.   The 2012 Application Qualifications and Applic ation Procedures for Molybdenum Export 
Quota  lays down similar requirements as stated for manufacturing enterprises and also provides 
that a trading enterprise applying for quota rights previously must have acquired export quotas 
and had actual export performance from 2008 to 2010. Further, trading enterprises must have a 
minimum registered capital of  more than RMB 30 million.376  
7.234.  The 2012 Application Qualifications and Applic ation Procedures for Molybdenum Export 
Quota also provide that molybdenum export quota is to  be allocated based on a formula that takes 
into account a trading enterprises export performance over a three-year period.377  
7.4.1.4  Series of measures 7.235.  In view of the quotas applicable to rare earths, tungsten, and molybdenum described 
above, the Panel has determined that as the panel in China – Raw Materials  did, the Panel will 
make findings and reco mmendations with respect to the series of measures comprising the 
relevant framework legislation, the implementing regulation(s), other applicable laws and the 
                                               
371 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-99, JE-59). 
372 2012 Second Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-165, JE-60). 
373 The Notice indicates the industrial chain for mo lybdenum proceeds as follows: molybdenum furnace 
materials (primary raw molybdenum)  molybdenum chemical products  molybdenum products. See 2012 
Second Batch Export Quotas of Tungsten , Antimony and Other Non-Ferrous Metals , (Exhibits CHN-165, JE-60). 
374 2012 Application Qualifications and Application Procedures for Molybdenum Export , 
(Exhibits CHN-107, JE-63). 
375 2012 Application Qualifications and Application Procedures for Molybdenum Export , 
(Exhibits CHN-107, JE-63). 
376 2012 Application Qualifications and Application Procedures for Molybdenum Export , 
(Exhibits CHN-107, JE-63). 
377 2012 Application Qualifications and Application Procedures for Molybdenum Export , 
(Exhibits CHN-107, JE-63) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 90 - 
 
  specific annual measures imposing the export quotas existing at the date of the Panel's 
establishment.378 
7.5  China's defence under Article XX(g) of the GATT 1994 7.236.  As the Panel noted above, China argues that its export quotas on rare earths, tungsten, 
and molybdenum are justified under Article XX(g) of the GATT 1994 because they "relate to the 
conservation of exhaustible natural resources"  and are "made effective in conjunction with 
restrictions on domestic production or consumption". In the following section, the Panel proceeds 
to consider the interpretation of Article XX(g) to determine the legal test to be applied in 
considering China's Article XX(g) defence. The Panel will look first at the interpretation of subparagraph (g) of Article XX, and will then proceed  to address the interpretation of the chapeau. 
Thereafter, the Panel will apply this legal test to  China's export quotas to determine whether China 
has met its burden to demonstrate that its measures are justified under Article XX(g).  
7.5.1  Introduction 7.237.  The Panel now turns to discuss the interpretation of Article XX(g), beginning with 
subparagraph (g) and followed by the requirements of the chapeau of Article XX. Following this, 
the Panel will turn to analyse whether China has demonstrated that the challenged export 
restrictions on rare earths, tungsten, and molybdenum can be justified under Article XX(g). In 
other words, the Panel will examine whether China has demonstrated that its export restrictions on 
these three products relate to the conservation of an exhaustible natural resource, and are made 
effective in conjunction with domestic restrictions on production or consumption. The Panel will then consider whether the measures comply with the requirements of the chapeau of Article XX. 
7.238.   A measure that is inconsistent with one or more obligations in the GATT 1994 may 
nevertheless be justified under Article XX.
379 As the Appellate Body stated in US – Gasoline , in 
order to be justified under Article XX:  
[T]he measure at issue must not only come under one or another of the particular 
exceptions – paragraphs (a) to (j) – listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX. The analysis is, in other 
words, two tiered: first, provisional justification by reason of characterization of the 
measure under [the sub-paragraph]; second, further appraisal of the same measure under the introductory clauses of Article XX.
380 
7.239.  The various subparagraphs of Article XX lay out the manner in which a Member may adopt 
measures pursuing "legitimate state policies or interests"381 that will justify the imposition of 
GATT-inconsistent measures. Article XX(g) reads as follows: 
Subject to [requirements regarding non-discrimination and disguised restriction on 
trade] nothing in this Agreement shall be construed to prevent the adoption or 
enforcement by any contracting party of measures: 
... 
(g) relating to the conservation of exhaustible natural resources if such measures are 
made effective in conjunction with restrictions on domestic production or consumption. 
7.240.  Therefore, for a measure to be justified under Article XX(g), the measure at issue must (i) 
"relate to" the "conservation" of an "exhaustible na tural resource", and (ii) be "made effective" "in 
conjunction" with "restrictions" on "domestic production or consumption". The Panel notes that, 
                                               
378 Panel Reports, China – Raw Materials , para. 7.33; see also A ppellate Body Reports , China – Raw 
Materials , para. 266. 
379 Appellate Body Reports, US – Gasoline , p. 24, DSR 1996:I, 3, at 22, and China – Raw Materials , 
para. 334 ("Members can resort to Article XX of the GATT 1994 as an exception to justify measures that would 
otherwise be inconsistent with GATT obligations"). 
380 Appellate Body Report, US – Gasoline , p. 22, DSR 1996:I, 3, at 20. 
381 Appellate Body Report, US – Gasoline , p. 17, DSR 1996:I, 3, at 16. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 91 - 
 
  although a measure's compliance with each of these elements must be shown, Article XX(g) 
ultimately lays down a single test, the entirety of which must be satisfied if a measure is to be maintained pursuant to that provision. The Panel is of the view that a measure's compliance with Article XX(g) can be determined only on the basis of a holistic assessment of whether the 
challenged measure relates to the conservation of rare earths, tungsten, or molybdenum and is 
made effective in conjunction with domestic restrictions on consumption or production. Additionally, and because of the unitary nature of the test, facts and arguments may be relevant in 
more than one part of the Panel's analysis. For example, in US – Gasoline , the Appellate Body 
observed that where there were no "restrictions" on domestically produced like products "at all", 
the measure could not be accepted "as primarily or  even substantially designed for implementing 
conservationist goals".
382 
7.241.  The Panel recalls that, as China invoked Article XX(g), it bears the burden of establishing 
that its measures come within the scope of that provision.383 As the Appellate Body explained in 
US – Wool Shirts  and Blouses : 
[T]he burden of proof rests upon the party, whether complaining or defending, who 
asserts the affirmative of a particular claim or defence. If that party adduces sufficient evidence to raise a presumption that what is claimed is true, the burden then shifts to 
the other party, who will fail unless it adduces sufficient evidence to rebut the 
presumption.
384 
7.242.  Accordingly, China bears the burden in the first instance of showing that its export quota 
measures comply with the terms of Article XX(g), including the chapeau. If China provides 
sufficient evidence to demonstrate a justification, the burden shifts to the complainants to show 
that China's measures are not justified under Article XX(g).  
7.243.  Pursuant to Article 3.2 of the DSU and Ar ticle 31 of the Vienna Convention, the Panel turns 
now to consider the ordinary meaning of the words used in subparagraph (g) in their context. 
7.5.2  Interpretation of Article XX(g) of the GATT 1994 7.244.  Article XX(g) of the GATT 1994 reads as follows: 
General Exceptions 
Subject to the requirement that such measures are not applied in a manner 
which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international 
trade, nothing in this Agreement shall be  construed to prevent the adoption or 
enforcement by any contracting party of measures: 
… 
(g)  Relating to the conservation of exhaustible natural resources if such measures 
are made effective in conjunction with restrictions on domestic production or consumption; 
7.5.2.1  Meaning of "relating to the cons ervation of exhaustible natural resources" 
7.245.  The first part of Article XX(g) requires th at the challenged measure is one "relating to the 
conservation of exhaustible natural resources". The Panel begins by considering the meaning of "exhaustible natural resources". We then continue to examine the meaning of "conservation" and 
"relating to". 
                                               
382 Appellate Body Report, US – Gasoline , p. 21, DSR 1996:I, 3, at 19. 
383 Panel Report, US – Gasoline , para. 6.35; Appellate Body Report, US – Gasoline , p. 23 (confirming 
that the burden of proof "rests on the party invoking the exception"), DSR 1996:I, 3, at 21.  
384 Appellate Body Report, US – Wool Shirts  and Blouses , p. 14, DSR 1997:I, 323, at 335. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 92 - 
 
  7.5.2.1.1  "exhaustible natural resources" 
7.246.  It is not entirely clear whether the parties agree on the meaning of "exhaustible natural 
resources". The European Union and Japan both consider that the term is limited to resources in their raw form and excludes semi-processed and processed materials.
385 The United States also 
doubts that processed or semi-processed materials are included within the term "exhaustible 
natural resource".386 China does not deal directly with the question whether and when processed 
materials cease to be classifiable as "exhaustible natural resources", but argues that the "product 
scope covered by this exception is broad".387  
7.247.  Although the parties appear to differ on the scope of "exhaustible natural resources", the 
Panel notes their apparent agreement that, whatev er the term's precise definition, measures can 
"relate to the conservation of exhaustible natural re sources" even if they do not explicitly apply to 
those resources.388 In other words, the parties seem to agree that a measure may "relate to the 
conservation of" an exhaustible natural resource even if that resource in its raw form is not the direct subject of the measure.  
7.248.  The Panel begins by observing that ther e is no internationally agreed definition of 
"exhaustible natural resources". Although the Appellate Body has held that the term encompasses clean air
389, sea turtles390, petroleum391, and various mineral resources392, the precise point at 
which processed raw materials cease to be considered "exhaustible natural resources" for the 
purposes of Article XX(g) has never been addressed in WTO dispute settlement.  
7.249.  At the same time, the Panel believes that "exhaustible natural resources" cannot be 
interpreted so broadly as to include resources or other products that are unrelated to, or have no 
connection with, "exhaustible natural resources". As the complainants have noted393, the drafters 
of Article XX(g) rejected a proposal to include the words "or other" after the words "exhaustible 
natural"394, indicating an intention that the exception should not apply to all resources. An unduly 
broad interpretation of the term "natural resource" would not, in the Panel's opinion, respect this 
intention to limit the scope of the provision, but would instead deprive the qualifier "exhaustible natural" of meaning, contrary to the principle of effective treaty interpretation.
395 
7.250.  The Panel considers that it need not de cide the precise meaning or scope of the term 
"exhaustible natural resources" to resolve this dispute. The Panel agrees with the parties that measures may "relate to the conservation of exhaustible natural resources" even if they are not imposed directly upon those resources. In US – Gasoline , the Appellate Body accepted the panel's 
finding that, as clean air is a "natural resource" susceptible to depletion, "a policy to reduce the 
depletion of clean air was a policy to conserve an exhaustible natural resource".
396 Since the 
measures at issue in that case were designed to support "the objective of stabilizing and 
preventing further deterioration of the level of air pollution prevailing in 1990", the Appellate Body 
found that such measures were "primarily"397 and not "merely incidentally or inadvertently aimed 
at the conservation of clean air".398 In our view, this means that the measures for which 
Article XX(g) is invoked need not be imposed directly on an "exhaustible natural resource", 
provided that they support or contribute to the conservation of an exhaustible natural resource. In the Panel's view, therefore, the subject matter of measures contemplated by Article XX(g) is not 
limited to raw natural resources, so long as the object of the concerned measures is to conserve, 
                                               
385 Japan's second written submission, para. 53; European Union's response to Panel question No. 129. 
386 United States' second written submission, para. 149. 
387 China's first written submission, para. 43. 
388 China's second written submission, para. 11; United States' response to Panel question No. 127; 
Japan's response to Panel question No. 122; Europe an Union's response to Panel question No. 129. 
389 Appellate Body Report, US – Gasoline , p. 14, DSR 199:I, 3, at 13. 
390 Appellate Body Report, US – Shrimp , para. 131. 
391 Appellate Body Report, US – Shrimp , para. 128. 
392 Appellate Body Report, US – Shrimp , para. 128; Panel Reports, China – Raw Materials , para. 7.369. 
393 Japan's second written submission, para. 54; Europe an Union's executive summary (part II), para. 7. 
394 United Nations Economic and Social Council, Report of the Drafting Committee of the Preparatory 
Committee of the United Nations Conference on Trade and Employment (E/PC/T/34, 5 March 1947), p. 31. 
395 See, e.g.  Appellate Body Report, US – Gasoline , p. 23, DSR 1996:I, 3, at 21. 
396 Appellate Body Report, US – Gasoline , p. 14, DSR 1996, 3 at 13. 
397 Appellate Body Report, US – Gasoline , p. 18, DSR 1996, 3 at 17. 
398 Appellate Body Report, US – Gasoline , p. 19, DSR 1996, 3 at 18. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 93 - 
 
  directly or indirectly, such raw natural resources.  This interpretation of the term "exhaustible 
natural resources" seems consistent with the object and purpose of subparagraph (g) and Article XX more generally, which is to allow for WTO-inconsistent measures where they relate to the conservation of exhaustible natural resources.  
7.251.  The Panel will therefore focus its analysis  on the question whether China's export quota 
measures "relate to" the "conservation" of an exhaustible natural resource, rather than the distinct question whether the products on which China's measures operate are themselves exhaustible 
natural resources. 
7.5.2.1.2  "conservation" 7.252.  China argues that the policy goal of "conservation" under GATT Article XX(g) is not limited 
to preserving exhaustible natural resources in their current state, but also covers the use and 
management of those resources in line with a Member's sustainable economic development.
399 In 
China's view, its argument is supported by the in terpretation and conclusion reached by the panel 
in China – Raw Materials . China recalls that the panel in that case did not stop its examination at 
the dictionary definition of "conservation" (defining the term to mean an "act of preserving and 
maintaining the existing state of something"), but considered also the context of the term and the 
preamble of the WTO Agreement, recognizing that WTO Members have "a large measure of 
autonomy" to make policy choices and select prioriti es in designing policies, provided they respect 
the requirements of Article XX(g). China further recalls that the panel in China – Raw Materials  
also took account of principles of general international law applicable to WTO Members. In particular, the panel noted that the principle of  permanent sovereignty over natural resources 
affords Members the opportunity to use their natural resources to promote their own development 
while regulating the use of these resources to ensure sustainable development, and recognized 
that conservation and economic develo pment should "operate in harmony".
400 Moreover, China 
stresses that a narrow interpretation along the lines proposed by the complainants, which would 
limit the meaning of "conservation" to "controlling  the pace of extraction" of natural resources, 
would amount to a per se  prohibition of the use of export quotas as part of a conservation policy, 
and is contrary to the object and purpose of Article XX(g).401 
7.253.  According to the complainants, the term "conservation" under Article XX(g) should not be 
interpreted to incorporate the notion of promoting a WTO Member's own economic development.
402 First, the complainants argue that the dictionary definitions of the word 
"conservation" listed by the panel an d repeated by the Appellate Body in China – Raw Materials  all 
refer to keeping exhaustible natural resources from harm, loss or waste, but say nothing about protecting or promoting domestic downstream industries.
403 The complainants also argue that the 
panel in China – Raw Materials  made clear, by referring to the context provided by Article XX(i), 
that the exception under Article XX(g) cannot be read  so as to extend the meaning of conservation 
to cover economic goals, since such a reading would bring Article XX(g) into conflict with the 
requirement under Article XX(i) that measures "not operate to increase the exports of or the 
protection afforded to such domestic industry".404 
7.254.  With respect to the context of Article XX(g ), Japan also takes issue with China's reliance on 
the preamble of the WTO Agreement to support its argument that "conservation" entails or 
includes the "use and management" of natural resources for industrial development. In Japan's 
view, such reliance is based on a selective reading of the WTO preamble and a failure to consider the context of the overall balance struck under th e WTO agreements and reflected in the preamble 
as a whole.
405 The European Union also argues that China's interpretation reads protectionism into 
the Article XX(g) exception, whereas the exceptio n is really about the legitimate non-economic 
objective of conservation. According to the European Union, China's interpretation thus deprives 
                                               
399 China's first written submission, para. 60; China's second written submission, paras. 17, 18, 20. 
400 China's first written submission, paras. 47-60. 
401 China's second written submission, paras. 16 and 19-20. 
402 United States' second written submission, paras. 88 and 90; European Union's second written 
submission, para. 48; Japan's second written submission, para. 60. 
403 United States' second written submission, paras. 85-88; European Union's second written 
submission, para. 38; Japan's second written submission, paras. 28, and 59-60. 
404 United States' second written submission, paras. 90-92; European Union's second written 
submission, para. 41; Japan's second written submission, paras. 33-35. 
405 Japan's second written submission, paras. 43-46. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 94 - 
 
  the chapeau of Article XX of its effect and purp ose as a safeguard against abuse of rights and 
protectionism.406 Regarding China's interpretation of the principle of sovereignty over natural 
resources, the European Union stresses that the panel in China – Raw Materials  clearly stated that 
WTO Members must exercise their sovereignty over natural resources "consistently with their WTO 
obligations".407  
7.255.  Finally, the complainants recall that the GATT negotiators rejected a proposal to allow, 
under Article XX(g), trade-restrictive measures enacted or imposed in order to ensure domestic 
access to ample supplies of exhaustible natural resources. The complainants argue that the 
negotiators did not intend to allow Article XX(g) to be used to justify export restrictions for the protection of domestic industry.
408 
7.256.  The Panel notes that although the term "c onservation" was discussed in detail by the panel 
in China – Raw Materials ,409 the Appellate Body has not yet had the opportunity to definitively 
address the meaning of this word.   
7.257.  The Panel will proceed to consider th e meaning of "conservation" according to the 
customary rules of interpretation of public international law.410 We begin by considering the 
ordinary meaning of the word in light of its context and object and purpose.  
7.258.  Like the panel in China – Raw Materials , this Panel recalls that the dictionary definition of 
the noun "conservation" is "the action of keeping from harm, decay, loss or waste; careful 
preservation. The preservation of existing conditio ns … The preservation of the environment, esp. 
of natural resources".411 The verb "conserve" is defined as "[k]eep from harm, decay, or loss esp. 
with view to later use; preserve with care. Ma intain (energy etc.) unchanged in total quantity 
according to a conservation law".412 The noun "preservation" is defined as "[t]he action or an act 
of preserving or protecting something; the fact of being preserved".413 To "preserve", is to "[k]eep 
from harm, injury; take care of, protect...keep from decay; maintain (a state of things)". 414 In 
sum, these dictionary definitions define "conserv ation" as the act of preserving and maintaining 
the existing state of something, in this case "natural resources" covered by Article XX(g).415 
7.259.  Having considered the ordinary meaning of "conservation", the Panel now turns to the 
context and purpose of Article XX(g). Article 31(2) of the Vienna Convention makes clear that the 
context of a treaty includes its "text, including its preamble and annexes"; therefore, the preamble 
forms part of the context of Article XX(g). Ind eed, the role of the WTO preamble as relevant 
context for interpreting Article XX(g) was confirmed by the Appellate Body in US – Shrimp , where 
                                               
406 European Union's second written submission, para. 48. 
407 European Union's second written submission, paras. 43-45. 
408 United States' responses to Panel questions, 25 April, 2013, paras. 1-4; European Union's second 
written submission, paras. 50-51; Japan's second written submission, paras. 37-38. 
409 Panel Reports, China – Raw Materials , paras. 7.372 – 7.386.  
410 DSU Article 3.2 and the Vienna Convention on th e Law of Treaties (Vienna Convention), done at 
Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679, Articles 31 and 32. 
411 Shorter Oxford English Dictionary , 5th edn., L. Brown (ed.) (Oxford University Press, 2002), Vol. 1, 
p. 492. 
412 Shorter Oxford English Dictionary , 5th edn., L. Brown (ed.) (Oxford University Press, 2002), Vol. 1, 
p. 493. 
413 Shorter Oxford English Dictionary , 5th edn., L. Brown (ed.) (Oxford University Press, 2002), Vol. 2, 
p. 2333. 
414 Shorter Oxford English Dictionary , 5th edn., L. Brown (ed.) (Oxford University Press, 2002), Vol. 2, 
p. 2333. 
415 Other definitions of the term "conservation" are reflected in  international agreements and 
conventions which tend to define the term "conservation" in light of the scope of the agreement or in relation 
to other obligations, meaning the act of preserving and maintaining the existing state of something in this case "natural resources". For instance, the Convention on Biol ogical Diversity defines the "conservation of biological 
diversity" as "the in situ  conservation of ecosystems and natural habitats and the maintenance and recovery of 
viable populations of species in their natural surroundings …" The preamble of the 1940 Western Hemisphere Convention expressed an intention "to protect representa tives of all species and genera of their native flora 
and fauna … over areas extensive enough to assure th em from becoming extinct through any agency within 
man's control". Further, the parties to the Associatio n of South East Asian Nations (ASEAN) Agreement aimed 
to "ensur[e] the survival and promotin g the conservation of all species under their jurisdiction and control". 
The 1979 Bonn Convention defines "conservation status" as "the sum of the influences  acting on the migratory 
species that may affect its long term distribution and abundance". WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 95 - 
 
  it stated that the preamble gives "colour, text ure, and shading to [the] interpretation of the 
agreements annexed to the WTO Agreement, in this case, the GATT 1994".416 
7.260.  The preamble recognizes that WTO Members' trade relations should, inter alia : 
[allow] for the optimal use of the world's resources in accordance with the objective of 
sustainable development, seeking both to protect and preserve the environment and 
to enhance the means for doing so in a manner consistent with their respective needs and concerns at different leve ls of economic development. 
7.261.  Thus, a proper reading of Article XX(g) in the context of the GATT 1994 and the 
WTO Agreement should take into account the objective of using and managing resources in a sustainable manner that ensures the protection an d conservation of the environment while at the 
same time not interfering with economic development. In other words, the objective of sustainable 
development is relevant to the interpretation of Article XX(g). However, this does not mean that 
sustainable development can be invoked as a basis to deviate from the requirements of subparagraph (g) of Article XX.  
7.262.  Pursuant to Article 31(3)(c) of the Vienna Convention, the Panel next considers the 
international law principles of sovereignty over natural resources and sustainable development, which, in the Panel's opinion, should also be taken into account when interpreting 
subparagraph (g) and, for the purposes of this  case, especially, the term "conservation".
417 In the 
Panel's view there is no doubt that the general principle of States' sovereignty over their natural resources is a "relevant" rule of international law applicable between the parties.
418  
7.263.  As indicated above, the Panel believes that the international law principles of sovereignty 
over natural resources and sustainable development419, which allow States to "freely use and 
exploit their natural wealth and resources wher ever deemed desirable by them for their own 
progress and economic development"420, are relevant to our interpretive exercise in this dispute. 
These two principles, which the Panel considers to  be closely interrelated, are embodied in a 
number of international agreements. For exampl e, the 1992 Rio Declaration on Environment and 
Development provides in Principles 2 and 4 that:421 
2. States have, in accordance with the Charter of the United Nations and the principles 
of international law, the sovereign right to exploit their own resources pursuant to their own environmental and developmental po licies, and the responsibility to ensure 
that activities within their jurisdiction or control do not cause damage to the 
environment of other States or of areas beyond the limits of national jurisdiction. 
…  4. In order to achieve sustainable development, environmental protection shall 
constitute an integral part of the development process and cannot be considered in 
isolation from it. 
7.264.  Similarly, UN General Assembly Resolution 626 (VII) provides that States may freely 
exploit their natural resources "wherever deemed  desirable by them for their own progress and 
economic development"; and UN General Assembly Resolution 2158 (XXI) recognizes that:  
The natural resources of the developing countries constitute a basis of their economic 
development in general and of their industrial progress in particular … it is essential 
that their exploitation and marketing should  be aimed at securing the highest possible 
                                               
416 Appellate Body Report, US – Shrimp , para. 153. 
417 Panel Report, EC – Approval and Marketing of Biotech Products , para. 7.67. 
418 Appellate Body Report, EC and Certain Member States – Large Civil Aircraft , para. 841. 
419 United Nations General Assembly Resolution 1803 (XVII), Permanent Sovereignty Over Natural 
Resources  (14 December 1962). 
420 United Nations General Assembly Resolution 626 (VII), Right to Exploit Freely Natural Wealth and 
Resources  (21 December 1952). 
421 Rio Declaration on Environment and Development,  done at Rio de Janeiro, 14 June 1992,; 31 
International Legal Materials 874. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 96 - 
 
  rate of growth of the developing countries … this aim can better be achieved if the 
developing countries are in a position to undertake themselves the exploitation and marketing of their natural resources. 
7.265.  The principle of sovereignty over natural resources thus recognizes that WTO Members 
have the right to use their natural resources to promote their own development while also 
encouraging the regulation of such use to ensu re sustainable development. According to the 
principle, then, conservation and economic deve lopment are not mutually exclusive policy goals; 
they can operate in harmony.  
7.266.  The Panel recognizes the permanent sovereignty that every WTO Member has, as a matter 
of fundamental principle, over its own natural re sources. As noted above, the Panel believes that 
the principle of sovereignty over natural resources is a relevant rule of international law applicable 
in this case, and that it assists us with our interpretation of Article XX(g), and especially the word 
"conservation". The Panel acknowledges that, pursuant to their permanent sovereignty over natural resources, WTO Members may adopt conserva tion measures that are not merely concerned 
with "preserv[ing] the natural resources in their current state".
422 Resource-endowed WTO 
Members are entitled to develop conservation policies on the basis of, or taking into account, a full range of policy considerations and goals, includin g the need to preserve resources in their current 
state as well as the need to use them in a sustainable manner. Moreover, given States' permanent 
sovereignty over natural resources, WTO Members, of course including China, are entitled to determine their own conservation objectives. Additionally, a Member's permanent sovereignty over its natural resources means that, in principle, it is entirely in that Member's discretion whether its 
conservation measures should "decrease the absolu te quantity" of materials extracted or "control 
the speed" of such extraction , provided that its measures do not cause damage to the 
environment of other States or of areas beyond the limits of the regulating Member's national 
jurisdiction.
423 Thus, understood in the light of every State's permanent sovereignty over their own 
natural resources, the Panel believes that conservation as used in Article XX(g) does not simply mean placing a moratorium on the exploitation of natural resources, but includes also measures 
that regulate and control such exploitation in accordance with a Member's development and 
conservation objectives. In this connection, we agree with China that "conservation" as used in Article XX(g) is not limited to mere "preservation of natural resources".
424 
7.267.  In recognition of the permanent sovereignty that every Member exercises over its natural 
resources, WTO law recognizes the right of Members to adopt conservation measures should they 
wish to do so, in the light of their own objectives and policy goals, including economic and sustainable development. In other words, resource-endowed WTO Members are entitled to design 
conservation policies that meet their developm ent needs, determine how much of a resource 
should be exploited today and how much should be  preserved for the future, including for use by 
future generations, in a manner consistent with their sustainable development needs and their 
international obligations.  
7.268.  This permanent sovereignty over natura l resources and the right of WTO Members to 
adopt conservation programmes pursuant to Article XX(g) allows WTO Members to develop and implement processes, means, or tools that put in to practice a conservation policy in a way that 
responds to a Member's development and conservation concerns. It is not, however, a general 
right to regulate and control a natural resource market for any purpose. As the Appellate Body 
recognized in US – Softwood Lumber IV , natural resource products that will necessarily enter the 
market and are available for sale are subject to  GATT disciplines in the same way as any other 
product. As such, no WTO Member has, under WTO law, the right to dictate or control the allocation or distribution of rare earth resources to achieve an economic objective. WTO Members' 
right to adopt conservation programmes is not a right to control the international markets in which 
extracted products are bought and sold. 
7.269.  The Panel also agrees with the panel in China – Raw Materials  that, as China has 
emphasized throughout this dispute, the conservation objective in Article XX(g), understood in 
light of States' sovereignty over their natural resources, is broad enough to allow "resource-
                                               
422 China's comments on the complainants' responses to Panel question No. 69. 
423 China's response to Panel question No. 112. 
424 China's first written submission, paras.  49 and 88 (referring to Panel Reports, China – Raw Materials  
paras. 7.372 and 7.375). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 97 - 
 
  endowed countries … to manage the supply and use of those resources".425 At the same time, we 
recall that panel's reference was made in the context of a longer sentence that reads as follows: "… resource endowed countries are entitled to manage the supply and use of those resources through conservation-related measures that foster  the sustainable development of their domestic 
economies consistently with general international law and WTO law".
426 In other words, the right 
to adopt "conservation programmes" does not perm it the exercise of boundless discretion such 
that WTO Members may adopt GATT-inconsistent measures as they see fit. Members cannot, for 
instance, regulate under Article XX(g) in a way that achieves indirectly what other subparagraphs 
of Article XX, including Article XX(i), prohibit directly.427   
7.270.  As noted by the panel in China – Raw Materials , a State's sovereignty is also expressed in 
its decision to ratify an international treaty and accept the benefits and obligations that such 
ratification entails. In becoming a WTO Member, China has of course not forfeited permanent 
sovereignty over its natural resources, which it enjoys as a natural corollary of its statehood. Nor, as the Panel explains in more detail below, has China or any other WTO Member "given up" its 
right to adopt export quotas or any other measure in pursuit of conservation. China has, however, 
agreed to exercise its rights in conformity with  WTO rules, and to respect WTO provisions when 
developing and implementing policies to conserve exhaustible natural resources.  
7.271.  Before concluding our discussion of the meaning of "conservation" under Article XX(g), we 
consider the drafting history of Article XX(g) to determine whether it confirms our interpretation of the word.  
7.272.  On the one hand, the early records make clear that the negotiators did not intend to allow 
conservation measures to be used to protect or promote domestic industries. During the London 
session of the Preparatory Committee held on 11 November 1946, a Brazilian proposal to allow the imposition of export restrictions on exhaustible natural resources when a regulating Member does 
not restrict domestic production or consumption of the resource was rejected. In arguing against 
the proposal, the United Kingdom emphasized that "it would be in the interests of the development of the general objective of the Charter if export prohibitions for industrial purposes were not 
allowed".
428 Along the same lines, in 1950 the Working Party D  on Quantitative Restrictions  
released a report reaffirming that the GATT as drafte d did "not permit the imposition of restrictions 
upon the export of a raw material in order to protect or promote a domestic industry, whether by affording a price advantage for that industry for the purchase of its materials, or by reducing the 
supply of such materials available to foreign competitors, or by other means".
429  
7.273.  On the other hand, and especially from the 1970s onwards, the principle of "permanent 
sovereignty over natural resources" was increasi ngly articulated within the GATT context by a 
number of developing countries. For instance, in 1979, in the context of "reassessing" GATT 
disciplines on export controls, India stated that: 
[I]t would be our understanding that when the CONTRACTING PARTIES address 
themselves to the task of reassessing the GATT provisions relating to export 
restrictions and charges, two of the guiding principles would be the sovereignty of States over their natural resources and the need for developing countries to utilize their resources for their development in the most optimal manner as considered 
                                               
425 Panel Reports, China – Raw Materials , para. 7.404. 
426 Panel Reports, China – Raw Materials , para. 7.404.  
427 Panel Reports, China – Raw Materials , para. 7.386. Article XX(i) provides an exception for measures 
"involving restrictions on exports of  domestic materials necessary to ensure essential quantities of such 
materials to a domestic processing in dustry during periods when the domest ic price of such material is held 
below the world price as part of a governmental stabilization plan; Provided  that such restriction shall not 
operate to increase the exports of or the protection a fforded to such domestic industry, and shall not depart 
from the provisions of th is Agreement relating to non-discrimination". 
428 United Nations Social and Economic Council, Prep aratory Committee of the International Conference 
on Trade and Employment, Verbatim Re port of the First Meeting of the Sub-Committee of Committee II on 
Quantitative Restrictions and Exchange Controls  (EPCT/C.II/QR/PV/1, 11 November 1946), pp. 20-21. 
429 General Agreement on Tariffs and Trade, "Report of  Working Party "D" on Quantitative Restrictions 
(GATT/CP.4/33, 28 March 1950), para. 12. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 98 - 
 
  appropriate by them, including processing of their raw materials, setting up industries 
to diversify their economies and ensuring supplies to domestic industries.430 
7.274.  Similarly, Mexico maintained that:  
O n  t h e  q u e s t i o n  o f  e x p o r t  r e s t r i c t i o n s  a n d  c h a r g e s ,  i t  i s  t h e  v i e w  o f  m y  d e l e g a t i o n  
that…any consideration or examination of the subject of export restrictions should be 
undertaken within the context of United Nations Resolution 3201 (S-VI) which emphasizes the full permanent sovereignty of  every State over its natural resources 
and all economic activities. Further, such consideration or examination should be 
undertaken with a view to giving effect to United Nations Resolution 3202 (S-VI) which states that all efforts should be made to "take measures to promote the processing of raw materials in the producer developing countries.
431 
7.275.  We consider these statements instructive, and believe that the sentiments reflected therein 
can be taken into account in interpreting words such as "conservation", given that, as the Appellate Body has said, the language of Article XX(g) is "not 'static' in its content or reference but 
is rather 'by definition, evolutionary'".
432  
7.276.  The Panel considers that while all of the foregoing suggests a need to balance the goals of 
trade liberalization, sovereignty, and sustainable development, it does not indicate precisely how 
such a balance could or should be struck.  
7.277.  In the Panel's opinion, the definition of "conservation" we have set out above, based on 
dictionaries and taking into account the WTO preamble and other general rules of international law applicable to the parties to the dispute, strikes an appropriate balance between trade liberalization, 
sovereignty over natural resources, and the right to sustainable development. As the Panel has 
noted, the drafting history of Article XX(g) does  not provide unequivocal guidance on the term's 
precise meaning, but does seem to suggest that some balance between preservation and 
development is required, and the Panel's suggested interpretation of the term "conservation" takes 
into account both concerns. In our view, the approa ch adopted by the Panel in this dispute and in 
China – Raw Materials, which gives a rather broad meaning to the term conservation, strikes an 
appropriate balance between these various legitimate policies.  
7.278.  The Panel now proceeds to examine the meaning of the term "relating to".  7.5.2.1.3  "relating to" 7.279.  With respect to interpretation of the term of "relating to" under Article XX(g), China and 
the complainants all refer to the test established by the Appellate Body in US – Shrimp  and 
followed by the panel in China – Raw Materials , that is, whether the challenged measure's 
structure and design show a "close and genuine relationship" to the goal of conservation of 
exhaustible natural resources. The United States also suggests that measures must be "primarily 
aimed at" conservation in order to "relate to" that objective. 
7.280.  In China's view, to assess the existence of a "close and genuine" relationship between a 
measure and the conservation objective, the Pane l is required to determine whether the measure 
is part of a comprehensive conservation policy.
433 In its written submissions, China examines the 
text, design, structure and context of its export quota measurers to show that they relate to the operation of what China characterizes as its "comprehensive conservation programme".
434 The 
United States responds that the Appellate Body used the language of a "comprehensive policy" 
only in interpreting the requirements of Article XX(b), and that moreover the notion of a "comprehensive policy" in the Article XX(b) jurisprudence was developed alongside a further 
requirement that responding parties demonstrate that their measures make a "material 
                                               
430 General Agreement on Tariffs and Trade, Multil ateral Trade Negotiatio ns Group "Framework", 
Statement by the Delegation of India (MTN/FR/W/23, 6 April 1979). 
431 General Agreement on Tariffs and Trade, Trad e Negotiations Committee (MTN/P/5, 9 July 1979), 
p. 63. 
432 Appellate Body Report, US – Shrimp , para. 130 (internal citations omitted). 
433 Appellate Body Report, US – Shrimp , para. 131. 
434 China's first written submission, para. 3. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 99 - 
 
  contribution" to the achievement of the claimed policy objective. The United States therefore 
rejects what it sees as China's selective use of  jurisprudence developed under other subparagraphs 
of Article XX.435 
7.281.  In the Panel's opinion, the parties are correct to refer to the test developed by the 
Appellate Body in US – Shrimp . In US – Gasoline , the Appellate Body referred to the legal test 
developed by a GATT Panel in the unadopted Canada – Herring and Salmon  case436, namely that 
measures "relate to" the conservation objective when they are "primarily aimed at" that 
objective.437 However, the Appellate Body appeared to adopt that test primarily because "all the 
participants and the third participants in the appeal" adopted it in their submissions. Indeed, the Appellate Body emphasized that "the phrase 'primarily aimed at' is not itself treaty language and was not designed as a simple litmus test for inclusion of exclusion from Article XX(g)".
438  
7.282.  The Appellate Body revisited the "relating to" test in its decision in US – Shrimp . In that 
dispute, the Appellate Body began by explaining that, in determining whether the challenged measures relate to conservation, "the treaty in terpreter essentially looks into the relationship 
between the measure at stake and the legitima te policy of conserving exhaustible natural 
resources".
439 Moreover, the Appellate Body clarified that  the relationship in question is to be 
established on the basis of "the general structure and design of the measure … at stake".440 In 
relation to the measures at issue, the Appellate Body held that: 
… Section 609, cum implementing guidelines, is not disproportionately wide in its 
scope and reach in relation to the policy ob jective of protection and conservation of 
sea turtle species. The means are, in principle, reasonably related to the ends. The 
means and ends relationship between Section 609 and the legitimate policy of 
conserving an exhaustible and, in fact, endangered species is observably a close and real one, a relationship that is every bit as substantial as that which we found in US – 
Gasoline  … 
441   
7.283.  It seems to the Panel that the rational co nnection test endorsed by the Appellate Body in 
US – Shrimp  is potentially less strict than the previously employed "primarily aimed at" standard. 
However, it is important to note that the Appellate Body in US – Shrimp  appeared to retain the 
"substantial relationship" test developed in US – Gasoline . This suggests that, while measures 
need not be primarily aimed at conservation, they must still bear a substantial, close, and real 
relationship to the conservation objective; as the Appellate Body said in US – Gasoline , a merely 
incidental or inadvertent connection will not suffice.442  
7.284.  This same legal test was applied by the panel in China – Raw Materials . Although the panel 
in that case referred to the "primarily aimed at" test443, it proceeded to determine whether China's 
measures related to the conservation of bauxit e and fluorspar by examining and analysing "the 
relationship between" the measures and the conservation objective, thus following the test established by the Appellate Body in US – Shrimp .
444 Likewise, in China – Raw Materials , the 
Appellate Body recalled that "for a measure to relate to conservation in the sense of Article XX(g), 
there must be 'a close and genuine relationship of ends and means'".445 
7.285.  The Panel therefore considers that the United  States is not entirely correct in arguing that 
China's measures must be "primarily aimed at" conservation in order to "relate to conservation". 
While the Panel considers that many conservation measures will, as a practical matter, be 
"primarily aimed at" conservation, it believes, on the basis of the Appellate Body's guidance, that measures should be considered to "relate to" conservation even where they are not "primarily 
                                               
435 United States' second written submission, paras. 97-99 
436 Appellate Body Report, US – Shrimp , para. 128; Panel Reports, China – Raw Materials , para. 7.639. 
437 Panel Reports, China – Raw Materials , para. 7.369. 
438 Appellate Body Report, US – Gasoline , p. 18-19, DSR 1996:I, 3, at 17. 
439 Appellate Body Report, US – Shrimp , para. 135. 
440 Appellate Body Report, US – Shrimp , para. 137. 
441 Appellate Body Report, US – Shrimp , para. 141. 
442 Appellate Body Report, US – Gasoline , p. 19, DSR 1996, 3 at 18. 
443 Panel Reports, China – Raw Materials , para. 7.370. 
444 Panel Reports, China – Raw Materials , para. 7.371. 
445 Appellate Body Reports, China – Raw Materials , para. 355 (citing Appellate Body Report, US – 
Shrimp , para. 136.) WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 100 - 
 
  aimed" at conservation, provided that the regula ting Member can show a "substantial", "close", 
and "genuine" relationship between the measure an d the conservation objective. As noted by the 
panel in China – Raw Materials , the Appellate Body in US – Gasoline ruled that a measure was 
"relate[d] to" conservation if there was a substa ntial relationship between the export measures 
and conservation.446 It further added that a measure that is  "merely incidentally or inadvertently" 
aimed at conservation cannot meet the requirement of "relating to" in Article XX(g).447 Further, as 
already noted by the Panel, the Appellate Body commented that the phrase "primarily aimed at" 
was "not designed as a simple litmus test for inclusion or exclusion from Article XX(g)".448 In US – 
Shrimp , the Appellate Body also described this relationship as "a close and genuine relationship of 
ends and means"449 that requires an examination of the relationship between the general structure 
and design of a measure and the policy goal it purports to serve.450 The Appellate Body explained 
that:   
Article XX(g) requires that the measure sought to be justified be one which "relat[es] 
to" the conservation of exhaustible natural resources. In making this determination, 
the treaty interpreter essentially looks into  the relationship between the measure at 
stake and the legitimate policy of cons erving exhaustible natural resources.451 
7.286.  The Panel also considers that the United States is not entirely correct in arguing that the 
notion of a "comprehensive policy" is irrelevant in determining whether a challenged measure 
"relates to" conservation under Article XX(g). In fact, in US – Gasoline , the Appellate Body did take 
account of the challenged measures' wider regulatory context; although it did not use the term "comprehensive conservation policy", it did, in examining the "relating to" test, observe that:  
The baseline establishment rules [i.e. the challenged measures], taken as a whole … 
need to be related to the "non-degradation" requirements set out elsewhere in the Gasoline Rule. Those provisions can scarcely be understood if scrutinized strictly by 
themselves, totally divorced from other sections of the Gasoline Rule which certainly 
constitute part of the context of these provisions … Without baseline rules of some kind … the Gasoline Rule's objective of stabilizing and preventing further deterioration 
of the level of air pollution prevailing in 1990, would be substantially frustrated.
452    
7.287.  It is clear that the Appellate Body did not consider the mere existence of a wider 
conservation plan incorporating the challenged measures to be itself sufficient to satisfy the "relating to" criterion. But the Appellate Body did suggest that the question whether the challenged 
measures related to conservation could not be answered in the abstract; to the contrary, the 
Appellate Body suggested that the question could only be answered in the light of the broader 
policy and regulatory framework in which those measures operated.  
7.288.  This position was affirmed by the panel in China – Raw Materials . After noting that States 
often adopt "a comprehensive policy comprising a multiplicity of interacting measures" in response to the "challenge of using and managing resources in a sustainable manner that ensures the 
protection and conservation of the environment while promoting economic development"
453, the 
panel stated that "these different policy objectives  cannot be viewed in isolation: they are related 
facets of an integrated whole. Moreover, the 'interacting measures' chosen by a Member will reflect and integrate these related policy goals".
454 Thus, the panel seemed to affirm that 
measures cannot be considered in isolation from their regulatory and policy context.  
7.289.  In sum, while the mere existence of a comprehensive conservation policy cannot, in and of 
itself, establish that every measure adopted pursuant to that policy "relates to" conservation, the 
                                               
446 Appellate Body Report, US – Gasoline , p. 18, DSR 1996:I, 3, at p. 17.  
447 Appellate Body Report, US – Gasoline , p. 19, DSR 1996:I, 3, at p. 18. 
448 Appellate Body Report, US – Gasoline , p. 19, DSR 1996:I, 3, at p. 17. 
449 Appellate Body Report, US – Shrimp , para. 136. 
450 Appellate Body Report, US – Shrimp , para. 137. 
451 Appellate Body Report, US – Shrimp , para. 135. 
452 Appellate Body Report, US – Gasoline , p. 19, DSR 1996:I, 3, at p. 17 . 
453 Panel Reports, China – Raw Materials , para. 7.375. 
454 Panel Reports, China – Raw Materials , 7.376. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 101 - 
 
  jurisprudence suggests that the "relating to" criterion must be considered by looking at the 
challenged measures in their policy and regulatory context, and not only in isolation.455  
7.290.  Finally, the Panel notes that, in assessing the existence and nature of the challenged 
measure's relationship with conservation, the Panel must focus on the "design and structure" of 
the measure.456 It is these which, taken together with the measure's text, must demonstrate a 
clear link with the conservation objective. 
7.291.  Before proceeding to examine the second part of Article XX(g), the Panel will address the 
argument made by China at various points in this dispute that, if the Panel were to accept the 
arguments advanced by the complainants with respect to the phrase "relating to the conservation of exhaustible natural resources", it would remove all possibilities of WTO Members using export quotas to manage the supply of limited resources for the benefit of domestic and foreign users
457 
The complainants for their part have vigorously denied that they are "challenging export quotas 
and their potential role in conservation in the abstract"458, and urge that "[t]his case is not about 
an absolute prohibition or an absolute right to export quotas as conservation policy tools. 
According to the complainants, the Panel should instead objectively assess the facts before it 
concerning the very concrete export restrictions at issue in this dispute".459  
7.292.  The Panel agrees that this case is not ab out a theoretical right of Members to use export 
quotas for conservation. Under the terms of reference, the Panel is tasked to consider the WTO 
conformity of, inter alia , the challenged export quota system460 on rare earths, tungsten, and 
molybdenum. It is neither required nor empowered to pass any general judgement on when export quotas can, as a matter of economic or legal theory, "relate to" conservation. In the Panel's view, 
the question whether a given export quota relates to the conservation of exhaustible natural 
resources can only ever be answered "on a case-b y-case basis, by careful scrutiny of the factual 
and legal context in a given dispute."
461 
7.293.  Having said that, the Panel emphasizes that, in principle, Article XX is available as a 
defence to any and every kind of GATT-inconsistent trade measure, including export quotas.462 The 
Panel's analysis in this case – or, indeed, the analyses of other panels and the Appellate Body in 
prior cases – should not be understood as suggesting that export quotas can never relate to 
conservation. To the contrary, the Panel agrees with China that "nothing in the text of Article XX(g) supports an interpretation that export quotas could never be justified under Article XX(g) of the GATT 1994".
463  
7.5.2.2  Meaning of "made effective in co njunction with restrictions on domestic 
production or consumption" 
7.294.  The Panel now turns to the interpretation of the second part of Article XX(g).  
7.5.2.2.1  "made effective in conjunction with" 
7.295.  Regarding the meaning of "made effective in  conjunction with", China recalls the Appellate 
Body's finding in China – Raw Materials  that the measures at issue must "work together" with 
restrictions on domestic production or consumption to conserve exhaustible natural resources.464 
                                               
455 See paras. 7.158-7.159 of the section on export duti es. There, the findings reason that "the mere 
assertion by China that the export duties form part of a broader 'comprehensive policy for environmental 
protection' in China is not sufficient to demonstrate that the export duties themselves are measures 'designed to achieve' this objective". 
456 Panel Reports, China – Raw Materials , para. 7.418. 
457 China's second written submission, para. 1. 
458 European Union's opening oral statement at the second meeting of the Panel, para. 5. 
459 European Union's opening oral statement at the second meeting of the Panel, para. 6. 
460 In this connection, the Panel recalls its discussion on the "series of measures": see above  
section 7.4.1.4. 
461 Appellate Body Report, US – Gasoline , pp. 16-17, DSR 1996:I, 3, at p. 17. 
462 Appellate Body Report, US – Gasoline , p. 24, DSR 1996, 3 at 22. 
463 China's second written submission, para. 20. 
464 Appellate Body Reports, China – Raw Materials , para. 360. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 102 - 
 
  7.296.  The United States also recalls and adopts the Appellate Body's finding in China – Raw 
Materials  that the phrase "made effective in conjunction with" means that measures must "work 
together with restrictions on domestic production or consumption, which operate so as to conserve natural resources".
465 In Japan's view, the term "work together with" means that conservation-
related trade restrictions must be part of a "rational regulatory scheme" that leads to parallel 
restrictions on both exports (or imports) and domestic production or consumption.466 Japan also 
recalls that the Appellate Body in China – Raw Materials  required trade-restrictive measures to 
"operate jointly with the restrictions on domestic production or consumption" for them to be 
justifiable under Article XX(g).467   
7.297.  The Panel begins its analysis by recalling the Appellate Body's finding in China – Raw 
Materials  that "the term 'made effective', when us ed in connection with a legal instrument, 
describes measures brought into operation, adopted or applied".468 The Appellate Body further 
held that the term "in conjunction" means "together with" or "jointly with"469, and concluded that 
"Article XX(g) … permits trade measures relating to the conservation of exhaustible natural 
resources when such trade measures work together with restrictions on domestic production or 
consumption, which operate so as to conserve an exhaustible natural resource".470   
7.298.  The Panel notes that the Appellate Body did not set out a test to determine when 
measures "work together with" domestic restrictions. The Appellate Body did say, however, that 
"Article XX(g) does not contain an additional requirement that the conservation measure be primarily aimed at making effective the restrictions on domestic production or consumption". It follows from this that the phrase "work together with" cannot be read to require that a Member's 
GATT-inconsistent measures "be aimed at ensuring  the effectiveness of domestic restrictions".
471    
7.299.  While the Appellate Body has not explained the "work together with" criterion in detail, its 
discussion in China – Raw Materials  suggests that the requirement looks to both the procedural 
and the substantive connections existing between the challenged trade-restrictive measures and 
the domestic production or consumption restrictions.  
7.300.  With respect to procedural connections, the Appellate Body suggested that the challenged 
measure will be "made effective in conjunction with domestic restrictions" when the former is 
"promulgated or brought into effect together with " the latter. This language suggests to the Panel 
that one relevant factor in the analysis of the "structure and design" of the domestic and foreign restrictions is whether the measures were brought into effect concurrently as a matter of 
legislative or regulatory process. Put another way, the Panel understands the Appellate Body's 
language to suggest that a major gap between the passage or "promulgat[ion]" of the relevant foreign and domestic restrictions through the re gulating Member's law-making apparatus (e.g. 
Parliament) may raise questions as to whether the foreign restrictions are applied "in conjunction 
with" the domestic restrictions and whether the foreign and domestic restrictions are actually "operative" at the same time. This understanding is  supported by the Appellate Body's adoption in 
China – Raw Materials  of the language of the Appellate Body's US – Gasoline  report. In that case, 
the Appellate Body had held that the term "in co njunction with" "quite plainly" means "together 
with" or "jointly with", while the term "made effe ctive" refers to a measure as being "operative", 
"in force", or "having come into effect".  
7.301.  At the same time, the phrase "work together with" also suggests a degree of substantive 
complementarity between the foreign and domestic restrictions in their operation "so as to conserve an exhaustible natural resource".
472 While the Panel does not think it useful to lay down a 
hard-and-fast rule about the form such complementarity may take, the Panel believes that there 
must be some meaningful correspondence or cooperation between the two measures, and that they must somehow help or reinforce one another,  or further one another's goals or operation. 
China thus needs to bring evidence that its quota system is designed in such a way that the 
                                               
465 United States' second written submission, para. 103. 
466 Japan's second written submission, para. 112. 
467 Japan's second written submission, para . 123 (citing Appellate Body Reports, China – Raw Materials , 
para. 356). 
468 Appellate Body Reports, China – Raw Materials,  para. 356. 
469 Appellate Body Reports, China – Raw Materials,  para. 356. 
470 Appellate Body Reports, China – Raw Materials,  para. 356. 
471 Appellate Body Reports, China – Raw Materials , para. 360. 
472 Appellate Body Reports, China – Raw Materials , para. 360. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 103 - 
 
  foreign and domestic restrictions are somehow related to one another, are operational together, 
and reinforce or support or, as it were, "cooperate with", each other in pursuit of conservation. In sum, in the present dispute, China must demonstrate that its export quota on rare earths "works together" with its relevant domestic restriction on production or consumption, which operate so as 
to conserve rare earths, tungsten, and molybdenum. 
7.302.  China argues
473 that foreign and domestic restrictions will "work together" where 
achievement of the conservation objective – by means of export quotas – is not undermined by 
unlimited domestic production or consumption.474 The Panel of course agrees that a domestic 
measure that worked to undermine or undercut the conservation goal embodied in a trade-restrictive measure would clearly not "operate jointly" or "work together" with that trade-restrictive measure. The Panel believes that "working together" and "operating jointly" require 
some positive interaction, mutual reinforcement, complementarity, and coherent cooperation. The 
measures should "work together" in the sense of forming together a rational system that works to further a stated objective. Showing that two or more measures do not undermine each other is, in 
the Panel's view, not sufficient to demonstrate th at such measures "work together" in the way 
Article XX(g) requires. 
7.303.  The Panel also emphasizes that, in th e words of the Appellate Body, the foreign and 
d o m e s t i c  m e a s u r e s  s h o u l d  w o r k  t o g e t h e r  " s o  a s  to conserve exhaustible natural resources".
475 
Obviously, measures that work together for purposes other than conservation cannot be considered to comply with Article XX(g), as the goal of Article XX(g) is to excuse or justify measures put in place for conservation. 
7.304.  The Panel notes that the "work together" criterion does not impose an effects or impact 
test. In the Panel's view, the relative impact of China's foreign and domestic restrictions are not assessed under Article XX(g), but may instead be relevant in an assessment of compliance under 
the chapeau of Article XX.  
7.5.2.2.2   "restrictions" 7.305.  In interpreting the term "restriction",  China refers to the finding of the panel in China – 
Raw Materials  that Members can demonstrate their compliance with this requirement by showing 
that their domestic measures have a "limiting effect" on either domestic production or domestic consumption. In China's view, measures can produce a "limiting effect" by direct means, i.e. by limiting the amount of the resources that are allowed to be produced or consumed, or by indirect 
means, i.e. by increasing the costs of  domestic production or consumption.
476   
7.306.  The complainants seem to understand the China – Raw Materials  panel and Appellate Body 
interpretation of the terms "restrictions on domestic production and consumption" in different 
ways.477 The United States draws on dictionary definiti ons to argue that "restrictions" on domestic 
production or consumption are "actions confining or fixing definitely the extent, amount, duration, etc. of domestic production or consumption that is permitted"; it stresses that the restrictions 
must actually restrict or limit domestic production or consumption.
478 According to the European 
Union, the term requires that "a certain limiting effect … be felt on the domestic side in order to counter-balance the impact (or limiting effect) of the export restrictions on foreign users".
479  
7.307.  The Panel begins by noting that in China – Raw Materials , the Appellate Body did not 
address the meaning of "restriction" in the contex t of Article XX(g). However, in the context of 
defining the term "restriction" in GATT Article XI, it essentially endorsed an interpretation that is 
identical to that given the term by the China – Raw Materials  panel in its Article XX(g) analysis, 
namely:   
                                               
473 China's response to Panel question No. 71. 
474 China's response to Panel question No. 71. 
475 Appellate Body Reports, China – Raw Materials , para. 360. 
476 China's first written submission, pa ras. 64-65, (citing Panel Reports, China – Raw Materials , 
para. 7.394 and Appellate Body Reports, China – Raw Materials , para. 319). 
477 United States' second written submission, paras. 102-103; European Union's second written 
submission, para. 139; Japan's second written submission, para. 106. 
478 United Sates' second written submission, para. 102. 
479 European Union's second written submission, para. 62. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 104 - 
 
  The term "restriction" is defined as "A thing which restricts someone or something, a 
limitation on action, a limiting condition or regulation" and as "the action or fact of limiting or restricting someone or something", specifically "deliberate limitation of industrial output [,] the action or fact of confining or binding the extent, amount, 
duration, etc. of permitted - in the case of Article XX(g) – domestic production or 
consumption. The Panel considers that the ordinary meaning of "restriction" is that which has a limiting effect.
480 
7.308.  We would like to emphasize that, in our op inion, a "restriction" on domestic production or 
consumption is not necessarily the same as a "constriction" or a "reduction" on domestic production or consumption. The word "restriction" in Article XX(g) requires the positive establishment of a quantitative limit on domestic production or consumption, but does not 
necessarily require that such limit reduce  or constrict  domestic production or consumption below 
the level of any previous year. Rather, the quantitative restriction must be set at a level that is lower than the expected demand for the period of time over which the restriction is intended to 
apply.  
7.309.  Importantly, the Panel considers that the phrase "made effective in conjunction with 
domestic restrictions" was not intended to establish an empirical effects test. Although, as the 
Appellate Body said in US – Gasoline  that "consideration of the predictable effects of a measure" 
may be relevant in assessing a measure's compliance with subparagraph (g) of Article XX, the availability of Article XX(g) is not dependent upon a regulating Member showing that its domestic restrictions have had "a positive effect on conservation goals", for example by reducing domestic 
demand and/or supply. Instead, the Panel agrees with Japan that, to meet its burden of proof, a 
regulating Member must show that its domestic restrictions are capable of limiting the amount of production or consumption below the amount that would be produced or consumed but for that 
measure.  
7.310.  The Panel understands the term "capable of limiting" to require more than just a restriction 
"on the books". A restriction embodied in a legal instrument, if not accompanied by actual 
enforcement, cannot be a real "restriction" capable of limiting domestic production or 
consumption. Instead, Article XX(g) requires that domestic restrictions be effective. Although the words "made effective in conjunction with" in Article XX(g) relate directly to the measure being challenged (here, the export quotas), they imply that both the foreign restriction and the domestic 
restriction must be "effective" before subparagraph (g) can be satisfied. In the Panel's opinion, a 
domestic restriction that is not enforced cannot be considered "effective".  
7.311.  In the Panel's view, when a party challenges a legal instrument that appears on its face 
(that is, in its text) to constitute or embody a restriction on domestic production or consumption 
(in the sense of imposing a quantitative limit below the level of expected demand in the relevant period) as not being actually enforced, that party bears the burden of showing that the non-
enforcement is such that it transforms what appears to be a restriction into a measure that has not 
been capable of having a limiting effect. Non-enforcement will affect the restrictive character or nature of an apparent restriction where such non- enforcement is so important as to be considered 
systemic.  
7.312.  To clarify, under Article XX(g) the Panel examines the extent to which a domestic 
restriction is enforced not to determine its impact. Any discriminatory impact it may have will be considered under the chapeau in the context of assessing whether the challenged measures are 
applied in a discriminatory manner or in a way that constitutes a disguised restriction on 
international trade, since a foreign restriction that is enforced more severely than a domestic restriction may be discriminatory. But under Article XX(g), the Panel examines the enforcement of 
a domestic restriction as a means of determining the real or actual nature  of what is claimed to be 
a domestic restriction. In other words, serious systemic non-enforcement goes not to the way in which an apparent domestic restriction is applied, but more fundamentally to its character qua 
restriction. In the Panel's opinion, an apparent domestic restriction that is systemically unenforced 
is, as a matter of law, no "restriction" at all, at least for the purposes of Article XX(g). To hold 
                                               
480 This definition was adopted by the Ap pellate Body: Appellate Body Reports, China – Raw Materials , 
para. 320 (referring to Panel Reports, China – Raw Materials , para. 7.394) ("Article XI of the GATT 1994 covers 
those prohibitions and restrictions that have a limiting  effect on the quantity or  amount of a product being 
imported or exported").  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 105 - 
 
  otherwise would be to open a serious lacuna by allowing Members to invoke Article XX(g) where 
their claimed domestic restrictions exist "on the books" but are never applied to domestic producers or consumers of the natural resource in question.  
7.313.  In sum, the Panel understands the term "restrictions on domestic production or 
consumption" to require a measure that is capable of limiting the quantity of domestic production 
or consumption below the level of expected demand. Such measure, in order to be considered a real restriction, must actually be enforced.  
7.5.2.3  The "even-handedness" requirement 
7.314.  China argues that, regardless of how challenged measures impact upon or affect foreign 
users, the "even-handedness" requirement in Article XX(g) is satisfied when the regulating Member ensures that some of the impact of its co nservation policy is also imposed upon domestic 
users, either through restrictions on domestic production or restrictions on domestic 
consumption.
481 In China's view, the Appellate Body in US – Gasoline  and the panel in China – Raw 
Materials  have made clear that the requirement of "even-handedness" does not mean that 
domestic and foreign users must receive identical treatment.482 Moreover, the "even-handedness" 
requirement cannot be understood by reading the words "restrictions on domestic production " out 
of the text of Article XX(g), since "the second clause of Article XX(g) speaks disjunctively of 
'domestic production or consumption'".483 China considers that it is the sovereign authority of 
every WTO Member to decide what is the most appropriate and practical way to allocate the restrictive effect of its conservation policy as between foreign and domestic trade, taking into account, inter alia , the technical and market realities of the resources at issue.
484  
7.315.  The complainants disagree. For the Unit ed States, the Appellate Body's discussion in US – 
Gasoline  relied on by China identified only the logical boundaries of the "even-handedness" 
requirement, and not the level of relative treatmen t of domestic and foreign interests that must be 
afforded under the test. According to the compla inants, the Panel must assess the impact of the 
overall conservation policy on both domestic and foreign interests to ensure that it is even-handed. They do not accept China's argument that Article XX(g) permits a Member to impose 
measures that advantage its own domestic users at the expense of foreign users as long as it 
imposes some level of restriction on domestic supply that is "greater than nothing".
485 In the 
European Union's view, the second part of Article XX(g) requires a certain limiting effect to be felt on the domestic side in order to counter-balance the impact of the export restrictions to foreign 
users.
486 The European Union argues that the "even-handedness" test as developed in WTO 
jurisprudence is essentially also a "fairness" or "impartiality test".487 Japan submits that where 
domestic and foreign users do not receive the same treatment under the regulatory system in 
question, any disparities must have a rational basis in light of the relevant conservation 
purpose.488  
7.316.  The Panel notes that, according to China, th ese issues should be dealt with as part of the 
Panel's assessment of China's export quota me asures under the chapeau requirements of GATT 
Article XX.489 The complainants have varied positions on the concept of even-handedness in 
subparagraph (g), and on whether some of the issues raised by China under the chapeau of 
Article XX should be discussed there, or rather under subparagraph (g). In the opinion of the 
United States, "even-handedness" is not espe cially concerned with determining whether a 
Member's treatment of its trading partners takes into account the similarity or difference of 
conditions prevailing in the partners' territories.490 Rather, the United States argues that "even-
handedness" is primarily about the credibility of the challenged measures as truly serving a 
conservation purpose. The European Union subm its that the non-discrimination principles and 
                                               
481 China's second written submission, para. 84. 
482 China's first written submission, para. 60 and China's second written submission, para. 83. 
483 China's second written submission, para. 85. 
484 China's second written submission, para. 84. 
485 United States' second written submission, paras. 109-110. 
486 European Union's second written submission, para. 62. 
487 European Union's second written submission, para. 179. 
488 Japan's second written submission, para. 127. 
489 China's response to the Panel question No. 63, in para. 102 of China's second written submission. 
490 United States' response to Panel question No. 63. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 106 - 
 
  relevant jurisprudence provide guidance on th e "even-handedness" test under Article XX(g).491 
Japan argues that since it is not relevant where the natural resources are consumed from the perspective of conservation of natural resources
492, the principle that "discrimination may result 
when countries where different conditions prevail are treated the same" set forth in the chapeau is 
not relevant in assessing even-handedness under GATT XX(g).493  
7.317.   The Panel recalls that, according to the Appellate Body, the requirement that trade-
restrictive measures "be made effective in conjunction with domestic restrictions" is essentially a 
requirement of "even-handedness".  
7.318.  The precise meaning of "even-handedness", and especially the relative treatment of 
foreign and domestic consumers required by that standard, is one of the most extensively-debated 
issues in this case. It is also one of the most difficult from a legal perspective, since the Appellate 
Body has, as the United States has rightly noted, articulated only the "logical boundaries"494 of this 
concept. We have also been unable to find, in either the GATT negotiating history or in other areas of international law, any material to illuminate and guide our interpretation of this term.  
7.319.  In this regard, the Panel observes that in  French the Appellate Body stated that "Cette 
clause établit une obligation d' impartialité  dans l'imposition de restrictions, au nom de la 
conservation, à la production ou à la consommation de ressources naturelles épuisables". In Spanish, 
the Appellate Body also used the term "imparcialidad " to say "Esa cláusula establece una obligación 
de imparcialidad  en los casos en que se impongan restricciones, en beneficio de la conservación, a la 
producción o al consumo de recursos naturales agotables. In the English language, words such as "fair", "impartial" or "balanced" are used as synonyms for even-handedness.
495 Some international 
investment tribunals have acknowledged that th e ordinary meaning of the terms "fair" and 
"equitable" in a "fair and equitable" clause commonly found in bilateral investment treaties would include "even-handedness".
496  
7.320.  The Panel also notes that the concepts of equity and even-handedness are quite closely 
related inasmuch as the Oxford English Dictionary defines "equity" with reference to fairness, impartiality and even-handedness.
497 International courts and tribunals including the International 
Court of Justice have had occasion to apply principles of equity, considering in one case that the 
principle of equity required "an equitable result".498   
7.321.  The Panel notes also that the Appellate Body made clear that "even-handedness" cannot 
require that imported and domestic products be subject to identical treatment as the goal of 
Article XX provisions is to be used as an exception to the national treatment obligation which 
requires such no less-favourable treatment. Indeed  as noted by the Appellate Body "where there is 
identity of treatment - constituting real, not merely formal, equality of treatment - it is difficult to 
see how inconsistency with Article III:4 would have arisen in the first place".499 
7.322.  The Panel has sought to illuminate its und erstanding of the principle of even-handedness 
by reference to different sources of international law. The only explicit reference to the even-
handedness principle is available in international investment law. The Panel does observe however 
that in substance, its own understanding of even-handedness or fairness is not essentially different from that of other international tribunals. In international investment arbitration cases, in applying 
                                               
491 European Union's second written submission, paras. 78-79. 
492 Panel Reports, China – Raw Materials , para. 7.428. 
493 Japan's second written submission, para. 145. 
494 United States' second written submission, para. 109. 
495 New Shorter Oxford English Dictionary, L. Brown (ed.) (Clarendon Press, 2007), Vol. I, p. 877. 
496 Arbitral Tribunal, Award on Merits, MTD Equity Sdn. Bhd. And MTD Chile S.A. , ICSID CASE 
NO. ARB/01/7, para 13. 
497 New Shorter Oxford English Dictionary, L. Brown (ed.) (Clarendon Press, 2007), Vol. I, p. 856. 
498 International Court of Justice, Continental Shelf (Libya v. Malta) , 1982, ICJ Reports, para. 70. 
499 US – Gasoline , Appellate Body Report, at p. 23 " There is , of course, no textual basis for requiring 
identical treatment of domestic and imported produc ts. Indeed, where there is identity of treatment - 
constituting real, not merely  formal, equality of treatment - it is difficult to see how inconsistency with 
Article III:4 would have arisen in the first place. On the other hand, if no restrictions on domestically-produced 
like products are imposed at all, and all limitations ar e placed upon imported products alone, the measure 
cannot be accepted as primarily or even substantially designed for implementing conservationist goals. The 
measure would simply be naked discrimination  for protecting locally-produced goods." WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 107 - 
 
  even-handedness requirements, for example, tribuna ls have been willing to show a degree of 
deference to the fact that governments have the right to choose the way in which they resolve their national problems.
500 They have nevertheless assessed whether the processes governments 
adopt to resolve their problems are fair to foreign interests or show a predisposition towards 
favouring domestic interests.501 Moreover, tribunals have found that host state measures violate 
the even-handedness standard when no justif iable explanation for the uneven treatment is 
available.502 The Panel has not relied on these sources to clarify the meaning of even-handedness, 
because they do not add any further clarification to the existing jurisprudence on Article XX(g). 
7.323.  The Panel has also considered whether concepts such as "equity" or "equitable share" 
could shed some light on the meaning of "even-ha ndedness" in the context of Article XX(g). In the 
first place, the fact that the concept of equity is  explicitly invoked in Article XX(j) of the GATT 1994 
but is not used in Article XX(g) leads to the Panel to conclude that this concept is not directly 
relevant in interpreting subparagraph (g). Moreov er, the Panel finds that the concept of "equity" 
offers no real or additional insight or assistan ce in understanding the meaning of even-handedness 
under Article XX(g).  
7.324.  The Panel continues its analysis by recalling that the words "even handed" do not appear 
in the text of Article XX(g), but were introduced for the first time by the Appellate Body in US – 
Gasoline .503 In that case, the Appellate Body stated: 
[W]e believe that the clause "if such measures are made effective in conjunction with 
restrictions on domestic production or consumption" is appropriately read as a requirement that the measures concerned impose restrictions, not just in respect of 
imported gasoline but also with respect to domestic gasoline. The clause is a 
requirement of even-handedness in the imposition of restrictions , in the name of 
conservation, upon the production or consumption of exhaustible natural resources. 
There is, of course, no textual basis for requiring identical treatment of domestic and 
imported products…On the other hand, if no restrictions on domestically-produced like products are imposed at all and all limitations are placed upon imported products 
alone, the measure cannot be accepted as primarily or even substantially designed for 
implementing conservationist goals.
504  
7.325.  The Panel also notes the Appellate Body's treatment of "even-handedness" in US – Shrimp . 
In that case, the Appellate Body repeated the passage quoted above and continued: 
We earlier noted that Section 609, enacted in 1989, addresses the mode of harvesting 
imported shrimp only. However, two years earlier, in 1987, the United States issued regulations pursuant to the Endangered Species Act requiring all United States shrimp 
trawl vessels to use approved TEDs, or to restrict the duration of tow-times, in 
specified areas where there was significant incidental mortality of sea turtles in shrimp trawls. These regulations became fully effective in 1990 and were later modified. They 
now require United States shrimp trawlers to use approved TEDs "in areas and at 
times when there is a likelihood of intercepting sea turtles", with certain limited exceptions. Penalties for violation of the Endangered Species Act, or the regulations issued thereunder, include civil and criminal  sanctions. The United States government 
currently relies on monetary sanctions and civil penalties for enforcement. The 
government has the ability to seize shrimp catch from trawl vessels fishing in the United States and has done so in cases of egregious violations. We believe that, in 
principle Section 609 is an even-handed measure.
505 
7.326.  In this passage, to determine even-handedness, the Appellate Body seems to have focused 
on a broad structural correspondence of key elem ents of the US regulatory requirements applied 
                                               
500 Permanent Court of Arbitration, Partial Award,  Saluka Investments BV v. The Czech Republic, 
UNCITRAL, para 411. 
501 Ibid. 
502 Ibid. para. 416. 
503 Appellate Body Report, US – Gasoline , p. 20 et seq , DSR 1996:I, 3, at 20. 
504 Appellate Body Report, US – Gasoline , pp. 20-21, DSR 1996:I, 3, at 20. 
505 Appellate Body Report, US – Shrimp , para. 144. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 108 - 
 
  to domestic and imported shrimp. The Appellate Body did not compare the domestic regulation's 
effects to those of the import restriction. In other words, the Appellate Body did not read an 
effects test in the second phrase of Article XX(g) . Most importantly, the Appellate Body did not, 
after establishing the existence of a real and effective domestic restriction, proceed to examine the 
"relative treatment of domestic and foreign interests" in order to determine whether that 
treatment was itself even-handed. As the Pane l understands it, even-handedness seems in the US 
– Shrimp  case (as in US – Gasoline ) to have been established by the fact that the US import 
restriction had indeed, as a matter of fact, been made effective in conjunction with parallel and 
corresponding restrictions on domestic production or consumption. In sum, the Panel therefore does not believe that "even-handedness" requires an assessment of the actual impact or effects of the measures imposed by a regulating Member to restrict domestic production or consumption.  
7.327.  The Panel is of the view that in requiring even-handedness under Article XX(g), the 
Appellate Body sought to ensure that GATT-inconsistent measures allegedly taken for conservation reasons are really about conservation. In th is regard, the "even-handedness" concept was 
referenced in the context of the second part of subparagraph (g), and in the context of its 
analysis, the Appellate Body observed that where there were no "restrictions" on domestically produced products, the measure could not be accepted "as primary or even substantially designed 
for implementing conservationist goals".
506  
7.328.  In the Panel's view, the assessment of co mpliance with subparagraph (g) should focus on 
the architecture and the design of the challe nged measure to determine whether it has a 
substantial link with conservation, e.g. whether it supports, assists, or contributes to conservation 
of the resources at issue since the object of the analysis under subparagraph (g) is for the Panel to 
determine whether China's export quotas on rare earths, tungsten, and molybdenum are about conservation. As the Panel discussed above, subp aragraph (g) includes several elements that 
together impose requirements that aim at ensu ring that measures invoked as exceptions for 
conservation are really about conservation. In the Panel's view, the even-handedness requirement 
of subparagraph (g) mentioned by the Appellate Body  serves as an analytical tool to help in 
assessing whether the challenged measure assists, supports, or contributes to conservation of the 
concerned natural resources. As the Panel sees it , measures allegedly adopted for the conservation 
of natural resources situated within a Member's territory cannot be said to "relate to" conservation if such measures exempt or otherwise do not control domestic actions that deplete or deteriorate 
the natural resource in question. In other words, if domestic users of a resource are exempted 
from the domestic restriction, it will be difficu lt to conclude that a GATT-inconsistent measure 
supposedly justified under Article XX(g) properly "relates to" conservation, since unregulated 
domestic exploitation could undermine such conservation – and this would be especially the case 
when the majority of what is to be conserved is consumed only domestically. In the present case, the Panel recalls that China's consumers represent an important share of world consumption of 
rare earths that China says it wants to conserve; China, accordingly, must be able to demonstrate 
that it is taking action to regulate the domestic consumption that constitutes a significant share of the global usage of rare earths and that is a serious threat to conservation. 
7.329.  In the Panel's view, this is consistent with the panel's approach in China – Raw Materials  
when it observed:  
This is, in fact, the very essence of the conservation objective set forth in 
Article XX(g): if a WTO Member is not taking steps to manage the supply of natural 
resources domestically, it is not entitled to seek the cover of Article XX(g) for the 
measures it claims are helping to conser ve the resource for future generations.
507 
7.330.  For the Panel, this observation is especially valid where, as in this dispute, the natural 
resources being conserved are essentially and mainly consumed by domestic users. The Panel 
agrees with the United States that "even-handedness" "scrutinizes whether the measure at issue is truly undertaken for purposes of conservation ". In a sense, then, even-handedness in the 
imposition of domestic restrictions is a way for regulating Members to demonstrate that measures 
are really about conservation. By reading subpar agraph (g) as requiring, in addition to the 
existence of restrictions that "relate to" conservation, that Members impose real or actual domestic restrictions that work together with the GATT-inconsistent measures for conservation, WTO law 
                                               
506 Appellate Body Report, US – Gasoline , p. 21, DSR 1996:I, 3, p .19. 
507 Panel Reports, China – Raw Materials , para. 7.406. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 109 - 
 
  ensures that measures adopted under Article XX(g)  truly are measures taken or adopted for the 
purpose of conserving exhaustible natural resources. The Panel also agrees with the panel in China 
– Raw Materials508 that resource-endowed countries are entitled to manage the supply and use of 
their resources through conservation-related measures that foster the sustainable development of 
their domestic economies consistently with general international law and WTO law. So long as 
even-handed restrictions are imposed on domestic production or consumption – and especially so 
when the resources sought to be protected are located and consumed mainly domestically – 
Article XX(g) does not oblige resource-endowed countries to ensure that the economic 
development of other user-countries benefits identi cally from the exploitation of the resources of 
the endowed countries. 
7.331.  Therefore, the Panel understands the "even-handedness" test to be a synonym for the 
second part of subparagraph (g) of Article XX. The question whether measures are applied in an 
"even-handed" manner should shed light on whether the measures are "made effective in conjunction with restrictions on domestic production or consumption". To show even-handedness, 
China needs to demonstrate that the export quota on foreign users is somehow balanced with one 
or more measures imposing restrictions on domestic users. In the Panel's view, the WTO Member imposing the trade restrictions allegedly related to conservation must be able to show that the 
relevant regulatory framework imposed on domestic and foreign interests has a legitimate and 
impartial conservation-based rationale. 
7.332.  In the Panel's opinion, the requirement of "even-handedness" calls for an investigation of 
the "regulatory" or "structural" balance. The question is whether, as a matter of objective 
structure, design, and architecture, the regulatory  system distributes the burden of conservation-
related measures between domestic and foreign consumers in a balanced way. The Panel emphasizes again that this systemic or regulatory analysis does not entail any form of "effects 
test" that would require the Panel to assess whether the measures are even-handed in their 
effects on the actual treatment of foreign and domestic like users. The Panel's task under subparagraph (g) is limited to determining whether China's regulatory system balances 
conservation-related regulatory burdens between foreign and domestic users; the Panel is not 
required under subparagraph (g) to consider the actual effects which a regulatory structure has in the marketplace. Such effects are properly examined under the chapeau of Article XX.  
7.333.  Additionally, the Panel recalls that th e even-handedness requirement is to be read 
together with the requirement that the challenged border restriction be made effective in 
conjunction with domestic restrictions.
509 Together, these two terms are a kind of "proxy" for 
detecting the purpose of an alleged conservation objective: by requiring domestic restrictions, 
subparagraph (g) prevents GATT-inconsistent meas ures that are not really about conservation 
from being brought within its scope. This is also the reason why the Panel is of the view that to show even-handedness in the imposition of domestic restrictions, China also needs to establish 
that its export restraints work together with a corresponding domestic restriction .  
7.334.  In the Panel's view, this requirement of even-handedness is also compatible with China's 
permanent sovereignty over its natural resources. We agree with the panel in China – Raw 
Materials  that "[a]s long as even-handed restrictions are imposed on domestic supply, 
Article XX(g) does not oblige resource-endowed countries to ensure that the economic 
development of other user-countries benefits identi cally from the exploitation of the resources of 
the endowed countries".
510  
7.335.  The Panel is aware that in the recent "trilogy" of TBT cases ( US – Clove Cigarettes511, US – 
Tuna II512, and US – COOL513), the Appellate Body articulated an "even-handedness" test in the 
context of Article 2.1 of the TBT Agreement. Specif ically, the Appellate Body held that panels must 
"carefully scrutinize the particular circumstances of the case, that is, the design, architecture, 
revealing structure, operation, and application of the technical regulation at issue," in order to 
                                               
508 Panel Reports, China – Raw Materials , para. 7.404. 
509 Van den Bossche, P. and Zdouc, W. The Law and Policy of the World Trade Organization, 3rd edn. 
(Cambridge University Press, 2013), p. 567: "Basically, the third element of the Article XX(g) test is a requirement of 'even-handedness' in the imposition of restrictions on imported and domestic products." 
510 Panel Reports, China – Raw Materials , para. 7.404. 
511 Appellate Body Report, US – Clove Cigarettes . 
512 Appellate Body Report, US – Tuna II (Mexico) . 
513 Appellate Body Report, US – COOL . WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 110 - 
 
  determine whether the challenged regulation "is designed or applied in a manner that constitutes a 
means of arbitrary and unjustifiable discrimination".514 This language appears to envisage a sort of 
"effects test", insofar as it would require panels to closely examine the actual operation and application of a challenged measure in addition to its design and architecture. Consideration of 
"even-handedness" in the context of Article 2.1 of the TBT Agreement thus seems to incorporate 
an assessment similar to that which is conducted under the chapeau of GATT Article XX.
515 This 
makes sense in the context of Article 2.1 of th e TBT Agreement, given that the TBT Agreement 
does not have a general exceptions clause like th at found in Article XX of the GATT. In addition, 
the Appellate Body interpreted Article 2.1 in light of the sixth recital of the preamble of the TBT 
Agreement, which explicitly refers to "the requirement that [technical regulations] are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between 
countries where the same conditions prevail or a disguised restriction on international trade"; we 
recall that preambles constitute an important elemen t of the context that must be considered by a 
treaty interpreter.
516  
7.336.  However, transposing this "applied" even-handedness test developed in the particular 
context of Article 2.1 of the TBT Agreement into Article XX(g) of the GATT would effectively require 
the Panel to deal with requirements contained in the chapeau of Article XX within subparagraph (g) 
of Article XX. Such an approach would, in our view, amount to a legal error. It would render the 
Article XX chapeau inutile  in the context of an Article XX(g) exception, contrary to the rule of 
effective treaty interpretation.517 It is not at all clear how the "even-handedness" test articulated in 
the context of Article 2.1 of the TBT Agreement co uld be distinguished from the Article XX chapeau 
analysis, since the language used to explain the former appears to have been drawn directly from 
the sixth recital of the preamble of the TBT Agreement, which is in turn drawn directly from the chapeau of Article XX of the GATT. It appears to us, therefore, that the Appellate Body's 
explanation of what "even-handedness" means in the context of Article 2. 1 of the TBT Agreement 
cannot be transposed into Article XX(g) based merely on the fact that the Appellate Body used the same word when interpreting Article XX(g) in US – Gasoline .  
7.337.  In sum, the Panel finds that the "even-handedness" criterion is satisfied where the 
regulating Member can show that, in addition to its GATT-inconsistent measures, it has also imposed real conservation restrictions on the domestic production or consumption of the resource subject to its GATT-inconsistent measures. These domestic measures must distribute the burden 
of conservation between foreign and domestic co nsumers in an even-handed or balanced manner. 
However, "even-handedness" under subparagraph (g) does not require the Panel to assess the 
effects of the concerned restrictions. Instead, th e relevant "balance" or "even-handedness" under 
subparagraph (g) is structural or regulatory. The balanced or even-handed nature of the domestic 
and foreign restrictions should be evident from the design, structure, and architecture of the 
challenged measure. Therefore, the Panel believes that issues relating to the effects of China's 
challenged export quotas on prices, as well as th e question why the challenged export quotas were 
not filled and what effect if any an unfilled export quota has on foreign consumers, are concerned with the application and effects of the challeng ed export quotas, which are properly assessed 
under the chapeau of Article XX. 
7.5.3  Interpretation of the chap eau of Article XX of the GATT 1994 
7.5.3.1  Introduction 7.338.  As the Panel has noted, China argues that several of the complainants' arguments under 
subparagraph (g) of GATT Article XX refer to the manner in which a (the) measure(s) are applied, 
and should therefore be assessed under the application of the chapeau of Article XX.
518 The 
chapeau addresses the manner in which a challenged measure is applied . China refers to the 
Appellate Body Report in Brazil – Retreaded Tyres  and stresses that a measure should only be 
considered arbitrarily or unjustifiably discriminatory if it discriminates against countries where the 
                                               
514 Appellate Body Report, US – COOL , para. 271. 
515 This approach was also followe d in the recent Panel Report, EC – Seal Products . 
516 Appellate Body Report, US – Shrimp , para. 153. 
517 Appellate Body Report, US – Gasoline , p. 23, DSR 1996:I, 3, at 21. 
518 Recall that for China, to satisfy the requirement of  even-handedness in Article XX(g), it is sufficient 
to show that it has imposed effective restrictions on do mestic production or consum ption. For China, there is 
no assessment of the impact of the measure under (g ) so long as the measure demonstrate a reasonable 
relation of means with the policy goal. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 111 - 
 
  same conditions prevail. Moreover, China contends  that even where the same conditions prevail, 
differential treatment may still be justified where it has a rational connection to the objective pursued by the measure. In that case, the me asure would still meet the requirement of not 
imposing any arbitrary or unjustifiable discrimination under the chapeau of GATT Article XX.
519  
7.339.  The complainants submit that China's export quotas are inconsistent with Article XX(g), 
and thus that the Panel does not need to assess whether the export quotas are consistent with the provisions of the chapeau of Article XX. Nonetheles s, the complainants argue that should the Panel 
consider that China's export quotas comply with  the requirements of Article XX(g), those quotas 
nevertheless do not comply with the provisions of the chapeau of Article XX.  
7.340.  The complainants see three prohibitions in  the chapeau of Article XX: (i) against arbitrary 
discrimination; (ii) against unjustifiable discrimination; and (iii) against a disguised restriction on 
trade. With respect to the first two of these prohibitions (considered together by China), the 
complainants refer to the Appellate Body report in US – Gasoline , and state that the requirement 
that a measure not be "applied in a manner which would constitute arbitrary or unjustifiable 
discrimination between countries where the same conditions prevail" is a requirement that 
measures not discriminate between other Members or between other Members and the regulating Member.
520 Moreover, the European Union refers to the Appellate Body's statements in US – 
Gasoline and Brazil – Retreaded Tyres  that the determination of a measure's discriminatory impact 
under the chapeau of Article XX should not depend exclusively on its quantitative impact, and that discrimination can also be arbitrary or unjustifiable in cases where it is avoidable and foreseeable – in that context, the availability of WTO-consistent alternatives is important.
521 Japan submits that 
there should not be any effects test under the chap eau of Article XX, and points to the availability 
of WTO-consistent alternatives to replace ex port quotas or at least improve their even-
handedness.522 
7.341.  China submits that, under the chapeau, the Panel's role is to assess the actual operation of 
China's export quota system. Hence, in contra st to the requirement of even-handedness in 
Article XX(g) of the GATT 1994, the question of how China allocates the limited supply to domestic 
and foreign users through the export quota system becomes relevant only in the chapeau 
analysis.523 According to China, the allocation of quantitative export restrictions should take into 
account the specific conditions prevailing in each WTO Member, including their respective needs.524 
China argues that the principles in Article X III of the GATT 1994 provide guidance in assessing 
whether an export quota system is applied in a manner that constitutes "arbitrary or unjustifiable 
discrimination."525  
7.342.  Concerning the difference between even-h andedness and the chapeau of Article XX, the 
United States submits that, taking into account the different roles and purposes of the 
Article XX(g) even-handedness requirement and the chapeau of Article XX, the factors that might 
be relevant to each test are likely to be highly case- and fact-specific. The United Sates accepts 
that facts that could be relevant for the Arti cle XX(g) even-handedness inquiry could also be 
relevant to the analysis under the chapeau, and vice versa.526 Similarly, in the European Union's 
view no facts are per se  excluded from the Panel's analysis under the even-handedness test or 
under the chapeau. It is, however, for the party that relies upon a certain set of facts to explain 
why they should be considered relevant under either of the tests.527 Japan argues that the 
requirements of Article XX(g) should be assesse d separately before the Panel proceeds with its 
application of the provisions of the chapeau. In Japan's opinion, it would weaken the requirements 
                                               
519 China's first written submission, para , 73, (citing Appellate Body Report, Brazil – Retreaded Tyres , 
para. 227). 
520 United Sates' second written submission, para. 294; European Union's second written submission, 
para. 86; and Japan's second written submission, para. 167. 
521 European Union's second written submission, paras. 88-89, (citing Ap pellate Body Reports, Brazil-
Retreaded Tyres , paras. 227, 229 - 230 and US – Gasoline, pp. 28-29); Japan's second written submission, 
paras. 179-180. 
522 Japan's second written submission, paras. 99 and 180. 
523 China's second written submission, para. 102. 
524 China's second written submission, para. 108. 
525 China's second written submission, para. 108. 
526 United States' responses to Pane l question No. 63, paras. 16-20. 
527 European Union's second written submission, paras. 71-73. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 112 - 
 
  u n d e r  A r t i c l e  X X ( g )  i f  t h e  s c o p e  o f  t ha t  p r o v i s i o n  w e r e  d e f i n e d  b y  r e f e r r i n g  t o  t h e  s c o p e  o f  t he  
chapeau.528 
7.343.  Referring to the Appellate Body's report in US – Gasoline , China points out that "disguised 
restriction", whatever else it covers, may properly be read as embracing restrictions amounting to 
arbitrary or unjustifiable discrimination in international trade taken under the guise of measures 
formally within the terms of an exception listed in Article XX. According to China, while the term "disguised restriction" covers situations where the application of a measure amounts to "arbitrary 
or unjustifiable discrimination", it seeks to identify, more broadly, situations where there is "abuse 
or illegitimate use of the exceptions to substantive rules available in Article XX".
529 China notes 
that the chapeau is thus meant to detect " concealed or unannounced " restrictions on international 
trade, disguised as measures formally within the terms of a subparagraph of Article XX.530 
Recalling the panel report in EC – Asbestos, China points out that whether the application of a 
measure constitutes a "disguised restriction on international trade" may be determined on the basis of an examination of the "design, architec ture and revealing structure" of the measure at 
issue.
531 
7.344.  With respect to the prohibition of "disgu ised restrictions", the complainants recall the 
Appellate Body's statement in US – Gasoline  that "concealed or unannounced restriction or 
discrimination" in international trade does not exhaust the meaning of "disguised restriction."532 
Referring to the panel report in EC – Asbestos, the European Union points out that the 
protectionist objective of a measure can frequently be discerned from its "design, architecture and 
revealing structure".533 Japan also notes that in evaluating whether a measure "complies with the 
chapeau" of GATT Article XX, the Appellate Body has indicated that the structure, design, and 
application of the measure must be examined.534 
7.5.3.1.1  Meaning of "arbitrary or unjustifi able discrimination or  disguised restriction 
on international trade" 
7.345.  As the Panel has noted, a measure that is inconsistent with obligations in the GATT 1994 
may nevertheless be permitted under Article XX. As the Appellate Body stated in US – Gasoline , 
and confirmed in Brazil – Retreaded Tyres,  to be justified under Article XX: 
[T]he measure at issue must not only come under one or another of the particular 
exceptions – paragraphs (a) to (j) – listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX.  The analysis is, in other 
words, two tiered: first provisional justification by reason of characterization of the 
measure under [the sub-paragraph]; second, further appraisal of the same measure under the introductory clauses of Article XX.
535 
7.346.  The various subparagraphs of Article XX delineate the manner in which a Member may 
adopt measures pursuing "legitimate state policies or interests".536 Such measures must then 
satisfy the requirements in the chapeau of Articl e XX, that is, they must not be applied in a 
manner that would constitute arbitrary or unjustifiable discrimination or a disguised restriction on 
international trade. 
7.347.  The Appellate Body has explained that "[t]he burden of demonstrating that a measure 
provisionally justified as being within one of the exceptions set out in the individual paragraphs of 
Article XX does not, in its application, constitute abuse of such exception under the chapeau, rests 
                                               
528 Japan's second written submission, paras. 136-140. 
529 China's first written submission, para . 75, (citing Appellate Body Report, US – Gasoline , p. 25). 
530 China's first written submission, pa ra. 75 (citing Appellate Body Report, US – Gasoline , p. 25) 
(emphasis in original). 
531 China's first written submission, para. 75 (citing Panel Report, EC – Asbestos , para. 8.236). 
532 United Sates' second written submission, para. 300, (citing Appellate Body Report, US – Gasoline, 
p. 25) and Japan's second written submission, para. 177. 
533 European Union's second written submissi on, para. 95 (referring to Panel report, EC – Asbestos , 
para. 8.236). 
534 Japan's second written submission, para. 165. 
535 Appellate Body Report, US – Gasoline , p. 22, DSR 1996:I, 3, p. 20. 
536 Appellate Body Report, US – Gasoline , p. 17, DSR 1996:I, 3, p. 16. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 113 - 
 
  on the party invoking the exception. That is, of necessity, a heavier task than that involved in 
showing that an exception, such as Article XX(g), encompasses the measure at issue".537 
7.348.  In US – Gasoline , the Appellate Body confirmed that the purpose of the chapeau was not 
to address "…the questioned measure or its specific contents as such, but rather the manner  in 
which that measure is applied".538 Referring to the negotiating history of Article XX, the Appellate 
Body explained that the purpose and object of the introductory clauses of Article XX is generally the prevention of "abuse of the exceptions of [what was later to become] Article [XX]."
539   
7.349.  In other words, if the exceptions under Article XX are not to be abused or misused, 
measures falling within the particular exceptions must be applied reasonably, with due regard both 
to the legal obligations of the party claiming the exception and the legal rights of the other parties concerned.
540 The chapeau imposes three requirements for the application of measures that have 
been found to be consistent with one of the subparagraphs of Article XX of the GATT 1994: 
specifically, the measure cannot be applied in a manner which would constitute: (i) a means of arbitrary…discrimination between countries wher e the same conditions prevail; (ii) a means 
of…unjustifiable discrimination between countries wh ere the same conditions prevail; and, (iii) a 
disguised restriction on international trade.
541 These three requirements in the chapeau of 
Article XX of the GATT 1994 reflect the principle of international law that treaties must be complied 
with in good faith.542 Additionally, the Appellate Body has confirmed that these concepts may 
overlap:  
"Arbitrary discrimination", "unjustifiable discrimination" and "disguised restriction" on 
international trade may, accordingly, be re ad side-by-side; they impart meaning to 
one another. It is clear to us that "disguised restriction" includes disguised 
discrimination  in international trade. It is equally clear that concealed  or unannounced  
restriction or discrimination in international trade does not exhaust the meaning of 
"disguised restriction." We consider that "disguised restriction", whatever else it 
covers, may properly be read as embracing restrictions amounting to arbitrary or unjustifiable discrimination in international trade taken under the guise of a measure 
formally within the terms of an exception listed in Article XX. Put in a somewhat 
different manner, the kinds of considerations pertinent in deciding whether the application of a particular measure amounts to "arbitrary or unjustifiable discrimination", may also be taken into account in determining the presence of a 
"disguised restriction" on international trade. The fundamental theme is to be found in 
the purpose and object of avoiding abuse or  illegitimate use of the exceptions to 
substantive rules available in Article XX.
543  
7.350.  The Appellate Body in US – Shrimp  elaborated three conditions for applying the "arbitrary 
or unjustifiable discrimination between countries where the same conditions prevail" clause: first, the application of the measure must result in discrimination . As the Appellate Body stated in US – 
Gasoline , the nature and quality of this discrimination is different from the discrimination in the 
treatment of products which was already found to be inconsistent with one of the substantive obligations of the GATT 1994. Second, the discrimination must be arbitrary  or unjustifiable  in 
character. Third, this discrimination must occur between countries where the same conditions 
prevail .
544   
7.351.  The Appellate Body has made clear that the discrimination mentioned in the chapeau of 
Article XX "could occur not only between different  exporting Members, but also between exporting 
Members and the importing Member concerned."545 In other words, the discrimination mentioned 
in the chapeau covers not only MFN-type discrimination among different countries to which an 
                                               
537 Appellate Body Report, US – Gasoline , p. 23, DSR 1996:I, 3, p. 22-23. 
538 Appellate Body Report, US – Gasoline , p. 22, DSR 1996:I, 3, p. 20. 
539 E/PC/T/C.11/50, p. 7; quoted in GATT, Analytical Index: Guide to GATT Law and Practice, Volume I, 
p. 564 (1995). 
540 Appellate Body Report, US – Gasoline , p. 22, DSR 1996:I, 3, p. 21. 
541 Appellate Body Report, US – Shrimp , para. 150. 
542 Appellate Body Reports, US – Shrimp , para. 158; US – Gambling , para. 339; and Brazil – Retreaded 
Tyres , para. 215. 
543 Appellate Body Report, US – Gasoline , DSR 1996:I, 3, at 16. 
544 Appellate Body Report, US –Shrimp , para. 150. 
545 Appellate Body Report, US – Shrimp , para. 150. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 114 - 
 
  exported product is destined, but also national treatment-type discrimination arising from the 
difference in treatment when the like product is destined for export or for domestic consumption. The Panel understands China to acknowledge this point in response to a question from the Panel.
546 
7.352.  Of particular significance is that the Appellate Body noted in Brazil – Retreaded Tyres  that 
the analysis of whether a measure's application results in arbitrary or unjustifiable discrimination should be based on the cause of the discrimination and not exclusively on the effects of such 
discrimination.  The Appellate Body then explained that arbitrary or unjustifiable discrimination 
exists when the "reasons given for this discrimination bear no rational connection  to the objective 
falling within the purview of a paragraph of Arti cle XX, or would go against that objective.[…]".
547 
In the present dispute, this requirement implies that the discrimination, if any, should be justified 
on the basis of conservation-related criteria. 
7.353.  Having said that, the Appellate Body has also recognized in Brazil – Retreaded Tyres  that 
panels may have to assess the effects  of challenged measures to determine compliance with the 
chapeau of Article XX: 
Having said that, we recognize that in certain cases the effects of the discrimination 
may be a relevant factor, among others, for determining whether the cause or 
rationale of the discrimination is acceptable or defensible and, ultimately, whether the 
discrimination is justifiable. The effects of discrimination might be relevant, depending on the circumstances of the case, because,  as we indicated above, the chapeau of 
Article XX deals with the manner of application of the measure at issue. Taking into 
account as a relevant factor, among others, the effects of the discrimination for 
determining whether the rationale of the discrimination is acceptable is, however, fundamentally different from the Panel's approach, which focused exclusively on the 
relationship between the effects of the discrimination and its justifiable or unjustifiable 
character.
548 
7.354.  The Panel recalls additionally that discrimination may also be arbitrary or unjustifiable in 
cases where it is avoidable and foreseeable. This will be the case where alternative measures  exist 
which would have avoided or at least diminished the discriminatory treatment.549 I n  s u m ,  t h e  
chapeau of Article XX allows for a degree of discrimination provided it is justified and not arbitrary and where the complainants are unable to demonstrate the availability of a WTO-consistent 
alternative measure.  
7.355.  The Panel notes that the prohibition against discrimination is a general principle that is 
reflected in a number of WTO provisions, including GATT 1994 provisions. For example, when 
GATT rules allow for quotas, Article XIII makes clear that the general principle of non-
discrimination in the allocation of such quotas remains. It may, however, be difficult to determine the best method for the non-discriminatory allocation of quotas, with and between other Members. 
For example, Article XIII, which deals with the "n on-discriminatory administration of quantitative 
restrictions", provides that in applying restrictions to any product, WTO Members shall aim at allocating the quota in shares approaching as closely as possible the shares which the various Members might be expected to obtain in the absence of such a quota. We see here no prescription 
or methodology for setting particular quota allocations other than the principle that quota 
                                               
546 China's response to Panel question No. 47. Specifically, the Panel put the following question to 
China: "Complainants argue that discr imination between "countries" within the chapeau of Article XX of the 
GATT 1994 includes not only MFN-type discrimination, but also NT-type discrimination (see, e.g. para. 54 of the European Union's oral statement at the first subs tantive meeting). Does China agree?" China responded 
that it "agrees that the requirement not to apply an ex port quota system in a manner that would constitute 
'arbitrary discrimination' also covers arbitrary di scrimination between domestic and foreign consumers". 
547 Appellate Body Report, Brazil – Retreaded Tyres , para. 227. 
548 Appellate Body Report, Brazil – Retreaded Tyres , paras. 229-230. (footnotes omitted) 
549 Appellate Body Report, US – Gasoline , pp. 28-29, DSR 1996:I, 3, at 26-27. In the case of those 
Article XX exceptions that apply to measures "necessa ry to" the achievement of a particular objective, 
alternatives are considered during the analysis under the paragraph at issue. However, in the context of 
Article XX(g), alternatives may be considered during the chapeau analysis. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 115 - 
 
  allocations should reflect as closely as possible the shares that Members would likely obtain in the 
absence of such quotas.550  
7.356.   The principle that restrictions should, so far as possible, maintain the relative market 
shares that all Members would have in the absence of restrictions is also echoed in Article XI:2 of 
the GATT, although in the somewhat narrower contex t of import restrictions on agricultural and 
fisheries products. The final paragraph of Article XI:2 provides that  
[A]ny restrictions applied … shall not be such as will reduce the total of imports 
relative to the total of domestic production, as compared with the proportion which 
might reasonably be expected to rule between the two in the absence of restrictions. In determining this proportion, the contra cting party shall pay due regard to the 
proportion prevailing during a previous representative period and to any special 
factors which may have affected or may be affecting the trade in the product 
concerned. 
7.357.  We note that no parties in the current disp ute have relied on this Article – and, indeed, in 
their response to a question from the Panel on th e relevance of this provision, the complainants 
urge that the principles it embodies cannot be used to interpret "even- handedness". The Panel is 
simply observing that this general principle appears to underpin the GATT regime.  
7.358.  The Panel recalls that GATT Article XXVIII:4 Ad Note also seems to recognize that, in 
determining the substantial suppliers of a Member intending to modify its tariff commitments, that Member must look at the shares that other contracting parties could reasonably be expected to have in the absence of discriminatory quantitative restrictions . The Panel sees once again 
embodied in this provision the principle that GA TT disciplines on non-discrimination intend to 
protect legitimate competitive opportunities that should be available to WTO Members. 
7.359.  Finally, we note that Article XX(j) provides that where a product is in short supply, 
measures for the acquisition and distribution of the product should ensure that all Members have 
access to an "equitable share" of the product. Th ere is no requirement for any equal or strictly 
non-discriminatory allocation. Although the special circumstances that Article XX(j) was drafted to 
handle (severe shortages caused by war and other emergencies
551) counsel against the provision's 
direct use in the interpretation of Article XX(g), what is important to note is that this Article too seems to us to reflect a general principle that, in  the case of restrictions on trade, Members' 
access to goods and materials should reflect as closely as possible the situation that would prevail 
in the absence of these restrictions. Articles  XI:2, XIII, XXVIII, and XX(j) of the GATT 1994 
together suggest that the overarching goal or co ncern of WTO rules in this area is to reduce 
distortion in trade flows caused by such restrictions and ensure that Members maintain their 
relative position vis-à-vis  each other with respect to their market shares and access to goods and 
materials.  
7.360.  In this regard, no WTO provision suggests  that the purpose of WTO disciplines on export 
restrictions is to equalize Members' access to goods and resources. The WTO disciplines on 
justifiable trade restrictions are not redistributive ; instead, they seem to aim for the maintenance 
of what the relative market situation would be abse nt the challenged restriction. This suggests that 
where, in the absence of restrictions, different Members would have naturally unequal shares of 
goods and resources, it is not the purpose of WTO law to "correct" such inequalities. In the Panel's 
view, the WTO concern for non-discrimination is limited to ensuring that equality in competitive opportunities is maintained when non-trade considerations are regulated.  
7.361.  The Panel now proceeds to apply the legal test explained above to the facts in this case.  
                                               
550 The Panel is aware that the Import Licensing Agreem ent includes some criteria for the allocation of 
tariff rate quotas. 
551 See, e.g. General Agreement on Tariffs and Trade, Summary of the Third Meeting held at the Palais 
des Nations, 8 March 1965, at 2.30pm,  SR.22/3, 16 March 1965, pp. 24-25. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 116 - 
 
  7.6  Application of Article XX(g) to China's export quota on rare earths 
7.6.1  Introduction 7.362.  The Panel will now apply the legal test discussed above to China's export quota on rare 
earths. The Panel will first assess whether the export quota complies with subparagraph (g), and 
will then proceed to consider whether the export quota is justified under the chapeau of Article XX, 
before reaching an overall conclusion on the quota's WTO-consistency. 
7.6.2  Application of subparagraph (g) to China's rare earth export quota 
7.363.  Before proceeding, the Panel recalls that, in its view, to comply with the legal test under 
subparagraph (g), the challenged measures must be genuinely related to, that is to say really  
about , conservation, and if they are, any conservation-related burden must be imposed even-
handedly on foreign and domestic users.
552 As the Panel explained in its legal analysis above, the 
test under Article XX(g) is unitary in nature, an d a regulating Member seeking to rely on the 
provision must show that its measure conforms with all of the Article's requirements. The Panel is of the view that a measure's compliance with Article XX(g) can be determined only on the basis of 
a holistic assessment of whether the challenged measure relates to the conservation of rare earths 
and is made effective in conjunction with restrictions on domestic production or consumption. Having said that, the Panel notes that the Appellate Body in its interpretation of subparagraph (g) 
has often examined Article XX(g) by dealing with its first and second phrases separately and 
sequentially.
553 For ease of exposition, we examine China's export quota measures under each of 
the first and second clauses of the Article before reaching a final, overall conclusion at the end of our analysis on whether the challenged export quota relates to the conservation of rare earths and 
is made effective in conjunction with domestic restrictions. 
7.6.2.1  First part: whether China's export  quota on rare earths "relates to the 
conservation of exhaustible natural resources" 
7.6.2.1.1  "exhaustible natural resources"  
7.364.  In our discussion of the legal test under Article XX(g), we noted that the parties appear to 
disagree about the scope of the term "exhaustib le natural resources". While the complainants 
suggest that semi-processed and processed raw materials fall outside the scope of "exhaustible 
natural resources", China argues that the term should be understood broadly.  
7.365.  The Panel indicated that, in its opinion, it is not necessary to decide the precise scope of 
the term in this dispute, since all parties agree that measures can "relate to the conservation of 
exhaustible natural resources" even if they are not imposed directly on the exhaustible natural 
resource in question. Moreover, in the specific context of this dispute, both the complainants and China agree that, at the very least, rare earth, tungsten, and molybdenum ores are "exhaustible 
natural resources" – a position that, the Panel observes, finds support in previous jurisprudence
554 
and in the history of Article XX(g).555 The question that the Panel does need to address, however, 
is whether China's export quota measures "relate to the conservation" of rare earth ores.  
                                               
552 In this Panel report, when the Panel uses the terms "users" it is  also referring to consumers. 
553 By analogy, the Appellate Body has emphasized that "[i]nterpretation pursuant to the customary 
rules codified in Article 31 of the Vi enna Convention is ultimately a holi stic exercise that should not be 
mechanically subdivided into rigid co mponents": Appellate Body Report, EC – Chicken Cuts , para. 176. 
However, for ease of exposition an d analysis, panels and the Appellate Body frequently examine the relevant 
elements of the general rule of in terpretation separately, and sequenti ally. In this regard, the panel in US – 
Section 301 Trade Act  understood that "the elements referred to in Article 31 – text, context and object-and-
purpose as well as good faith – are to be viewed as one ho listic rule of interpretation  rather than a sequence of 
separate tests to be applied in a hier archical order." Notwithstanding, that panel explained that "for pragmatic 
reasons", the normal way of applying this general ru le is to examine the elements of the general rule 
sequentially: Panel Report, US – Section 301 Trade Act , para. 7.22. 
554 Appellate Body Report, US – Shrimp , para. 128; Panel Reports, China – Raw Materials , para. 7.369. 
555 See the Panel's discussion of the legal test under Article XX(g). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 117 - 
 
  7.6.2.1.2  "conservation" 
7.366.  China must demonstrate that its export quota relates to the conservation  of rare earth 
ores in order to fall within the exception in Article XX(g). As the Panel explained above, our 
interpretation of the term "conservation" in this context should take into account the international 
principles of sovereignty over natural resources and sustainable development.  
7.367.  China argues that it has a "comprehensive conservation policy" whose purpose is to ensure 
the "effective protection and rational utilization" of China's rare earth reserves.556 China points to 
the 1991 Circular  to support its argument that its comprehensive conservation policy is designed 
to "reasonably develop, utilize, and protect"557 its "limited rare earth resources".558 Moreover, 
China argues that its comprehensive conservation policy, including its extraction, production, and export quotas, are designed to "control[] the depletion rate of the rare earth resources".
559  
7.368.  China explains that its rare earth conser vation policy came into existence in 1991, when 
the State Council designated rare earths as "special minerals under national protective mining" that China must "reasonably develop, utilize and protect".
560 In 2005, the State Council specified 
in another Circular that "[f]or the purpose of conserving domestic resources [including rare 
earths], it is necessary to control the export amount of certain exhaustible resource products while controlling the domestic production and consumption of them".
561 In its 2011 Several Opinions  – a 
high-level policy-setting instrument that is legally binding for all ministries, agencies, commissions, 
and provincial and local Chinese authorities562 – the State Council articulated a rare earths policy 
requiring "effective protection and a rational utilization"563 of rare earths by all responsible 
authorities within China.  
7.369.  China explains564 that its rare earths conservation policy consists of (a) strict control of 
access to the rare earth industry; (b) taxation measures; (c) tackling harm to the environment caused by rare earth mining and production; (d) strict quantitative control of extraction, 
production of smelted and separated rare earth products, and export restrictions, all three of which 
are interconnected and reinforcing; and (e) strict enforcement of laws and regulations relating to 
the rare earths industry.  
7.370.  According to China, its conservation policy starts with the rare earths in the ground. The 
extraction quota controls the annual depletion rate of the rare earth resources.
565 This quota is 
split between light and medium/heavy rare earths according to the main types of ores and their geographical location in China. This quota is monitored by the Ministry of Land and Resources 
(MLR).
566   
7.371.  China also imposes a production quota on smelted and separated rare earth products in 
addition to the extraction quota. This quota is se t and administered by the Ministry of Industry and 
Information Technology (MIIT). It covers approximately the same total volume as the extraction 
quota, with a slight adjustment for the rare earth concentrates that are lost during further processing.
567 China argues that this second quota – imposed at the smelting and separating stage 
of the rare earths supply chain – facilitates the en forcement of the extraction quota against illegal 
mining. According to China, were there only an extraction quota, and given the difficulty of 
                                               
556 China's second written submission, para. 29. 
557 China's second written submission, para. 29 and Circular on Listing Tungsten, Tin, Antimony and 
Ionic Rare Earth Minerals as Specified Mi nerals under National Protective Mining  (Exhibit CHN-12, JE-72). 
558 China's second written submission, para. 34. 
559 China's second written submission, para. 36. 
560 1991 Circular, (Exhibit CHN-12, JE-72), second introductory paragraph. 
561 Measures Limiting the Export of  Certain of High-Energ y-Consuming, High-Polluting and Resource-
Related Products , (Exhibit CHN-62), Section III. 
562 The Status and Effect of Severa l Opinions of the State Council on Promoting the Sustainable and 
Sound Development of the Rare Earth In dustry in China's Domestic Law System , 9 June 2013 
(Exhibit CHN-185). 
563 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13) Introductory Paragraph. 
564 China's first written submission, para. 19. 
565 China's second written submission, para. 36; China's first written submission, paras. 24 and 175. 
566 China's Answers of 14 March 2013, para. 94; China's second written submission, para. 36. 
567 China's second written submission, para. 37 and footnote 94; China's first written submission, 
paras. 24 and 176-183. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 118 - 
 
  detecting illegal mining, illegal mines could sell their ore products to smelting and separating 
enterprises, who could process unrestrained quantities of these illegal products without being inspected.
568 China further urges that the monitoring and enforcement of the production quota by 
a different Chinese Ministry (MIIT) than the one that monitors the extraction quota (i.e. the MLR), 
enhances the enforcement of China's rare earth conservation goal.  
7.372.  China explains that the production quota also furthers China's conservation policy by 
effectively placing an annual limit on extraction in cases where smelting and separating enterprises 
have unused stocks of unprocessed rare earth concentrates due to lack of demand in the previous 
year. In the absence of a production quota, these enterprises could produce unrestrained amounts of smelted and separated products from (a) these older concentrate stocks, in addition to (b) the 
full amount of rare earth concentrate that is produced according to the new extraction quota for 
the running calendar year. However, China argues that because China imposes a production quota, 
in the new year, the smelting and separating enterp rises will only need to use a part of the new 
ores that can be produced according to the extraction quota for that year. According to China, 
these enterprises will use their stockpiles first. Thus, argues China, the result of the production 
quota is that demand for newly extracted ores will be limited, which will keep ores in the ground.     
7.373.  Finally, China also imposes an export quota to "manage what is effectively the world 
supply of the volume of rare earth products determined in the extraction and production 
quotas".
569 China asserts that the export quota applies to the rare earth products that are traded 
internationally and thus drive the depletion of the resources. According to China, these products are rare earth oxides, metals and salts.
570 China maintains that the export quota "relates to" 
conservation in a number of ways, each of which will be discussed by the Panel below.  
7.374.  The complainants do not accept China's characterization of the objective of its export 
quota measures. According to Japan, China's export regime "serves no purpose other than" 
benefiting Chinese rare earth consumers at the expense of foreign users.571 The European Union 
does not contest "China's objective to conserve exhaustible natural resources", but argues that the export quota measures "do not form part of that policy".
572 The United States similarly does not 
contest the existence of a comprehensive conservation policy, but argues that the question for the 
Panel is whether "the export quotas have a close and genuine relationship of ends and means with respect to the goal of natural resource conservation", and not whether China "has in place a comprehensive conservation policy".
573 The United States urges that China's reliance on its 
"comprehensive conservation policy" misconstrues language developed by the Appellate Body in 
the context of interpreting Article XX(b)574, and stresses that "China [is] attempt[ing] to articulate 
a new test for "relating to" under Article XX(g) … [which] would effectively alter and lower the 
standard that a measure must meet in order to be considered a conservation measure".575 
7.375.  In our view, China has demonstrated that it has a comprehensive conservation policy, and 
we recognize that it is in China's economic interests not to exhaust or deplete its exhaustible rare 
earth resources. The Panel also considers that China has demonstrated that it has developed a 
series of interconnected measures and programmes, including extraction and production caps and enforcement actions, which are designed to manage the extraction and supply of rare earth resources through a conservation policy.  
7.376.  The Panel observes, however, that this di spute is not concerned with whether China has an 
appropriate conservation policy, or whether its conservation programmes are comprehensive. None of the complainants challenges China's extraction or production quota as such
576, or the 
many forms of enforcement, including site and documentary checks, that China claims to have 
implemented to enforce its conservation policy.  
                                               
568 China's second written submission, para. 37. 
569 China's executive summary (part II), para. 8. 
570 China's second written submission, paras. 12-13 and 70-71. 
571 Japan's second written submission, para. 4. 
572 European Union's second written submission, para. 19. 
573 United States' second written submission, para. 96. 
574 United States' second written submission, paras. 97-98. 
575 United States' second written submission, para. 99. 
576 See, e.g. European Union's second written submission, paras. 4 and 7.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 119 - 
 
  7.377.  Instead, this dispute is about whether spec ific measures – export quotas – claimed to be 
part of this conservation policy are inconsistent with China's obligations under the WTO Agreement, as alleged by the complainants . The parties agree that genuine conservation 
measures on rare earths, potentially including export quotas in certain circumstances, could be 
covered by subparagraph (g), so long as they co mply with the other requirements of (g) and the 
chapeau of Article XX. The first question the Panel must address, therefore, is whether the specific 
export quota on rare earths "relates to" the "conservation" of exhaustible rare earths. While the 
Panel will consider the export quota in the contex t of China's "comprehensive conservation policy", 
it is the export quota itself, and not the conservation policy more broadly, that will be scrutinized to determine its compatibility with WTO law. The other measures that comprise China's comprehensive conservation policy are relevant to the Panel's inquiry only insofar as they shine 
light on the design and architecture of the challenged export quota and its role in China's 
comprehensive conservation policy.  
7.6.2.1.3  "relating to"  
7.378.  The Panel now turns to consider whether China's export quota measures "relate to" the 
conservation of rare earths. As the Panel noted in its discussion of the legal test under Article XX(g), the Panel will conclude that China's measures "relate to" the goal of conserving rare 
earth ores if China can establish that the design  and architecture of the export quota show or 
manifest a "close", "real", "rational", and "substanti al" relationship with the conservation objective.  
7.379.  China argues that its measures make a "substantial contribution" to conservation, and are 
therefore "related to" conservation. The Panel recalls, however, that according to the Appellate 
Body, the test for whether a challenged measure "r elates to" conservation turns on an examination 
of its "general design and structure", and in particular on whether the measure is 
"disproportionately wide in its scope and reach in relation to the policy objective of protection and 
conservation" or whether, conversely, it is "reasonably related" to the conservation objective, such 
that its relationship with conservation is "close and real" and "substantial".
577 As the Panel 
explained in its discussion of the legal test, the test in Article XX(g) focuses on the written 
measure, on the design and architecture of the ch allenged export quota, and its operation, while 
under the chapeau of Article XX the Panel will re view the manner in which the quota system is 
applied. As the Panel noted, the analysis under su bparagraph (g) does not require an evaluation of 
the actual effects of the concerned measures. The Panel is thus not required to examine whether a 
challenged measure has in fact improved the level of conservation of exhaustible natural 
resources. There is therefore no need for the Panel to decide, in quantitative or qualitative terms, 
precisely what level of contribution a challenged measure has made to the conservation objective. 
Instead, the Panel looks at the nature of the challenged measures to determine whether, as a 
matter of design and architecture, they assist, support or further the goal of conservation.  
7.380.  China advances a number of arguments to show that its export quota measures "relate to" 
conservation. First, it argues that the texts of the challenged measures refer to the goal of 
conservation.578 Second, China argues that its export qu ota "relates to" conservation because it 
(a) enforces China's extraction and production caps579; (b) sends a signal that China intends to 
reduce its rare earth extraction,580 and thus that new sources of supply need to be developed581; 
and (c) encourages stability in the international rare earth market by acting as a safeguard against 
"demand surges".582 Third, China argues that the export quota is necessary to enable China to 
"manage what is effectively the world supply of the volume of rare earth products"583 by allocating 
the limited amount of rare earth products that are legally produced in China each year between 
Chinese and foreign consumers in a way that responds to China's and the world's "sustainable development" needs.
584 Although this argument underpins all of China's other arguments, China 
seems to raise this in part II of its executive summa ry as an additional basis justifying the export 
quota. The Panel will thus deal with this argument independently from the first and second 
                                               
577 Appellate Body Report, US –Shrimp , para. 141. 
578 China's first written submission, paras. 91-98. 
579 China's second written submission, paras. 44-49. 
580 The Panel notes that China also made this 'signa lling' argument in the context of tungsten: see 
below, section 7.7.2.1.3.2 of the Panel's reports. 
581 China's second written submission, paras. 50-52. 
582 China's second written submission, paras. 53-61. 
583 China's executive summary (part II), para. 8. 
584 China's second written submission, para. 53. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 120 - 
 
  arguments. Finally, China argues that the manner in which the export, extraction, and production 
quotas are set demonstrates that the export quota "relates to" conservation. China argues that its 
export quota relates to conservation and is not a measure imposed with a view to benefiting its domestic industry. According to China, the export quota is "central"
585 to China's conservation 
policy and to its sovereignty over natural resources.  
7.381.  The complainants' take issue with China's claim that its export measures "relate to" 
conservation. They argue that the textual referenc es to conservation are ambiguous, and that a 
close examination of the design and architecture  of the export quota measure shows that they 
"relate to" industrial policy rather than conservation.  
7.382.  As the Panel explained above, an export  quota can, in principle, be justified under 
subparagraph (g) of Article XX. The parties discussed this issue briefly in their written submissions 
and during the meetings with the Panel, and all seem to agree with this proposition. In this 
dispute, China bears the burden of persuading the Panel that its export quota measures relate to 
the conservation of exhaustible natural resource s and are made effective jointly with domestic 
restrictions. 
7.383.  The Panel will now address in turn each of the justifications raised by China with respect to 
the first part of subparagraph (g) – that is, thos e that relate to the conservation of exhaustible 
natural resources.  
7.6.2.1.3.1  Textual references to conservation 7.384.  The Panel begins by considering China's argument that the texts of the five measures
586 
constituting its export quota on rare earths indica te the existence of a substantial, close, and real 
relationship between that quota and the objective of  conservation. According to China, the text of 
those measures explicitly refers to the objectiv e of "protecting resources", and clearly links the 
export quota with China's policy of conserving re sources by cross-referencing to the quota's legal 
basis (i.e. to the Foreign Trade Law  and Regulations).587 In addition, China points to a number of 
State Council policy documents, in particular the 1991 Circular  designating rare earths as a 
"specified mineral subject to protective mining" and the 2011 Several Opinions , which, China 
argues, explicitly state that the export quota is part of a comprehensive conservation 
programme.588  
7.385.  In response to the argument made by the complainants during the first substantive 
meeting that China's comprehensive conservation policy "post-dates" the establishment of the 
export quota, China points out that each of the Circular  documents and Several Opinions  of the 
State Council pre-dates the 2012 quota system. Mo reover, China argues that the addition of 
textual references to "conservation" in its 2012 export quota system reflects its efforts to bring its 
laws and regulations into conformity with WTO law589, including the decision in China – Raw 
Materials .  
7.386.  The complainants disagree with China on several counts regarding the value of the textual 
references to "conservation" in China's export quota measures. First, the complainants suggest 
that, as a matter of fact, only a small number of China's measures reference conservation.590 
Second, they argue that the references that do exist do not explain the contribution to the conservation goal of the measures in which they appear.
591 The complainants also note that the 
State Council's Several Opinions  white paper, which China discussed at length in its first written 
submission, fails to provide any explanation about how the export quota relates to the 
                                               
585 China's response to Panel question No. 93. 
586 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48); 2 012 Application Qualifications and 
Procedures for Rare Earth Export Quotas , (Exhibits CHN-38, JE-61); 2012 List of Enterprises for the Export of 
Rare Earths , (Exhibits JE-66, CHN-55); 2012 First Batch Rare Earth Export Quotas , (Exhibits CHN-56, JE-55); 
and 2012 First Batch Rare Earth Export Quotas (Supplement) , (Exhibits CHN-57, JE-56). See also China's first 
written submission, paras. 79 and 91. 
587 China's first written submission, paras. 89 and 91-98; China's second written submission, para. 41. 
588 China's second written submission, para. 41. 
589 China's second written submission, paras. 22-23. 
590 Japan's second written submission, para. 86. 
591 United States' second written submission, paras. 117 and 121; European Union's second written 
submission, para. 105; Japan's second written submission, para. 86. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 121 - 
 
  conservation of rare earths.592 Third, in the complainants' view, the limited references to 
conservation in the measures imposing, implementing, and administrating the export quota, and in particular in those measures promulgated in 2012 and late 2011 after the issuance of the panel 
reports in China – Raw Materials , do not provide sufficient support for China's argument.
593 Fourth, 
the complainants contend that cross-references to legal instruments such as the Foreign Trade 
Law and Regulations  in the export quota measures is insufficient to meet China's burden of proof 
under Article XX(g), since those instruments also list reasons other than "conservation" for which 
the export quotas might have been imposed.594 Finally, the complainants list a number of China's 
legal and policy instruments595 to demonstrate that China's export quota on rare earths serves the 
purpose of promoting China's industrial policy goals.596 
7.387.  The Panel examines first whether the challenged legal instruments that China claims 
constitute its "comprehensive conservation policy" refer to the objective of conserving exhaustible 
natural resources. We recall that in previous disputes, panels have indeed had regard to the text of a challenged measure. For instance, the panel in China – Raw Materials  recognized that "[t]o 
determine whether a challenged export restriction relates to conservation, a panel should examine 
the text of the measure itself".
597  
7.388.  As such, we think that explicit references to "conservation" in the text of a measure may, 
depending on the nature of the reference, provide evidence that the measure in fact relates to 
conservation. While it seems correct to us that "a mere reference to 'conservation' in a measure is not necessarily an indication that the measure is related to a legitimate conservation goal", and while we agree that, as a general rule, something "beyond just a mention of conservation" will be 
needed to establish the existence of the required  relationship between a challenged measure and 
the conservation objective, the Panel believes that such references could help to demonstrate that the measure relates to conservation. Such references provide evidence of the regulating WTO 
Member's concerns, and can support a finding by the Panel that the measure in which they appear 
is "related to" conservation. References to conservation are part of the "design and architecture" of a challenged measure, and as such may shed light on the policy considerations and goals that 
underpin it.  
7.389.  Moreover, and in the particular context of th e measures at issue, we think that even if the 
complainants are correct that China rewrote its export restrictions and added new references to conservation in response to the China – Raw Materials  Reports, this fact does not undermine their 
legitimacy or evidentiary value.
598 The mere fact that textual references to conservation were 
included in the text of China's export measures following the Reports in China – Raw Materials  
does not indicate to us that those references are necessarily, as Japan contends, "self-serving".599 
Indeed, it is to be expected that a Member will seek to improve and update measures found to be 
WTO-inconsistent to bring them into conformity with WTO law. Allowing the complainants' argument that China's textual references are "s elf-serving" would, we think, put unsuccessful 
respondents in the unfortunate position of not being able to reflect a new policy or justification in 
measures previously challenged in another dispute.  
7.390.  Finally on this point, we recall the Appe llate Body's admonition that "Members of the WTO 
should not be assumed, in any way, to have continued previous protection or discrimination 
                                               
592 United States' second written submission, para. 120; European Union's second written submission, 
paras. 110-112. 
593 United States' second written submission, para. 118; European Union's second written submission, 
paras. 103-104; Japan's second written submission, paras. 86-87. 
594 United States' second written submission, para. 119; European Union's second written submission, 
para. 107. 
595 The Panel notes that, ac cording to China, the Several Opinions , though a "policy statement", 
nevertheless mandate[s] the local governments, Ministries, Commissions and Agencies affiliated to the State Council  to implement a policy to ensure'effective protection  and a rational utilization of rare earths'": China's 
first written submission, para. 102 (internal citations om itted). The Panel therefore considers that whether or 
not this policy document is strictly a legal instrument, is related to the implementation of China's rare earth 
conservation policy.  
596 United States' second written submission, para. 121; European Union's second written submission, 
para. 114–116. 
597 Panel Reports, China – Raw Materials , para. 7.418. 
598 Cf European Union's second written submission, paras. 103 and 112. 
599 Japan's second written submission, para. 88. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 122 - 
 
  through the adoption of a new measure. This would be close to a presumption of bad faith".600 We 
understand this statement as instructing panels to read new measures adopted by a Member in response to a negative panel or Appellate Body find ing in light of a presumption of good faith. The 
mere fact that China might, at a previous point in time, have imposed export quotas that were 
WTO-inconsistent does not in itself justify treating the measures challenged in this dispute (i.e. the 
2012 export quota) as a mere continuation of its prev ious policies. To the contrary, and in line with 
the presumption of good faith, China is presumed to be "abid[ing] by [its] treaty obligations in 
good faith, as required by the principle of pact a sunt servanda articulated in Article 26 of the 
Vienna Convention".
601 The references to "conservation" in China's export quota under challenge in 
this dispute are thus to be regarded as an indication of China's efforts to adopt WTO-consistent measures in conformity with previous decisions ag ainst its export quotas. We reiterate, however, 
that references to "conservation" are not sufficient on their own to prove that the challenged 
measures are "related to" conservation. They are but one factor that the Panel will consider. In 
this regard, we consider that references to cons ervation cannot insulate measures from challenge 
on the basis that their design and architecture do not "relate to the conservation of exhaustible 
natural resources". 
7.391.  The Panel will now proceed to examine th e text of each of China's five export quota 
measures. As the Panel has explained, China argues that these measures themselves contain 
references to the objective of conserving natural resources, and so establish the existence of a close, real, and substantial relationship betw een the export quota system and the goal of 
conserving exhaustible rare earth resources.  
7.392.  First, the Panel notes that China's 2012 Application Qualifications and Procedures for Rare 
Earth Export Quotas  indicates that the objective of the 2012 export quota system for rare earths is 
to "protect resources". It also cross-references the legal basis for conservation measures: 
In order to protect the resources and the environment, further strengthen the rare 
earth export administration, and regulate the export operation order, according to the relevant provisions of the "Foreign Trade Law of the People's Republic of China", 
"Regulations of the People's Republic of China on the Administration of the Import and 
Export of Goods", the "Public Notice of the Application Standards and Application Procedures for the 2012 Rare Earth Export Quota" is hereby published.
602 
7.393.  Second, the Panel observes that the 2012 List of Enterprises for the Export of Rare Earths  
also sets out the goal of "protect[ing] resources" and refers to the legal basis for conservation 
measures in its introductory paragraph: 
In order to protect resources and environment, and to further enhance the 
administrations on exports of rare earth and coke, and to regularize the order of 
export business, in accordance with the Fore ign Trade Law of the People's Republic of 
China and the Regulations of the People's Republic of China on Administration of 
Import and Export of Goods, the List Pub lishing Online Export Enterprises of Rare 
Earth of 2012 … are hereby published.603 
7.394.  Third, the Panel notes that the 2012 Export Licensing Catalogue , which specifies the goods 
subject to quota licences, does not explicitly refer to the conservation objective. However, like the 
first two measures described above, it refers to the measures providing its legal basis604, which, 
according to China, explicitly links export restraints and conservation: 
Pursuant to the Foreign Trade Law of the People's Republic of China and the 
Regulations on the Administration of the Import and Export of Goods of the People's 
                                               
600 Appellate Body Report, Chile – Alcoholic Beverages , para. 74 (footnote omitted). 
601 Appellate Body Report, EC – Sardines , para. 278.  
602 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , Introductory 
Paragraph, (Exhibit CHN-38, JE-61). 
603 2012 List of Enterprises for the Export of Rare Earths , Introductory Paragraph, (Exhibit CHN-55, 
JE-66). 
604 These are Foreign Trade Law , (Exhibits CHN-11, JE-49) and Regulations on the Administration of the 
Import and Export of Goods , (Exhibit CHN-54, JE-50). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 123 - 
 
  Republic of China, the 2012 Export Licensing Management Goods List is hereby 
promulgated.605 
7.395.  Fourth, the Panel observes that the 2012 Notices specifying the different batches of the 
2012 rare earths export quota (i.e. approvals of expo rt quota shares) do not explicitly refer to the 
conservation objective. However, they do cross-reference to the measures providing the legal 
basis for using export quotas. According to China, these measures (i.e. Foreign Trade Law and 
Regulations on the Administration of the Import and Export of Goods ) make explicit the link 
between export restraints and the goal of conservation. The introductory paragraph of the 2012 
First Batch Rare Earth Export Quotas  provides as follows: 
In accordance with the Regulations of the People's Republic of China on the 
Administration of the Import and Export of  Goods, the list of rare earth exporting 
enterprises of 2012 is hereby published and the first batch of rare earth export quota 
is hereby allocated.606 
7.396.  The Panel notes that the same cross-references appear in the measures specifying the 
supplement to the first batch as well as the second batch of the 2012 rare earth export quota.607 
7.397.  Having determined that all of the 2012 export quota measures explicitly state that they are 
adopted "in accordance with" Foreign Trade Law and Regulations on the Administration of the 
Import and Export of Goods , the question before us is whether these legal measures serve to link 
China's export restraints with China's conservation objective, such that the challenged export quota may be considered to be "related to" conservation.  
7.398.  The Panel has difficulty accepting China's claim that textual references to the Foreign 
Trade Law  and/or the Regulations on the Administration of the Import and Export of Goods  
establish the necessary connection between China's export quota and the goal of conserving exhaustible natural resources. The Panel acknowledges that Article 16(4) of the Foreign Trade 
Law
608 provides that the export of goods may be restricted "in order to effectively conserve 
exhaustible natural resources". However, it is Article 35 of the Regulations on the Administration of 
the Import and Export of Goods  that sets out the circumstances in which the export of goods "shall 
be restricted". Specifically, Article 35 allows for the imposition of restrictions in the circumstances 
"set forth in subparagraphs (1), (2), (3) and (7) of Article 16 of the Foreign Trade Law".609 
However, these subparagraphs concern restrictions for the purposes of (1) safeguarding national security, social and public interests, or public morals; (2) protecting human or animal health, or to 
protect the environment, (3) controlling the im port and export of gold and silver; and (7) 
establishing or accelerating the establishment of specific domestic industries.
610 As the Panel has 
noted, subparagraph 16(4) of the Foreign Trade Law  refers to "effectively conserv[ing] exhaustible 
natural resources", but this subparagraph is not explicitly mentioned in the Regulations. As such, 
the Panel does not consider that Article 35 of the Regulations supports China's contention that its export quota on rare earths is linked to the conservation objective.
611 Moreover, because the 
                                               
605 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , Introductory 
Paragraph, (Exhibit CHN-38). 
606 2012 First Batch Rare Earth Export Quotas , Introductory Paragraph, (Exhibits CHN-56, JE-55). 
607 2012 First Batch Rare Earth Export Quotas (Supplement) , Introductory Paragrap h, (Exhibits CHN-57, 
JE-56) (referring to the  2012 First Batch Rare Earth Export Quotas , Introductory Paragraph, (Exhibits CHN-56, 
JE-55), which itself refers to the Regulations on the Administration of the Import and Export of Goods , 
(Exhibits CHN-54, JE-50): see 2012 Second Batch Rare Earth Export Quotas , (Exhibits CHN-58, JE-57) ("In 
accordance with the Regulations of the People's Re public of China on the Administration of the Import and 
Export of Goods , the second-batch of rare earth ex port quota is hereby passed down"). 
608 Foreign Trade Law , (Exhibits CHN-11, JE-49). 
609 Regulations on the Administration of  the Import and Export of Goods , Article 35, (Exhibits CHN-54, 
JE-50). 
610 Foreign Trade Law , (Exhibits CHN-11, JE-49). 
611 The Panel notes that Article 35 of the Regulations , when enacted in 2002, must have referred to the 
1994 version of the Foreign Trade Law  (Exhibit CHN-61). The 1994 version of the law does authorize, in Article 
16(2), the imposition of import and ex port restrictions "where the export shall be restricted on account of 
domestic shortage in supply or effective protection of  exhaustible domestic resources". However, this version 
of the law was repealed and replaced by a new Foreign Trade Law  adopted in 2004 (Exhibit CHN-11), which, in 
subparagraphs (1), (2), (3), or (7),  as the Panel has noted, does not contemplate the application of export or 
import restrictions for the purpose of protecting exhaustible resources (although this is contemplated in 
subparagraph (4) of Article 16). With out any information on this point from China, the Panel struggles to WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 124 - 
 
  Foreign Trade Law  contains a range of provisions allowing for the imposition of export (and import) 
restrictions for a wide variety of reasons, the Panel cannot find that bare references to that instrument in China's export quota measures are capable of establishing the relationship required under Article XX(g).  
7.399.  The Panel accepts that some of China's export quota measures contain references, 
whether direct or indirect, to the goal of conser ving exhaustible natural resources. However, in 
examining the legal and policy instruments submitted in evidence by China, the Panel has also 
found a number of references to goals other than conservation. The complainants too have noted 
some of these in their written submissions. 
7.400.  The Panel begins by taking note of the Circular on Listing Tungsten, Tin, Antimony and 
Ionic Rare Earth Minerals as Specified Minerals under National Protective Mining
612 which places 
rare earths under "national protective mining".613 In our view, the focus of this document is on the 
prevention of illegal mining to ensure that the "comparative advantage" China enjoys in these non-ferrous metal minerals is not illegally exploited and that the State does not "suffer from significant 
losses".
614 Although the goal of maintaining a "comparative advantage" may not necessarily be 
contrary to the goal of conservation, the Panel considers that it is primarily an industrial policy goal, since it relates to the competitive relationship between Chinese and foreign industries rather 
than the pace at which natural resources are consumed.  
7.401.  Next, the Panel observes that China's Twelfth Five-Year Development Plan for New 
Materials Industry , published in January 2012, articulates China's policy goal of ensuring that 
"RMB2 Trillion Yuan of output value is reached wi th an average annual growth rate of over 25%". 
Regarding rare earths, this Plan adds that "[t]ak ing the improvement of performance of rare earth 
new materials, the expansion of application in high-end fields and the increase of added value of products as key points, it would give full play to the advantages of rare earths resources in China 
to strengthen the industrial scale of rare earths new materials." As the Panel understands it, this is 
clearly a reference to industrial rather than conservation policy.  
7.402.  The Twelfth Five-Year Hi-Tech Industry Development Plan for Inner Mongolia , published in 
December 2011, projects a 60% average annual growth rate for the region's rare earth industry 
and identifies the "acceleration of the development of the new materials industry" as a "major task 
and developmental focal point".
615 This too seems to be a reference to the goal of utilizing rare 
earth resources for the purpose of industrial development.   
7.403.  The Panel next notes that the Several Opinions , which China presented as the foundation 
of its rare earth conservation policy, refers to th e goal of "vigorously develop[ing] rare earth new 
materials and industry applications" and also indicates that "development of new products and the 
application of new technology shall be accelerated. Rare earth new materials shall increasingly 
support and secure the downstream industries." In the Panel's view, these statements regarding 
the industrial goals of the measures sit in tension with China's stated objective of reducing 
domestic consumption for the purpose of conserving exhaustible natural resources.  
7.404.  Moreover, and as noted above, the Panel recalls that the Foreign Trade Law616 lists several 
policy grounds for the imposition of export restrictions, including "national security", "human health", "shortage of domestic supply", "limited market capacity of the importing countries", 
                                                                                                                                               
understand how Article 35 of the Regulations , as it existed and was applied in 2012, could be read as referring 
to Article 16 of the now-repealed version of the Foreign Trade Law . To the contrary, our understanding is that 
the new version of the Foreign Trade Law  must be the reference point when it comes to applying Article 35 of 
the Regulations  today and in 2012. The Panel observes that in its argument on trading rights, China has made 
clear that the new version of the Foreign Trade Law superseded the 1994 version. In light of this, the Panel has 
difficulty understanding how Article 35 co uld properly be read to refer to a law that is no longer in force. 
612 China's first written submissi on, para. 100, (referring to Circular on Listing T ungsten, Tin, Antimony 
and Ionic Rare Earth Minerals as Specified Minerals under National Protective Mining ), (Exhibit CHN-12, JE-72). 
613 China's first written submissi on, para. 100, (referring to Circular on Listing T ungsten, Tin, Antimony 
and Ionic Rare Earth Minerals as Specified Minerals under National Protective Mining ), (Exhibit CHN-12, JE-72). 
614 Circular on Listing Tungsten, Tin, Antimony and Ioni c Rare Earth Minerals as Specified Minerals under 
National Protective Mining , Second Paragraph, (Exhibit CHN-12, JE-72).  
615 Inner Mongolia Autonomous Region "Twelfth Fi ve Year" High-Tech Industries Development Plan , 
Table 1 in para. 3, (Exhibit JE-29). 
616 Foreign Trade Law , (Exhibits CHN-11, JE-49). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 125 - 
 
  "export operation orders," and "other circumstances" in addition to "conservation". Hence in our 
view, references to "conservation" in that document offer little support for China's position that its measures are "related to" conservation.  
7.405.  Having reviewed the various documents placed in evidence before us, the Panel concludes 
that some documents relating to China's export quota measures make reference to conservation 
goals, while others refer to China's industrial policy. The Panel considers that these references do not provide a clear basis to conclude that the measures are "related to" conservation.  
7.406.  Adding to this lack of clarity is the fact that, in the Panel's view, the texts of the export 
quota measures fail to make clear precisely how the challenged export quota relates to the goal of conserving exhaustible rare earth ores. While use of words like "conservation" might go some way towards establishing a connection between the measures and the conservation objective, they 
cannot substitute for a full and proper explanat ion of how the export quotas are designed to 
promote conservation. In the Panel's opinion, simple references to "conservation", while not unimportant, do not explain the nature of the rela tionship between the export quota and the goal 
of conserving exhaustible natural resources. For instance, the Panel notes that the State Council's 
Several Opinions , which China has presented as the foundation of its rare earth conservation 
policy, does not explain how export quotas rela te to the goal of conservation. As the Panel 
understands it, the Several Opinions  merely states that quantitative restrictions on extraction, 
consumption, and export will be imposed simultan eously, but it does not explain the relationship 
between these three kinds of restriction.  
7.407.  In sum, the Panel finds the various references to conservation in the texts of China's 
export quota and related documents to be inconc lusive. The Panel is also of the view that 
references to terms such as "conservation" in the preamble or the text of a legal instrument cannot insulate measures from challenge where th e design and architecture of such measures 
appear to indicate that the measures "relate to" an objective other than conservation. While the 
text of a measure is, as the panel in China – Raw Materials  said, the starting-point of the 
examination under Article XX(g), the "design and architecture" of the measure are also central 
indicators of whether a challenged measure "relates to" conservation. It is therefore to the design 
and architecture of China's measures that the Panel now turns.  
7.6.2.1.3.2  Do the design and architecture of  China's export quota on rare earths "relate 
to" the conservation of exhaustible natural resources? 
7.408.  In its various submissions to the Pane l, China has advanced a number of arguments 
purporting to show that the design and architecture  of its measures "relate to" the conservation of 
exhaustible natural resources. The Panel observes that China's argumentation on this issue has 
evolved over the course of this dispute; for the sake of clarity, we set out China's arguments in the 
following paragraphs.  
7.409.  The Panel begins with China's arguments as  articulated in China's most recent submission. 
I n  P a r t  I V  o f  t h e  s e c o n d  p a r t  o f  i t s  e x e c u t i v e summary, China, explains that its export quota 
"relates to" conservation for two reasons: first, because the export quota "send[s] the correct conservation signals to the market"
617; and second, because the text, context, and architecture of 
the 2012 export quota demonstrates that it relates to conservation.618 
7.410.  With respect to sending the "correct conservation signals to the market", China makes the 
following arguments: (a) by preventing a "domes tic supply squeeze", the export quota reduces 
domestic demand for illegally produced rare earth products, and thus reduces incentives for illegal 
extraction. Through the export quota, China signal s to would-be illegal producers that it is not 
worth investing in illegal extraction and production programmes619; (b) by indicating to foreign 
consumers that unlimited supplies of China's rare earth products cannot and will not last. This 
encourages investment in rare earth projects in other countries620; and (c) by signalling to foreign 
and domestic consumers what volume of rare earth products they can expect to have access to in any given year, the export quota reduces the likelihood of panic, speculative and pre-emptive 
                                               
617 China's executive summary (part II), paras. 14-17. 
618 China's executive summary (part II), paras. 18-23. 
619 China's executive summary (part II), para. 15. 
620 China's executive summary (part II), para. 16. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 126 - 
 
  buying, to which the rare earth market is especially vulnerable. By preventing "speculative 
surges", China ensures that access to rare earth supplies is not cut off, and thus that sustainable development is not threatened.
621 
7.411.  With respect to the "text, context, an d architecture" of the 2012 export quota, China 
argues that the texts of the export quota measur es themselves confirm the quota's relationship 
with the conservation objective.622 The Panel has dealt with this issue above. Additionally, China 
argues that (a) the way in which the export quota is set, and especially the fact that the export, 
extraction, and production quotas are set simultaneously, show that the export quota relates to 
conservation623; (b) the fact that the export quota is applied at the level of smelted and separated 
products, which are the products "actually traded" on the rare earth market, show that the export quota relates to the conservation objective
624 ; and (c) the fact that China does not apply its 
export quota to downstream processed products demonstrates that the export quota "relates to" 
conservation.625  
7.412.  China's second written submission presents China's arguments somewhat differently. 
There, China argues that the export quota "relat es to" conservation because it "facilitates the 
enforcement and operation of China's 2012 rare earth conservation policy". It does this, according 
to China, in three ways: first, by helping China to crack down on smuggling626; second, by 
signalling the need for exploring other sources of supply627; and third, by safeguarding against 
uncertainty in the market, which could inte rfere with China's sustainable development.628 China 
also argues that the product scope of its export quota "relates to" conservation.629 
7.413.  The Panel also notes that while enforc ement, signalling, and safeguarding are three 
separate heads of argument in China's second written submission, in its executive summary, China 
argues that enforcement (by preventing a domest ic supply squeeze) and safeguarding against a 
"demand surge" are themselves aspects of the quota's signalling function. Thus, until China's 
executive summary, reducing incentives for illegal extraction, signalling, and safeguarding against 
market disruptions are presented as separate and di stinct arguments, rather than as elements of a 
broader "signalling" operation.  
7.414.  China's argumentation in its first written submission is similar to that in its second written 
submission. China divides its argument on the "relating to" criterion into three sections. China argues that its State Council rare earth policy measures, and especially the Several Opinions , 
establish the link between China's export quota and the goal of conserving rare earth ores.
630 
Next, China argues that the way in which the export quota volumes were set, and especially the 
fact that the export, production, and extraction quotas were set simultaneously, shows that the export quota "relates to" conservation.
631 Finally, China argues that the export quota relates to 
conservation because it (a) reduces incentives for illegal extraction and production of rare earth 
products632; (b) signals the need for other sources of supply633 and (c) "safeguards" against 
"speculative surges" and thus ensures that sustainable development is not threatened.634  
7.415.  As the Panel understands it, China has ad vanced six distinct arguments in its various 
submissions which, it submits, prove that the expo rt quota "relates to" the conservation of rare 
earth ores. These arguments are that (a) the expo rt quota prevents smuggling and/or the export 
of illegally extracted rare earth products; (b) the export quota reduces domestic demand for 
illegally extracted and/or produced rare earth products, and thus enforces and strengthens the 
extraction and production quotas; (c) the export quota "signals" to rare earth consumers that 
                                               
621 China's executive summary (part II), para. 16. 
622 China's executive summary (part II), para. 18. 
623 China's executive summary (part II), para. 20. 
624 China's executive summary (part II), para. 21. 
625 China's executive summary (part II), para. 23. 
626 China's second written submission, paras. 44-49. 
627 China's second written submission, paras. 50-53. 
628 China's second written submission, paras. 53-62. 
629 China's second written submission, paras. 62-79. 
630 China's first written submission, paras. 99–112. 
631 China's first written submission, paras. 113–130. 
632 China's first written submission, paras. 133–138. 
633 China's first written submission, paras. 139–145. 
634 China's first written submission, paras.146–154. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 127 - 
 
  additional sources of supply must be found; (d) the export quota works as a "safeguard" against 
"speculative surges" in demand, which would under mine sustainable development; (e) the export 
quota enables China to "allocate" the limited supp ly of rare earth resources; and (f) the way in 
which the export quota is established "relates to" conservation.  
7.416.  The complainants contest China's claims.635 They argue that the export quota is 
overbroad636 and that alternative, WTO-consistent or at least less trade-restrictive measures could 
have curtailed the export of illegally produced materials.637 They point to inconsistencies638 in the 
design and architecture of the quota, and argue that China has failed to establish the required 
connection between the quota and the goal of conservation. They submit that, in fact, the quota encourages smuggling, and so undermines China's alleged conservation goals.
639 
7.417.  Before proceeding, the Panel notes that, in its opinion, the availability of alternative WTO-
consistent or less trade-restrictive measures that would or might achieve a Member's stated 
objective does not necessarily deprive a challenged measure of its connection to the conservation objective. If a challenged measure can be shown to have a "substantial relationship"
640 to the 
conservation of exhaustible natural resources, th en the existence of other measures that would 
achieve the same objective does not affect that specific conclusion. Unlike other paragraphs of Article XX, subparagraph (g) does not require that measures be "necessary" to achieve their stated 
goal, but only that they "relate" to it.
641 As such, we cannot agree with the complainants that the 
existence of hypothetical alternatives "demonstra tes that China's export quotas on downstream 
products … are not 'related to' … conservation".642 While the existence of alternative measures that 
could be adopted may be relevant in other aspects of the Article XX(g) analysis or under the 
chapeau of Article XX, we do not agree that alternatives necessarily undercut the existence of a 
demonstrated "reasonable relationship of means and ends"643 between a challenged measure and 
the conservation objective – provided, of course, that such relationship has been proven by the 
respondent and not rebutted by the complainant. As  such, the Panel emphasizes that the fact that 
complainants have in their submissions on the issue of "related to" suggested alternative ways for China to achieve its alleged goals is not relevant at this point of the analysis. At this stage, the 
Panel's task is to determine whether the measures in fact adopted by China "relate to the 
conservation of exhaustible natural resources" on their own terms.  
7.418.  The Panel now proceeds to analyse each of China's arguments in turn. While the Panel 
recognizes that its order of analysis may not correspond exactly to China's presentation of its case, 
the Panel believes that an argument-by-argument approach is the best way to ensure that all of 
China's arguments receive appropriate attention.  
7.6.2.1.3.3  Does China's expo rt quota prevent smuggling and/or the export of illegally 
extracted rare earth products?  
7.419.  According to China, "the export quota sy stem enables the Chinese authorities to trace the 
sources of the exported rare earth products and thus to identify illegally produced rare earth 
products when they are exported".
644 Moreover, China argues that "the quantitative restrictions 
embedded within the export quota system reduce incentives for domestic illegal production. By 
imposing a maximum limit on the amount of rare earth products that can be exported and will be 
                                               
635 United States' second written submission, para. 126; Japan's second written submission, para. 74 
(both citing Appellate Body Report, US – Shrimp , para. 141). 
636 United States' second written submission, para. 126. 
637 United States' second written submission, para. 125; European Union's second written submission, 
para. 123. 
638 European Union's second written submission, para. 124 (referring to China's response to Panel 
question Nos. 13 and 27); Japan's second written submission, para. 97. 
639 United States' second written submission, para. 127; European Union's second written submission, 
para. 125; Japan's second written submission, para. 96. 
640 Appellate Body Report, US – Shrimp , para. 141. See also the Panel's discussion of the legal test 
under Article XX(g) above. 
641 China's response to Panel question No. 123. 
642 Japan's response to Panel question No. 121; see also United States' response to Panel question 121 
("Examples by the complainants about what China could have done in lieu of export quotas illustrate how these 
particular measures are not 'primarily aimed at' conser vation because they show that there are alternative 
measures … whose design and structure are more closely aligned with conservation"). 
643 Appellate Body Report, US – Shrimp , para. 141. 
644 China's second written submission, para. 46. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 128 - 
 
  satisfied by legal producers, the quota sends a signal to domestic producers that it is not worth 
starting up illegal mining or production".645 
7.420.  In its first written submission, China describes its rare earths export quota in the following 
way646: 
The export quota measures further enhance the effectiveness of China's 
comprehensive conservation policy by facilitating the enforcement of existing domestic production and extraction quotas in other ways….specific export quota measures 
require the production of documentation that assists Chinese authorities to identify 
and enforce domestic production that occurs outside of permitted production and mining quotas. Thus, manufacturing enterprises that seek to export rare earth products must provide the list of the mining  enterprises that are the sources of supply 
of rare earth raw materials, the quantities purchased and the relevant VAT invoices 
and proof of sources of mining enterprises.
647 Trading enterprises must provide the 
relevant supporting materials and relevant VAT invoices demonstrating that they 
purchased exported rare earth products from manufacturing enterprises that meet all 
applicable requirements.648 These specific requirements are tied to and dependent on 
the existence of the export quotas. Thei r effect is to help China enforce its 
conservation policy by curbing rare earth production outside permitted production 
quotas. 
7.421.  According to China, smugglers sometimes use "false declarations, concealed reports of 
commodity names, exports from different ports in batches, and exports without proof of the 
legality of production or extraction" to smuggle illegally produced rare earths out of China.649 In 
China's view, the export quota, which is administ ered as a series of documentary and physical 
inspections, primarily at the point of exportation (i.e. at the border), helps China to overcome such 
attempts to "circumvent and avoid the costs of China's conservation measures". As China explains 
it, "in the face of this illegal demand, China must also control at the border what quantities of the rare earth products that are exported and determine whether their origin is legal or illegal".
650   
7.422.  Referring to the Appellate Body's analysis in US – Shrimp , which requires that 
conservation-related trade measures be narrowly targeted to achieve their purpose, the United States and Japan consider that China's export quota is overly broad, in particular because it applies not just to illegally extracted rare earths but also equally to legally extracted rare earths.
651 
Japan also suggests that the fact that "recipients of China's export quotas can readily sell or 
transfer their export quotas" means that "the export quota system cannot ensure that rare earths actually exported were legally produced".
652 Moreover, the complainants argue that sourcing and 
documentation requirements or on-the-spot-checks at the mines and processing facilities, without 
the export quota, could have served the purpose of curtailing the export of illegally produced 
materials.653 According to the European Union and Japan,  China fails to demonstrate that there is 
a necessary link between illegally mined rare earths and the exportation of rare earths, as illegally 
mined rare earths can be sold and consumed within China, as China itself concedes.654 Japan 
stresses that domestic purchasers of refined and separated rare earths products are not subject to enforcement measures, which serve as a critical component of China's enforcement structure.
655 
                                               
645 China's second written submission, para. 47; China's first written submission, para. 135. 
646 China's first written submission, paras. 136-137. 
647 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , Article III.4(2), 
(Exhibit CHN-38, JE-61). 
648 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , Articles I.2.3 and III.5, 
(Exhibit CHN-38, JE-61). 
649 China's first written submission, para. 221. 
650 China's response to Panel question No. 30. 
651 United States' second written submission, para. 126. 
652 Japan's executive summary (part II), para. 70. 
653 United States' second written submission, para. 125; European Union's second written submission, 
para. 123. 
654 European Union's second written submission, para. 124, (referring to China's response to Panel 
questions, 14 March 2013, in paras. 72 and 129); Japan's second written submission, para. 97. 
655 Japan's second written submission, para. 98. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 129 - 
 
  Finally, the complainants argue that, in essence, th e export quota (and export duties) result in two 
markets with different prices, which actually creates  an incentive for smuggling.656 
7.423.  The Panel understands that China is concerned about two different kinds of rare earth 
"smuggling": 
a. legally or illegally extracted or produced goods could be exported illegally, i.e. outside of 
the regulated chain of commerce;  
b. illegally extracted or produced goods, or lega lly extracted or produced goods destined to 
be exported above the export quota level,  being exported fraudulently through the 
regulated chain of commerce (for instance, exporters might use false declarations to pass their illegal consignments through Customs controls). 
7.424.  The Panel agrees with China that, in the face  of such smuggling, it is important that border 
authorities verify the provenance of all rare earth products destined for export. Measures designed 
to verify that rare earths destined for export were legally sourced, and to interdict shipments of illegally produced rare earth products do, in the Panel's view, "relate" to conservation. The Panel 
accepts that the various border inspections, controls, and checks that China carries out on export 
consignments of rare earths are appropriate for th e task of interdicting consignments of illegally 
extracted or produced rare earth products (inclu ding products produced above quota levels). By 
enabling Chinese authorities to detect shipments that contain illegally produced products, or 
products produced by legal enterprises in excess of the extraction and production quotas, these 
border controls reduce the incentive for illegal or over-quota rare earth extraction and/or production, and thus help to reinforce China's rare earths conservation policy. 
7.425.  The Panel fails to understand, however, why the clear need to prevent the export of 
illegally produced goods entails or justifies the imposition of quantitative restrictions on the amount of legally produced  rare earth products that can be exported. While it may well be 
necessary to check that all rare earth products leaving China have been produced legally (i.e. 
within the extraction and production caps and in accordance with China's various environmental regulations) and to stop attempted exports of ill egally extracted or produced products, the Panel 
struggles to see how a quantitative limit on the amount of legally produced  goods that can be 
exported "relates to" China's efforts to suppress smuggling. The Panel accepts China's argument that border checks and controls could intercept illegally produced rare earths that are exported 
through the regular export channel, including where they are accompanied by false declarations or 
other kinds of fraud. The Panel understands that such border checks and controls "relate to" 
conservation, since they prevent illegally extracte d and/or produced rare earth goods from leaving 
China, and thus reduce incentives for illegal extraction, production, and export. But, as we have 
explained above, the Panel struggles to understand how quantitative restrictions  on the amount of 
legally produced  goods that can be exported play a role in such policing. China has argued that its 
border controls and checks "are tied to and de pendent on the existence of the export quotas."
657 
In the Panel's opinion, China has failed to explain why this is so. As the Panel sees it, policing and 
checking are distinct from the export quota, whic h simply limits the amount that can be exported 
from the already limited pool of legally extracted and produced rare earths. The amount of legally produced rare earth products that China allows to  b e  e x p o r te d  i s  n o t  c o n n e c t e d  t o  t he  g o a l  of 
checking the legality of a particular shipment. Even if there were no quota, China would still need 
to inspect and police exports of rare earths. This suggests to the Panel that the export quota itself 
has nothing to do with policing and checking, even if in practice quota compliance checks and legal 
sourcing checks are performed by the same customs authority. To the contrary, the quantitative 
restriction on the volume of exports seems to the Panel to be an independent mechanism whose purpose is to control how much  of the legally extracted and produced rare earths leave China. 
However, as the panel in China – Raw Materials recognized, the place where a resource is 
consumed is not relevant to the conservation of that resource.
658 In the Panel's opinion, China has 
not demonstrated how a quantitative limit on exports, above and beyond documentary and physical inspection and other methods of border control, prevents smuggling or limits illegal 
extraction or production of rare earths.  
                                               
656 United States' second written submission, para. 127; European Union's second written submission, 
para. 125; Japan's second written submission, para. 96. 
657 China's second written submission, para. 137. 
658 Panel Reports, China – Raw Materials , para. 7.428. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 130 - 
 
  7.426.   In sum, there seems to the Panel to be no reason why border checks and controls, which 
clearly do "relate to" the suppression of smuggling,  could not operate in the absence of the export 
quota. In sum, the Panel believes that to deal with smuggling, China does not need a quota but enhanced border controls.  
7.427.  As explained above, the Panel agrees with  China that policing actions and customs checks 
are capable of detecting consignments of illegally produced rare earth products that are exported 
through regular channels. As noted above, China has explained that "the export quota system 
enables the Chinese authorities to trace the source s of the exported rare earth products and thus 
to identify illegally produced rare earth products wh en they are exported". It does this by requiring 
all exporters to "provide information on the mining  enterprises that are the sources of supply, the 
quantities purchased and VAT invoices".
659 However, the Panel considers that some smuggling 
activity takes place outside the regulated chain of commerce, avoiding customs and other border 
controls altogether. In such circumstances, it is  difficult to see how China's export quota system 
will be able to intercept and prevent illegal expo rts or smuggling. Where a quantitative restriction 
involves border controls to limit the amount of legally exported rare earth products, it will not be 
capable of counteracting the risk that rare earth products will be exported outside of the regulated 
export quota system.  
7.428.  The Panel notes additionally the complainants' argument that, far from preventing 
smuggling, export quotas have the tendency to increase it. The United States argues that "the 
export quotas themselves create an incentive for Chinese enterprises to produce illegally and sell to foreign consumers".
660 Japan concurs that "because China's export quotas yield a divergence in 
the Chinese domestic prices and export prices for the raw materials, China's export quotas actually 
create incentives for Chinese producers to produce the raw materials illegally and subsequently to smuggle them out of China".
661 Similarly, the European Union argues that "it is those very export 
quotas … that create the incentive for smuggling".662 China strongly disagrees with this suggestion, 
and asks the Panel to give "no weight" to the complainants' allegations.663  
7.429.  The Panel considers that any restriction on access to rare earth products, including 
extraction and production quotas on their own,  could, to a greater or lesser extent, provide 
incentives for illegal production to satisfy unmet demand. In the Panel's opinion, the problem with China's export quota measures is not that they may, as an almost inevitable side-effect, produce some incentives for illegal extraction, production, or exports. The problem is rather, as the Panel 
has suggested above, that limiting the amount or volume of legally extracted and produced rare 
earth products that can be exported for consumption overseas – which is the very essence of an export quota – is not related to the prevention of illegal extraction, production, or export. In fact, 
it is not export quotas that police illegal ex traction, production, and smuggling, but rather 
enforcement, policing checks, and border controls.  
7.430.  Finally, the Panel recalls the Appellate Body's direction in US – Shrimp  that a conservation 
measure must not be "disproportionately wide in its scope and reach in relation to the policy 
objective of protection and conservation".
664 In this respect, we agree with the complainants that, 
at least insofar as China's concern is to prevent smuggling of illegally produced rare earth products, the measures are overbroad
665 since they prevent the export of legally produced rare 
earth products (above a certain absolute numerical limit), rather than just illegally produced 
products.666   
                                               
659 China's second written submission, para. 46.  
660 United States' second written submission, para. 126. See also European Union's second written 
submission, para. 125. 
661 Japan's response to Panel question No. 26; See al so European Union's response to Panel question 
No. 26. 
662 European Union's second written submission, para. 125. 
663 China's second written submission, para. 45. 
664 Appellate Body Report, US – Shrimp , para. 141. 
665 Japan's response to the Panel's question No. 123; United States' response to the Panel's question 
No. 123. 
666 Japan's second written submission, para. 75. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 131 - 
 
  7.6.2.1.3.4  Does China's expo rt quota control or limit ille gal extraction or production 
destined for the domestic  market? 
7.431.  China also argues that its export restrictio ns work to prevent illegal mining for sale to the 
domestic market . In its answer to one of the Pane l's questions, China explained that667: 
China's export quotas support on-going enforcement efforts by further reducing 
incentives for illegal mining and production by removing an outlet for selling such illegal products. Indeed, by means of the quantitative export restrictions, China 
ensures that this export volume will be met by legal producers.
668 Without an export 
quota in place, there is the potential that a significant part of all legally produced rare earth products could be exported. This could occur because of a speculative demand surge or because of governmentally-promoted foreign stockpiling. This could leave the 
domestic Chinese market in a supply squeeze. Because the legitimate Chinese 
producers cannot produce more than the assigned production quota – and there are no other rare earth supplies of any significance outside China – there would be great 
incentives for illegal producers to meet do mestic Chinese demand. The presence of an 
export quota removes this additional incentive for conservation-frustrating illegal production and selling to the domestic market.
669 Therefore, China relies on 
quantitative export restrictions as part of its comprehensive conservation policy.  
7.432.  In other words, China argues that the export quota polices the rare earth product flow to 
domestic down-stream industries. By ensuring that domestic consumers receive a sufficient share of the limited rare earths supply to meet thei r demand, the export quota prevents a domestic 
"supply squeeze" that would create domestic demand for illegally produced rare earth products, 
and thus limits incentives for illegal production as well as over-production by legal mining and separating and smelting companies.  
7.433.  The Panel has difficulty agreeing with China's argument for a number of reasons. 
7.434.  First, the relationship between "quantitative limits" on exports that are controlled at the 
border and domestic extraction and production quot as is far from clear. The export quota at issue 
does not contain any provision regarding any form of direct or indirect control over the amount 
extracted or produced legally or illegally, or over the amount of rare earth products consumed domestically. While an export quota might operate to check the source of rare earth products destined for export , the Panel fails to see how such export quota could effectively operate to check 
or "trace"
670 the source of rare earth products being consumed domestically . Nor is the Panel 
convinced that export quotas can discourage ille gal extraction and production intended for the 
domestic market. For the Panel, there is no connection between export quotas, which operate as a 
border check on goods destined for export, and domestic consumption, which takes place inside 
China's own borders, far away from the border points at which the rare earth export quota is controlled. In other words, demand from the domestic market for illegal extraction or production 
cannot be controlled by export quotas controlled at the border. 
7.435.  Moreover, it seems to us that if the export quota were to operate as China claims, i.e. by 
ensuring that domestic consumers have access to a sufficient supply of rare earth products, incentives for illegal extraction and production might still exist if China maintains extraction or 
production restrictions. This concern is based upon what appears to us to be a tension inherent in 
China's "comprehensive conservation policy", and which we explain in the following paragraphs.  
7.436.  China argues that through its extraction and production quotas, China "intend[s] to restrict 
domestic consumption of newly produced rare earth products".
671 China has also made clear that it 
attempts to set the levels of its extraction an d production quotas below the expected level of 
                                               
667 China's response to the Panel's question No. 124. See also China's executive summary (part II), 
para. 15. 
668 China's first written submission, para. 135; China's second written submission, para. 47. 
669 China's opening statement at the second meeting of the Panel, para. 20; China's comments on the 
complainants' responses to the Panel question No. 26. 
670 Japan's executive summary (part II), para. 70. 
671 China's second written submission, para. 95. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 132 - 
 
  domestic demand.672 Finally, China argues that "China's rare earth consumers cannot purchase 
more newly produced rare earths than the volume obtained after deducting the export quota from the production quota", and that the export quota therefore operates to restrict the amount of rare 
earth products  available to domestic users.
673 In sum, China argues in a variety of ways that its 
"comprehensive conservation policy" works to restrict the access of domestic consumers to rare 
earth products. In the Panel's view, so long as the legal domestic supply is lower than domestic demand, the demand for illegally produced rare eart h products would likely exist. It appears to us, 
then, that China's explanation of its export quota as necessary to prevent a "supply squeeze" sits 
uncomfortably with its claim that a key purpose of its extraction and production caps is precisely to restrict domestic consumption. We find it difficult to reconcile China's claims that, on the one hand, it sets its extraction and production quotas below  expected domestic demand, but that on the 
other hand, the export quota is necessary precisel y to avoid a "domestic supply squeeze". Without 
deciding at this point whether China has demonstrated that its measures do in fact restrict domestic production or consumption, we simply note that the stated goals of China's export 
restriction (to prevent a domestic "supply squeez e") and its extraction and production caps (to 
restrict domestic consumption) seem difficult to reconcile.  
7.437.  The Panel considers that not only foreign but also domestic consumers might seek to 
secure low-cost rare earth products. Indeed, China itself has recognized that there is also demand 
within China for illegally mined or produced products. As the Panel sees it, it is likely that there will always be some demand for illegally produced goods, which are often cheaper than goods produced by legal enterprises. But, as noted earlier, domestic demand for illegally produced rare 
earth products cannot be properly addressed through the imposition of an export quota. An export 
quota is not capable of responding to or tackling the conditions that incentivize illegal extraction and production in these cases because an export quota is simply a quantitative limit on the 
amount of (legally extracted and produced) rare earth products that can be exported.
674 The 
amount that can be exported and the policing system that China needs to maintain in light of its conservation policy are two distinct considerations. China could maintain its reporting, checking, 
and policing mechanisms for rare earth products even if it did not limit the maximum amount of 
exports. 
7.438.  Recalling the Appellate Body's statement that measures justified under Article XX(g) must 
bear a "substantial", "close", and "real" relationship to the conservation objective
675, the Panel is 
not convinced that China has demonstrated that its use of an export quota is an appropriate 
means of preventing illegal consumption domestically . Moreover, the use of a measure that 
burdens foreigners  in order to achieve a domestic goal (i.e. reducing domestic consumption of 
illegally produced rare earth products) in the presen t case seems to us to lack the requisite degree 
of "rational"676 connection demanded by the Appellate Body. 
7.439.  In sum, there are a number of problems an d inconsistencies in China's arguments that its 
export quota works to reduce domestic demand fo r illegally produced goods, and thus that they 
"relate to" conservation by enforcing China's extraction and production quotas. Considered 
together, these problems and inconsistencies cast doubt on China's claims that the export quota has a substantial, close, and real relationship with the conservation objective.  
7.6.2.1.3.5  Signalling  
7.440.  China argues that the export quota system  contributes to the effectiveness of its overall 
conservation policy by signalling to foreign users of rare earths the need to explore other sources 
of supply, including substitutes an d recycling. According to China, "without the export quotas, the 
risk exists that foreign users, investors, and financial institutions – knowing there is unlimited export from China – would not likely proceed with rare earth exports outside China and the burden 
of the conservation policy would be solely on China".
677 In addition, China explains that the export 
quota, working in conjunction with domestic Chinese restrictions, creates a disincentive for domestic Chinese producers to expand production, while simultaneously creating an incentive for 
                                               
672 China's first written submission, para. 130. 
673 See, e.g. China's second written submission, para. 86. 
674 European Union's second written submission, para. 124. 
675 Appellate Body Report, US – Shrimp , para. 141. 
676 Appellate Body Report, US – Shrimp , para. 141. 
677 China's second written submission, paras. 51-52. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 133 - 
 
  foreign producers to initiate and expand production abroad. Referring to several new foreign mines 
and recent technological innovations that create substitutes for existing rare earth sources, and noting also the existence of recycling initiatives in different countries, China submits that these developments reflect the signalling effect of its export quota.
678 In its second written submission, 
(in response to the complainants' question about how the export quota, as opposed to domestic 
production restrictions, creates an incentive to increase foreign production) China further argues that its export quota ensures that the burden of  its conservation policy is balanced between 
domestic and foreign users of rare earths.
679  
7.441.  The complainants take issue with China's position and explanations. The United States and 
the European Union argue that, by raising international prices while reducing domestic prices, the export quota creates two markets, resulting in a "two-tiered" pricing structure and a corresponding 
incentive for foreign users of rare earths to relocate to China to obtain rare earths at a cheaper 
price.
680 They argue that while the export quota may se nd a conservation-related signal to foreign 
users, it simultaneously signals to domestic cons umers that they should increase their rare earth 
consumption, contrary to China's claim that the export quota relates to conservation.681 The United 
States and the European Union provide statements and policy documents from Chinese local governments with a view to demonstrating that th e availability of cheaper or "unrestricted" rare 
earths is held out to attract new foreign investment in the rare earth processing industry in 
China.
682 The European Union stresses that the price volatility caused by Chinese export 
restrictions on rare earths may decisively keep companies from setting up other mining operations 
outside China.683 With respect to China's assertion that the signalling effect is evidenced by the 
development of rare earth recycling efforts, Japan argues that the practical difficulties and costs 
relating to rare earth recycling make it unfeasible at commercial levels capable of satisfying global demand for rare earths.
684 The complainants argue that strict enforcement of a domestic 
production quota would be sufficient to signal to foreign and domestic rare earth producers that 
supply needs to be found elsewhere than China and to limit production.685 
7.442.  The Panel agrees with China that, "[l]ike any commodity market, the rare earths market 
functions on information and market participants react to signals received from major suppliers 
and consumers".686 More specifically, the Panel notes that markets respond to signals which are 
"broadcast", as it were, through the price which a commodity commands in a given market. It is precisely through price that signals can be sent to and through a market.  
7.443.  The Panel accepts China's argument that encouraging foreign users and investors to 
explore alternative sources of supply could relate to the goal of conserving China's exhaustible natural resources, since the development of altern ative supply sources would "relieve the pressure 
on" China's own rare earth supplies.
687 To the extent that the export quota communicates to 
foreign rare earth consumers that China will no long er supply all the rare earth products needed, it 
is logical to assume that it will provide a stimul us to consumers, investors, and innovators to 
explore and develop alternative sources of supply and thus reduce demand for limited Chinese rare 
earth reserves.  
7.444.  Having said that, the Panel considers that export quotas are liable to send a perverse  
signal to domestic consumers . Whereas export quotas may reduce foreign demand for Chinese 
rare earths, it seems likely to the Panel that they will also stimulate  domestic consumption by 
                                               
678 China's first written submission, paras. 139-145. 
679 China's second written submission, para. 52. 
680 See, e.g. United States' second written submission, para. 127. 
681 United States' second written submission, paras. 129-130; European Union's second written 
submission, paras. 128-129. 
682 United States' second written submission, para. 129,  (referring to "Xinhua Insight: China tightens 
regulation of rare earth industry", Xinhua General Ne ws Service, June 15, 2011, (Exhibit JE-118)); European 
Union's second written submission, para. 130, (referring to Preferential Policies Encouraging Investments for 
Fujian (Longyan) Rare Earth Industrial Zone , (Exhibit JE-152)). 
683 European Union's second written submission, paras. 131-132. 
684 Japan's second written submission, para. 100. 
685 United States' second written submission, para. 132; European Union's second written submission, 
para. 127; Japan's second written submission, para. 101. 
686 China's executive summary (part II), para. 14. 
687 China's first written submission, para. 140. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 134 - 
 
  effectively reserving a supply of low-price raw materials for use by domestic downstream 
industries.688 They may also encourage relocation of rare earth-consuming industries to China. 
7.445.  China responds that other measures in its comprehensive conservation plan counteract or 
counterbalance the perverse signal sent to domestic consumers by the export quota.689 According 
to China, the export quota is a "balancing tool", since without it the extraction and production 
quotas would only provide a signal to domestic users, while foreign consumers would have no incentive to explore and develop alternative sources of supply.
690  
7.446.  The Panel has difficulty accepting this argument. While it may be true that extraction 
and/or production quotas could , in theory, counteract the perverse signals sent by export quotas 
to domestic consumers, it seems to us that whether or not a production quota coupled with an export quota cuts domestic consumption depends entirely on the level at which the production 
quota is set and the way in which the export and production quotas interact. According to 
Exhibit JE-183, if the production quota is very tight
691, it will reduce domestic consumption. At 
more generous levels, however, it may not reduce co nsumption at all, or it may reduce it while still 
leaving it above the level it would be in the absence of export restrictions.692   
7.447.  In the Panel's opinion, China has not demonstrated that, in the design of its export quota 
and its conservation programme more generally, there is any mechanism to ensure that the export 
quota and the extraction and/or production caps will work together in such a way as to counteract 
the perverse signals sent by its export quota to domestic consumers. As such, the Panel considers 
that the risk of perverse signals is real, and this  casts doubt on China's claim that the export quota 
"relates to" conservation. 
7.448.  The Panel takes note of China's indication that various rare earth recycling projects, efforts 
to modify industrial designs of downstream products so that they use less rare earths, and developments of rare earth substitutes are under way.
693 The Panel acknowledges that these 
efforts may go a long way towards furthering what all involved in this dispute recognize is China's 
bona fide  conservation policy. Nevertheless, our consideration of the design and architecture of 
China's export quota on rare earths does not convin ce us that the export quota is designed in such 
a way as to ensure that domestic demand is not stimulated by low prices. There does not appear 
to be any mechanism to ensure that the export quota is set at such a level that, in combination with the extraction and/or production caps, no perverse incentives will be sent to domestic consumers.  
7.6.2.1.3.6  Safeguards 
7.449.  China argues that the export quota enhances its rare earths conservation policy by 
providing a safeguard against uncertainty in the market and preventing sudden speculative and 
pre-emptive demand surges. According to China, such speculative surges, which are liable to be 
caused as a result of China's decision to implement measures to conserve its rare earths resources, "would threaten the sustainable development of rare-earths using industries"
694 by 
cutting off their access to the limited rare earth supplies.695 Indeed, China submits expert evidence 
arguing that it was speculative behaviour by consum ers, traders, and investors, rather than actual 
supply shortages caused by the export quotas, which distorted the rare earths market and caused exaggerated price movements in 2010-2012. China refers to 2011 Several Opinions  of the State 
Council  and submits that the State sets a reasonable quota for annual rare earth exports that 
basically satisfies the normal demand of the international market, thus reducing the risk of market-distorting panic-buying and stockpiling. In China's view, export quotas "help manag[e] the 
limited supply [of rare earths] and provide reasonable certainty on the quantities that will be 
supplied to the domestic and foreign users", thus "moderating speculative demand surges that 
                                               
688 Panel Reports, China – Raw Materials , para. 7.586. 
689 See, e.g. China's comments on the complainan ts' responses to Panel question Nos. 71 and 123; 
China's second written submission, para. 52 ("export quotas are a balancing tool"). 
690 China's second written submission, paras. 51-52. 
691 In economics, this means an amou nt set significantly below demand. 
692 Prof. L. Alan Winters, " Response to Professor de Melo ", (Exhibit JE-183), p. 5. 
693 See, e.g. China's first written submission, para. 143. 
694 China's second written submission, para. 53. 
695 China's second written submission, paras. 53-61. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 135 - 
 
  could upset market balance and certainty sought by China".696 They thus contribute to sustainable 
development.  
7.450.   The complainants contend that China's argument that export quotas function as a 
"safeguard tool" reflects China's intent to protect its domestic downstream industry, and that such 
pursuit cannot be seen as genuinely "relating to conservation".697 The United States argues that an 
export safeguard does not keep rare earths from harm, loss, or waste through protective oversight, but rather only protects Chinese do wnstream consumers from the impact of market 
forces. In the European Union's view, "speculative demand surges" are themselves caused by the 
Chinese export restrictions on rare earths.
698 Japan stresses that if China is concerned about the 
impact of export surges on its domestic industries, the relevant GATT provisions are Articles XI.2(a), XX(i), XX(j), and XXVIII.
699 
7.451.  It is not clear to the Panel how protecting the domestic industry from speculative surges in 
foreign demand relates to "conservation". As the Panel noted in its discussion of the legal test under Article XX(g), "conservation" is essentially about protecting exhaustible natural resources. 
Therefore, in the Panel's opinion, the fact that th e export quota might "contribute to stability in the 
market and thus to sustainable economic development"
700 does not mean that it "relates to the 
conservation of exhaustible natural resources". Although, as the Panel has explained, a Member's 
sustainable economic development needs are a legitimate consideration that may be taken into 
account when deciding whether and how to design and administer a conservation policy, they are 
not a standalone justification for the imposition of measures otherwise WTO-inconsistent. In this dispute, China has invoked Article XX(g) to justify its export quota and this subparagraph protects 
measures which contribute to the "conservation of exhaustible natural resources". As the Panel 
noted in its discussion above, the panel in China – Raw Materials  did not suggest that "sustainable 
economic development" is itself a goal that can be pursued under Article XX(g), but simply 
indicated that resource-endowed Members may take their sustainable economic development 
needs into account in designing a conservation  policy that "manages the supply and use"
701 of 
exhaustible resources in a way that "take[s] into account the challenge of using and managing 
resources in a sustainable manner that ensures the protection and conservation of the 
environment while promoting economic development".702  
7.452.  As such, the Panel considers that China's desire to "moderat[e] speculative demand surges 
that could upset the market balance and certainty sought by China"703 is not a conservation-
related objective, but an aspect of China's industrial policy. The Panel considers that China is 
entitled to be concerned about "speculative su rges" and other kinds of market "manipulation"704 
that "disrupt the supply of rare earths to both domestic and foreign consumers".705 Indeed, 
Members are perfectly entitled to pursue their own industrial policies. But they must do so in a 
way that is either consistent with their WTO obligations or justified by one of the relevant provisions that explicitly provides exceptions for measures pursuing industrial policy.  
7.453.  Both the GATT 1994 and other WTO covered agreements generally allow Members to 
adopt measures in pursuit of their industrial policy needs, and even recognize that, in certain circumstances, Members' industrial policy need s, and especially the imperative to protect 
vulnerable domestic industries, can override GATT obligations. The Panel considers that China's 
concerns about the risks posed by sudden "specula tive surges" could be addressed, for example, 
by measures adopted under Article XI.2(a) of the GATT 1994, which allows for "[e]xport prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs 
or other products essential to the exporting contracting party". As the Appellate Body in China – 
                                               
696 China's second written submission, para. 61. 
697 United States' second written submission, para. 27; European Union's second written submission, 
para. 134; Japan's second written submission, para. 103. 
698 European Union's second written submission, para. 135. 
699 Japan's second written submission, para. 103; Japan's comments on China's response to Panel 
question No. 141. 
700 China's second written submission, para. 61. 
701 Panel Reports, China – Raw Materials , para. 7.404. 
702 Panel Reports, China – Raw Materials , para. 7.375. 
703 China's second written submission, para. 61. 
704 China's second written submission, para. 56. 
705 China's second written submission, para. 53. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 136 - 
 
  Raw Materials  explained706 Article XI:2(a) permits the application of restrictions or prohibitions on 
a limited basis to prevent and/or address "critical shortages" of "essential products". An "essential" 
product is one that is "important," "necessary," or "indispensable" to a particular Member. This may include a product that is an "input" to an important product or industry. The term "critical 
shortage" in Article XI:2(a) refers to those situations or events that may be relieved or prevented 
through the application of measures on a temporary, and not indefinite or permanent, basis. Members are entitled to take anticipatory measures within the bounds of Article XI:2(a) to 
"prevent" a "critical shortage" before it occurs.
707 Moreover, as the Appellate Body clarified, 
measures applied for a limited duration, adopted in order to bridge a passing need, need not have t h e i r  t e m p o r a l  s c o p e  f i x e d  i n  a d v a n c e .  I n  o t her words, Members may adopt measures under 
Article XI:2 without having determined in adva nce precisely how long the measure will remain 
operative, although they must remain temporary. 
7.454.  The Panel believes that Article XI:2(a) is sufficient to allow China to adopt measures as 
needed to protect its domestic industry in times of special vulnerability. In holding that the 
prevention of "speculative surges" is not a cons ervation goal, the Panel is not denying China the 
right to act promptly and effectively to protect it s domestic industry, but simply requiring China to 
act in a manner that is consistent with its WTO obligations. Measures that intend to pursue an 
industrial purpose cannot be justified as measures  that "relate to" conservation, although they 
may be supported by alternative provisions of the GATT 1994 or other WTO covered agreements.  
7.6.2.1.3.7  Does the allocation of limited rare earth resources "relate to" conservation? 
7.455.  Throughout this dispute, China has argued that the sovereignty it exercises over its own 
natural resources allows it to allocate rare earth products produced using Chinese rare earth ores 
between foreign and domestic consumers. While the Panel considers that this argument underpins all of the three alleged justifications discussed above, it also appears to be somewhat distinct, 
especially when in the second part of its integrated summary, China explains that through its 
export quota, it manages what is effectively the world supply of rare earths. China adds that it does so in order to "ensur[e] an appropriate supply for foreign and domestic commercial users 
today".
708 
7.456.  China argues that its export quota seeks to "distribute trade of rare earth products in a 
manner that approaches the expected domestic and foreign demand".709 Additionally, China has 
explained that one purpose of its export quota is  to prevent foreign consumers from "purchas[ing] 
… all of the limited volume of rare earths supply according to the extraction quota".710 According to 
China, supply management and allocation "in a manner that meets as much as possible the relative commercial needs of foreign and domestic users" is a "responsibility that comes with 
[China's] role as currently supplying more than 90% of all rare earth supply".
711 
7.457.  China argues that its right to "manage the supply" of exhaustible natural resources is 
inherent to its sovereignty over exhaustible natural resources, which, in China's opinion, allows 
resource-endowed Members to "freely use and exploit their natural wealth and resources … for 
their own progress and economic development".712 According to China, a finding by this Panel that 
China is not entitled to allocate the supply of rare earth products between foreign and domestic users would be anathema, since "it is simply not credible that resource-endowed countries would, 
by acceding to the WTO, have relinquished this fundamental norm".
713 China also refers to a 
statement made by the panel in China – Raw Materials  that it interprets as allowing measures that 
address "the challenge of using and managing  resources in a sustainable manner … while 
promoting economic development".714 On the basis of this statement, China argues that "a 
conservation policy is not limited to preserving  exhaustible natural resources in their current state, 
but also covers use and management  of these resources in line with a Member's sustainable 
                                               
706 Appellate Body Reports, China – Raw Materials , paras. 308-344. 
707 Panel Reports, China – Raw Materials , para. 7.305. 
708 China's executive summary (part II), para. 8. 
709 China's second written submission, para. 52. 
710 China's response to Panel question No. 123. 
711 China's response to Panel question No. 66. 
712 China's response to Panel question No. 66, (quoting United Nations General Assembly Resolution 626 
(VII), Right to Exploit Freely Natural Wealth and Resources (21 December 1952) (Exhibit CHN-49)). 
713 China's response to the Panel's question No. 66. 
714 China's second written submission, para. 54. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 137 - 
 
  economic development".715 China makes clear that, in its opinion, the "conservation" objective 
allows Members to adopt measures, including export quotas, "that foster the sustainable development of their domestic economies consistently with general international law and WTO law".
716 
7.458.  The complainants have at various points in their submissions argued that China 
misunderstands "conservation" by "readi ng economic goals into Article XX(g)".717 The European 
Union argues that "the concept of conservation does not cover allocation  of where the product is 
consumed", and explains that "[f]or the purpose of conservation the place of consumption is 
irrelevant".718 The United States adds that "the negotiating history does not support China's 
argument that Article XX(g) of the GATT includes a right of supply-management to promote a Member's domestic industry".
719 Japan urges that "it would be anomalous if Article XX(g) were to 
be interpreted in such a way as indirectly to permit WTO Members to promote industrial policy 
while the limited scope of paragraphs (i), (j), and other GATT exceptions would prevent them from doing so directly".
720 
7.459.  The Panel set out its understanding of the relationship between "conservation", 
"sustainable development", and "permanent sove reignty over natural resources" above. It 
explained that the conservation objective embodied in Article XX(g) of the GATT 1994 allows 
Members to take their sustainable development needs into account in deciding whether to adopt a 
conservation policy, how to design that policy, and what instruments will be used to implement that policy. It clarified that, in the context of  Article XX(g), resource-endowed Members exercise 
their sovereignty over natural resources precisel y by designing and implementing conservation 
policies based on their own assessment of various, sometimes competing, policy considerations, 
and in a way that responds to their own concerns and priorities.  
7.460.  China appears to misconstrue what the panel said in China – Raw Materials .
721 As we have 
already explained, that panel did not say that "sus tainable economic development" was, in itself, a 
goal that could be pursued under the rubric of "conservation". As we have further explained, the need for "sustainable development" may impact a Member's decision whether or not and how to 
implement a conservation policy. It may also affect the final form of any conservation policy 
eventually adopted, as well as the form or manner of any conservation actions taken. But 
measures adopted for the purpose of economic development are not automatically measures "relating to the conservation of exhaustible natu ral resources". Indeed, the Panel considers that 
measures the objective of which is to promote economic development are not "measures relating 
to conservation" but measures relating to industrial policy.  
7.461.  China maintains that its "supply management is not intended to protect or promote the 
domestic industry, but to ensure that the limite d supply (specified in the production quota) is 
allocated in a manner that meets as much as possible the relative commercial needs of foreign and domestic users". China argues that it "undertakes this supply management given the particular 
responsibility that comes with its role as currently supplying more than 90% of all rare earth 
supply".
722  
7.462.  In the Panel's opinion, once resources are extracted and have entered the market, it is 
neither China's nor any other Member's "responsibility" or right to allocate the available stock 
between different users; once extracted and in commerce, rare earths trade is subject to WTO law. 
Therefore, a priori , trade in natural resources should not be restricted without justification. The 
                                               
715 China's second written submission, para. 18. 
716 China's second written submission, para. 18, citing Panel Reports, China – Raw Materials , 
para. 7.404. 
717 European Union's response to Panel question No. 66; Japan's response to Panel question No. 66.  
718 European Union's response to Panel question No. 66. 
719 United States' comments on China's response to Panel question No. 66. 
720 Japan's response to Panel question No. 66. 
721 It does this by leaving out certain crucial words in its citations. What the Raw Materials  panel said at 
paragraph 7.375 of its report was that "a proper reading of Article XX(g) in the context of the GATT 1994 should take into account the challenge of using and ma naging resources in a sustainable manner that ensures 
the protection and conservation of  the environment while promoting economic development". See China's 
second written submission, paras. 17 and 54. 
722 China's response to the Panel's question No. 66. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 138 - 
 
  Panel fails to see how, in this case at least, China's allocation of quantities between foreign and 
domestic users can be justified as enhancing conservation.723  
7.463.  At any rate, while it may be considered generous of China to want to protect the "relative 
commercial needs of foreign and domestic users", the Panel believes that a priori determinations 
of what volume of rare earth products foreigners need or are entitled to are not directly linked to 
conservation. While the Panel acknowledges that there is nothing objectionable about Members accounting for their own and other countries' deve lopment needs when adopting, designing, and 
implementing a conservation policy, the Panel does  not believe that export quotas that delimit a 
maximum amount of products available for export from the already limited rare earth product supply are "closely" or "substantially" related to conservation. This conclusion follows naturally from our earlier finding that "manag[ing] what is effectively the world supply of the volume of rare 
earth products"
724 is not a conservation-related objective. 
7.464.  Moreover, China's fear that foreign consumers will purchase all of China's limited rare 
earth resources seems to be founded on the unlikely premise that Chinese consumers would not 
compete with foreign consumers for rare eart h products. Given the heavy reliance of many 
Chinese industries on rare earth inputs – the Panel recalls that up to 80% of Chinese rare earth products are consumed domestically – there is little reason to believe that such industries would 
simply "lie back", as it were, and allow the entire  resource on which their businesses depend to be 
exported. Of course, the Panel understands that markets, including the rare earths market, are 
subject to failures, and that it may at times be necessary for Members to intervene in the market to ensure stability and protect potentially vulnerable rare earths consumers. The Panel accepts 
China's evidence that "commodities markets are particularly susceptible to speculative and pre-
emptive buying".
725 But, as the Panel has explained above, the appropriate way for China to deal 
with such situations is through other provisions of the WTO Agreement, for example the imposition 
of temporary safeguard measures under Article XI.2 of the GATT, which addresses situations like 
the one China seeks to prevent.  
7.6.2.1.3.8  Do the manner and circumstance s of setting the export quota show that 
China's export quota "relates to" conservation? 
7.465.  China also argues that the way in which its 2012 export quota was set demonstrates that it 
"relates to" conservation. 
7.466.  China explains in its first written submission726 that the 2012 export quota was set as part 
of the coordinated establishment of the diverse volume restrictions for 2012, involving the NDRC, 
MIIT, MLR and MOFCOM. According to China, such a coordinated and cooperative approach to achieving the objective of conserving China's rare earth resources is legally required by the 2012 
Provisional Measures on the Administration of the Directive Production Plan of Rare Earths , which 
provides that the MIIT "will discuss with other Mini stries and propose a plan of rare earth mining, 
producing and exporting for the next year to the State Council".
727 China urges that the 2012 
export restrictions are thus an integral part of China's coordinated effort to manage the use of its 
exhaustible rare earth resources.  
7.467.  According to China, the State Council's 2011 Several Opinions  also mandated the 
coordinated imposition of production and expo rt quotas to carry out China's rare earths 
conservation objective. The Several Opinions  provides that mining, production, and consumption 
as well as export of rare earths must be restricted "simultaneously".728 The State Council directed 
                                               
723 As the Panel has noted above, export quotas ma y be capable of sending signals to foreign rare 
earths producers and consumers that th ey need to locate and develop new sources of ra re earths. However, as 
the Panel explained, export quotas can also have perverse effects on domestic  consumption and production. 
These perverse effects would need to be addressed by the regulating Member.  
724 China's executive summary (part II), para. 8. 
725 Exhibit CHN-153, Dr David Humphreys, Rare Earths – Demand and Speculation , April 2013 
(Exhibit CHN-153),  pp. 3 and 5; China's second written submission, para. 55. 
726 China's first written submission, paras. 114-116. 
727 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21), Article 4. 
728 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13), Paragraph II(7). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 139 - 
 
  the Ministries to establish the 2012 rare earth export quota by taking into account the "situations 
concerning domestic resources, production and consumption, and the international markets".729    
7.468.  China explains that, in line with these directives, and as set forth in a statement by Zhang 
Chenyang, the Director of the Division of Foreig n Trade Law of the Department of Treaty and Law 
of MOFCOM who was involved in the quota-setti ng process of 2012, the Ministries took into 
account three categories of factors when setting the level of the export quota for 2012: 
 the situation concerning domestic resources in China;  
 domestic and foreign demand for rare earths; and 
 domestic and foreign production of rare earths. 
7.469.  China elaborates on these three factors in its first written submission. With respect to "the 
situation concerning domestic resources in China", China explains that the Ministries examined 
"the extent and rate of depletion of rare earth resources within China" and concluded that "there 
was a need to conserve both light and heavy rare earths".730 With respect to "domestic and foreign 
demand for rare earth", China explains that it considered the "expected level of consumption of 
rare earths in China and abroad".731 Finally, with respect to "domestic and foreign production of 
rare earths", China explains that the "Ministrie s determined the level of the 2012 export quotas [] 
taking into account the total production quota set by MIIT"… [and] "also considered the expected 
foreign  production of rare earths ".732 
7.470.  In its second written submission, China reiterates that, when it set the 2012 export quota 
volumes, it took into account "situations concerning domestic resources, production and consumption, and the international markets".
733 China explains that, after considering these 
factors, it determined how much of its rare earth resources would be preserved for future use, and 
how much would be consumed during 2012 by users in China and abroad.734 
7.471.  In the Panel's opinion, the three factors list ed by China could potentially be said to "relate 
to" conservation, although in the Panel's opinion domestic and foreign demand for rare earths and 
domestic and foreign production of rare earths also seem to "relate to" China's industrial policies. In particular, and as the Panel has explained abov e, the Panel thinks that managing "uncertainty 
and volatility in the market"
735 is an industrial rather than a conservation policy.  
7.472.  At any rate, as the Panel sees it, the key difficulty with China's argument is that simply 
stating what factors are taken into account when setting the export quota does not explain how 
the export quota relates to conservation. Rather, China needs to demonstrate that the export 
quota as it is designed, and regardless of the subjective thoughts or intentions of those who set it, 
is "substantially" connected to the goal of conservation. China stated that regulators had conservation concerns in mind when setting export quota.
736 However, the Panel is not concerned 
with the subjective intention of legislators or regu lators. Instead, the Panel's task is to determine, 
on the basis of an objective examination of the facts, whether the design and architecture of 
China's export quota measures "relate to" conservation. The Panel considers that China cannot 
simply list factors that can be relevant without any demonstration of how they were used to design 
a conservation-related quota in 2012.  
7.473.  Additionally, for the reasons given below in section 7.6.2.2.2.1, the Panel does not 
understand how China can argue that the levels for the extraction, production, and export quotas 
were set simultaneously. To the contrary, it appears to the Panel that the various quota levels 
                                               
729 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13), Paragraph II(7). 
730 China's first written submission, para. 117. 
731 China's second written submission, para. 118. 
732 China's first written submission, paras. 123 and 126. 
733 China's second written submission, para. 110, (referring to Several Opinions of the State Council on 
Promoting the Sustainable and Sound Development of the Rare Earth Industry , (Exhibit CHN-13)). 
734 China's second written submission, para. 110. 
735 China's first written submission, para. 121. 
736 China's first written submission, paras. 116-130. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 140 - 
 
  were determined in batches at various times between December 2011 and August 2012. At any 
rate, even if China has set the volumes simultaneously, the Panel considers that China has failed to explain how, in this specific case, this simultaneity indicates that the export quota relates to conservation. The Panel accepts that, in principle, simultaneous setting of foreign and domestic 
restrictions could be an indication that those measures "work together". However, in this case 
China has failed to explain the significance  of the establishment procedures or their connection to 
the conservation objective. China has only posited but not explained why the fact that the quotas 
were set "as part of the coordinated establishment of the diverse volume restrictions for 2012, 
involving the NDRC, MIIT, MLR and MOFCOM" means th at those agencies were acting with a view 
to "achieving the objective of conserving China's rare earth resources".  
7.474.  The Panel has additional difficulties accepting that the manner in which China sets its 
export quota shows that the quota "relates to" conservation. 
7.475.  First, the Panel considers that China's allocation of the quota on the basis of light and 
heavy/medium rare earths tends to treat each category of rare earths as a single commodity, 
whereas in fact different rare earths have different levels of scarcity. The Panel understands that, 
as China explains, "China could not make in its extraction quota a further division for each of the 17 elements because different rare earths elements are normally found together in the same ores 
and indeed in the same minerals".
737 The Panel also understands that "the processing steps will 
inevitably produce several different ra re earth elements at the same time".738 The Panel does not 
object to China's conclusion that "China can only practically control the total volume of ores mined and the total volume of smelted and separated products processed from these ores".
739 
7.476.  Nevertheless, the Panel finds it difficult to understand why an export quota purportedly for 
conservation does not distinguish between the products on the basis of their abundance or scarcity. In our view, the fact that individual rare earth ores are released into the market without 
distinction on the basis of scarcity undermines China's claim that the manner in which the export 
quota is set "relates to" conservation.  
7.477.  The Panel also fails to understand why China does not impose restrictions on the sale 
and/or further processing of individual rare earth ores once they have been separated on the basis 
of their relative abundance or scarcity. While it is true that rare earths are often found together in the same ores, they are eventually separated into individual rare earths, and thus the Panel sees no reason why the export quota could not be denominated on the basis of individual rare earth 
elements. 
7.478.  The Panel notes that, in its first writte n submission, China argues that its 2012 export 
quota was set, inter alia, on the basis of evidence  regarding the increasing scarcity of both light 
and heavy/medium rare earths.
740 According to China, the need to conserve China's limited rare 
earth resources "was particularly acute for medium/heavy rare earths, because those reserves were estimated to last for only 15 years. Therefore, in 2012, China decided to regulate their use 
by setting separate export quota volumes for light and medium/heavy rare earths".
741 However, 
the Panel does not see the logical connection be tween, on the one hand, the need to conserve 
exhaustible natural resources and, on the other hand, China's decision to administer its export quota in two separate categories. The Panel understands and accepts China's desire to conserve its 
exhaustible natural resources, and certainly accept s that different categories of rare earth may 
need to be subject to different levels or degrees of control depending on their scarcity. But China has not explained why, instead of treating each rare earth separately, it has decided to group the 
17 rare earth elements into two broad categories. China has not argued that all rare earths in the 
light and all rare earths in the medium/heavy categories have the same level of scarcity.
742 In fact, 
China appears to negate this possibility in its response to Panel question No. 21, in which it 
acknowledges that, "within the group of rare eart h elements produced together from the same 
tonne of ore, the price for any single rare earth element can be very different than the price for 
another element. It is market demand that decides the price. The price reflects the scarcity or the 
                                               
737 China's response to Panel question No. 21. 
738 China's response to Panel question No. 21. 
739 China's response to Panel question No. 21. 
740 China's first written submission, para. 117. 
741 China's first written submission, para. 117 (internal citations omitted). 
742 China's response to Panel question No. 21. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 141 - 
 
  abundance of a particular type of rare earth product ".743 In this connection, the Panel recalls that it 
asked China for details about the reserve levels of its various rare earth materials, but that China has not availed itself of the opportunity to assist the Panel in this regard.
744  
7.479.  China has explained that the extraction quota makes a distinction between ores rich in 
light rare earth elements and ores rich in medium/heavy rare earth elements. 745 The geographical 
allocation of each type of ores is concentrated in particular regions of China. Ores (rock-type) rich in light rare earth elements are mainly located in the Northern part of China, while the iron-type 
rare earth ore, which is rich in heavy rare earth elements, is mainly located in the Southern part.
 
The allocation of extraction quota follows this natural geographically distinct distribution pattern.746 
Thus, explains China, the extraction quota is distributed on a light and medium/heavy basis to each province based on the particular reserve(s)of that province.
747  
7.480.  The Panel notes that the European Union has questioned the logic of China's extraction 
quota allocation, since, as it argues, ores mined in different regions of China are "not only constituted of either light or heavy rare earths but … [are] a mix, with some rare earths being only 
predominant".
748  
7.481.  Ultimately, whether certain kinds of rare earths are or are not found in different parts of 
China is irrelevant to the Panel's primary concern, which is that the allocation of the export  quota 
is administered on the basis of light and me dium/heavy, but that China has not explained 
sufficiently how this division relates to conservation. While it may make sense for China to allocate its extraction  quota along these lines – and the Panel makes no finding on this point, since the 
extraction quota has not been challenged – the Panel cannot see any conservation-related reason 
for China to set the export  quota on the basis of the geographical origin of the elements. As the 
Panel has explained, an export quota that groups different kinds of resources together for the purpose of sale into the market seems inconsistent with the goal of conserving natural resources, 
since it does not account for the different levels of scarcity or abundance of each individual 
element. China has explained that medium/heavy rare earths are, as a general matter, scarcer than light rare earths;
749 but China has also acknowledged that different rare earth resources 
within the light and medium/heavy categories  have different levels of scarcity. As such, it appears 
to the Panel that the allocation of the export quot a on the basis of two broad categories will tend 
to treat different elements in the same way. This seems to undermine, rather than support, the goal of conserving exhaustible natural resources. 
7.482.  The Panel notes that in its answer to Panel question No. 21, China argued that applying a 
single export quota on all rare earth elements co uld enable exporters "to use the quota completely 
for either light or medium/heavy rare earths. Such decision by exporters, which may be fuelled by 
speculative demand, would distort the market for the group of rare earth elements that the 
exporters decided not to export". In the first plac e, this seems to the Panel to be an industrial 
policy justification. As the Panel has explained, managing an international resources market cannot 
be considered to fall within the meaning of "conservation". Moreover, the Panel emphasizes that it 
is not suggesting a single  export quota would "relate to" conservation any more than China's 
current structure.
750 To the contrary, the Panel's concern is that it is difficult to understand how 
any quota system that treats products with different scarcity levels in the same way could "relate 
to" conservation. 
7.483.  In sum, the Panel has difficulty accepting th at China's allocation of the export quota on the 
basis of light and medium/heavy rare earths "relates to" the conservation of exhaustible rare earth 
ores.  
                                               
743 Emphasis added. 
744 China's response to Panel question No. 20. 
745 See also China's response to Panel question No. 21. 
746 China's response to Panel question No. 105. 
747 China's response to Panel question No. 105. 
748 European Union's comments on China's response to Panel question No. 105. 
749 China's first written submission, p. 5. 
750 The Panel makes no finding on this point. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 142 - 
 
  7.484.  Finally, the Panel notes that China has explained that its export quota is allocated on the 
following basis751: 
Allocation receivable = allocation of  the type of rare earth* (A1+A2) 
(A1 = export quantity of a certain company for the last 3 years / total export quantity 
of China) *0.5 
(A2 = export value of a certain company for the last 3 years / total export value of China) *0.5 
 
7.485.  The Panel does not understand the relationship between the formula used for setting the annual export quota shares and China's conservation programme, and China did not argue that these variables individually and collectively relate to conservation. Indeed, according to China this 
formula is designed to manage the supply of rare earth resources and encourage export quota 
utilization. While recognizing that not every aspect of a government's policy must relate directly to conservation, the Panel is concerned that this formula might undermine China's conservation 
goals. In particular, the Panel notes that the relative abundance or scarcity of a given rare earth 
material is not an element taken into account when calculating how much an enterprise will be allowed to export in any given year. Instead, the formula seems to focus on industrial policy 
concerns, including prior export performance and overall value of exports from China.  
7.6.2.1.3.9  The possibility that unused expo rt quota volumes will be sold to domestic 
consumers 
7.486.  Finally, the Panel notes the European Unio n's argument that "if China were serious about 
conserving its resources, it would conserve the material that has not been used up by exports, 
instead of making it available to domestic producers".
752 In response, China argues that the 
domestic availability of unused export quota volumes does not undermine the "substantial 
relationship" between the export quota system and the goal of conserving rare earth ores since 
"the conservation levels … determined in the extraction and production quota for any given year … constitutes the level of extraction that China cons idered appropriate for that year". Thus, according 
to China, there is no harm, from a conservation perspective, in allowing domestic rare earth 
consumers to use whatever quantity of export-d esignated rare earths has not been used by 
foreign consumers. According to China, "onc e extracted, China cannot put these extracted 
materials back in the ground".
753 China argues that if, "at the end of the year, there are unsold 
stocks, due to lack of foreign and/or domestic demand, the existence of these unsold stocks is an 
important factor considered in setting the extraction, production and export quotas for the following year ".
754 Thus, in China's view, there is no need for China to "adopt a new measure to 
prohibit the sale of the material that has not been used up by exports".755 
7.487.  The Panel agrees with China on this poin t. In the Panel's opinion, the mere fact that 
unused volumes are allowed to be sold into the domestic market does not in itself mean that the 
export quota system does not "relate to" conser vation. Assuming that the extraction and/or 
production caps were "real" restrictions, i.e. were set below the level of expected demand for the relevant period (i.e. for 2012), then we believe the fact that China does not require unused export quotas to be preserved for use in future years does not necessarily cast doubt on its conservation 
objectives, since China is still pursuing conservation through the imposition, on an annual basis, of 
limits on extraction and production. Within these limits, there is nothing illegal or even contradictory about China pursuing its own industrial or other goals (so long as these are pursued 
in a WTO-consistent manner).  
7.488.  While taking into account the unused shar e of the export quota in the determination of 
extraction/production and export quotas for the foll owing year(s) may result in a higher degree of 
conservation, we believe that the Panel cannot find that China's measures as they stand do not 
"relate" to conservation merely because China has designed its export quota system in such a way 
                                               
751 2012 First Batch Rare Earth Export Quotas , (Exhibits CHN-56, JE-55). See also China's second 
written submission, para 90. 
752 European Union's opening statement at th e first meeting of the Panel, para. 49. 
753 China's response to Panel question No. 36. 
754 China's response to Panel question No. 36; Declaration On the Setting Of 2012 Export Quotas on 
Rare Earth Products , (Exhibit CHN-63), para. 14. 
755 China's response to Panel question No. 36. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 143 - 
 
  as to prohibit the stockpiling or exchange of unused export quota shares among exporters while 
allowing unused export quota volumes to be sold into the domestic market. In our view, this is so even though taking into account such unused export quota's shares for future years' determinations could result in a higher degree of conservation. China is entitled to identify and 
pursue its own level of conservation, and once such level of extraction/conservation is determined, 
where products are eventually consumed (abroad or  domestically) does not affect the relationship 
between the challenged measures and the goal of conserving exhaustible natural resources.  
7.6.2.2  Second part: whether China's export quota on rare earths is made effective in 
conjunction with restrictions on do mestic production or consumption 
7.489.  The Panel now turns to examine whether China's export quota on rare earths is "made 
effective in conjunction with restrictions on domestic production or consumption". 
7.490.   China submits that its 2012 comprehensive conservation policy includes both export and 
domestic  restrictions. Specifically, China argues that its conservation plan includes five categories 
of domestic restriction: access conditions; resource taxes; quotas on extraction, production and 
export; environmental requirements; and enforcement actions.
756 China argues also that its 
restrictions on domestic production and consumption of rare earths are "substantial".757 China 
argues that it meets the even-handedness requiremen t in Article XX(g) so long as it ensures that 
the impact of its conservation policy is imposed on domestic as well as foreign users.758 
7.491.  The complainants rebut the five parts of China's argument, and maintain that China's 
conservation measures do not constitute "restrictions on domestic production or consumption" within the meaning of Article XX(g) of the GATT 1994. According to the complainants, the export 
quota, together with the production restrictions, ensures favourable access to domestic consumers 
at the expense of foreign consumers, fundam entally contradicting the "even-handedness" 
requirement.
759 
7.492.  The Panel now proceeds to determine whether (i) China imposes "restrictions on domestic 
production or consumption" of rare earths; and (ii) China's export quota is "made effective in conjunction with" such restrictions on domestic production or consumption. 
7.6.2.2.1  Whether China has imposed rest rictions on domestic production or 
consumption of rare earths 
7.493.  China identifies five categories of measures that it claims restrict the production or 
consumption of rare earth resources in China.
760 As the Panel noted above, these are (a) access 
conditions; (b) resource taxes; (c) volume restrictions; (d) environmental requirements; and (e) 
enforcement actions. 
7.494.  We will assess the first four categories of domestic measures individually. The Panel 
considers that "enforcement measures", listed by China as a fifth category, are part of the design, 
structure, and architecture of each of the alle ged restrictions, i.e. access conditions, resource 
taxes, volume restrictions, and environmental requirements, and should be assessed together with 
each of those four categories of measures invoke d by China. The Panel will evaluate each legal 
instrument invoked by China as an alleged restriction on domestic production or consumption, and assess whether that alleged restriction is capable of restricting domestic production or consumption. As discussed under the legal test of Article XX(g), a domestic instrument will be 
considered a "restriction" for the purposes of Article XX(g) where it is capable of having a limiting 
effect. For that purpose, the Panel will consider not only whether there are restrictions in the text of Chinese law, but also whether China has adopted measures to enforce its alleged restrictions. 
Moreover, the Panel recalls that the question whether there are restrictions on domestic production 
or consumption of rare earths does not entail an "effects test" of such alleged restrictions, but, rather, an assessment of whether China maintains real restrictions backed up with actual 
                                               
756 China's first written submission, para. 164. 
757 China's first written submission, para. 228. 
758 China's first written submission, paras. 226-228. 
759 United States' second written submission, paras. 194 and 197; European Union's second written 
submission, paras. 179 and 181; Japan's second written submission, section III.A.3. 
760 China's first written submission, para. 165. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 144 - 
 
  enforcement that work together with the export qu ota for the goal of conserving exhaustible rare 
earths. 
7.6.2.2.1.1  Whether the access conditions  are capable of restricting domestic 
production or consumption of rare earths 
7.495.  According to China, enterprises wishing to mine rare earths in China are required to obtain 
a mining licence.761 Mining companies and smelting and separating enterprises must comply with 
certain access conditions before they can engage in and have access to the rare earth industry.762 
These access conditions set a minimum production scale for mining, smelting, and separating, and 
impose a minimum recovery rate for mines763 and separating enterprises.764 China explains that 
these requirements are designed to eliminate sm all, inefficient producers. In addition, China 
argues that the State Council in its Several Opinions decided to continue the suspension of the 
processing of applications for new rare earth mi ning as well as for rare earths smelting and 
separating projects lodged during 2012. Moreover, the State Council has refused to grant requests for the expansion of mining by existing mines and the expansion of the scope of existing smelting 
and separating projects during 2012.
765 According to China, these access restrictions are intended 
to accelerate rare earth industry consolidation and to streamline the industry structure in order to limit the number of miners and producers. China contends that it is much easier to control a 
smaller number of well-organized and professionally  managed mines and production facilities than 
a very large number of small and more informal mining and production operations. China explains that the consolidation of licences for a much more limited number of mining and rare earth producers helps to restrict domestic production.
766 Indeed, argues China, these 2011-2012 
mandated restrictions resulted in a significant reduction in the number of rare earth mining and 
producing enterprises, and shut down inefficient and uncontrolled mining and production.767 
7.496.  The measures invoked by China as access conditions to the rare earth industry are: 
a. Administration of Registration of Mining of Mineral Resources768 of 1998; 
b. Several Opinions of the State Council on Promoting the Sustainable and Sound 
Development of the Rare Earth Industry769 of 2011; 
                                               
761 China's first written submissi on, para. 167, (referring to Administration of Registration of Mining of 
Mineral Resources , (Exhibit CHN-15)). 
762 China's first written submissi on, para. 167, (referring to 2012 Circular on Admission to Rare Earth 
Industry , (Exhibit CHN-16) and Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21)). 
763 2012 Circular on Admission to Rare Earth Industry , (Exhibit CHN-16), Article IV ("Mixed type rare 
earth mines and hamartite mines shall have a mining loss rate and a dilution rate not exceeding 10%, the 
recovery rate of separation shall be no less than 72%, and the recycling rate of separation wastewater shall be 
no less than 85%. For ion-absorption-type rare earth mi nes, the mining recovery ra te shall be no less than 
75%, the recycling rate of separation  wastewater shall be no less than 90%, and the vegetation restoration 
rate shall be no less than 90%. For sm elting and separation projects processi ng rare earth ore of mixed type or 
hamartite ore, the total recovery rate  shall be above 90% from rare earth concentrate to mixed rare earth or 
above 95% from mixed rare earth to single or concentrat ed rare earth compounds; for smelting and separation 
projects processing south ion-absorpti on-type rare earth ore, the total re covery rate shall be above 92% from 
mixed rare earth to single or  concentrated rare earth comp ounds. The direct recovery rate of rare earth metals 
shall be above 92%"). 
764 China's first written submissi on, para. 168, (referring to 2012 Circular on Admission to Rare Earth 
Industry , (Exhibit CHN-16)). 
765 China's first written submission, paras. 169-170, referring to Several Opinions of the State Council 
on Promoting the Sustainable and Sound Development of the Rare Earth Industry , (Exhibit CHN-13), 2012 
Circular on Admission to Rare Earth Industry , (Exhibit CHN-16), and 2012 Total Extraction Quotas of Tungsten, 
Antimony and Rare Earth Ores for 2012 (First Batch) , (Exhibit CHN-20). 
766 China's first written submission, para. 172. 
767 China's first written submission, paras. 171-172, referring to Information Office of the State Council, 
"Situation and Policies of China's Rare Earth Industry ", Beijing, June 2012, (Exhibits CHN-1), Roskill, Rare 
Earths & Yttrium: Market Outlook to 2015 , 14th Edition, November 2011, (Exhibit CHN-9), Several Opinions of 
the State Council on Promoting the Sustainable and Sound Development of the Rare Earth Industry , (Exhibit 
CHN-13), and " MLR Revokes Raft of Rare Earths Mining Licences ", Interfax China , 14 September 2012, (Exhibit 
CHN-74). 
768 Administration of Registration of Mining of Mineral Resources , (Exhibit CHN-15). 
769 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 145 - 
 
  c. Circular on Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 
2012770; 
d. Administration of Directive Production Plan of Rare Earths771 of 2012; 
e. 2012 Circular on Admission to Rare Earth Industry .772 
7.497.  The Panel has difficulty seeing how these "access conditions" work to restrict the domestic 
production of rare earths. Although the Panel accepts that these access conditions make it harder for new enterprises to enter the rare earths industry, they do not control the amount of rare 
earths that enterprises already in the industry may extract or produce. 
7.498.   The Administration of Registration of Mining of Mineral Resources
773 sets out licensing 
requirements for rare earth mining enterprises, but it does not refer to restrictions on extraction or production of rare earths. 
7.499.  The 2012 Circular on Admission to Rare Earth Industry
774specifies access conditions for 
mining and separating enterprises seeking entry into the rare earth industries. The Circular  
addresses (i) the establishment and layout of th e mining and smelting/separating projects; (ii) 
production scale, technology, and equipment (including the minimum production scale 
requirement); (iii) energy consumption; (iv) comprehensive utilization of resources (including a minimum recovery rate requirement); (v) environmen tal protection; (vi) production quality; (vii) 
production safety and social responsibility; and (viii) supervision and administration. The 
Administration of Directive Production Plan of Rare Earths
775 provides that, in order to apply for a 
share of China's extraction and production plan for rare earths, mining and smelting and separating enterprises must satisfy the access conditions. 
7.500.  As an initial matter, the Panel notes that both the 2012 Circular on Admission to Rare 
Earth Industry
776 and the Administration of Directive Production Plan of Rare Earths777 were made 
effective only after  mining and separating and smelting enterprises received their allocation of the 
2012 extraction and production quotas. The Pane l will address the issue of extraction and 
production quotas in the following sections. Second, the Panel has doubts how the access conditions described above, which apply to newcomers seeking entry to the rare earths industry, 
could restrict the activity of rare earth miners and producers who had already entered the rare 
earths industry and been granted a share of th e 2012 extraction and production quotas. In the 
Panel's opinion, the existence of access condit ions confirms the existence of governmental 
regulation and control over extraction and production of rare earths. However, while access 
conditions make it harder for new enterprises to enter the rare earths industry, they do not control 
the amount of rare earths that enterprises already in the industry (i.e. those satisfying the access conditions) extract or produce. The Panel therefore is unable to conclude that access conditions 
such as a minimum production scale – which is designed to promote the efficiency of resource 
extraction and production – are restrictions on domestic production.  
7.501.  The Several Opinions of the State Council on Promoting the Sustainable and Sound 
Development of the Rare Earth Industry
778, as well as Section IV of the Circular on Total Extraction 
Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 , impose a suspension of processing of 
applications for new or expanded rare earth mines during 2012. According to these documents, however, while such suspension is maintained "in principle"
779, "[k]ey projects approved by the 
                                               
770 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20). 
771 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21). 
772 2012 Circular on Admission to Rare Earth Industry , (Exhibit CHN-16). 
773 Administration of Registration of Mining of Mineral Resources , (Exhibit CHN-15). 
774 2012 Circular on Admission to Rare Earth Industry , (Exhibit CHN-16). 
775 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21). 
776 2012 Circular on Admission to Rare Earth Industry , (Exhibit CHN-16), (made effective 26 July 2012). 
777 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21), (made effective 13 June 
2012). 
778 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13). 
779 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13), para. IV(14). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 146 - 
 
  State Council," "survey projects," mine integration projects, and "[c]onstruction projects to be 
supported under [agreements] signed between [the central government] and the government of relevant province (region or municipality) in the context of regional economy support policies of the central government"
780 are still permitted. In the Panel's vi ew, the suspension of processing of 
applications for new or expanded  rare earth mines during 2012 – with certain exceptions – also 
confirms the existence of governmental control over extraction and production of rare earths. However, China has failed to explain how these suspensions restrict the production or extraction of 
rare earths either by existing rare earth miners and producers or in the context of existing 
mining/production projects. 
7.6.2.2.1.2  Whether the volu me restrictions are capabl e of restricting domestic 
production or consumption of rare earths 
7.502.  China argues that its 2012 comprehensive conservation policy for rare earths includes 
volume restrictions on domestic production in the form of quotas on the volume of rare earths that can be extracted and smelted and separated.
781 China also posits that the combined effect of its 
export and production quotas for rare earths is to  impose a volume restriction on domestic Chinese 
consumption of rare earth products.782 
7.503.  First, the Panel recalls its conclusion, explained above, that it rejects the notion that 
measures are capable of restricting domestic production or consumption of rare earths solely on 
the basis of the existence in law of a volume cap on extraction, production, or consumption of rare 
earths. In our view, China must also demonstrate that it has measures to effectively enforce these caps. The Panel will therefore ex amine both the legal framework of the domestic restrictions and 
whether the caps have been legally implemented and are being enforced in the context of its 
analysis and application of the second phrase of Article XX(g).  
The extraction quota system applicable to rare earths 
7.504.  According to China, China's extraction quota determines how much rare earth concentrates 
can be legally produced each year.
783 China invokes the following legal instruments in support of 
its claim that it has imposed a restriction on the extraction of rare earths in 2012784: 
a. Administration of Exploration and Mining of the Specified Minerals785; 
b. 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores786; 
and 
c. Circular on Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 
2012.787 
7.505.  The Panel notes first that China does not explain the relationship between these three legal 
instruments in its submissions. The Panel has examined the exhibits and finds that the 
Administration of Exploration and Mining of the Specified Minerals788, which was "formulated in 
accordance with "the Mineral Resources Law789, governs the imposition of quantity control over the 
extraction of the so-called "specified minerals for which protective mining is prescribed". As China 
explains, "specified minerals" are those minerals "which are subject to the State administration of 
planned exploration and mining in accord ance with pertinent regulations". The Administration of 
Exploration and Mining of the Specified Minerals , however, does not refer explicitly to rare earths. 
                                               
780 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20), Section IV. 
781 China's first written submission, para. 175. 
782 China's first written submission, para. 184. 
783 China's second written submission, para. 36. 
784 China's first written submission, paras. 24 and 175. 
785 Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18). 
786 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19). 
787 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012  (First Batch) , 
(Exhibit CHN-20). 
788 Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18). 
789 Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18), Article 1. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 147 - 
 
  Nonetheless, the Panel notes that Paragraph 5 of the Circular on Total Extraction Quotas of 
Tungsten, Antimony and Rare Earth Ores for 2012 (described below) and the Monthly Reporting of 
the Implementation of the Rare Earths Extraction Controlling Quota do refer to the Administration 
of Exploration and Mining of the Specified Minerals . The Panel considers therefore that the 
Administration of Exploration and Mining of the Specified Minerals is applicable to rare earths, and 
governs the setting of requirements to control the amount of mining in general.  
7.506.  In 2011, the Ministry of Land and Resources issued the Circular on Total Extraction Quotas 
of Tungsten, Antimony and Rare Earth Ores for 2012 . This document specifies the first batch 
(46900 rare earth ore (REO) tonnes) of the extraction quota, which is to be allocated among the provinces.
790Article I of the Circular  announces that an additional batch of extraction quotas for 
tungsten, antimony, and rare earth ores will be re leased at a "proper time" in the second quarter 
according to national policies and market changes.791 The Panel therefore understands that the 
total amount of the 2012 extraction quota was not known until the second quarter of 2012. The 
Panel recalls that the 2012 extraction quota dist inguishes between light and medium/heavy rare 
earths, and sets separate quota volumes for both of these categories.792 
7.507.  On 19 April 2012, the Ministry of Land and Resources issued the 2012 Total Extraction 
Controlling Quota of Tungsten, Antimony and Rare Earth Ores , which specifies the total extraction 
quota for rare earths (93,800 REO tonnes793) and allocates the quota between the provinces for 
2012. The introductory paragraph of the 2012 Total Extraction Controlling Quota of Tungsten, 
Antimony and Rare Earth Ores  states that the amount of the total extraction quota includes the 
amount of the first batch of 2012 extraction quota issued in 2011.794 Thus it appears that China 
does not decide at the beginning of 2012 the total amount of rare earths that Chinese miners are 
permitted to extract for that year, which means that mining enterprises must prepare business plans prior to being informed of their total share for the year. Instead, China issued through the 
2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores  a second 
batch of the extraction quota on rare earths in April 2012, a few months after the issuance of the 
first batch of the extraction quota for 2012. The Panel understands that the volume of these two 
batches together represent the maximum amount of rare earths that can legally be extracted 
through the end of 2012.  
7.508.  Where a mineral subject to the extraction quota (such as rare earth minerals) co-exists 
with other minerals in the same ore, the Administration of Exploration and Mining of the Specified 
Minerals provides for two scenarios. Article 15 states that if rare earths constitute more than 20% 
of all minerals in the mine, the extraction of other minerals shall be "subject to the extraction quota set for" rare earths.
795 If the rare earth does not reach the level prescribed under Article 15, 
the production of the "major mined mineral" will be limited to the volume that can be produced 
without exceeding the extraction quota for rare earths. However, if there is a need to expand the production of the "major mined mineral", for instance in case of shortage of the particular type of 
mineral extracted from the mine, and this expansion would lead to the over-quota extraction of 
r a r e  e a r t h s ,  o f f i c i a l  a p p r o v a l  m u s t  b e  o b t a i n e d  i n  a d v a n c e .  I n  t h i s  s p e c i a l  c a s e ,  t h e  m i n e r  i s  required to keep the over-extracted amount of rare earth in stock and not to sell it into the 
market.
796 
                                               
790 China's first written submission, paras. 24, and 175, footnote 32, (referring to 2012 Total Extraction 
Controlling Quota of Tungsten, Antimony and Rare Earth Ores , (Exhibit CHN-19) and 2012 Total Extraction 
Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , (Exhibit CHN-20)). 
791 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20). 
792 China's first written submission, para. 175 an d China's responses to Panel question No. 105 
(referring to 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19), Annex). 
793 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19). 
794 The Panel notes that the English version of the 2012 Total Extraction Quotas of Tungsten, Antimony 
and Rare Earth Ores for 2012 (First Batch) , (Exhibit CHN-20) does not provide the effective date for the first 
batch of extraction quota, while the Chinese versio n indicates that document was promulgated in 2011. 
795 China's responses to Panel question No. 139. 
796 Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18), Article 16; 
Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control  (Exhibit CHN-43) 
Article 11; China's responses to the Panel's question No. 139. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 148 - 
 
  7.509.  The Panel notes that, based on Exhibit CH N-191, the level of extraction set by China for 
2012 (93,800 REO tonnes) was hi gher than the actual extraction amount in 2011 (84,943 
REO tonnes), but identical to the level of the 2011 extraction plan (93,800 REO tonnes). It is not clear whether China knew about the actual level of extraction in 2011 when it set its 2012 
extraction level, but the Panel presumes that China must have been aware (at least 
approximately, through the reports it should have received through its mandatory reporting requirement
797) that the  extraction quota was not being entirely filled. The Panel accepts that an 
extraction quota set at a level that is equal to or higher than the previous year's level of actual 
extraction could still be restrictive, if, for example, in deciding the level of extraction quota for the following year, those responsible for setting the quota predicted an increase in domestic demand on the basis of reliable information. However, China has not explained in sufficient detail the 
rationale for setting an extraction quota for 2012 ab ove the actual extraction level for 2011. In the 
Panel's view, these circumstances cast doubt on the assertion that the extraction quota in 2012 
was designed by China to limit extraction (i.e. production of rare earth concentrates). 
7.510.  The Panel notes that, in its explanation regarding the extraction quota setting process
798, 
China refers to Exhibit CHN-63 and CHN-64, arguing that forecasts in 2011 indicated an expectation of increase in Chinese demand in  2012. The Panel examined the two exhibits and 
found that Exhibit CHN-64, an article from the China Rare Earths Information Journal published in 
December 2011, predicts an increase in Chinese demand in rare earths in 2011-2015 , but no 
specific information is provided for the year 2012.
799 Exhibit CHN-63, the Declaration on the 
Setting of 2012 Export Quotas on Rare Earth Products , does indicate that, in setting the 2012 
quota, the relevant Ministries predicted an increase of Chinese demand for rare earths in 2012, 
and took this into account. However, China has not provided any evidence or data about the information taken into account by the concerned Ministries and decision-makers in reaching this 
prediction.
800 Without explaining the basis on which China claims to have predicted an increase in 
domestic demand in 2012, the Panel feels unable to determine whether the level set in 2012 really was lower than that expected demand. For instan ce, paragraph 13 of Exhibit CHN-63 states that 
China based its expectation in part on "industry forecasts", but China has not provided such 
forecasts to the Panel. Such evidence is even more important because China's own data suggests that domestic consumption of rare earths decreased between 2010 and 2011.
801 A rise in domestic 
demand would therefore seem to go against trend.802 China has argued that it predicted an 
increase in domestic demand on the basis of dropping prices.803 However logical this may be in 
theory, it is has not been supported with sufficient factual demonstration showing the foundation of China's claim. The Panel is certainly not suggesting that an increase in domestic demand was 
not possible; it is simply emphasizing that China has failed to provide evidence sufficient to 
establish that its quota was set at a level that was restrictive, i.e. below predicted domestic demand. Therefore, it is not clear to the Panel whether China's 2012 extraction quota was capable 
of having a limiting effect. As such, the Panel has difficulty concluding that the extraction quota 
was a real restriction within the meaning of Article XX(g).
804 Nevertheless, we will continue our 
analysis of the extraction and production quotas in order to examine the extent to which the 2012 extraction quota was effectively enforced.  
7.511.  The complainants allege that China does not effectively enforce its extraction and 
production quotas, that these have not been respected since 2006, and that in 2012 the actual level of extraction was much higher than the level set forth in China's quota measures.
805 China 
claims that the actual level of extraction of rare earths in 2012 was 76,029 REO tonnes, an 
                                               
797 Monthly Reporting of the Implementation of th e Rare Earths Extracti on Controlling Quota , 
(Exhibit CHN-44) (indicating that, prior to the mont hly reporting requirement that came into force in 
September 2011, reporting was required on a quarterly basis).   
798 China's first written submission, para. 119. 
799 "Current situation of China rare earth industry and outlook for '2011-2015' period ", China Rare 
Earths Information Journal, Vol. 17, No. 12, December 2011 and Vol. 18, No. 1, January 2012, (Exhibit CHN-64), p. 4. 
800 Declaration On the Setting Of 2012 Export Quotas on Rare Earth Products , (Exhibit CHN-63), p.12. 
801 Updated Rare Earths Data (1999-2012) , (Exhibit CHN-191). 
802 In fact, China's data shows that domestic consum ption fell quite dramatically in 2012, from 83,110 
REO tonnes in 2011 to 64,797 tonnes in 2012: see Updated Rare Earths Data (1999-2012) , (Exhibit CHN-191). 
803 Declaration On the Setting Of 2012 Export Quotas on Rare Earth Products , (Exhibit CHN-63), 
para. 24.  
804 Declaration On the Setting Of 2012 Export Quotas on Rare Earth Products , (Exhibit CHN-63), p.12. 
805 United States' second written submission, para. 163; European Union's second written submission, 
paras. 149-150. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 149 - 
 
  amount lower than the 2012 extraction quota of 93,800 REO tonnes. The complainants maintain 
that the actual extraction level in 2012 was 95,000 REO tonnes, which exceeds the 2012 quota.806  
7.512.  The complainants rely for their data on the Rare Earth Elements  report prepared by 
Roderick G. Eggert.807 China, however, challenges the data source relied on by Eggert, namely the 
US Geological Survey, and argues that the US Geological Survey data "higher estimated" the level 
of actual extraction in China. According to China, the source of its own data is official NDRC data, 
collected either by the authorities directly supervising the industries or by relevant industry 
associations, as required by Chinese law.808 China acknowledges that the illegal extraction by 
miners without a licence and over-quota production by legal miners fall outside of its extraction statistics; therefore, the actual extraction data pr ovided by China only covers in-quota production 
by legal miners. In the Panel's view, it is unclear whether the difference between China's data and 
the complainants' data is due to the inclus ion of amounts extracted by illegal miners. 
Nevertheless, for the purpose of assessing whether the extraction quota in 2012 was a real and actual restriction on domestic production, the Panel will use the data provided by China regarding 
the actual extraction of legal miners in 2012. 
7.513.  As noted above, China claims that the actu al level of extraction of rare earths in 2012 was 
76,029 REO tonnes, an amount lower than the 2012 extraction quota of 93,800 REO tonnes. 
According to China, the 2012 extraction quota was set to impose a real restriction. The 
complainants argue that China does not fully and sufficiently enforce its domestic restrictions and, therefore, that China's alleged domestic restrictions are not real and actual. The Panel must determine whether the design and structure of th e relevant enforcement measures were capable 
of effectively capturing and punishing over-quota extraction of rare earths and illegal extraction. 
7.514.  China invokes the following instruments to support its argument that it has imposed 
enforcement mechanisms to ensure that rare earth mining enterprises comply with the extraction 
quota
809, including reporting requirements, supervisio n by the MLR, and deduction of share for 
over-extraction: 
a. Administration of Exploration and Mining of the Specified Minerals810; 
b. Administration of the Quota for the Minerals Subject to the Total Extraction Quantity 
Control811; 
c. Monthly Reporting of the Implementation of the Rare Earths Extraction Controlling 
Quota812; 
d. Circular Establishing Mining Zone Assistant Administrators Team813; and 
e. Inclusion of VAT Invoices Issued by Rare Earth Enterprises into "VAT Anti-Fake System" . 
7.515.  The Panel notes that the Administration of Exploration and Mining of the Specified Minerals  
and the Administration of the Quota for the Minerals  Subject to the Total Extraction Quantity 
Control do not refer to rare earths. China has not explained whether or not rare earths fall within 
the scope of the term "minerals" as that term is  used in these two instruments. Nonetheless, the 
Panel notes that the 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 
2012814 and the Monthly Reporting of the Implementation of the Rare Earths Extraction Controlling 
                                               
806 See, e.g., United States' comments to China's re sponses to Panel question No. 75 (referring to the 
Roderick G. Eggert, Rare Earth Elements , 25 April 2013, (Exhibit JE-129), p. 8). 
807 Roderick G. Eggert, Rare Earth Elements , 25 April 2013, Exhibit JE-129). 
808 China's comments on the complainants' response to Panel question No. 70. 
809 China's first written submission, para. 218. 
810 Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18). 
811 Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control , 
(Exhibit CHN-43). 
812 Monthly Reporting of the Implementation of th e Rare Earths Extracti on Controlling Quota , 
(Exhibit CHN-44). 
813 Circular on Establishing Team of Mining Zone Assistant Ad ministrators for Ore Districts of Rare Earths 
and Other Materials , (Exhibit CHN-85). 
814 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 150 - 
 
  Quota  confirm the application of the Administration of Exploration and Mining of the Specified 
Minerals to the extraction of rare earths. Moreover, the 2012 Total Extraction Controlling Quota of 
Tungsten, Antimony and Rare Earth Ores815 refers to the Administration of the Quota for the 
Minerals Subject to the Total Extraction Quantity Control  as the basis for the 2012 extraction quota 
and the quota allocation. Theref ore, as the Panel understands it, the enforcement measures 
embodied in the Administration of Exploration and Mining of the Specified Minerals and the 
Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control are 
applicable to the extraction of rare earths.  
7.516.  The Administration of Exploration and Mining of the Specified Minerals  and the 
Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control direct 
the local departments of the MLR to allocate the ex traction quota to mining enterprises, and each 
mining enterprise is required to sign a liability letter with the local MLR to confirm their obligation 
of compliance and their liability in case of breach.816 Mining enterprises must establish a booking 
system to record the quantity of rare earth concentrates they produce and sell817, and must report 
this to the local departments of the MLR on a monthly basis.818 Local departments of the MLR are 
subject to the supervision of the central MLR819, to which they are required to report monthly or 
quarterly on the implementation of the total extraction quota. Monthly Reporting of the 
Implementation of the Rare Earths Extraction Controlling Quota modifies the quarterly reporting 
system by making it into a monthly reporting system for the enforcement of the extraction quota on rare earths.
820 
7.517.  With respect to the supervision of the MLR, the Circular Establishing Mining Zone Assistant 
Administrators Team refers to additional specialized human resources to supervise whether mines 
adhere to their extraction quota.821Article 18 of the Administration of Exploration and Mining of the 
Specified Minerals  also provides for local MLR officials to assign a technical expert to visit the 
mines to conduct inspections without prior notice.822 Moreover, according to China, in June 2012 a 
new VAT system was put in place to enable identifi cation of production over the extraction caps.823 
7.518.  Regarding punishment for over-quota extraction, the 2012 Total Extraction Controlling 
Quota of Tungsten, Antimony and Rare Earth Ores  refers to the Administration of the Quota for the 
Minerals Subject to the Total Extraction Quantity Control as the basis for the enforcement of the 
2012 annual extraction quota. The Administration of the Quota for the Minerals Subject to the 
Total Extraction Quantity Control  provides that over-extraction is grounds for reducing a province's 
or an individual enterprise's share of the extraction quota.824 
7.519.  In our view, China has made efforts to co mbat illegal extraction, including in October and 
November of 2012, when the MIIT in coordination with MLR and other government agencies 
                                               
815 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19). The Panel believes that in its introductory paragraph, the English version of this exhibit 
mistakenly translates " 开采总量控制矿种指标管理暂行办法" (see  Administration of the Quota for the Minerals 
Subject to the Total Extraction Quantity Control , (Exhibit CHN-43)) as " Provisional Measures for the  
Administration of Exploration an d Mining of the Specified Minera ls subject to Protective Mining ". 
816 Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control , (Exhibit 
CHN-43), Article 9; Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18), 
Article 11; China's first written submission, para. 218, and China's response to Panel question No. 77. 
817 Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control , (Exhibit 
CHN-43), Articles 10 and 12; Administration of Exploration and Mining of the Specified Minerals , (Exhibit 
CHN-18), Article 12; China's first written submission, para. 218; and China's responses to Panel question 
No. 77. 
818 Ibid. 
819 Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control , (Exhibit 
CHN-43), Article 14; China's response to Panel question No. 77. 
820 Monthly Reporting of the Implementation of th e Rare Earths Extracti on Controlling Quota , 
(Exhibit CHN-44). 
821 China's first written submission, para. 217 (referring to Circular on Establishing Team of Mining Zone 
Assistant Administrators for Ore District s of Rare Earths and Other Materials , (Exhibit CHN-85)). 
822 China's responses to Panel qu estion No. 77 (referring to Administration of Expl oration and Mining of 
the Specified Minerals , (Exhibit CHN-18)). 
823 China's second written submission, para. 22. 
824 Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control Articles , 
(Exhibit CHN-43), Articles 5, 13 and 14. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 151 - 
 
  initiated a campaign to combat the illegal extraction and production of rare earths.825 In the annex 
to its first written submission, China provides a summary of "on-going enforcement efforts by local governments", listing cases where companies were fined or shut down and where individuals were prosecuted and punished for engaging in illegal mining.
826 
7.520.  However, as the Panel has explained, it is not clear whether the 2012 extraction quota was 
capable of having a limiting effect. China has not convinced the Panel that, although the level was the same as 2011 (but above the 2011 level of actual extraction), it was designed to have a 
limiting effect. This is so because China has not explained the basis on which it predicted the 
evolution in demand.  
The production quota system applicable to rare earths 
7.521.  China also claims that its production quota is a domestic restriction imposed in conjunction 
with its export quotas and hence that its measur es conform to the requirements of Article XX(g). 
With respect to the relationship between the pr oduction quota and the extraction quota, China 
explains that the production quota volume corresponds to the extraction quota volume, but that 
the former is slightly adjusted because some rare earth concentrates (about 4%) are lost during 
further processing. Accordingly, in 2012 the production quota was set at 90,400 REO tonnes, while the extraction quota was set at 93,800 REO tonnes.
827According to China, the production quota is 
an additional control necessary to avoid circumvention of the extraction quota.828 
7.522.  China explains further that its production quota determines how much smelted and 
separated products (mainly rare earth oxides and salts) separating and smelting companies can process each year from rare earth concentrates.
829 China invokes the following legal instruments 
to support its claim that it has imposed a restriction on the production of rare earths in 2012830: 
a. Administration of Directive Production Plan of Rare Earths831; 
b. 2012 First Batch of the Directive Production Plan of Rare Earths832; and 
c. 2012 Second Batch of the Directive Production Plan of Rare Earths .833 
7.523.  The Administration of Directive Production Plan of Rare Earth s, which was formulated in 
accordance with the Opinions of the State Council on Promoting the Sustainable and Sound 
Development of the Rare Earth Industry , and the Circular on Listing Tungsten, Tin, Antimony and 
Ionic Rare Earth Minerals as Specified Minerals under National Protective Mining834, establish a 
maximum amount of rare earth oxides and salts th at can be produced – i.e. a production quota. 
The Administration of Directive Production Plan of Rare Earths  was promulgated and made 
effective on 13 June 2012. China explains that Article 11 of the Administration of Directive 
Production Plan of Rare Earths835 requires the MIIT to publish the directive production plan on an 
                                               
825 Verification and Rectification of Ille gal Conducts in Rare Earth Industry  (Exhibit CHN-42).  
The Panel notes that, in paras. 205-215, China has presented evidence regarding other short-term 
"campaigns" against illegal mining and production in 2010 and 2011. The Panel considers that those campaigns 
were not enforcement measures for 2012 extraction quotas or production quotas. 
826 Annex of China's first writte n submission, (referring to Guangdong Province Combats Illegal Rare 
Earths Mining Cases Summary , (Exhibit CHN-83), Jiangxi Province Combats Illega l Rare Earths Mining Cases 
Summary , (Exhibit CHN-90), " Rare Earth Special Rectification Campaign Has Achieved Initial Success ", Rare 
Earth Information, No. 12, December 2011, (Exhibit CHN-91), and Notices Ordering Enterprises Producing 
Over Quota to Cease Production , (Exhibit CHN-113)). 
827 China's responses to Panel question No. 141. 
828 China's second written submission, para. 37. 
829 China's first written submission, pa ra. 24, footnote 33, (referring to Administration of Directive 
Production Plan of Rare Earths , (Exhibit CHN-21), 2012 First Batch of the Directive Production Plan of Rare 
Earths , (Exhibit CHN-22), and 2012 Second Batch of the Directive Production Plan of Rare Earths , 
(Exhibit CHN-23)); China's responses to Panel question No. 141. 
830 China's first written submission, paras. 24 and 177. 
831 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21). 
832 2012 First Batch of the Directive Production Plan of Rare Earths , (Exhibit CHN-22). 
833 2012 Second Batch of the Directive Production Plan of Rare Earths , (Exhibit CHN-23). 
834 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21). 
835 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21), was promulgated and 
effective on 13 June 2012. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 152 - 
 
  annual basis in a Circular . Starting with the directive production plan for 2013, the quota included 
in the plan will be issued in two separate batches.836 According to China, "this codifies a practice 
that was already applied for the 2012 Directive Production Plan".837 As the Panel understands it, 
the Administration of Directive Production Plan of Rare Earth s provides guidance for the imposition 
of production quotas after 13 June 2012.  
7.524.  The Panel understands that the MIIT issued the 2012 First Batch of the Directive 
Production Plan of Rare Earths on 13 January 2012 on the basis of the Opinions of the State 
Council on Promoting the Sustainable and Sound Development of the Rare Earth Industry  and the 
Circular on Listing Tungsten, Tin, Antimony and Ionic Rare Earth Minerals as Specified Minerals under National Protective Mining .
838 This document set the first batch of the production quota of 
rare earths at 45,200 REO tonnes.839 On 11 June 2012, the MIIT issued the 2012 Second Batch of 
the Directive Production Plan of Rare Earths . This document set the second batch of the production 
quota of rare earths at 45,200 REO tonnes.840 Taken together, the total production quota for 2012 
was 90,400 REO tonnes.841 The annexes to these two instruments specify the allocation of the 
production quota at both the central enterprises level and the regional level.842 The Panel considers 
that the two batches of the  production quota together indicate the maximum amount of rare earth oxides, salts, and other compounds that smelting and separating enterprises could legally produce 
through the end of 2012. Having examined Exhibi t CHN-191, the Panel understands that the total 
2012 production quota (90,400 REO tonnes) was set at the same level as in 2011. The Panel recognizes that this level is lower than the actu al amount of production of smelted and separated 
products (96,934 REO tonnes) in 2011.  
7.525.  However, as the Panel explained above in its discussion of the legal test under 
Article XX(g), the fact that a quantitative restriction on domestic production or consumption (here, the production plan) is, in a given year, set at a level lower than the level of consumption in a 
previous year does not necessarily mean that it constitutes a "restriction" within the meaning of 
Article XX(g), just as the fact that a quantitative restriction is set above or at the same level as in a previous year does not necessarily deprive it of its character as a real restriction. What matters, 
in the Panel's view, is that the quantitative restriction is set below the expected level of demand 
for the period in which the alleged restriction is intended to apply. Since expected demand may fluctuate from year to year, the mere fact that China's production was set lower in 2012 than the level of actual consumption in 2011 does not of itself establish that the production quota 
constituted a "restriction". Instead, the Panel needs to determine whether the 2012 production 
quota was set at a level below the expected demand for 2012.  
7.526.  Paragraph 24 of the Declaration On the Setting Of 2012 Export Quotas on Rare Earth 
Products states that in setting the production quota, the relevant Ministries "considered that the 
overall domestic and foreign demand for the rare earths would continue to be significant", in particular because "prices for rare earths were falling from the levels that they had rapidly 
achieved in late 2010 and early 2011". The Panel recognizes the logic of this argument, but 
considers that China has failed to place before it evidence or other demonstration sufficient to support it. As the Panel has explained above, it is very difficult to assess whether a measure such as China's constitutes a "restriction" without evidence showing how China's reasoning, which 
appears to run contrary to the trend towards reduced domestic demand, is justified. Accordingly, 
the Panel's view is that China has not provided sufficient evidence as to the expected level of demand for 2012 on the basis of which the Pane l would be able to assess whether the 2012 
                                               
836 China's first written submission, para. 177 (referring to Administration of Directive Production Plan of 
Rare Earths , (Exhibit CHN-21)). 
837 China's first written submission, para. 177. 
838 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13); see also  2012 First Batch of the Directive Production Plan of Rare 
Earths , (Exhibit CHN-22). 
839 2012 First Batch of the Directive Production Plan of Rare Earth s, (Exhibit CHN-22). 
840 China's first written submission, para. 178 (referring to 2012 First Batch of the Directive Production 
Plan of Rare Earths , (Exhibit CHN-22) and 2012 Second Batch of the Directive Production Plan of Rare Earths , 
(Exhibit CHN-23)); China's second written submission, pa ra. 37; China's response to Panel question No. 141. 
The 2012 First Batch of the Directive Production Plan of Rare Earths , (Exhibit CHN-22) was promulgated on 13 
January 2012, and the 2012 Second Batch of the Directive Production Plan of Rare Earths , (Exhibit CHN-23) 
was promulgated on 8 June 2012. 
841 Updated Rare Earths Data (1999-2012), (Exhibit CHN-191). 
842 2012 First Batch of the Directive Production Plan of Rare Earth s, Annex, (Exhibit CHN-22); 2012 
Second Batch of the Directive Production Plan of Rare Earths , Annex, (Exhibit CHN-23). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 153 - 
 
  production plan constituted a "restriction" for the purposes of Article XX(g). In this dispute such 
evidence is especially important, since in 2012 all consumption levels (both domestic and foreign) for ores and smelted and separated products dec lined significantly from the 2010 and 2011 levels. 
This suggests to the Panel that demand  for such products was especially low in 2012 
independently of China's restrictions.  
7.527.   This means that the fact that the 2012 production restriction was set at a level lower than 
the 2010 and 2011 restrictions does not suffice, at least in this dispute, to establish that it was 
capable of having a limiting effect in the sense of restricting domestic production or consumption 
below the level of expected demand. The low level set in the production plan may still have been 
higher than the level of expected demand, given that the data suggests an unusually low level of demand throughout the domestic and foreign rare earth markets.  
7.528.  Indeed, the fact that the extraction and production plans were not filled in 2012 suggests 
that they were set at levels above  demand. To the Panel, this seems to indicate that China's 
extraction and production plans were targets  to be achieved, and not "restrictions" as required by 
Article XX(g).  
7.529.  Despite its concerns about whether the 2012 production cap was set at a level capable of 
restricting domestic production, the Panel now turns to examine the parties' arguments with 
respect to the enforcement of such production cap. 
7.530.   China has invoked a number of Articles
843 of the Administration of Directive Production 
Plan of Rare Earths to describe how it enforces its 2012 production quota. China refers to 
Articles 13-18 of the Administration and argues that rare earth smelting and separating 
enterprises cannot operate legally without having received a share of the production quota.844 
Further, producing enterprises must establish a ledger reflecting the "real picture of the production and operation" and report monthly on their prod uction and sales to the provincial authorities.
845 
For enterprises that produce above the quota, the provincial authorities will impose a suspension 
of production and may reduce the quota for the next year.846 Enforcement actions by local 
authorities are scrutinized by central government officials.847 
7.531.  As mentioned earlier, the Panel understands that the Administration of Directive Production 
Plan of Rare Earths  provides guidance for the imposition of  a production quota after 13 June 2012. 
Under the circumstances, the Panel has difficulty understanding how the MIIT could have enforced the 2012 production quota on the basis of the Administration of Directive Production Plan of Rare 
Earths . For instance, Article 14 of the Administration of Directive Production Plan of Rare Earths  
requires producing enterprises to establish a ledger reflecting the "real picture of the production and operation" and report monthly on their produc tion and sales to the provincial authorities. 
Considering that the Administration of Directive Production Plan of Rare Earths  was made effective 
in June 2012, it would not have been possible for enterprises to comply with these requirements from January to June 2012. 
7.532.  The texts of the two batches of 2012 Directive Production Plan of Rare Earths  provide for 
reporting mechanisms that support the implementa tion of the production quota on rare earth 
oxides and salts. The persons in charge of implemen ting the production plan at the regional level, 
and the enterprises subject to the central government's specific plan, are required to report 
relevant figures and information to the superior administrative departments on a monthly basis.
848 
According to China, in June 2012, a new VAT system was put in place to provide a reliable way to identify production above the capped levels.
849 
7.533.  The texts of the two batches of 2012 Directive Production Plan of Rare Earths  also provide 
punishment mechanisms for over-quota production . Enterprises that "produce[] beyond the plan", 
                                               
843 See, e.g. Articles 13–18, (Exhibit CHN-21); China's first written submission, para. 219. 
844 Administration of the Directive Production Plan of Rare Earths , (Exhibit CHN-21), Article 15. 
845 Administration of the Directive Production Plan of Rare Earths , (Exhibit CHN-21), Articles 13-14. 
846 Administration of the Directive Production Plan of Rare Earths , (Exhibit CHN-21), Article 16. 
847 Administration of the Directive Production Plan of Rare Earths , (Exhibit CHN-21), Article 18. 
848 2012 First Batch of the Directive Production Plan of Rare Earths , Articles III-IV,  (Exhibit CHN-22); 
2012 Second Batch of the Directive Production Plan of Rare Earths , Articles III-IV, (Exhibit CHN-23). 
849 China's first written submission, para. 220. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 154 - 
 
  and/or produce "with environmental pollution and safety risk", will have their share of the 
production quota reduced or even cancelled. Enterprises that "follow[] the plan, pass[] the 
environmental protection verification, and meet the requirement of safe production" may have 
their quota share increased.850The Panel considers that these instruments demonstrate that 
China's legislation contains some mechanisms to enforce the 2012 production quota on rare earth 
oxides and salts.  
7.534.  The core of the complainants' argument is that, notwithstanding China's legal measures, 
China's alleged production quota is not actually en forced. They point to significant overproduction, 
leading them to conclude that China's production plan is not a restriction. 
7.535.  To this end, the complainants have su bmitted the Eggert Report, which estimates the 
actual level of rare earths production in 2012 to have been 95,000 REO tonnes. China, however, 
claims that the actual level of legal production851 was 82,000 REO tonnes.  
7.536.  The Panel recalls that it is for the co mplainant challenging the existence of domestic 
restrictions on the basis of non-enforcement to prove that such non-enforcement is so important 
as to be considered systemic.  
7.537.  In the Panel's opinion, the complainants have not established to the Panel's satisfaction 
that there was important or systemic overproducti on in 2012, although the Panel recognizes that 
there appears to have been in previous years. The Eggert Report consists of estimates rather than 
real statistics, and the Panel therefore feels that it is not entitled to rely on the report to conclude 
that there was overproduction in 2012.852 
7.538.  The complainants argue additionally that  China's argument about the enforcement of its 
production quota is undermined by China's multiple actions at different levels of government to 
incentivize the production of rare earths, thereby directly causing production above the target.853 
The complainants refer to media sources suggesting that local governments encourage rare earth 
producers to expand production beyond the central government's production targets854, and allege 
that "a lot of illegally produced rare earth products could 'openly' use special invoices" through a process that "allow[s] some of the illegal companies that were 'shut down' due to reasons such as 
environmental protection noncompliance to come back to life".
855 Moreover, according to the 
complainants, actual rare earth extraction and production in China have traditionally exceeded the quotas, sometimes by more than 50%.
856 The European Union argues that the fact that extraction 
quotas were introduced after the export quotas had been in place for many years, and the fact 
that the extraction quotas have steadily increased since 2006, demonstrate that China's domestic 
production controls are not restrictive.857 
7.539.  China rejects these accusations. It argues that China does not undertake or sanction any 
activity designed to stimulate or promote domestic consumption of rare earths above the 
extraction and production quotas. China explains the complainants misunderstand China's evidence, which shows that it is only within the limits of China's conservation policy  (in particular 
within the quota limits imposed) that China re-focuses demand for rare earths, prioritizing rare 
earths use to higher value-added industries and making more efficient use of the limited supply. 
                                               
850 2012 First Batch of the Directive Production Plan of Rare Earths , Articles III-IV, (Exhibit CHN-22); 
2012 Second Batch of the Directive Production Plan of Rare Earths , Articles III-IV, (Exhibit CHN-23). 
851 China has emphasized that it s statistics reflect only legal extraction and production.  
852 Roderick G. Eggert, Rare Earth Elements , April 25 2013, (Exhibit JE-129). 
853 United States' second written submission, para.174 (referring to Twelfth Five-Year Development Plan 
for New Materials Industry , (Exhibit JE-28), Inner Mongolia Autonomous Region "Twelfth Five Year" High-Tech 
Industries Development Plan , (Exhibit JE-29), Guiding Opinions of Jiangxi Province on the Development of the 
Rare Earth Industry , (Exhibit JE-18)); Japan's second written submission, paras.120-121; United Sates' 
response to Panel question No. 70. 
854 United States' second written submission, para.175. 
855 Japan's second written submission, para.119. 
856 United States' second written submission, para. 163; European Union's second written submission, 
paras. 149-150. 
857 European Union's second written submission, paras.148 and 151. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 155 - 
 
  According to China, such internal prioritization is  perfectly consistent with the goal of preserving 
natural resources by limiting the volume that can be extracted and produced each year.858 
7.540.  The Panel agrees with China that, within the limits of China's extraction and production 
quotas, a policy prioritizing rare earths use by hi gher value-added industries does not necessarily 
mean that China is not enforcing its restrictions on domestic production.859 Moreover, the Panel 
has concerns about the probative value of the evidence cited by the complainants in support of their contention that Chinese local governments do  not respect the extraction and/or production 
quotas. The exhibits cited by the complainants consist mainly of short media reports
860 and the 
Panel has not been provided with any direct evidence on which it may rely with confidence. We appreciate that it may be difficult to obtain better evidence of these matters; however, we are 
unable to found a conclusion of China's failure to enforce its production quota on this evidence 
alone.  
7.541.  The Panel recalls that the general effect of  an export quota is to reduce prices in the 
domestic market, thus stimulating domestic production and consumption. Indeed, as the Panel 
understands it, export quotas suggest to domestic consumers that, in principle, the price of rare 
earths should be pushed down
861, and that a certain amount of low-cost rare earth products will be 
"reserved", as it were, for domestic use. This in  turn seems likely to encourage the development 
and expansion of the domestic rare earth industry on the basis of what might be read as a supply 
guarantee. The export quota therefore incentiviz es the development and expansion of domestic 
raw-earth consuming industries. In this connection, the Panel agrees with the panel in China – 
Raw Materials  that "measures that increase the cost of [a raw material] to foreign consumers, but 
decrease their costs to domestic users are difficult to reconcile with the goal of conserv[ation]".862  
7.542.  China has not demonstrated that its production quota is capable of counteracting this 
perverse incentive. As such, the Panel doubts whether the 2012 production plan imposed a real 
restriction. 
7.543.  The Panel further observes that China provides a VAT refund on all exported downstream 
rare earth products.863 To the Panel, this would also seem to stimulate the production and 
consumption of rare earths. Again, China has not shown that its production plan in any way 
counteracts or negates this incentive. All of this suggests to the Panel that the production plan was not a "real restriction" or accompanied by effective enforcement. 
7.544.  In sum, the Panel has difficulty concluding that the domestic restrictions referred to by 
China were capable of restricting the production of rare earth oxides, salts, and compounds in 
2012. China has not demonstrated that the production quota was set at a level below expected demand. Additionally, the Panel is concerned that the export quota itself and China's VAT rebate 
                                               
858 China's response to Panel question No. 70. 
859 China's response to Panel question No. 70. 
860 See, e.g. United States' second written submission, para. 175; Japan's second written submission, 
para. 119. 
861 United States' second written submission, para. 129. 
862 Panel Reports, China – Raw Materials, para. 7.434. 
863 Explanation for the Compilation of Emission Standard s of Pollutants from Rare Earths Industry (Draft 
for Comments)  (Exhibit JE-99). This document explains that "[s]ince 1985, China has been exercising export 
tax rebate policy. Through the implem entation of this policy, value-adde d tax or consumption tax imposed by 
the state on exports is refunded indi rectly to the enterprise, which reduces the cost of  exported products and 
promotes exports": p. 19. As the Pane l understands it, exporters are eligib le for VAT rebates by default unless 
such rebates are expressly terminated. Explanation for the Compilation of Emission Standards of Pollutants 
from Rare Earths Industry (Draft for Comments)  (Exhibit JE-99) shows, at p.  18, that  VAT rebate were 
expressly terminated for upstream rare  earth products, including rare earth metals, rare earth oxides, and rare 
earth salts. Similarly, Notice on Adjusting the VAT Refund of Certain Products (2005)  (Exhibit JE-83) shows 
that VAT rebates on rare earths metals, oxides, and salt s were expressly terminated, while the  tax rebate on 
tungsten and tungsten products was reduced to 8%. Notice on Adjusting the Tax Refund Rates (2006)  (Exhibit 
JE-75) shows that VAT refunds on various upstream form s of tungsten have also been terminated. However, 
China has not provided any evidence showing that VAT rebates on downstream rare  earths, tungsten, and/or 
molybdenum have been terminated. Japan raised this point in its second written submission, para. 294, but 
China has not responded to this claim. The Panel also notes that Notice on Adjusting the VAT Refund of Certain 
Products (2005)  (Exhibit JE-83) and Notice on Adjusting the Tax Refund Rates (2006)  (Exhibit JE-75) show 
that VAT refunds on various forms of upstre am molybdenum have also been terminated. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 156 - 
 
  incentivize domestic production, and that the production quota has not been designed in a way 
that counteracts these incentives.  
Whether there are volume restrict ions on domestic consumption 
7.545.  China submits that the collective effect of China's export and production quotas on rare 
earths is to impose a volume restriction on domestic Chinese consumption  of rare earths, within 
the meaning of Article XX(g).864 China explains that it controls what it is physically able to control, 
i.e. production and consumption of newly produced rare earths. China argues that domestic rare 
earth consumers cannot purchase more newly produced rare earths than the volume obtained 
after deducting the export quota from the producti on quota, in the assumption that the export 
quota is filled. China contends further that even  where the export quota is not filled, China's 
domestic consumers can never legally exceed the production quota minus the actual exports. 
China asserts that by deducting the export quota from the production quota, the amount of newly 
produced rare earth products available for domestic consumption in 2012 was significantly lower than in previous years, and "would likely also  be below expected demand for the same year".
865 
7.546.  The complainants take issue with several aspects of China's argument. According to the 
complainants, under the combined effect of bo th a production quota and an export quota, 
domestic consumers are provided a consumption assurance.866 The United Sates argues that 
establishing an export performance requirement as  one of the quota allocation criteria does not 
necessarily provide an export incentive, since an  individual company's export quota could remain 
the same if, in the previous year, its exports followed the general market trend.867 The European 
Union stresses that the fact that unused export quota volumes remain available for domestic sale 
is an incentive to increase domestic consumption in China.868 Regarding China's argument that the 
use of stockpiling and recycling account for the data on over-consumption, the European Union 
and Japan point out that rare earth recycling is not practically or economically feasible at 
commercial levels, and yield from such activities is generally quite low.869  
7.547.  For several reasons, the Panel is not in agreement with China that it has imposed volume 
restrictions on domestic consumption. First, China has not provided any evidence to demonstrate 
that it imposes domestic consumption quotas or other forms of regulatory control over the level of 
domestic consumption. In fact, the combined e ffect of the extraction, production, and export 
quotas does not establish a maximum level of domestic consumption, since domestic users can consume any amount of the export quota that has not been used in a given year. If the export 
quota for a given year is not filled, the un-exported rare earth products will not be reserved for 
export in the following year. China explains that it sends such unexported rare earth products to its domestic market because "[e]xporters might then attempt to sell the remaining rare earth 
products in the domestic market either late in a given year or even in the following year. The rare 
earth products that were not sold by the end of a given year will remain in the stocks of the rare earth producers."
870 In other words, the unused quota volume will remain in the domestic market, 
and will ultimately be consumed by domestic users.  Therefore, the Panel considers that the alleged 
"consumption cap", i.e. the combined effect of a pr oduction and export quota, is rather a kind of 
consumption assurance or guarantee to domestic consumers871, since it provides a minimum  
amount of rare earths available for domestic consumption. In 2012, the level of domestic 
consumption, which was initially assessed at 64,797 REO tonnes, was in fact liable to reach 
74,797 REO tonnes, since domestic consumers had access to the non-used part of the export quota. In the Panel's opinion, the fact that unused export quota volumes remain available for 
domestic sale is an incentive to increase domestic consumption in China.
872 In this connection, the 
                                               
864 China's first written submission, para. 184. 
865 China's second written submission, para. 87; China's response to Panel question No. 71. 
866 United States' second written submission, para. 182; European Union's second written submission, 
para. 156. 
867 United States' second written submission, paras. 183, 184. 
868 European Union's second written submission, para. 156. 
869 European Union's second written submission, para. 156; Japan's second written submission, 
para. 118. 
870 China's response to Panel question No. 36. 
871 United States' second written submission, para. 182; European Union's second written submission, 
para. 156. 
872 European Union's second written submission, para. 156. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 157 - 
 
  Panel also notes that China does not appear to have any mechanism in place to prevent the illegal 
selling to domestic users of quantities allocated for export.  
7.548.  Second, China has not provided any evidence to demonstrate that it imposes enforcement 
measures on the domestic downstream rare earth industry to ensure that domestic users do not 
consume more than the alleged "consumption cap". For instance, China has not provided evidence 
showing that, under Chinese law, there is any punishment on domestic upstream or downstream rare earths users for consuming illegally produced rare earth products. 
7.549.  Third, the Panel also notes that China has established measures, inter alia  VAT refunds for 
downstream users of rare earths, which could stimulate domestic consumption of rare earths by downstream industries that export value-added processed goods.
873 The Panel fails to see how 
such measures contribute to domestic restrictions whose purpose is to enhance the conservation of 
rare earths. 
7.550.  Lastly, the Panel notes that, according to China's data in Exhibit CHN-191, the 2012 levels 
of extraction and production (93,800 REO tonnes) we re well above the levels of actual extraction 
of 2011 (84,943) but below the level of actual consumption for 2011 (96,934 REO tonnes). The 
Panel notes also that the 2012 actual domestic consumption level of rare earths was 64,797 REO tonnes, slightly lower than the available amount (66,400 REO tonnes, calculated from the 
2012 production quota minus the export quota, i.e. 90,400-24,000 REO tonnes) set by China. This 
raises doubt about whether, as China's argues, the amount of "newly produced rare earth products 
available for domestic consumption" in 2012 would likely also be "below the expected demand" for 
the same year.
874  Indeed in 2012 the total amount of rare  earths available was above the actual 
demand level for the same year. The Panel recognizes that circumstances may change after 
China's extraction and production quotas were set, so that what was initially designed as a restriction may not, due to intervening circumstances, actually restrict consumption during the 
relevant period. In such circumstances, a Member may nevertheless be able to demonstrate that 
the concerned domestic measure may have been desi gned at a level intended to be restrictive at 
the time it was set. However, here, China has not provided sufficient explanation as to why its 
domestic measure should be considered restrictive. Throughout its submissions China has argued 
in various ways that "the competent Ministries consulted all information reasonably available in late 2011" in setting the domestic restrictions.
875 However, as the Panel has explained, such 
assertions cannot substitute for detailed evidence showing what level of demand China predicted 
and how it arrived at that prediction. Without such detailed evidence, the Panel cannot conclude 
that the domestic quotas were set at levels below domestic demand. As such, in the Panel's opinion China has not demonstrated that it imposed volume restrictions on domestic consumption 
of rare earths in 2012. 
7.6.2.2.1.3  Whether the resource tax is a restriction on domestic production or 
consumption of rare earths 
7.551.  China cites its Several Opinions of the State Council on Promoting the Sustainable and 
Sound Development of the Rare Earth Industry
876 of 2011 to explain that its resource tax aims at 
"bringing rare earths price … close to its cost".877 China refers the Panel to the Implementation 
Rules for the Provisional Regulations on Resource Tax878, and submits that in 2012, light rare 
earths were subject to a tax rate of 60 RMB per tonne of undressed ore mined. For medium/heavy 
rare earths, the tax was set at 30 RMB per tonne of undressed ore mined.879 
7.552.  According to China, the resource tax seeks to conserve Chinese rare earth resources by 
reducing consumption; and the effect of a resource tax is filtered through the entire rare earth 
supply chain. Higher mining costs increase the costs of inputs for smelting and separating 
                                               
873 On the VAT rebate, see discussion in footnote 863 above; on other measures that could stimulate 
domestic rare earth consumption, see e.g.  United States' second written submission, para. 130. See also 
Twelfth Five-Year Development Pl an for New Materials Industry  (Exhibit JE-28), p. 40. 
874 China's second written submission, para. 25. 
875 China's response to Panel question No. 92.  
876 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13). 
877 China's first written submission, para. 191. 
878 Implementation Rules for the Provisional Regulations on Resource Tax , (Exhibit CHN-27). 
879 China's first written submission, para. 192. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 158 - 
 
  enterprises. The higher costs of smelted and sepa rated rare earth products increase the costs of 
inputs for producers of downstream rare earth-using products, such as magnets and phosphors. The parties disagree on the effects that the resource tax could have on rare earth production in China. In particular, the complainants submit that a tax can have a restricting effect only if it is 
sufficiently high.  
7.553.  China supports its position by indicating
880 that, before the tax increase in 2011, rare 
earths were subject to a tax of 0.4 - 3 RMB per tonne, and that in 2012, rare earths were subject 
to 60 RMB per tonne of undressed light rare earth ores and 30 RMB per tonne of undressed heavy 
rare earth ores. China uses the resource tax paid by Baotou Rare Earth as an example to show that the increase in the resource tax in 2011 has led to a very significant increase in the financial burden borne by that company. The complainants, however, note that according to data provided 
by China regarding the costs imposed on Inner Mongolia Baotou Steel by the increased resource 
tax, it is that company's enlargement of production, and not the resource tax, which caused an 850% increase in the company's costs.
881 China explains in its second written submission that 
Baotou Rare Earth paid 762,089 RMB in resource taxes for the ores mined by its own mining 
projects, a figure that does not include the undressed ores purchased from Mongolia Baotou Steel. However, in 2011 – when the tax was increased – Baotou Rare Earth agreed with Mongolia Baotou 
Steel to pay the resource tax. To this end, Baotou Rare Earth transferred 650 million RMB to 
Mongolia Baotou Steel.
882 
7.554.  Nevertheless, the Panel acknowledges that increased costs caused by the tax could, in the 
long run, lead to a reduction in demand and ther efore limit production of rare earth ores. Thus, 
resources taxes could work to reduce extraction of  rare earths. However, in the Panel's opinion, 
China has not adduced sufficient evidence to persua de the Panel that the tax at issue here would 
be capable of having a limiting effect. Specifically, China's example is insufficient to establish to 
the Panel's satisfaction that the resource tax was designed in such a way as to increase the costs, 
and thus decrease demand for, rare earth produc ts. As the Panel understands it, China's example 
suggests that the increase in the resources taxes in 2011 has lead the rare earth ore producer (i.e. 
Mongolia Baotou Steel) to pass on the cost to a rare earth ore consumer (i.e. Baotou Rare Earth) 
during that year. However, the Panel considers that, in order to assess the cost increase caused by the increase in the resource tax
883, it is not sufficient to provide only the total amount of resources 
tax that Baotou Rare Earth paid in 2011. As noted by the complainants, the increase in cost might 
also have been caused by enlargement of produc tion. In order to properly support its argument, 
China would have had to provide information about the percentage of the tax or the quantities of rare earth ores sold by Mongolia Baotou Steel to Baotou Rare Earth in 2010 and 2011, and the 
resources taxes charged to Mongolia Baotou Steel for the transactions of rare earth ores with 
Baotou Rare Earth in 2010. In Exhibits CHN-148 and 149, China indicates that the price of undressed iron ores is 105 RMB per tonne and the resources tax on Baiyun Obo ores is 60 RMB per 
tonne. 
7.555.  The Panel emphasizes that it is not assessing here the impact  of China's resource tax. As 
mentioned in our discussion of the legal test, when performing our analysis under paragraph Article XX(g), the Panel must assess, on the basis of the legal instruments at issue and 
the design, structure, and architecture of the alleged restrictions, whether such restrictions are 
capable of having a limiting effect on domestic consumption or production. China has failed to convince the Panel that its resource tax imposes a real and actual restriction on domestic 
production. 
7.6.2.2.1.4  Whether environmental requir ements are restrictions on domestic 
production or consumption 
7.556.  China lists a series of measures imposing environmental protection requirements in 
support of its defence under Article XX(g). These are: 
                                               
880 China's first written submission, footnote 290. 
881 United States' second written submission, para. 187; European Union's second written submission, 
para.161; Japan's comments on China's answers to the Panel's written questions, paras. 27-28. 
882 China's first written submission, footnote 294; China's second written submission, para. 32. 
883 The Panel notes that, at footnote 290 of China's fi rst written submission, China indicates that before 
the increase, rare earths were subject to a tax of 0. 4-3 RMB per tonne. However, China does not specify the 
tax rate for the rare earth ores in the example of Baotou Rare Earth in 2010. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 159 - 
 
  a. Emission Standards of Pollutants from Rare Earths Industry884; 
b. Deposit for ecological recovery requirements in Opinions on Enhancing the Ecological 
Protection and Restoration of Mines885 and Several Opinions of the State Council on 
Promoting the Sustainable and Sound Development of the Rare Earth Industry886； 
c. Circular on Environmental Protection Inspection of Rare Earth Industry887; and 
d. Environmental requirements as qualification requirements for the application of the 
production quota in the Administration of Directive Production Plan of Rare Earths888or 
the export quota in the 2012 Application Qualifications and Procedures for Rare Earth 
Export Quotas .889 
7.557.  The Emission Standards of Pollutants from Rare Earths Industry provides for control of 
wastewater and waste gas produced by the rare earth industry. However, it does not refer to 
restricting extraction, production, or consumption of rare earths.  
7.558.  The requirement that mining companies make a deposit for ecological recovery  to insure 
against the risk that they will fail to clean up their mining sites after ceasing operations similarly 
does not refer to restricting extraction, production, or consumption of rare earths. 
7.559.  The Circular on Environmental Protection Inspection of Rare Earth Industry provides for 
the inspection of rare earth companies' compliance with applicable environmental requirements 
and for the publication of a list of complying companies. However, this measure too does not refer 
to restricting extraction, production, or consumption of rare earths. 
7.560.  According to the Administration of Directive Production Plan of Rare Earths and the 2012 
Application Qualifications and Procedures for Rare Earth Export Quotas , only enterprises on the list 
of enterprises that meet the environmental protec tion requirements published by the Ministry of 
Environmental Protection are eligible to apply for a share of the extraction, production, or export 
quotas. The Panel fails to see how this environmental requirement, which is effectively a 
qualification requirement for entry into the rare ea rths industry, could restrict the amount of rare 
earths extracted or produced by enterprises that have already obtained a share of the extraction, 
production, and/or export quotas, or that will do so in the future.  
7.561.  China explains that rare earth enterprises in China face significant costs in complying with 
the listed environmental requirements. According to China, these higher costs restrict production, 
first by eliminating a number of small and inefficient producers, and second, by causing a price 
pass-through effect from producers to consumers.890 
7.562.  As discussed in the section on "access cond itions", the Panel has difficulty understanding 
how measures that promote the efficiency of reso urce extraction and production necessarily work 
as restrictions on domestic production as such. While such measures might increase efficiency, 
they do not on their own impose any restrictions on the volume or pace of rare earth extraction or 
production.  
7.563.  The Panel acknowledges that regulatory requirements will impose some compliance costs 
on concerned enterprises. The issue before the Panel is whether those regulatory requirements 
contribute to the conservation of rare earths. In the Panel's view, environmental costs are ordinary costs imposed on enterprises to address the market  externalities caused by rare earth extraction 
and production.  
                                               
884 Emission Standards of Pollutan ts from Rare Earths Industry , (Exhibit CHN-31). 
885 Opinions on Enhancing the Ecological Prot ection and Restoration of Mines Exhibit , Section IV, 
(Exhibit CHN-32). 
886 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , Paragraph II(8), (Exhibit CHN-13). 
887 Circular on Environmental Protection  Inspection of Rare Earth Industry , (Exhibit CHN-33). 
888 Administration of Directive Production Plan of Rare Earths , (Exhibit CHN-21). 
889 Chart of raw materials subject to export duties , (Exhibit JE-6); 2012 Application Qualifications and 
Procedures for Rare Earth Export Quotas , (Exhibits CHN-38, JE-61). 
890 China's first written submission, paras. 197-203. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 160 - 
 
  7.564.  The Panel notes that China provides financial rewards to rare earths mining and smelting 
companies that have passed the national environmental audit.891 Article 8 of the Notice on Issuing 
"Management of Special Fund for Rare Earth Industry Adjustment and Improvement" provides that 
"rare earth mining and smelting companies that have passed the national environmental audit, in 
accordance with the rare earth companies' producti on capacity verified and published by the MIIT, 
may receive a one-shot reward". The criteria applicable to this reward are as follows: mining and selection – 1000 RMB per REO tonnes; smelting and separating – 1500 RMB per REO tonne; metal 
smelting 500 RMB per REO tonne. According to China, the reward amounts to a one-third rebate of 
an enterprise's total environmental costs.
892 The Panel accepts that such award measures could 
provide an incentive for enterprises to comply with environmental requirements; however, the Panel considers that such rewards could counteract or offset the costs which China claims are 
"restricting" domestic production.  
7.565.  Finally, the Panel turns to China's argument that the five categories of measures (i.e. 
access conditions; resource taxes; volume restrictions; environmental requirements; and 
enforcement actions) restrict, individually or collectively, and directly or indirectly, the production 
or consumption of rare earth resources in China.
893 However, China does not explain how these 
measures collectively are capable of restricting domestic production or consumption of rare earths 
beyond the ways in which each individual category of measure might be capable of doing so. In 
other words, China has not explained how these measures operate together to restrict domestic production or consumption in a way that exceeds what the measures might do individually. The Panel also notes that the State Council documents such as Several Opinions of the State Council 
on Promoting the Sustainable and Sound Development of the Rare Earth Industry
894 provide 
general instructions on various aspects of the management of China's rare earth industry. Each of the restrictions referred to by China reviewed above is mentioned in this document. However, in 
the Panel's opinion, these documents do not explain how China's various measures collectively 
have additional capacity to restrict China's domestic production or consumption of rare earths than each of the measures do individually.  
7.566.  In sum, and for the reasons given above, the Panel has difficulty agreeing that China's 
environmental measures constitute "restrictions on domestic production or consumption" within the meaning of Article XX(g). While China's en vironmental measures are, of course, to be 
welcomed, China has not established to the Panel's satisfaction that they are capable of having a 
limiting effect on domestic production or consumption, as is required if China is to rely on 
Article XX(g).  
7.567.  The Panel now turns to consider whether, assuming the above-mentioned measures were 
"restrictions", China's 2012 rare earths quota was "made effective in conjunction with" these 
restrictions on domestic production or consumption.  
7.6.2.2.2  Whether the 2012 export quota on rare earths were "made effective in 
conjunction with" restriction on do mestic production or consumption 
7.568.  The Panel recalls that subparagraph (g) requires that trade-restrictive measures work in 
conjunction with domestic restrictions to conserve exhaustible natural resources.
895 The Panel 
considers that the "made effective in conjunction with" clause requires the simultaneous or 
perhaps near-simultaneous operation of the relevant foreign and domestic restrictions. As the 
panel stated in China – Raw Materials , "to benefit from the justification permitted under 
subparagraph (g), a Member cannot seek to rely on a future or potential domestic restriction; nor 
will measures enacted concurrently but which only have effect or are foreseen to have effect only 
in the future respect the Article XX(g) criteria, for they must not only exist concurrently; they must operate concurrently." In the Panel's view, the phrase "work in conjunction with" also suggests 
operative complementarity between the foreign and domestic restrictions.  
                                               
891 Notice on Issuing "Management of Special F und for Rare Earth Industry Adjustment and 
Improvement" , (Exhibits CHN-212, JE-114); see also European Union's second written submission, para. 166; 
China's responses to Panel question No. 118; United States' comments on China's response to Panel question No. 118; European Union's comments on China's response to Panel question No. 118. 
892 China's response to Panel question No. 118. 
893 China's first written submission, para. 165. 
894 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13). 
895 Appellate Body Reports,  China – Raw Materials, para. 356. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 161 - 
 
  7.569.  As the Panel has noted, China argues that its restrictions on domestic production and 
consumption of rare earths are substantial , and that domestic users, together with foreign 
consumers of rare earths, collectively  bear the burden of China's conservation policy. For China, its 
export quota and its domestic restrictions work together in support of its comprehensive 
conservation programme.  
7.570.  As we explain in more detail below, the Panel is not persuaded by China's argument. In 
our view, China has not explained how the export quota operates and works together with 
restrictions on domestic production or consumption for the conservation of rare earths. On the 
contrary, the Panel considers that China's export quota and the restrictions on domestic users or producers of rare earth referred to by China do not seem to work coherently towards the goal of conservation. 
7.571.  The Panel now proceeds to explain its concerns on the basis of China's and the 
complainants' arguments.  
7.6.2.2.2.1  The levels and timing of the 2012 export, extraction, and production quotas 
7.572.  China maintains that the Ministries determ ined the level of the 2012 export quota taking 
into account the total production quota set by the MIIT in consultation with MLR in the 2012 
Directive Production Plan .
896 The production quota volume, in turn, corresponds to the extraction 
quota volume, but is slightly adjusted because some rare earth concentrates (about 4%) are lost 
during further processing.897 According to China, however, the exact amounts of the extraction 
quota, production quota, and export quota are set at the end of the year preceding or the 
beginning of the year in which the quota will apply.  
7.573.  The Panel notes that the legal instrument898 issuing the first batch of the export quota 
provides that "the quantity allocated is around 80% of the total quantity to be allocated to enterprises for the whole year". However, the second batch of the export quota
899 allocated to the 
enterprises amounted to around 31% of the total 2012 total export quota.900 In the Panel's 
opinion, the data on the allocation of the expo rt quota in 2012 therefore does not correspond to 
the statement in the first batch of 2012 Rare Earth Export Quota  that "the quantity allocated is 
around 80% of the total quantity to be allocated to enterprises for the whole year".901 The 
remaining part of the 2012 total export quota was not allocated automatically to eligible enterprises, since such enterprises still needed to go through the quota application procedures for the second batch of export quota shares.
902  
7.574.  In light of the above, it seems clear that  the total export quota was not set at the end of 
2011 or at the beginning of 2012. The evidence suggests that the annual quota level was set late in the year, probably to take into account evolving domestic needs. 
7.575.   Moreover, the Panel considers that the ti ming of the overall export quota determination 
could affect the certainty of the rare earths market and enterprises' capacity to make business plans for 2012. In the following paragraphs, the Panel will explain why this uncertainty is relevant 
to the question whether China's export quota is a genuine conservation measure, and how it casts 
doubt on the claim that China's domestic and foreign restrictions "work together". 
7.576.  The Panel observes first that the three categories of quotas (export, extraction, and 
production) were set batch by batch at different times. The first batch of the extraction  quota was 
                                               
896 China's first written submission, para. 123 (citing Declaration On the Setting Of 2012 Export Quotas 
on Rare Earth Products , para. 22, (Exhibit CHN-63)). 
897 China's responses to Panel question No. 141. 
898 2012 First Batch Rare Earth Export Quotas , (Exhibits CHN-56, JE-55). 
899 2012 Second Batch Rare Earth Export Quotas , (Exhibit CHN-58, JE-57). 
900 On the other hand, for some individual enterprise s, the second batch of the export quota was less 
than 1/4 of the amount of the first batch of export quota, or 20% of the total amount of the two batches of export quota. For instance, the first batch of 2012 rare earth export quota allocated to Sino Steel Corporation was 1,010 tonnes of light rare earth and 145 tonnes of he avy/medium rare earth, while the second batch of 
export quota allocated to this company was only 96 tonn es of light rare earth and 0 tonnes of heavy/medium 
rare earth. 
901 2012 First Batch Rare Earth Export Quotas , (Exhibits CHN-56, JE-55), para. II, p. 1.  
902 Idem, Annex 2.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 162 - 
 
  announced in 2011903, and the second batch of the extraction quota was announced on 19 April 
2012.904 The first batch of the production  quota was announced on 16 January 2012,905 and 
contained no indication of when the second batch of the production quota would be announced. The second batch of the production quota was issued on 8 June 2012. The first batch of the  export  
quota was announced on 27 December 2011. A supplement to the first batch of the export quota 
was issued on 16 May 2012, following the second round of environmental protection verification. The second batch of the export quota was issued on 16 August 2012. The following table illustrates 
the amounts of the extraction, production, and ex port quotas, and the dates on which they were 
issued. 
Time of  
issuance 
Quota 2011/End 
of 2011 January 
2012 April 2012 May 2012 June 2012 August 
2012 
Extraction quota 46900 
REO tonnes 
(first 
batch)  46900 
REO tonnes (second batch)    
Production quota  45200 
REO tonnes (first batch)   45200 
REO tonnes 
(second 
batch)  
Export quota 10546  
tonnes 
(first 
batch)   10680 tonnes 
(supplement-ary batch)  9770  
tonnes 
(second 
batch) 
 
7.577.  The Panel fails to see any coordination am ong the three categories of quotas that would 
suggest they work together, be it for conservation of rare earths or for other reasons. China did not explain how the timing of its announcement of its export quota works together with the overall 
structure of its measures for the purposes of conservation. 
7.578.  Indeed, in the Panel's opinion, the uncertainty and unpredictability caused by determining 
the level of the export quota only late in the year do not help rare earth users to rationally utilize the available amount of rare earths. The insecu rity about undetermined limitations may lead to 
stockpiling, smuggling, second-best alternatives , and sub-optimal investments by consumers. As 
the panel in Colombia – Ports of Entry found
906, such uncertainty can itself be considered a 
restriction on international trade, and so must be treated seriously. China has not explained how 
such restrictions work together with other domestic and foreign restrictions for the purpose of 
conservation. To the contrary, this uncertainty seems only to create instability in the international rare earths market. 
7.579.  Additionally, the Panel is troubled by the way China determines its quota levels. As we 
have mentioned, the amount of export of rare earths for 2012 (16,262 tonnes
907) ended up being 
even less than the combined amount of the first batch and the supplement to the first batch of the export quota (21,226 tonnes
908). When China decided to issue the second batch in August 2012, it 
should have known that foreign users had not used all of their first batch entitlement based on its 
export control procedures (which are administered at the border); therefore, China would have known that some, if not all, of the second batch could probably end up being consumed 
domestically. In the result, the second batch of  the export quota was unfilled and eventually 
consumed in China's domestic market. The Panel understands that the total legal supply of rare earths is determined by the extraction quota, wh ich, as we have noted, was determined in April 
2012. However, the Panel notes that an important quantity of rare earths that was initially 
designated for export was redirected to the domest ic market (for which it was not destined under 
                                               
903 The Panel recalls that 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 
2012 (First Batch) , (Exhibit CHN-20) does not specify the date of the issuance of the first batch of the 2012 
extraction quota. 
904 2012 Second Batch Rare Earth Export Quotas , (Exhibit CHN-58, JE-57). 
905 2012 First Batch of the Directive Production Plan of Rare Earths , (Exhibit CHN-22). 
906 Panel Report, Colombia – Ports of Entry , para. 7.240. 
907 Updated Rare Earths Data (1999-2012) , (Exhibit CHN-191). 
908 2012 First Batch Rare Earth Export Quotas , (Exhibit CHN-56, JE-55); 2012 First Batch Rare Earth 
Export Quotas (Supplement) , (Exhibit CHN-57, JE-56). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 163 - 
 
  China's original comprehensive conservation plan). To the Panel, this reinforces the fundamental 
f a c t  t h a t  t h e  v a s t  m a j o r i t y  o f  r a r e  e a r t h s  p r o d u c e d  i n  C h i n a  i s  c o n s u m e d  d o m e s t i c a l l y ,  f u r t h e r  raising doubts about the usefulness and effectiveness of export quotas. It also suggests that, if the export and domestic restrictions "work together" at all, they tend to do so to secure the supply of 
rare earths to downstream domestic users, rather than for the goal of conserving exhaustible 
natural resources. 
7.580.  Third, for the Panel, the fact that each batch of the production quota was announced after 
the export quota was set contributed to the unfilled export quota and the unpredictability of the 
export market for rare earths.
909 It seems illogical to determine a level for the export quota before 
the extraction and production quotas are determin ed. As explained by China, the production quota 
shares are distributed from MIIT to central enterprises and local MIIT branches, and then to each 
enterprise at the regional level. The Panel understands that, as a result of such distribution 
process, Chinese rare earth producers get their share of the first batch of production quota only after the exporters receive their share of the firs t batch of the export quota. Consequently, most 
exporters cannot immediately secure the supply of rare earth oxides and salts for export because 
they must await the allocation of shares of the pr oduction quota, with the result that the export 
quota risks being partly unused. Of course, producers could have a stock of smelted and separated 
products from the previous year, which they could supply to exporters. However, in the Panel's 
view, this suggests that the way China releases its quota is not concerned with conservation, but is rather concerned with other considerations including, possibly, a desire to respond to domestic industrial needs.  
7.581.  In sum, the Panel believes that China has not explained how the timing of its export quota 
ensures that the quota works in conjunction with domestic restrictions for conservation. The main effect seems to be to cause market instability with no clear conservation justification or 
connection.  
7.6.2.2.2.2  The different product scopes of  China's export quota, production quota and 
extraction quota  
7.582.  The volume restrictions in China's comprehensive conservation policy on rare earths, i.e. 
China's extraction, production, and export quotas, are imposed on products at different stages of 
the rare earth industry value-added chain.  
Mining and 
concentration Upstream intermediate prod ucts Downstream products 
Rare earth 
concentrates Rare earth 
oxides and salts Rare earth metals Rare earth alloys Rare earth 
magnets, etc. 
Ferroalloy 
(containing 
≥10% rare 
earths) Other rare earth 
alloys 
Export quota 
Extraction quota Production 
quota 
 
7.583.  China submits that the product coverage of the challenged 2012 rare earth export quota 
reflects China's sovereign right to set its conservation objective at a particular level.910 According 
to China, all rare earth metals are produced only from rare earth oxides and salts. The export quota divides the total amount of rare earths at the processing stage into salts and oxides, and 
allocates shares for foreign and domestic users.
911 Within the limit of their respective shares of the 
extraction and production quotas, foreign and dome stic users decide how much of each type of 
rare earth product they want to purchase.912 
                                               
909 The Panel recalls that China claims that the most  internationally traded rare earth products are 
intermediate products, such as oxides, salts and metals . Therefore, the timing of issuing the quotas on the 
production of rare earth oxides, salts and metals is mo st relevant to the export quotas. The Panel in this 
paragraph compares the timing of issuin g production quotas and export quotas. 
910 China's second written submission, paras. 63-64. 
911 China's responses to Panel question No. 141. 
912 China's responses to Panel question No. 141. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 164 - 
 
  7.584.  As represented in the table above, China im poses volume restrictions on the production of 
rare earth concentrates, oxides, and salts, while China's export quota covers not only rare earth concentrates, oxides, and salts, but also metals and some high rare-earth content ferroalloys. 
7.585.  China argues that it must include rare earth metals in its export quota for the purpose of 
allocating an appropriate share of rare earths resources to domestic and foreign "downstream" 
rare earth users, who consume not only rare earth oxides and salts, but also metals.
913 Were rare 
earth metals excluded from the export quota, argues China, foreign users could circumvent the 
export quota volumes for oxides and salts by purchasing an unlimited amount of metals. Indeed, 
in extreme cases, all oxides and salts produced from legally extracted concentrates in China could 
be exported in metallic form if metals  were not subject to any export control.914 
7.586.  With respect to the situation domestically, China explains that all metals come from oxides 
and therefore that it does not need to control th e production of metals separately. This begs the 
question why China needs to impose export restrictions on metals if it does not need to control their production – all metals come from oxides, be  they exported or not. The Panel does not see 
any connection between China's differing produc t coverage and conservation. Rather, this 
inconsistency seems to highlight China's industrial policy, where metals are inputs in the national production of value-added goods often destined for export. The Panel therefore has difficulty 
seeing how the product scope of China's 2012 export quota can be considered to "work in 
conjunction with" the restrictions on domestic production for conservation.  
7.587.  The Panel also considers that China's argument that foreign users could circumvent the 
export quota volumes by purchasing an unlimited amount of metals if metals were excluded from 
the scope of the export quota is flawed, since ex porters seeking to export metals would still be 
subject to the total volume limit imposed by th e extraction and production quotas. Therefore, 
foreign users would not have access to unlimited amounts of metal even if the product scope of 
the export quota excluded rare earth metals.  
7.588.  The Panel further notes that China's export quota does not include downstream products, 
such as rare earth magnets. Following China's logic that "in the extreme case, all oxides and salts 
produced from legally extracted concentrates in Ch ina could be used to produce metals that could 
be exported without controls", it appears to the Panel that even under the export quota's current product scope (i.e. rare earth concentrates, rare earth oxides, salts and metals), all oxides and salts produced from legally extracted concentrates in China could be used to produce metals and 
then be processed into downstream products, such  as rare earth magnets, which could themselves 
be exported without control. China also explai ns that the further one moves down the supply 
chain, the more difficult it becomes to inspect th e rare earth content of semi-finished and finished 
products. According to China, imposing domestic and export restrictions at the downstream stage 
may well create trade distortions, and would require very burdensome inspections.
915  
7.589.  The Panel tends to agree that imposing additional restrictions on finished and semi-finished 
products that would include small amounts of rare earths likely would be inefficient. Having said 
this, the Panel recalls that China provides benefits to support exports of those finished products not subject to the export quota such as the VAT rebate. In the Panel's opinion, these benefits operate to stimulate domestic production of downstream products and demand for more rare 
earths extraction and production, in tension with conservation needs. Additionally, since, as the 
Panel has explained above, a large amount of Ch inese rare earth resources could end up being 
exported in the form of finished products, the Panel is not persuaded that China's export quota 
coverage is designed to conserve resources. It se ems rather that the point of the coverage is to 
reserve more raw materials for use by Chinese value-added industries. The Panel recognizes that China, like all WTO Members, needs to balance and implement several policies simultaneously. 
However, subparagraph (g) offers justification only to conservation-related measures.  
7.590.  Finally, the Panel recalls that China explai ns that the inclusion of ferroalloy (containing 
≥10% rare earth content) in the export quota is to prevent exporters for circumventing the export 
quota on rare earths by adding small amounts of other alloy elements into rare earth metals. 
                                               
913 China's opening statement at the second meeting of the Panel, para. 32; China's second written 
submission, paras. 12-13, 70-71. 
914 China's responses to Panel question No. 141. 
915 China's second written submission, paras. 77-78; China's responses to Panel question No. 141. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 165 - 
 
  7.591.  The Panel is not convinced that there is a link between exempting metals, ferroalloys, and 
downstream rare earth products from the production quota while including some of those same products in the export quota (i.e. the metals and ferroalloys), on the one hand, and the goal of conserving exhaustible natural resources on the other. In the Panel's view, the absence of any 
production quota on metals and ferroalloys is linked to China's industrial policy of promoting its 
downstream rare earth industry. The fact that China's 2012 export quota on rare earths includes metals and ferroalloys, even though such produc ts are excluded from the production quota, 
suggests that it is designed to reserve or keep a certain amount of specific rare earth products 
(i.e. rare earth metals) for use by domestic downstream industries. In the Panel's opinion, this is industrial policy, not conservation.  
7.592.  The Panel appreciates China's argument that the inclusion of ferroalloys in the export 
quota is necessary to prevent exporters for circ umventing the export quota on rare earths by 
adding small amounts of other alloy elements into rare earth metals. However, the Panel does not understand why China has not imposed any similar measures to prevent domestic  circumvention 
of the production quota. The absence of a similar domestic restriction on the consumption of 
ferroalloys raises doubts that China's export quota system works together with its domestic extraction and production restrictions. 
7.593.  With respect to its export policy regarding downstream finished products incorporating rare 
earths, China argues that it is China's sovereign right to design its rare earth conservation policy by limiting its control to the upstream "rare earth industry" stage of the rare earth supply chain. China insists that the different product scopes of th e production and export quotas do not affect in 
any way the allocation of specific rare earth products to domestic and foreign users. China, as a 
sovereign state, has the fundamental right to decide its conservation and consumption needs, and thus to set its extraction levels in light of its economic and industrial policies. But, as the Panel has 
said, conservation is not concerned with where extracted resources are consumed. As discussed 
above, Article XX(g) does not give WTO Members the right to "control the allocation" of rare earths resources once those resources have entered the market. Therefore, sharing the production quota 
between domestic and foreign users is not itself a conservation-related objective.  
7.6.2.2.2.3  Policies on domestic consumptio n and foreign consumption of rare earths 
and the question of even-handedness  
7.594.  The Panel recalls that, because unused export quota shares must be returned to Chinese 
authorities by 31 October
916 and are allowed to be sold into the domestic market,917 the Panel 
found that China's alleged "consumption cap", which results from the combined effect of the production and export quotas, is rather a kind of "consumption assurance", guaranteeing the 
availability of a minimum amount of rare earths for China's domestic consumers. This suggests to 
the Panel that China has not been even-handed in imposing foreign and domestic restrictions. Although, as the Panel has explained above, the mere fact that unused export quota volumes can 
be sold into the domestic market does not, of itself, indicate that China's export quota on rare 
earths does not "relate to" conservation, it nevertheless does seem to favour domestic over foreign users.  
7.595.  The Panel also believes that the restrictions imposed on producers of rare earth ores, 
concentrates, oxides, and salts affect both domestic and foreign consumers, while the export 
quota on rare earths affects only foreign consumers. From a structural perspective, China's extraction and production restrictions therefor e do not counterbalance its export restrictions. 
Moreover, the export quota is not the only restrict ion imposed by China on exports of intermediate 
rare earth products. China imposes export duties on intermediate rare earths and lower value-added rare earth products, such as rare earth oxides, salts, and metals, but not on higher value-
added rare earth products such as rare earth magn ets. The Panel considers the existence of export 
duties on intermediate rare earths and lower value-added rare earth products to be another example of an uneven burden imposed on foreign downstream rare earth consumers without any equivalent, counterbalancing burden being imposed on China's downstream rare earth industry.  
                                               
916 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. 
917 China's response to Panel question No. 36. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 166 - 
 
  7.6.2.2.2.4  Temporal disconnect betw een the export quota and the domestic 
restrictions referred to by China 
7.596.  Finally, the Panel finds it significant that China has imposed quotas on the export of rare 
earth products since at least 2002, but has, a ccording to its own arguments, only maintained 
restrictions on domestic extraction since 2006 and on domestic production since 2007.918 The 
Panel recalls that China has argued that one of the goals and purposes of its export quota on rare earths is to enforce its domestic production and consumption quotas. In the Panel's opinion, 
however, this argument is difficult to reconcile  with the fact that, for the years between 2002 and 
2007, China did not impose any domestic restrictions. This raises doubts in the Panel's mind about the nature and, indeed, the existence of any co ordination and interaction between the export 
quota and any domestic restrictions between at least 2002 and 2006. The Panel is well aware that 
the complainants chose to challenge only the 2012 export quota. Having said this, the WTO case 
law is clear that panels are entitled to look at the functioning of any challenged measure before and after the date of the request for establishment of a panel when this is useful for the Panel to 
understand the functioning of the challenged measure. The Panel is also aware that, as the 
Appellate Body clarified in China – Raw Materials , the phrase "made effective in conjunction with" 
does not require that the challenged measures be designed to make domestic restrictions effective 
or operative.
919 As such, the mere fact that a restriction on foreign trade was enacted prior to 
domestic restrictions does not, without more, pr eclude a regulating Member from arguing that 
such measure began "working together" with domestic  restrictions at a later date (in this dispute, 
in 2012) and so from relying on the exception in Article XX(g) as of that date.   
7.597.  Nevertheless, the fact that China's export restrictions pre-date its extraction and 
production restrictions by 4 and 5 years respectively raises doubts as to whether these two sets of restrictions are designed to work together for co nservation. These doubts are amplified when it is 
recalled that, as the Panel has already explained in the context of its discussion of the legal test 
under Article XX(g), the requirement that foreign and domestic restrictions "work together" generally implies some degree of temporal simultaneity.  
7.598.  In the Panel's view, the temporal disconnect between China's export restrictions and its 
restrictions on domestic production and/or consumption does not demonstrate, by itself, that the two sets of restrictions do not in fact "work to gether" for conservation. However, this temporal 
disconnection casts doubt on whether the measures were "made effective in conjunction" with one 
another. When viewed in the context of and toge ther with the Panel's other findings above, the 
temporal disconnect between China's export quota and its extraction and production restrictions 
simply reinforces the Panel's conclusion that the former do not seem to have been "made effective 
in conjunction with" the latter.  
7.599.  In sum, the Panel does not understand how China's export quota and domestic restrictions 
can be considered as working together coherently to enhance conservation. 
7.6.2.3  Conclusion on subparagraph (g) 
7.600.  As explained above, the Panel is of the view  that all the elements of subparagraph (g) seek 
to ensure that challenged measures work in conjunction with domestic restrictions for conservation and to ensure that the conservation burden is  distributed in an even-handed manner between 
foreign and domestic users. The Panel has reviewed  the design and architecture of China's export 
quota system, and has considered whether it (a) relates to the conservation of rare earth ores and (b) works jointly with domestic restrictions for conservation, and therefore whether it is justified 
under Article XX(g).  
7.601.  In the Panel's opinion, it is difficult to conclude that China's export quota relates to the 
conservation of rare earths. The Panel is not persuaded that China's domestic consumption is 
restricted by the combined effect of China's prod uction quota and export quotas. The Panel agrees 
that China has some restrictions on domestic produc tion in place, but by setting the levels of the 
export quota significantly below the level of its alleged production cap, as China acknowledged it has done, China has effectively set aside specific quantities of rare earth products for domestic 
consumption. Rather than "relating to the conservation of exhaustible natural resources", then, 
                                               
918 Rare Earths Data (1999-2012), (Exhibit CHN-137).  
919 Appellate Body Reports, China – Raw Materials , paras. 360 and 361. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 167 - 
 
  China's export quota on rare earths seems designed to reserve amounts of rare earth products for 
domestic consumption.  
7.602.  With respect to the requirement that measures "relate to" conservation, the Panel is not 
convinced by China's claim that the texts of its export quota measures themselves demonstrate 
the existence of a "close" and "real" relationship wi th the goal of conserving exhaustible rare earth 
resources. As the Panel has explained, many of the references pointed to by China are indirect, 
referring not to the goal of conservation but to the Foreign Trade Law , which lists several grounds 
justifying the imposition of export quotas. As such, these references do not provide sufficient 
evidence of the challenged measures' relationship with the goal of conserving China's natural resources. Even those texts that do refer to conser vation simply refer to the "goal" of conserving 
exhaustible resources, but fail to explain how that goal is furthered or promoted through the 
imposition of an export quota. As the Panel ha s explained, such references to the goal of 
conservation, without any further explanation or demonstration as to how the measure is designed 
in such a way as to assist, support or enhance China's conservation programme, do not suffice to 
establish the requisite relationship between th e export quota measures and the conservation 
objective in Article XX(g).  
7.603.  Moreover, China not only allows for unutilized export quota shares to be sold domestically, 
but it does not appear to have any mechanism in place to prevent the illegal selling to domestic 
users of quantities allocated for export. In th e Panel's view, nothing under the Chinese system 
actually acts so as to prevent expansion of Chinese domestic consumption at the expense of 
foreign consumption. China essentially leaves it to market forces to determine whether quantities 
permitted for exportation will indeed be exported and will not instead be used by domestic 
downstream producers. The Panel does not accept China's justification that its export quota enforces its domestic extraction and production quotas – and thus relates to conservation of rare 
earths – when there is no mechanism in place for tracing such rare earths that are initially 
destined for exports but which are finally consum ed domestically. More fundamentally, the Panel 
fails to understand the usefulness of an export qu ota that is applied on less than 20% of rare 
earths extracted annually in China, to regulate the remaining 80% that is consumed 
domestically.
920 
7.604.  The Panel agrees with China that its export quota may signal to the world its limited 
resources and its conservation policy, but China has not been able to demonstrate how it manages 
to tackle the perverse signals that export quotas  usually send to domestic consumers. The Panel 
therefore does not accept China's argument that its export quota relates to conservation by virtue of its signalling function.  
7.605.  Importantly, the Panel does not agree with China that its sovereign right over its natural 
resources allows it to control international markets and the domestic and international allocation and distribution of rare earths. China, as a sovereign WTO Member, can control the amount of rare 
earths it extracts, but once such resources enter the market, they are subject to WTO rules, which 
prohibit quotas unless justified under one or more of the GATT exceptions. China has not convinced the Panel that the right in Article XX(g) to adopt measures for conservation provides China with the right to control the domestic and in ternational allocation and distribution of rare 
earths. 
7.606.  The Panel recognizes that it is vitally important for China to control at its border, via 
checking and policing exercises, all exports of na tural resources, including rare earths. But the 
Panel fails to understand why such regulatory control is exercised through a quota system that 
limits the amount of legally produced rare earth products that can be exported. As the Panel has 
explained, there is no reason why China's legitimate customs controls and checks could not be 
carried out in the absence of an export quota. China could easily maintain the same legislative 
apparatus for policing exports even if it were not applying any export quota. Border controls and policing can be WTO-consistent even when impo sed on products traded without quantitative 
restrictions.  
7.607.  Moreover, the Panel fails to see how an export quota administered at the border could in 
any way work to control or prevent smuggling that occurs outside of the regulated chain of 
                                               
920 According to Updated Rare Earth Data, (Exhibit CH N-191), the actual level of  exports of smelted and 
separated products in 2012 was 14,000 tonnes, whereas the actual level of production was 82,000 tonnes. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 168 - 
 
  commerce. As such, the Panel cannot accept China's argument that the export quota relates to 
conservation by assisting China to detect an d prevent smuggling or illegal extraction and 
production, since, inter alia, the vast majority of  what is extracted and produced is destined to 
China's domestic market.  
7.608.  The Panel notes also that China characterized its production quota, access regulations, 
resource tax, and environmental regulations as even-handed domestic counterparts to the 
challenged export quota.  
7.609.  In the first place, the Panel recalls that it has been unable, on the basis of the evidence 
presented, to find that China's extraction and production caps constitute "restrictions" within the meaning of Article XX(g). China has not provided the Panel with sufficient evidence of expected demand for rare earths during 2012, and as such the Panel cannot determine whether China's 
extraction and production cap were set at levels lower than the expected demand for the period of 
time over which the restriction was intended to apply (here, 2012). 
7.610.  The Panel recalls further that China's access regulations, production quota, environmental 
regulations, and resource tax affect domestic and foreign users equally, whereas China's export 
quota applies exclusively to foreign users. Since China does not impose any limits on domestic consumption or a tax that applies exclusively to domestic users, the Panel does not accept that 
China's export quota has any domestic counterpart. In consequence, the Panel finds that given the 
structure, design, and architecture of China's export quota system, it is not balanced or "even-handed".  
7.611.  Additionally, in light of our analysis above, the Panel does not understand how China's 
export quota could be said to work together with China's domestic restrictions when the 
extraction, production, and export quotas are applied at different dates, on different products, and denominated in different values
921 without any apparent coordination among them. 
7.612.  In the Panel's view, China's export quota seems to be designed to guarantee a minimum 
amount of rare earths for its domestic downstream industries, which are themselves encouraged to export their final products. This is also confirmed by the existence of stimuli for exportation of 
higher value-added products. The Panel notes in particular that, in contrast to its export 
restrictions on lower value-added products, China provides export incentives through, for example, refunds of the value-added tax (VAT) upon the exportation of higher value-added products that use rare earths such as rare earth magnets.
922  
7.613.  The Panel acknowledges that WTO Members have legitimate rights to pursue industrial 
policies, and that not all aspects of China's expo rt quota must be about conservation. However, 
the design and architecture of the export quota must operate so as to assist, support or enhance 
conservation if China wishes to justify the export quota pursuant to Article XX(g).  
7.614.  Having examined the design, structure, an d architecture of China's export quota and the 
related domestic restrictions, it is clear to the Panel that China maintains a comprehensive 
conservation programme. Nevertheless, the Panel finds that China has failed to justify its rare 
earths export quota, which is the measure challenged by the complainants, under Article XX(g) of the GATT 1994.  
7.615.  Nonetheless the Panel continues its examination of the matter at issue with the parties' 
arguments relating to China's statement that its export quota complies with the chapeau of 
Article XX. 
                                               
921 On the issue of denomination in different values, see para. 7.650 below. 
922 Japan's second written submission, paras. 261 and 294; United States' comments on China's 
response to Panel question, No. 103. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 169 - 
 
  7.6.3  Application of the chapeau of Article XX to China's export quota on rare earths  
7.6.3.1  Whether China has demonstrated that  its export quota on rare earths was not 
applied in a manner that constituted arbitr ary or unjustifiable discrimination or a 
disguised restriction on international trade 
7.616.  China argues that its export quota system is not applied in a manner that arbitrarily or 
unjustifiably discriminates against users of rare earths in the United States, the European Union, or Japan. It argues further that its export quota system does not constitute a disguised restriction 
on international trade. In particular, China argues that its export quota system allocates the 
limited supply of rare earths in a manner sufficient to meet foreign demand, and submits that the export quota is not a genuine and substantial cause of differences between domestic and foreign prices of rare earth products.
923 China points out that its 2012 export quota on rare earths makes 
no distinction in respect of the destination of exported rare earth products. Therefore, argues 
China, the quota is not applied "in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail".
924  
7.617.  In response to a question from the Panel, China acknowledged that "the requirement not 
to apply an export quota system in a manner that would constitute 'arbitrary discrimination' covers arbitrary discrimination between domestic and foreign consumers".
925 
7.618.  The complainants argue that China's rare earth export quota, as such and as administered, 
discriminates against other WTO Members and their industries by creating an advantage for rare earth-consuming Chinese industries that would not have existed in the absence of such quota.
926 
They submit therefore that China' s position that the export quota is not applied in a manner that 
constitutes arbitrary or unjustifiable discrimination because it "make[s] no distinction in respect of 
the destination of the products that are exported" is insufficient to satisfy its burden under the chapeau.
927 Moreover, the complainants argue that the application of the rare earth export quota 
has resulted in discrimination between foreign and domestic users, as illustrated by the drastically 
higher prices paid by foreign consumers for the very same products. According to the complainants, this discrimination, which serves no conservation-related purpose, is arbitrary and 
unjustifiable.
928 
7.619.  China explains the process of determining export quota volumes and argues that the 2012 
and 2013 export quota volumes were determined in a manner that was not "arbitrary or unjustifiable" and did not result in any restriction on international trade.
929 According to China, 
when it set the volume of its 2012 export quota, it took into account "situations concerning 
domestic resources, production and consumption, and the international markets".930 China 
explains that, after considering these factors, it determined how much of its rare earth resources 
would be preserved for future use and how much  would be consumed during 2012 by users in 
China and abroad.931 China points out that, when China's consumption of rare earths is compared 
with consumption by the rest of the world, it becomes clear that the export quota allocates the 
limited supply of rare earth products between fore ign and domestic users in shares that closely 
approximate relative foreign and domestic demand.932 Moreover, according to China, the 2012 
                                               
923 China's second written submission, paras. 101 and 110. 
924 China's first written submission, para. 336. 
925 Panel question No. 47. Specifically, the Panel put the following question to China: "Complainants 
argue that discrimination between 'countries' within th e chapeau of Article XX of the GATT 1994 includes not 
only MFN-type discrimination, but also  NT-type discrimination (see, e.g. paragraph 54 of the European Union's 
oral statement at the first substantive meeting). Does China agree?" 
926 United States' second written submission, paras. 307-308; European Union's second written 
submission, para. 225. 
927 United States' second written submission, paras. 293-295; Japan's second written submission, 
para. 168. 
928 United States' second written submission, para. 299; Japan's second written submission, 
paras. 167-175. 
929 China's second written submission, para. 115. 
930 China's second written submission, para. 110 (referring to Several Opinions of the State Council on 
Promoting the Sustainable and Sound Development of the Rare Earth Industry , (Exhibit CHN-13)). 
931 China's second written submission, para. 110. 
932 China's second written submission, para. 111. See also  S. Shaw and J. Chegwidden, "Global Drivers 
for Rare Earth Demand", Roskill Information Services , August 2012, p. 32, (Exhibit CHN-4), (reporting that WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 170 - 
 
  export quota volume was set at the same level as the quota volume in 2011 despite the fact that 
the 2011 rare earth export quota was not filled. In China's view, by keeping the export quota 
volume for 2012 at the 2011 level, China allocated a significant amount of rare earth products for priority consumption by foreign users. China notes that, in 2012, the export quotas for light and 
medium/heavy rare earths were more than sufficient to meet foreign demand, as evidenced by the 
fact that the 2012 quota was not filled.
933 With respect to the complainants' argument that 
stockpiling during 2010 is one reason for the quotas not being filled in 2011 and 2012, China 
argues that the fact that foreign buyers were able to stockpile prior to 2011 demonstrates that the 
export quotas were set at an appropriate level, thereby ensuring that supply was more than sufficient to meet foreign needs.
934  
7.620.  China submits that its export quota system, rather than being applied in a manner that 
constitutes a disguised restriction on international tr ade, is genuinely designed to contribute to the 
effectiveness of China's overall conservation policy. In particular, China argues that the lack of any "disguised restriction on international trade" in its export quota system is demonstrated by the 
following facts: (a) the export quota volumes for 2011 and 2012 were sufficient to meet foreign 
demand; (b) the 2012 export quota system creates incentives for exporters to meet the demand 
of foreign rare earth users, most notably through the eligibility criteria for enterprises applying for 
a share in the quota and the formula used as the basis for calculating enterprises' export quota 
shares; and (c) the fact that there is no distinction between specific rare earth products in the export quota system beyond division into two general categories: light and medium/heavy rare 
earths.
935 
7.621.  The Panel recalls that it is for China, as the party who invoked Article XX of the 
GATT 1994, to demonstrate that its rare earths export quota is not applied in a manner that 
constitutes unjustified or arbitrary discrimination, either among foreign users or between domestic 
and foreign producers and consumers. As the Panel understands it, China raises two main 
arguments in support of its position that its export quota system does not impose any discrimination, let alone any unjustified discrimination, against other Members. The first one is that 
the export quota on rare earths was not filled in 2012. 
7.622.  The complainants, however, argue that quotas create, even when unfilled, some 
uncertainty among consumers, as compared to a situation in which there are absolutely no restrictions on access to such resources.
936 Such uncertainty would provide incentives for 
downstream users of rare earths to relocate to China to ensure a stable supply of rare earth 
inputs.937 China responds that its conservation policies create uncertainty both for domestic and 
foreign consumers, that is, the uncertainty cost does not fall disproportionately on foreign 
consumers.938 In addition, China asserts that most industry relocation to China took place prior to 
China's tightening of its export quotas in 2008 and 2010.939 In China's view, this shows that the 
principal reasons for companies using rare earths to relocate to China are the need to be located 
near their customers940 and to exploit China's competitive advantages in the production of rare 
earth-containing products941, and not the export quotas. 
7.623.  The second (and related to the first) main argument that China puts forward in support of 
its position that its export quota system does  not impose any discrimination, let alone any 
unjustified discrimination, against other Members, is  that there is no price difference between the 
foreign and domestic rare earth markets. The complainants contest this claim. They argue that (a) China's price data is based on an improper "adj ustment" methodology; (b) for most of 2012, even 
adjusted export prices exceeded domestic prices significantly; (c) there are no substantial quality 
                                                                                                                                               
"China accounts for nearly 70% of demand in 2012". Ther efore, non-Chinese demand is residually estimated as 
100-70 = 30% (red bar in the graph on p. 32 of the Exhibit)). 
933 China's second written submission, paras. 112-113. 
934 China's second written submission, para. 114. 
935 China's first written submission, paras. 232- 249. 
936 Prof. L. Alan Winters, Under-filled export quotas do not indicate that the quotas impose no costs on 
non-Chinese users , (Exhibit JE-141). 
937 United States' second written submission, para. 131.  
938 China's response to Panel question No. 87. 
939 Dr David Humphreys, Developments in rare earth-using industries , (Exhibit CHN-163). 
940 Dr David Humphreys, Developments in rare earth-using industries , (Exhibit CHN-163). 
941 Dr David Humphreys, A response to expert evidence supplied with their Second Written Submissions 
by the United States, the European Union and Japan , (Exhibit CHN-186). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 171 - 
 
  differences between the most commonly consumed domestic and exported rare earth products; 
and (d) any difference in the Chinese domestic price of rare earths, in comparison with the foreign 
price, provides a direct competitive advantage to Chinese producers of value-added products containing rare earths.
942 The complainants also point to alternative measures that would 
contribute to China's conservation goals while reducing the level of discrimination and trade 
restrictiveness that is caused by the export quota.  The Panel will consider first the main arguments 
of China, i.e. that its export quota was not filled in 2012 and that there is no price difference 
between rare earths sold domestically and those sold outside China. 
7.624.  In light of the legal test discussed earl ier, the Panel will examine whether China has 
demonstrated that the application of its export quota on rare earths does not cause arbitrary or unjustified discrimination or a disguised restrictio n on international trade. The Panel will first 
determine whether there is discrimination and/or a disguised restriction on international trade. If 
we make an affirmative finding in this respect, we will then determine whether such discrimination or disguised restriction is based on or explained by a conservation rationale. Finally, we will 
consider whether WTO-consistent alternative measures exist, before concluding overall on China's 
compliance with the chapeau of Article XX.  
7.625.  As noted in the Panel's discussion of the legal test, WTO jurisprudence recognizes that the 
same facts can be relevant in analysing unjustifiable or arbitrary discrimination and disguised 
restrictions on trade, and that often these concep ts overlap. In the present dispute, China's own 
argumentation about the non-use of the 2012 export  quota and the absence of price differences is 
threaded between these two overlapping concepts. In the Panel's opinion, a situation of 
discrimination that is not justified constitutes a disguised restriction on trade, but a disguised 
restriction on trade may exist even if there is no  discrimination. For ease of exposition, the Panel 
will examine different aspects of China's export quota under both of these concepts together. 
7.6.3.1.1  The allocation of the export quot a in two broad quotas, while export demand 
and supply may be product-specific 
7.626.  The Panel recalls China's claim that the mere fact that the 2012 export quota was unfilled 
necessarily or automatically means that the export quota cannot have had any discriminatory 
impact. As we have explained above, China bears the burden of establishing every element of its 
defence, including, in this case, that the challenged export quota on rare earths was not applied in a manner that constituted arbitrary or unjustifiable discrimination between countries where the 
same conditions prevail. China has attempted to di scharge this burden by arguing that where, as 
in 2012, an export quota is not fully filled, it cannot have had any discriminatory impact.  
7.627.  The Panel queries whether the fact that the quota was not filled necessarily means that 
there was no restriction on foreign consumers accessing certain rare earth elements, leading to 
instances of discrimination. This is so because, as the Panel understands it, exporting firms may decide to export only one or a few rare earth elements, depending inter alia  on expected demand 
as well as on their own corporate structure and capacity and business plans and priorities 
(including industrial specialization, if any).
943 Therefore, even if within their light and/or 
medium/heavy export quota shares exporters can choose which particular rare earth element(s) to export
944, and even if exporters were able to purcha se individual rare earth elements on the 
                                               
942 European Union's second written submission, paras. 197-209; Japan's second written submission, 
paras. 189-195. 
943 China's first written submission, para. 26, notes th at "rare earth elements are sold and traded in 
many different forms." Similarly, Chin a's response to Panel question No. 21 indicates that there are different 
markets for different rare earths prod ucts. According to China's own expert evidence, "the 'rare earths market' 
does not exist. We cannot treat rare earths as a single  commodity": see Exhibit CHN-4, p. 7, cited in United 
States Opening State at the First Meeting, para. 51. In the Panel's view, the parties' description of the rare earths market could support an inference that export specialization is possible.. The possibility of specialization is also suggested by China's explanation that light rare ea rths are produced in the Northern part of China while 
heavy/medium rare earths are mainly found in the so uthern part of the country : see China's first written 
submission, para. 85; China's response to Panel ques tion No. 105. In the Panel's opinion, the vertical 
integration of rare earths production in China could ve ry well lead some enterprises to specialise in the 
exportation of only some rare earth elements, rath er than every element in both the light and the 
medium/heavy categories: see European Union's comments  on China's requests to review precise aspects of 
the Panel's interim reports, para. 9. 
944 China's first written submission, para. 249; China's response to Panel question No. 21 (indicating 
that exporters decide what products to export with in their export quota shares); Japan's first written WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 172 - 
 
  market945, it is possible that some exporters may not have the technical capacity or be in the 
commercial situation to export all rare earth el ements within the light and/or medium/heavy 
categories. Where an exporting enterprise has no t fully used its quota by 31 October, it must 
return any unused volume to Chinese authorities.  Moreover, exporting firms are prevented by law 
from exchanging export quota licences inter se .946 In this situation, it would be possible that the 
overall export quota volume may be unused, and thus partly available for domestic consumption, while foreign demand may still be unsatisfied fo r one or more specific rare earth products.  
7.628.  In its comments on the Panel's Interim Reports, China claimed that the Panel's analysis on 
this point was not supported by the evidence on the record, and alleged, apparently for the first 
time, that "exporting firms, even if not allowed to sell export quota shares among themselves, can 
always purchase individual rare earths elements  that are in demand on the market and export 
until their quota share is filled".
947 According to China, "[i]f exporters consider that a particular 
type of rare earth is needed more than another el ement by their clients, it is undisputed that they 
can buy this rare earth element on the market and export it to clients".948 This new argument was 
not supported by any footnote reference or other evidence. As we have explained in our Interim 
Review section, in order to properly assess the implications of the fact that exporters may be able to purchase individual products on the domest ic market, the Panel would need to re-open its 
investigation and ask further questions to the parties. The Panel still believes that, even if 
exporting enterprises are able to purchase any product on the market, it remains the case that an unfilled quota may still be discriminatory for the reasons given hereafter, and this whether or not exporters may, in practice, export only a few products and/or may be able to purchase individual 
rare earths products on the domestic market. Nevertheless, we take note of China's point, and we 
have adjusted our reasoning in the following paragraphs so that it will be clear that our findings that unfilled quotas can still be discriminatory are not based on an understanding that some 
exporters may not export all products. 
7.629.  Before proceeding, the Panel also notes the United States' argument that the division of 
the export quota into two categories raises the problem that consumers of some rare earth 
elements may be unable to obtain a sufficient or even any supply of a specific rare earth element if 
exporters use the full volume of the export qu ota to export a different rare earth element.
949 The 
Panel need not deal with this argument here, since China's 2012 export quota on rare earths was not filled.  
7.6.3.1.2  Unfilled quota shares 
7.630.  As we have noted, China argues that the unfilled 2011 and 2012 export quotas 
demonstrate that there was no discriminatory treatment of foreign consumers as a consequence of 
the 2012 export quota.  
7.631.  The Panel agrees with China that, in general, quota utilization can be a relevant factor in 
establishing the existence and nature of a quota' s restrictive effects. However, for a number of 
reasons, the Panel is not persuaded that such evidence is sufficient to establish non-discrimination 
here.  
7.632.  First, the Panel is not persuaded that the unfilled export quota is evidence of non-
discrimination in this case because China has applied export restrictions (quota and duties) on rare 
earths for over a decade, and therefore the international rare earths market has adjusted to long-
term distortions. China has not successfully re butted the complainants' arguments that business 
uncertainty caused by the long-term imposition of  export quotas could lead to reduced foreign 
demand of the product under quota, which could ex plain, at least in part, why the 2012 quota was 
not filled. Business uncertainty may lead foreign enterprises to opt for second- or third-best business choices, including relocation of downstream users to China to ensure a stable supply of 
                                                                                                                                               
submission, para. 78 (indicating that exporters freely choo se what particular elemen ts to export from within 
the light and medium/heavy categories). See 2012 List of Enterprises for the Export of Rare Earths , 
(Exhibit CHN-55, JE-66) (announcing enterprises- shares  of the rare earths quota in light and medium/heavy 
rare earths).  
945 China's comments on the interim re ports of the Panel, paras. 49-50. 
946 China's responses to Panel question Nos. 143 and 144.  
947 China's comments on the Interim Reports of the Panel, para. 50.  
948 China's comments on the Interim Reports of the Panel, para. 50. 
949 United States' second written submission, para. 303. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 173 - 
 
  rare earth inputs950, thus representing a disproportionate cost for foreign enterprises even when 
the quota remains unfilled. 
7.633.  In particular, the Panel is not convinced that industrial relocation is unrelated to China's 
export quotas. The Panel is of the view that on e cannot simply compare the flow of FDI before 
2008 to the situation after 2008, and conclude that since FDI flows did not increase following the 
tightening of the quota, the quota is not a possible cause of relocation, without taking into account the global fall in FDI activity that followed the 2008 economic downturn. Therefore, in the view of 
the Panel, the evidence provided by China is not sufficient to exclude the possibility that export 
quotas (and duties) were a significant reason for industrial relocation.
951 As China itself 
acknowledges, if foreign demand shifts inward, the export quota can cease to be "binding"952, that 
is, it can remain unfilled, but this is not necessarily an indication that the export quota does not 
have any discriminatory effect on foreign users. Rather, this could be an indication that the export 
restriction, which China has applied for over a decade, has distorted international trade and investment. In other words, the effects of the export quota are not being compared to the 
appropriate counterfactual (China's exports had the quota not been in place). 
7.634.  Indeed, Paragraph 7 of the Ad Note to Article XXVIII of the GATT 1994 recognises that 
when determining the market share of an export in the context of a Member's renegotiation of a 
schedule, the situation of the affected Member should be assessed as if there had not been 
discrimination in place. It is difficult to determine in the case before us precisely the degree to which the lack of quota fill is attributable to, on the one hand, the international financial crisis and, on the other hand, the quota's long-term market distorting effects; at any rate, the important 
point is that China has not convinced the Panel that its 2012 export quota did not have distorting 
effects that discouraged and reduced export trade of rare earths. The Panel is of the view that, 
under these circumstances, the evidence that the export quota was not fully utilized in 2012 does 
not demonstrate that China's quota has been applied in a non-discriminatory manner. 
7.635.  Second, the Panel is not persuaded that the unfilled export quota is evidence of non-
discrimination because this argument ignores the fact that, as acknowledged by all parties 
including China, a large proportion of demand for exports of rare earths is satisfied illegally, i.e. 
through smuggling.
953 While the Panel agrees with China that smugglers seek "to get past 
governments regulations"954 (including China's production restrictions), the Panel considers that, 
according to the evidence put forward by the parties955, smuggling may also be due to the export 
quotas (beyond production restrictions) themselves. To the extent that an unfilled quota may be a 
consequence of the quota itself, i.e. because the quota's existence encourages smuggling that satisfies some foreign demand, the Panel considers that the unfilled quota in this case cannot be 
taken as evidence of non-discrimination.  
7.6.3.1.3  Price differences 7.636.  A second pillar of China's defence of its 2012 export quota system is that the export quota 
has had no "effects" on the foreign price of rare earth products. In support of this position, China 
provides estimates of differences between foreign and domestic prices for 15 products (namely  
europium, dysprosium, terbium, neodymium, praseodymium, cerium, lanthanum, in their oxide and metal forms respectively, and for yttrium in metal form only).
956 China excludes samarium and 
                                               
950 European Union's second written submission, para. 159; Magnet FAQs , (Exhibit JE-112); Roderick G. 
Eggert, Rare Earth Elements , (Exhibit JE-129). 
951 The Panel accepts, as China argues, that relocations to China may not necessarily be wholly 
attributable to the imposition of ex port quotas: see Dr  David Humphreys, Developments in rare earth-using 
industries , (Exhibit CHN-163). 
952 Prof. Jaime de Melo, Selected Economic Issues Regarding Export Quotas and Production Quotas , 
(Exhibit CHN-157). 
953 United States' second written submission, para. 297, Rare earth exports to be below quota , 
chinadaily.com.cn, 4 March 2013, (Exhibit JE-109); Smuggling blights rare earth industry , chinadaily.com.cn, 
December 14 2012, (Exhibit JE-104); Rare earth smuggling from China exceeds official exports , 
WantChinaTimes, 10 August 2012, (Exhibit CHN- 151); SinoCast, Rare Earths Exporters Facing Shifting Risk , 
Exhibit (JE-117), The Rare Earth Industry is Still in the Downturn , (Exhibit CHN-152) 
954 China's Second Written Submission, para. 45.  
955 See, e.g. United States' second written submission, para. 127; European Union's second written 
submission, para. 125; United States' response to Panel question No. 33; and China's second written 
submission, para. 45. 
956 This evidence is presented in Annex 1 of China's second written submission.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 174 - 
 
  gadolinium from the analysis because, it argues, there is only sporadic trade for these two 
products.957 China also excludes yttrium oxide from its price analysis on the ground that the 
domestic and exported yttrium oxides are of different purity.958 
7.637.  China's defence with regard to pricing data relies on two main arguments. First, China 
argues that the price data analysis demonstrates that "the differences between domestic and 
foreign prices for the same rare earth products collapsed dramatically by the end of 2012" and that the narrowing  and, in many cases, elimination  of the price gap through the year demonstrate 
that the 2012 export quota could not be imposed in order to maintain or create a price difference 
to advantage China's domestic rare earths users.
959 Second, China argues that any difference 
between foreign and domestic prices was not caused  by the export quota in 2012. According to 
China, it is economically impossible, under the conditions prevailing in the Chinese rare earths 
market at present (that is, export duties between  10-25%, a largely unfilled quota, and the large 
number of firms that are allocated export quota shares)960, that an unfilled export quota could 
cause any differences between foreign and domestic prices.961 The Panel will consider each of 
these arguments in turn. 
7.638.  As regards the size of the price gap, the Panel has difficulty accepting China's argument 
that an alleged narrowing of the price gap duri ng 2012 demonstrates that the 2012 export quota 
could not have as its objective that of maintaining or creating a price difference to advantage 
China's domestic rare earths users.962 The Panel observes that estimates of the price gap provided 
by the parties vary significantly across products. Foreign prices are higher than domestic prices for several products. In Annex 1 of its second wri tten submission, for example, China's weighted 
average price gap analysis shows higher foreig n prices in 2012 for the following products: 
dysprosium metal (foreign prices higher by 24% ) and dysprosium oxide (93%), europium oxide 
(54%), terbium oxide (57%) and terbium metal (64%), yttrium metal (54%), neodymium metal 
(13%), and praseodymium metal (33%). Furtherm ore, the Panel notes that at the end of 2012, 
the foreign price for 9 of the 15 products for which China provided data in Table 2 of its response to the Panel's question No. 78 was still higher than the domestic price. Having said that, the Panel 
recognizes that the price gap was smaller than at the beginning of 2012. In any case, and 
importantly, foreign prices still exceeded domestic prices for several products as of 28 May 2013
963, the month China claims best represents a "normal" situation. The Panel also notes that 
for several products (dysprosium metal, dysprosium oxide, europium oxide, terbium oxide, 
terbium metal, and yttrium metal), the percentage  gap between the foreign price and the domestic 
price increases over the period 2007-2012 for which the analysis is provided.964   
7.639.   Given the persistence of the price gap between foreign and domestic prices in the cases 
indicated above, the supposed narrowing of the price gap through 2012 and the alleged 
elimination of this difference by May 2013 for some products is not, in the Panel's view, evidence that the 2012 export quota was not imposed with a view to providing a competitive advantage to 
the downstream industry through price discrimination.
965 It is the view of the Panel that the 
evidence before it does not allow to exclude the po ssibility that existing price differences (be they 
large or small) have indeed provided a competitive advantage to Chinese producers of value-added products containing rare earths, since in a competitive market, even small differences may 
provide an advantage. Even "narrowing" differences in critical raw materials such as those at issue 
may potentially be "significant" in a market where downstream producers face severe competition, thus providing an advantage to domestic users of rare earths in China. China has not 
                                               
957 China's response to Panel question Nos. 40-42. 
958 China's second written submission, footnote 261. 
959 China's response to Panel question No. 78. 
960 Prof. Jaime de Melo, Response to Prof. Grossman and Prof. Winters' Expert Reports , 
(Exhibit CHN-206). 
961 Prof. Jaime de Melo, Selected Economic Issues Regarding Export Quotas and Production Quotas , 
April 2013, (Exhibit CHN-157). 
962 China's response to Panel question No. 78. 
963 As reported in Table 2 of China's response to Panel question No. 78. 
964 Evidence provided by Prof. L. Alan Winters, The Effect of China's Rare Ea rth Export Restrictions on 
Export Prices , (Exhibit JE-169) supports the view that these pr ice differentials have be en caused by export 
quotas. 
965 As indicated in Roderick G. Eggert, Rare Earth Elements , (Exhibit JE-129), other reasons can explain 
the narrowing of the gap between fore ign and domestic prices of rare ea rths, such as consumers' drawing 
down inventories that they purchased previously, slow  economic growth worldwid e, market uncertainty. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 175 - 
 
  demonstrated that the positive gap between foreig n and domestic prices – where it existed – did 
not provide a competitive advantage for its downstream sector. 
7.640.  More generally the Panel has concerns about the reliability of the data and the 
methodology used in China's analysis of the price gap.  
7.641.  In the first place, the Panel is concerned with the fact that the price data on which the 
analysis is conducted may not reflect actual pricing, and that "this practice could lead to both the over-estimation of the likely foreign price as well as the under-estimating of the foreign price".
966 
To the extent that, as stated in China's answer to  Panel question 85, this can be one of the factors 
that explains why domestic prices may appear to be higher than adjusted foreign prices – a result against the basic economic logic - the Panel has concerns about the reliability of the data.  
7.642.  Second, the Panel has concerns about the methodology that China used to calculate price 
gaps, considering that it is likely to result in downward estimates of the price difference between 
foreign and domestic prices of rare earths. For example, China deducted 10% fees from the f.o.b. China price, allegedly because such fees are associated with exportation and they are not included 
in the compared domestic price.
967 Even accepting, arguendo , China's argument that these fees 
are exclusively associated with exports968, the Panel notes that the 10% figure is an average 
between the lower estimate of 0.2% and the uppe r estimate of 20% in a survey of exporters.969 
The wide difference between these two estimates casts doubt on the reliability of the 10% simple 
average, without information on the underlying survey's findings. The Panel acknowledges that 
China also provided some analysis applying a 5%  fee to calculate the ratio between the adjusted 
FOB price and the Chinese domestic price. However, lacking any information on the distribution of 
costs, the Panel is not in the position to assess whether a 5% fee is a reliable estimate of average 
costs. Furthermore, this additional analysis is provided only for 8 rare earth elements and only with regard to the situation at a specific point in time (end of May 2013).
970    
7.643.  Moreover, China's foreign adjusted prices are calculated by subtracting the export duty 
from the f.o.b. foreign price. China argues that th e Panel is not entitled to assess the joint effects 
of its export duties and export quota, since it ha s invoked different justifications (Article XX(b) and 
Article XX(g)) respectively for its export duties and its export quota. The Panel disagrees with 
China that, when assessing the effects of China's export quota, it is prohibited from taking into account the effects of China's export duties on the same products. In the present dispute, China 
itself asked the Panel to look at the effects of its export quota. The Panel recalls that "in certain 
cases the effects of the discrimination may be a relevant factor, among others, for determining 
whether the cause or rationale of the discrimination is acceptable or defensible and, ultimately, whether the discrimination is justifiable".
971 This assessment of the effects called for by China 
cannot, however, be carried out by setting aside an d ignoring the effect on the relevant rare earth 
of the export duties, in addition to the export quota. Independently of whether China can use its 
suggested effects test to demonstrate the conservation purpose of its export quota, it is clear to 
the Panel that, if an effects test is used, it must be applied taking into account all the components 
that characterize the relevant market.  
7.644.  From an economic perspective, as China it self recognizes, export duties and export quotas 
may interact, and their price effects may overlap. It can be difficult, therefore, to disentangle the 
effects of these two restrictions. For example, the presence of the export duty may at times lead 
the quota to have no apparent effect on foreign price, in the case in which the duty reduces the quantity demanded to below the export quota level. However it would be erroneous to conclude 
that in this circumstance the export quota has no effect at all. To the contrary, the export quota 
may still have an effect if it reduces exports to a lower level than their free trade level (that is, their level in the absence of the export duty).
972   
                                               
966 China's response to Panel question No. 85. 
967 China's first written submission, para. 136. 
968 China's comments on the complainants' response to Panel question No. 82. 
969 China's second written submission, footnote 347. 
970 China's opening oral statement at the second meeting of the Panel, para 53; Updated rare earth 
metal prices applying different  "other export-associate fees ", (Exhibit CHN-197). 
971 Appellate Body Report, Brazil – Retreaded Tyres , para. 230. 
972 Prof. Jaime de Melo, Response to Expert Re port by Prof. Winters , (Exhibit CHN-195); European 
Union's second written submission, para. 200. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 176 - 
 
  7.645.  China asserts that this scenario is not applicable to the current situation in the rare earths 
market because the fill rate for China's export quotas on rare earth products is very low (only around 50%) and the demand for rare earth products is inelastic – that is, a decrease in the price of rare earths leads to only relatively small increases in demand. Therefore, the removal of China's 
export duties (ranging between 10% and 25%) for rare earths would not result in an increase in 
exports that would be anywhere close to the level required to fill the export quotas.
973   
7.646.  The Panel acknowledges that this scenario is possible. However, the Panel points out that, 
although China claims that the demand for rare earths is inelastic, China does not provide an 
indication of the magnitude of the demand elastici ty for rare earths.  Furthermore, the Panel notes 
that parties agree that in the medium-run such elasticity may be higher than in the short-run.  However, China does not explain why the analysis of  the effects of the simultaneous application of 
an export quota and an export duty should relate to the short-run, or whether results would 
remain unchanged if the analysis were to be conducted over a longer time horizon, especially in light of the long period of time during which China has been using these policy instruments.       
7.647.  As regards the causal relationship between the export qu ota and its alleged discriminatory 
price effects, China argues that an unfilled quota cannot be the cause of a price difference between foreign and domestic prices.
974  
7.648.  The Panel is not persuaded, because there are circumstances when an unfilled export 
quota can cause a price gap. Since, as we have explained above, an unfilled quota could be discriminatory, it could also cause price gaps. In addition, for example, export quotas can facilitate 
the exercise of market power. If one exporter raises its price, rivals cannot increase their sales as 
much as they might like to take advantage of their competitor's higher prices, as they will not be 
able to sell above the amount that has been allocated under the quota system. In such a situation, the quota may be under ‐filled, while at the same time foreign prices are higher than domestic 
prices.
975  
7.649.  The Panel considers that determining causation is always challenging, but it is particularly 
challenging in the present circumstances because quota and duty restrictions have been in place for over a decade. China itself concedes that "it is impossible to isolate the effect of the export 
quota from a number of other factors during the time period mid-2010 to mid-2012". Given the 
above, the Panel is not convinced that the evidence of unfilled quota and decreasing price gap, where it exists, through 2012 is sufficient to conclude that China's export quotas were not applied 
in a manner that would constitute arbitrary or unjustifiable discrimination or a disguised restriction 
of international trade. 
7.6.3.1.4  The use of REO denominati ons for domestic consumption only 
7.650.  The Panel also has difficulty with the fa ct that the 2012 export quota was denominated in 
gross weight, while the amount of rare earths destined for domestic consumption was denominated in REO tonnes. Thus, the amount of rare  earths that could effectively be exported is 
determined on the basis of a less concentrated form of rare earths, therefore inflating the amount 
that appears to be exported. This indirectly redu ces the proportion between rare earths that is 
consumed domestically and rare earths exported, and as such appears to the Panel to operate in a discriminatory manner. In its second written submission, China argues that "it is difficult and 
would be very costly for customs officials to inspect the exact REO-equivalent weight of each rare 
earth product is presented". The Panel notes the ev idence put forward by the European Union that 
the same quota amount in REO tonnes was converted in consecutive years with a different factor 
and consequently the gross weight equivalent for 24,000 REO tonnes was different each year: 
30,258 tonnes for 2010, 30,184 tonnes for 2011 and 30,996 tonnes for 2012. The Panel notes also the uncontested evidence put forward by the Europe an Union that China never indicated, prior to 
these proceedings that the quota amount in these years was set at 24,000 REO tonnes. Each year, 
China published only gross weight figures. At the same time, the Panel notes that China's export 
quota includes rare earths alloys containing >10% of rare earths , which is a downstream product 
                                               
973 Prof. Jaime de Melo, Response to Expert Re port by Prof. Winters , (Exhibit CHN-195). 
974 China's second written submission, para. 123, referring to Prof. Jaime de Melo, Selected Economic 
Issues Regarding Export Quotas and Production Quotas , (Exhibit CHN-157). 
975 Prof. Gene M. Grossman, " Export Restrictions: Possible Effects of  Under-Filled Quotas on Prices and 
Consumption ", (Exhibit JE-164). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 177 - 
 
  and which can effectively reduce the amount of allowed exports because its weight is potentially 
considerable, without taking this inclusion into account when fixing the annual export quota amount (the latter remained virtually at the same level in 2011 and 2012). The Panel has doubts as to whether China really needs to use different denominations in its export quotas and in the 
amount of rare earths destined to domestic consumption.  
7.6.3.1.5  The structure of the quota 7.651.  The Panel is also concerned about the uneven and unbalanced structure of China's export 
quota measures. As the complainants have noted throughout this dispute, the measures that 
China alleges constitute "restrictions on domest ic production on consumption," and especially 
China's extraction and production quotas and its taxes on extraction, also restrict foreign consumption of Chinese raw materials. In other words, every restriction on domestic consumption 
of Chinese raw materials applies also to foreign consumption. In contrast, China's export quotas 
impact only on foreign users: there is no corresponding burden, such as a domestic consumption quota, imposed by China on Chinese consumers.  Additionally, as the Panel noted above, the 
difference in the scope of China's production and export quotas seems to favour domestic users 
while restricting foreign access to certain rare earths products, such as metals. Regardless of whether such structural imbalance meets the "even-handedness" requirement under 
subparagraph (g) of Article XX, the Panel believes that these features of the 2012 export quota 
system, which impose unique and special burdens on foreign consumers, are discriminatory in its application.  
7.6.3.1.6  Other consideratio ns concerning the manner in which the export quota is 
determined  
7.652.  The Panel notes that in 2012, China disclosed  for the first time the criteria that informed 
its decision on the quantity of rare earths to be made available for export. In December 2012, 
China for the first time published a declaration
976 explaining – in very general terms and ex post 
facto – how its export quotas were set. China relies on this declaration and on Several Opinions of 
the State Council on Promoting Sustainable and Sound Development of the Rare Earth Industry977, 
which was issued in May 2011, in alleging that the volumes that it makes available for export are 
determined taking into account the "situations concerning domestic resources, production and consumption, and the international markets".
978 China submits that its export quota assists in 
managing the supply of rare earths to domestic and foreign users, and suggests that its decision-
making on annual quota volumes available is based on objective criteria and informed by pre-
established conservation targets.  
7.653.  The Panel notes, however, that China has disclosed no details about its mid-term or long-
term conservation targets and expected level of demand, and has only provided very general 
information about the criteria on the basis of which China allegedly sets its export quotas. It is not clear from the evidence that China presented to this Panel what relative weight is ascribed to each 
of the criteria taken into account in its yearly decisions. The 2012 Declaration  states that Chinese 
demand was determined based on "industry forecasts based on discussions with industrial users of rare earths".
979 However, there is no evidence that China consulted foreign producers, and China 
did not contest the complainants' allegation that it had consulted and taken into account the 
interests of its domestic producers, consumers, and industries. China seems to argue that foreign 
demand is sufficiently taken into account by looking at the level of actual exports in the previous year (which, of course, were themselves limited by  an export quota). In this respect, the Panel 
considers that China treats domestic interests more favourably than foreign interests.  
7.654.  The Panel also finds discrimination in the criteria used for allocating the rare earth quota 
between domestic and foreign users. The export quota level is based on the level of actual 
consumption in the preceding year, whereas the dome stic level seems to be set on the basis of the 
demand forecasted in China's Five Year Plan. The Panel is also concerned about the formula that China uses to determine the annual allocation of the export quota. This formula is issued annually, 
                                               
976 Declaration On the Setting Of 2012 Export Quotas on Rare Earth Products , (Exhibit CHN-63). 
977 Several Opinions of the State Council on Promoting the Sustainable and Sound Development of the 
Rare Earth Industry , (Exhibit CHN-13). 
978 China's opening statement at the fi rst meeting of the Panel, para. 23. 
979 Declaration On the Setting Of 2012 Export Quotas on Rare Earth Products , pt. 13, (Exhibit CHN-63). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 178 - 
 
  as part of the annual export quota measure. As the Panel understands it, the formula could change 
each year, and there is no guarantee that the quota allocation formula will remain the same from one year to the next. Moreover, as the allocation formula is liable to change annually, the Panel considers that exporters will always face uncertainty as to the weight or significance to be 
accorded to their export performance in the current year in the quota allocation formula for the 
following year. This increases the already considerable uncertainty costs that the export quota imposes on foreign rare earth users.  
7.655.  In the Panel's view, the above analysis su ggests that China's export quota on rare earths 
is applied in a manner that is discriminatory and that constitutes a disguised restriction on trade. 
7.656.  Finally, the Panel recalls that the export  quota system requires exporters to return 
unexported quantities of rare earths to Chinese authorities by 31 October,
980 after which point they 
may be sold into the domestic market,981 but exporting firms are not entitled to exchange their 
export quota shares inter se. In the Panel's opinion, this results in discrimination against foreign users, since this functioning of the export quot a allows and perhaps even encourages domestic 
stockpiling of rare earths, while ensuring that expo rters are never able to build up their own stocks 
of Chinese rare earths for export. To the Panel, this is discriminatory, insofar as it restricts the access of foreign consumers far more than that of domestic consumers. 
7.657.  The Panel recalls that the chapeau of Article XX allows for justifiable  discrimination, which 
means that the rationale for such discrimination must relate to the policy invoked – in this case, conservation. Having concluded that several aspects of China's export quota on rare earths, including its structure, design, and operation, disf avour and discriminate against foreign users, the 
Panel now considers whether the rationale for this discrimination is based on conservation 
considerations.  
7.6.3.2  Whether the rationale for the discrimination or the disguised restriction on trade 
created by the application of China's export  quota on rare earths is concerned with 
conservation 
7.658.  In accordance with the Appellate Body Report in Brazil – Retreaded Tyres
982, the Panel now 
proceeds to determine whether the discrimination that results from the application of China's rare 
earths export quota is nevertheless justified and rationally linked to conservation goals. In Brazil – 
Retreaded Tyres , the Appellate Body explained that arbitrary or unjustifiable discrimination exists 
when the reason(s) for discrimination bear(s) no rational connection to the Article XX objective on 
the basis of which a Member claims to be regulating, or else contradicts or undermines that 
objective. This is why the determination whether a measure is discriminatory in violation of the chapeau  of Article XX should not depend exclusively on its quantitative impact, but must consider 
also whether the rationale for the discrimination relates to the legitimate objective of the measure. 
Therefore, to determine whether China has demonstrated that its rare earths export quota does not impose unjustifiable discrimination in violation of the chapeau of Article XX, the Panel will need 
to consider whether the rationale that China provides for the discrimination relates to the alleged 
conservation objective of the export quota. 
7.659.  China submits that its export quota is an integral part of its comprehensive conservation 
policy. According to China, export quotas are necessary to allow China to manage its resources in 
a manner consistent with its economic development objectives. In the Panel's view, China has not 
demonstrated that the distortion created by the app lication of its export quota system is incidental 
to its conservation considerations. Rather the discrimination seems to result from components of 
its export quota systems that reflect industrial policy considerations. For example, the fact that 
unused export quota volumes must be returned to Chinese authorities by 31 October
983 and may 
subsequently be sold into the domestic market984 seems to point toward industrial policy 
considerations. Further, the Panel does not understand the link between exempting metals and 
                                               
980 Regulations on the Administration of  the Import and Export of Goods , (Exhibit CHN-54), Article 42.  
981 China's response to Panel question No. 36. 
982 Appellate Body Report, Brazil – Retreaded Tyres , para. 226. 
983 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. 
984 China's response to Panel question No. 36. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 179 - 
 
  downstream rare earth products from the production quota but including those same products in 
the export quota, and the goal of conserving exhaustible natural resources. 
7.660.  The Panel recalls that more than 80% of rare earths extracted in China are consumed in 
China. In our opinion, it is difficult to understand the function of an export quota in a situation 
where the first threat to conservation is domestic. For the Panel, this suggests that the main effect 
of the export quota on rare earths is to guarantee that domestic consumption benefits from a minimum amount of the extracted rare earths.  
7.661.  In the Panel's view, although China main tains and enforces a comprehensive conservation 
policy, the manner in which it operates its rare earths export quota system seems to indicate that its export quota does not relate to conservation considerations but is aimed rather at controlling the amount of rare earths that leaves the co untry. Moreover, the level of the two-staged 2012 
export quota casts doubt on China's alleged conservation objectives. As the Panel noted above
985, 
China issued the second batch of the export quota in August of 2012, despite the fact that the first 
batch plus the supplementary batch were already above export needs, thus leading to a 2012 
export quota that was never going to be filled and that was inevitably going to be returned to 
Chinese authorities and possibly resold into the domestic market. The fact that China announced that its first batch (including the supplementary batch) would constitute 80% of the export 
quota
986, while the second batch amounted to 31% of the total export quota in 2012987, is 
certainly an indication that when China issued the first batch of the export quota, the final or total amount of the export quota for 2012 had not yet been set. Finally, as noted earlier
988, the fact that 
the total extraction quota was not determined or known before 19 April 2012 and the second batch 
of the production quota was issued only on 8 June  2012, seems to indicate that China waited to be 
informed of its domestic demand before fixing its level of production and its export quota (determined on 16 August 2012),and raises questions about whether what was ostensibly for 
export (when there was no further foreign demand after the first batch of the export quota) was in 
fact designed for domestic consumption. 
7.662.  The Panel also has difficulty understanding how China's decision to denominate its export 
quotas in gross weight rather than REO tonnes relates to conservation. The Panel accepts that all 
WTO Members have the sovereign right to choose to structure and apply their export quota systems in a manner that advances their own conservation goals, but they must do so consistently with their GATT/WTO obligations. In the present case, we are persuaded that China's decision to 
denominate the export quota in gross weight while it uses REO for domestic consumption is not 
based on conservation considerations. China argues that "it is difficult and would be very costly for customs officials to inspect the exact REO-equivalent weight of each rare earth product is 
presented".
989 This may be true, but it suggests that China's export quotas are set with a view to 
easing the administrative burden of border enforcement and to facilitating trade, rather to conservation. The Panel does not mean to suggest that denominating in gross tonnes could not, as 
a matter of principle, relate to conservation, but simply finds that China has not provided sufficient 
details to explain to the Panel how the denomination system adopted – and the discrimination resulting from that system – relates to conservation. 
7.663.  In sum, China has not demonstrated that the market distortion or discrimination caused by 
the operation of its rare earth export quota is based on conservation considerations.  
7.6.3.3  WTO-consistent alternatives 7.664.  It is well settled that discrimination can al so be arbitrary or unjustifiable where alternative 
measures exist that would have avoided or at least diminished the discriminatory treatment. In the 
context of conducting an analysis under the chapeau of Article XX of a measure provisionally justified under subparagraph (g), the Appellate Body has examined whether a WTO-consistent or 
less trade-restrictive alternative would be available and would enable the regulating Member to 
                                               
985 See the Panel's discussion at para. 7.579 above. 
986 2012 First Batch Rare Earth Export Quotas , (Exhibit CHN-56), para. II, p. 1.  
987 2012 Second Batch Rare Earth Export Quotas , (Exhibit CHN-58). 
988 See para. 7.507 above. 
989 China's second written submission, para. 176. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 180 - 
 
  achieve its legitimate policy goals with the same degree of efficiency and efficacy.990 The Panel will 
review first the arguments of the complainants in this respect and those of China, and will follow 
with our own analysis.  
7.665.  The complainants put forward various alte rnatives that, in their view, China could use 
instead of export quotas. According to the comp lainants, these alternatives would provide China 
with the same level of conservation effectivene ss while avoiding the discriminatory and distorting 
effects that its export quotas ha ve on foreign rare earth users. 
7.666.  The complainants submit that, to prevent the smuggling of rare earths produced beyond 
the production targets, China could impose prec onditions on rare earth exports to ensure the 
legality of the export consignments, such as chec king VAT invoices. Unlike the export quotas, such 
preconditions would not be overly broad in their e ffect because they would not prohibit the export 
of legally produced rare earths.991 According to the European Union, if China wanted to prevent the 
smuggling of rare earths produced beyond the production targets, China could conduct "on-the-spot-checks" at mines and processing facilities, inspect the records of the industries involved, 
and/or rely on or strengthen the licensing system that China has already put in place for rare 
earths. The European Union stresses that, by virtue of their economic effects, export quotas tend 
to create incentives for illegal trade, and argues that stopping illegal international trade is best 
done in a plurilateral setting. For example, the European Union suggests that, through a 
mechanism for peer reviewing compliance with defined norms, an incentive would be created for both importers and exporters to reduce or eliminate illegal trade, since internationally-traded goods would be subject to double control at origin and destination. However, even when 
plurilateral action is not an (immediate) option , screening of exports and automatic procedures for 
checking shipments are better ways to fight illegal trade than export quotas. In other words, argues the European Union, China has at its disposal a number of alternative measures that would 
deal with illegal production by controlling producti on itself and/or controlling trade flows through 
existing monitoring instruments (e.g. licensing, VAT declarations
992) but without the use of 
quantitative restrictions. 
7.667.  The complainants also suggest993 that, if China were interested in having an even-handed 
conservation regime, it could enforce a domestic consumption restriction, such as a domestic sales quota. Such a regime would prevent the export quota from diverting rare earths from the foreign market into China and, in the process, undermining China's alleged conservation goals.  
7.668.  To respond to China's need to enforce it s resource conservation policy, the complainants 
suggest that China develop an export licensing s y s t e m ,  w h i c h ,  t h e y  c l a i m ,  w o u l d  b e  j u s t  a s  
effective as an export quota at preventing the ex portation of illegally produced or smuggled rare 
earths. China has actually started to implement a tracing system using VAT invoices. To prevent or 
reduce incentives for domestic producers to engage in illegal mining or production, China could adopt tougher domestic restrictions and strengthen the enforcement of those domestic 
restrictions. China could also simply set and enforce a production or consumption limit on rare 
earth ores. If either of these measures were properly enforced, the pace of depletion of rare earth ores could be brought under control. In this cont ext, Japan notes that China has already adopted a 
form of consumption limit on rare earth ores by imposing an extraction quota on rare earth 
concentrates.
994 Japan notes that China's argument fails to explain why China cannot control the 
pace of rare earth consumption given that, according to China's own assertion, China is regulating the production of concentrates. This restriction on consumption could take the form of a sales 
quota covering both domestic sales and exports,  but without mandating quantitative allocation 
between domestic and foreign users (i.e . a non-discriminatory sales quotas). 
                                               
990 Appellate Body Reports, US – Gasoline , pp. 25-29, DSR 1996:I, 3, pp. 23-27, and US – Shrimp , 
para. 171 ("The Inter-American Convention thus provides convincing demonstration that an alternative course 
of action was reasonably open to the United States fo r securing the legitimate po licy goal of its measure a 
course of action other than the unilateral and non-co nsensual procedures of th e import prohibition under 
Section 609".). 
991 Appellate Body Report, US – Shrimp , para. 141 (examining whether a measure is overbroad in 
determining if it relates to conservation). 
992 United States' opening statement at the second meeting of the Panel, para. 42. 
993 See, e.g. complainants' responses to Panel question No. 123.  
994 Ores becomes concentrates when transformed for consumption. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 181 - 
 
  7.669.  With respect to the export quota's alleged signalling function, the complainants argue that 
China could have sent the relevant conservation-related signals to both domestic and foreign users alike in a non-discriminatory manner by tightening its domestic restrictions on production. The complainants insist that such signalling is clearly feasible, since China can simply enforce existing 
domestic production limits or adopt consumption li mits to convey such signals. Considering that 
users in China are responsible for a large portion of total global rare earth use, such non-discriminatory signalling would be much more effective at controlling excessive production or 
consumption of rare earths, tungsten, or molybdenum, and would create an undistorted market 
and therefore a climate for long-term investments.
995 To the extent that the current system 
reserves the lion's share of Chinese production for domestic industries, this only reduces the incentive for domestic industrial users to take steps to conserve rare earths or to seek substitutes. 
The European Union adds that a multilateral agr eement on developing new rare earths supplies, 
research initiatives, and/or cooperation projects at the international level could be reached. In this respect, the European Union argues that even where concerted multilateral action is not 
(immediately) available, a credible public announcement that China is taking serious measures to 
cut and control rare earth production would induce trade partners to develop new supplies. 
7.670.  China did not comment extensively on these various, allegedly non-discriminatory 
alternatives, except to say that it already uses an export licensing system in addition to its export 
quota system. China maintains that there is no alternative to export quotas for policing and reducing illegal mining and illegal production. It adds that export quotas also enhance the functioning of China's conservation policy through supply management. According to China, 
nothing is able to replace quotas because export quotas fulfil a number of additional functions. 
First, they ensure that not only Chinese users but also foreign users receive a signal that China's rare earth supply is not unlimited and that they should explore alternative sources of supply.
996 
China expresses concern that in the absence of an export quota, foreign users may consider that 
they can purchase any share, or even all, of th e limited rare earths supply. Additionally, China 
argues that export quotas ensure stability in the rare earths market by signalling in a transparent 
manner the volumes of rare earths that will be available to domestic and foreign users. This 
provides a safeguard against the risk that a sp eculative demand surge or foreign government-
promoted stockpiling could endanger sustainable economic development. Rare earths users know 
that no such surges will be permitted, given the existence of the export quota. 
7.671.  With respect to the argument that, to comply with the even-handedness requirement, 
China should ensure that the unused export quot a volumes are not made available to domestic 
consumers, China responds that it does respect the even-handedness requirement and so is not 
obliged to explore available alternatives. China insists that when an export quota is not filled, it 
cannot be the cause of any difference and discr imination between domestic and foreign prices.997 
Hence, the export quota, which was unfilled in  2012, cannot be causing or imposing any uneven-
handed impact on foreign users. In these circum stances, it would not further the achievement of 
the even-handedness requirement to further restrict domestic consumption below the level obtained by deducting the actual export from th e production quota volume. For China, preventing 
domestic users from having access to unused export quota volumes would impose an additional 
restriction on domestic users and would not further China's conservation objective.  
7.672.   With respect to the possible use of a domestic sales quota, China asserts without 
explanation that it does not consider such sales quota to be an appropriate or necessary measure 
to achieve even-handedness. China adds that rest rictions on domestic consumption by industrial 
users would involve an "undue burden, such as prohibitive costs or substantial technical difficulties"
998, and argues that implementing such measures would require China to "bear 
                                               
995 European Union's closing statement at th e second meeting of the Panel, para. 10. 
996 China's first written submission, paras. 139-145; China's second written submission, paras. 50-52 
China's opening statement at the first meeting of the Panel, paras. 21-22; China's response to Panel question No. 18; China's comments on the complainants' responses to Panel question No. 26; and China's opening statement at the second meeting of the Panel, para. 21. 
997 Prof. Jaime de Melo, Selected Economic Issues Regarding Export Quotas and Production Quotas , 
April 2013, para. 37, (Exhibit CHN-157). 
998 Appellate Body Report, US – Gambling , para. 308. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 182 - 
 
  additional administrative costs".999 However, China has failed to provide any details or evidence as 
to the administrative burdens or other costs of imposing a domestic sales quota. 
7.673.  The Panel notes that China does not discuss the fact that all of the alternatives suggested 
by the complainants are claimed to be WTO-consistent, whereas the export quota it uses is 
inconsistent with Article XI:1 of the GATT 1994.  
7.674.  With respect to the complainants' argument that China could send the necessary 
conservation signals to foreign and domestic rare earth users in a less trade-distorting way, China 
insists that its conservation policy works and that it has provided evidence of the impact of China's 
conservation policy on China's rare earth users, including evidence of reduced domestic consumption
1000, evidence of significantly increased domestic prices for rare earths between 
January 2011 and January 20131001, evidence of significant drops in sales by Chinese producers of 
downstream rare earths-using products1002, evidence of substitution by Chinese downstream 
users1003, and evidence of rare earths recycling projects being researched, developed, and 
conducted by Chinese enterprises.1004   
7.675.  The Panel recalls once again that it is not asked to assess the efficiency or effectiveness of 
China's conservation policy, but only to determine whether the export quota China argues is part of its conservation programme are really about conservation rather than another policy reason, 
and whether any discrimination caused by that quota is justified on the basis of conservation. This 
requires the Panel to consider whether China ha s explored the use of WTO-consistent or less 
trade-restrictive alternatives that could achieve th e same conservation goal. In this regard, China 
has not satisfied the Panel that it has fully explored and justifiably rejected the alternatives 
proposed by the complainants. In the Panel's opinion, China needed also to explain why such 
WTO-consistent or less trade-restrictive alternativ es are not available to China. In the Panel's 
view, China has not done so.  
7.676.  China argues that the alternatives put forw ard by the complainants are not able to serve or 
replicate all the functions of an export quota. Bu t the Panel is not convinced that export quotas 
serve the functions listed by China, or that all of the functions identified by China relate to 
conservation. In addition, one of the export quot a's functions mentioned by China – the possibility 
of controlling the supply of rare earths – is, as we have said, not contemplated by Article XX(g); as such, China cannot demand that the complainants come up with an alternative means to perform what is essentially an Article XX(g)-inconsistent function. 
7.677.  The Panel considers that the alternatives  proposed by the complainants are reasonably 
available and appear to be capable of achieving Ch ina's desired level of conservation. In particular, 
the Panel is not convinced that the discrimination caused by China's export quota is merely 
incidental to its conservation programme and could not have been avoided with WTO-consistent 
alternative means of policing and controlling illegal extraction, production, consumption, and export of rare earths. Similarly, the Panel considers that the other goals invoked by China to 
justify the use of an export quota –signalling and safeguarding, can also be reached with WTO-
consistent measures. Therefore, for the Panel, th e discrimination and trade distortion engendered 
by China's export quota measures were not based on conservation considerations and were both foreseeable and avoidable, including through the us e of WTO-consistent alternative means. In the 
Panel's view the complainants have met their burden of proof in putting forward alternatives, and 
China has not provided arguments to rebut them.  
7.678.  In the Panel's view, China's has not met it s burden of demonstrating that its export quota 
on rare earths is applied in a manner that does not result in unjustified or arbitrary discrimination 
or disguised restriction on trade against foreign users.  
                                               
999 China's second written submission, para. 100 and China's opening statement at the second meeting 
of the Panel, para. 33. 
1000 China's opening statement at the second meetin g of the Panel, paras.  38, 39 and Figure 4. 
1001 China's opening statement at the first meeting of the Panel, Table 1. 
1002 "Three Concerns Behind the Prosperity of Rare Earth Listed Companies ", 21st Century Business Herald , 
2 August 2011, (Exhibit CHN- 132), pp. 2-3. 
1003 "Three Concerns Behind the Prosperity  of Rare Earth Listed Companies ", 21st Century Business 
Herald, 2 August 2011, (Exhibit CHN-132), pp. 2-3. 
1004 China's Answers of 8 July 2013, paras. 107-108 and (Exhibit CHN-214): Introduction of the Rare 
Earths Recycling in China , Association of China Rare Earth Industry, 3 July 2013. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 183 - 
 
  7.6.3.4  Conclusion 
7.679.  In view of the above, the Panel concludes that China has not demonstrated that its 2012 
export quota on rare earths was not applied in a manner that constitutes arbitrary or unjustifiable discrimination or a disguised restriction on international trade.
1005 
7.6.4  Overall conclusion on Chin a's export quota on rare earths 
7.680.  For the reasons given above, the Panel concludes that China's export quota on rare earths 
is inconsistent with Article XI:1 of the GATT 1994 and Paragraphs 162 and 165 of China's Working 
Party Report. The Panel also concludes that China's export quota on rare earths is not justified 
under either subparagraph (g) or the chapeau of Article XX of the GATT 1994.  
7.7  Application of Article XX(g) to China's export quota on tungsten 7.7.1  Introduction 
7.681.  The Panel will now apply the legal test  discussed above to China's export quota on 
tungsten. The Panel will first assess whether the export quota complies with subparagraph (g), and will then proceed to consider whether the export quota is justified under the chapeau of 
Article XX, before reaching an overall conclusion on the quota's WTO-consistency. 
7.7.2  Application of subparagraph (g) to China's export quota on tungsten 
7.7.2.1  First part: whether China's export qu ota on tungsten relates to the conservation 
of exhaustible natural resources 
7.682.  The Panel now proceeds to consider whether China's export quota on tungsten "relates to 
the conservation of exhaustible natural resources". 
7.683.  Before proceeding, the Panel notes that the parties have focused less attention on 
tungsten than on rare earths. China's second written submission has only three pages on 
tungsten
1006, and does not include any argumentation on whether the export quota on tungsten 
"relates to the conservation of exhaustible natural resources".1007 Japan's second written 
submission does not address the quotas on tungsten in detail. 
7.684.  Additionally, many of the parties' argume nts on tungsten draw on and incorporate their 
arguments on rare earths. As such, the Panel's findings on China's export quota on tungsten are 
shorter than its findings on rare earths, and, wh ere appropriate, incorporate some of the analysis 
already set forth above.  
7.7.2.1.1  "exhaustible natural resources" 7.685.  China submits that tungsten is being depl eted due to intense exploitation, and thus that 
tungsten resources are "exhaustible natural resources" within the scope of Article XX(g) of the 
GATT 1994.
1008 China argues that it holds about 61% of the world's tungsten reserves, but bears a 
disproportionately high burden of producing 83% of the world's tungsten supply.1009    
7.686.  According to the United States, China's argument is based on a simplified assumption that 
"tungsten" in the abstract is an exhaustible natural resource; however, in terms of the tungsten export quota, "tungsten" covers 14 tariff codes ranging from tungsten ores and concentrates to 
                                               
1005 In view of the nature of the ex port quota system described above, the Panel's finding is with respect 
to the series of measures comprising the relevant frame work legislation, the implem enting regulations, other 
applicable laws and the specific annual measures imposing the export quotas existing at the date of the Panel's establishment. 
1006 China's second written submission, paras. 179–190. 
1007 These paragraphs are solely concerned with whethe r China's export quotas on tungsten result in a 
price advantage for Chinese consumers. 
1008 China's first written submission, para. 297. 
1009 China's first written submission, para. 285 (referring to USGS Mineral Commodity Summaries 2012, 
"Tungsten" , (Exhibit CHN-92), p. 177. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 184 - 
 
  tungsten recyclables and intermediate tungsten products.1010 The United States recalls that the 
forms of bauxite and fluorspar subject to the challenged export restrictions in China – Raw 
Materials  were clay and a mineral, which, like tungsten ores and concentrates, are basically in the 
form in which they are mined from the earth.1011 The United States notes that, in contrast, in the 
present dispute China's export quotas cover not ju st ores but also a number of products that 
"might not themselves be considered 'exhaustible natural resources' because they are intermediately processed products".
1012 
7.687.  The European Union does not dispute that tungsten is a natural resource.1013 However, the 
European Union stresses that the export quota that China imposes on tungsten is not imposed on tungsten ores, which are not even allocated a quot a, but is rather imposed on various forms of 
tungsten products which have undergone some degree of further processing.
1014 
7.688.  The Panel has explained above, in the context of rare earths, that measures can relate to 
the conservation of exhaustible natural resources even if they do not act directly upon the resource sought to be conserved. Article XX(g) is not only available for measures that apply 
directly to the raw form of the resource in question, but to any measure that bears a "close", 
"real", or "substantial" relationship with the goal of conserving an exhaustible natural resources, regardless of the particular product which is the subject of the challenged measure. 
7.689.  All the parties seem to agree that tungsten ores are exhaustible natural resources. As 
such, the Panel does not need to determine whether semi-processed tungsten products are  "exhaustible natural resources", but will instead focus its attention on whether China's export quota on semi-processed tungsten products are "closely" or "substantially" related to the 
conservation of tungsten ores.  
7.7.2.1.2  "conservation" 7.690.  China points out that it has adopted a coherent policy to manage the use of its finite 
tungsten resources, and that the 2012 export quota on tungsten, challenged by the complainants, 
is an integral part of this policy and works together with several restrictions on the domestic production and consumption of tungsten resources.
1015 
7.691.  According to China, the Mineral Resources Law1016 and the Foreign Trade Law1017 provide a 
general legal basis for Chinese measures that manage the use of exhaustible minerals, including tungsten. Article 16 of the Mineral Resources Law provides that for certain minerals "protective 
mining is prescribed by the State".
1018 Additionally, Article 16(4) of the Foreign Trade Law  provides 
that the export of goods may be restricted "in order to effectively conserve exhaustible natural 
resources".  
7.692.  China explains that on 15 January  1991, the State Council specified in the 1991 
Circular1019 that tungsten is to be considered as one of the "special minerals under the national 
protective mining". This 1991 Circular  continues in force today. It specifies the reasons for 
qualifying tungsten as a "special mineral": 
In order to reasonably develop, utilize and protect the national precious resources and 
push forward the improvement and rectificat ion of the order of mining industry, the 
State Council decides, pursuant to Article 15 of Mineral Resources Law, to include tungsten, tin, antimony and ion-absorption-type rare earth minerals into the special 
                                               
1010 United States' second written submission, paras. 218-219. 
1011 United States' second written submission, para. 222. 
1012 United States' second written submission, para. 224. 
1013 European Union's second written submission, para. 234. 
1014 European Union's second written submission, para. 235. 
1015 China's first written submission, para. 288. 
1016 Mineral Resources Law , (Exhibit CHN-10). 
1017 Foreign Trade Law , (Exhibits CHN-11, JE-49). 
1018 Mineral Resources Law , (Exhibit CHN-10), Article 16(3). 
1019 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , (Exhibit CHN-12, JE-72). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 185 - 
 
  minerals under the national protective mining, and carry out the planned and unified 
management of their mining, separation , processing, selling and export, etc.1020  
7.693.  As a result of its designation as a "special  mineral", exploration and processing of tungsten 
is subject to strict planning and management to protect the resources and use tungsten in a 
reasonable manner. The 1991 Circular  mandates that a total production plan is set up for 
tungsten1021, and MOFCOM is responsible for developi ng any export plans for the resource.1022 
China submits that production control and export restrictions are thus integral parts of its 
conservation policy for tungsten. 
7.694.  China explains that at present, China's tungsten conservation policy is implemented 
through the following categories of measures: 
 Measures limiting and controlling access  to the tungsten industry1023;  
 Measures directly controlling the volume  of the resources being extracted, produced and 
exported, consisting of an extraction quota (limiting the amount of tungsten concentrates that can be extracted)
1024, a production quota in a Directive Production 
Plan1025, and an export quota1026;   
 A resource tax  on tungsten producers to ensure that the price of the resources reflects 
their costs1027; and  
 A measure requiring mines to make a deposit for ecological recovery .1028  
7.695.  The complainants do not appear to contest that China has a conservation policy for 
tungsten. For instance, the European Union accepts that China has a tungsten conservation policy
1029, but argues that the export quota on tu ngsten does not "relate to" this policy.1030 It 
concludes that "China's export quota on tungsten does not meet the conditions of 
subparagraph (g) and of the chapeau of Article XX of the GATT 1994".1031 Similarly, while the 
United States expresses some uncertainty about whether China has a "comprehensive 
                                               
1020 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , second introductory paragraph, (Exh ibit CHN-12, JE-72). Note that this 
Circular, which dates from 1991, refers to Article 15 of the Mineral Resources Law , (Exhibit CHN-10). Article 15 
was the provision in the 1986 version of the Mineral Resources Law that introduced the category of "specified 
minerals of which protective mining is prescribed". After amendment in 1996, the corresponding provision became Article 16 of the Law. 
1021 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , section 4, first subparagraph,  (Exhibit CHN-12, JE-72).  
1022 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , section 5, fourth subparagrap h, (Exhibit CHN-12, JE-72).  
1023 Mining enterprises must obtain a license for expl oration and exploitation of  mineral resources. See  
Rules for Implementation of  the Mineral Resources Law , (Exhibit CHN-14) and Administration of Registration of 
Mining of Mineral Resources , (Exhibit CHN-15). The conditions for admission to the tungsten industry are 
specified in Conditions for Admissio n to Tungsten Industry , (Exhibit CHN-93).  
1024 The procedures for administration of the extraction quotas are provided in Administration of 
Exploration and Mining of the Specified Minerals , (Exhibit CHN-18). The 2012 extraction quotas are specified in 
2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , (Exhibit CHN-19) and 
2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20).  
1025 The 2012 Directive Production Plan for tungsten is issued in tw o batches, as specified in First Batch 
of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94) and Second Batch of the 2012 Directive 
Production Plan of Rare Metals , (Exhibit CHN-95). 
1026 2012 Export Licensing Catalogue , Paragraph I(i), (Exhibits CHN-8, JE-48), indicating that tungsten 
is subject to an export quota. Expo rt quotas are initiated pursuant to Regulations on the Administration of the 
Import and Export of Goods , (Exhibits CHN-54, JE-50) and Export Quota Administration Measures , 
(Exhibits CHN-96, JE-52).  
1027 Amendment of the Provisional Regulations on Resource Tax , (Exhibit CHN-26) and Implementation 
Rules for the Provisional Regulations on Resource Tax , (Exhibit CHN-27). 
1028 Opinions on Enhancing the Ecological Protection and Restoration of Mines , Section IV, 
(Exhibit CHN-32). 
1029 European Union's comments on China's response to Panel question No. 108. 
1030 European Union's second written submission, paras. 234 – 243. 
1031 European Union's executive summary (part II), para. 55. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 186 - 
 
  environmental policy for all three groups of produc ts or whether it has distinct such policies 
tailored to each industry", it does not argue that China has no policy in place for the conservation of tungsten.
1032  
7.696.  The Panel begins by noting that China's conservation policy for tungsten is similar in 
structure to China's conservation policy for rare earths, except that that there are fewer measures. 
Despite this difference, the Panel believes that its analysis in the context of rare earths is largely applicable in the context of tungsten as well.  
7.697.  The Panel accepts that China has a conservation policy for its exhaustible tungsten ore 
resources. As the Panel observed in the context of rare earths, it is certainly in China's own interest to conserve its tungsten resources, and none of the parties have brought evidence to suggest that China has no conservation policy for tungsten.  
7.698.  The Panel's task is therefore to objectively assess China's export quota on tungsten for 
compliance with the requirements of Article XX(g). Where the Panel looks at other measures that are also claimed to form part of China's tungsten conservation policy, it does so only for the light 
such measures throw on the challenged export quota.  
7.699.  The Panel now proceeds to consider whether China's export quota on tungsten "relates to" 
the conservation of tungsten ores.  
7.7.2.1.3  "relating to" 
7.700.  As the Panel has observed, China's arguments about tungsten are significantly less 
extensive than its arguments with respect to rare earths. Whereas China has advanced a number of interrelated arguments as to why its export quota on rare earths "relates to" the conservation of 
rare earth ores, it seems only to have advanced two reasons why its export quota on tungsten 
bears a "close", "real", and "substantial" connection to the goal of conserving exhaustible tungsten ores. First, China argues that the texts of its export quota measures include various references to 
the conservation objective, demonstrating that these measures "relate to" conservation.
1033 
Second, China argues that its export quota on tungsten "relates to" conservation because it "enhances the effectiveness of China's conservation policy", specifically by "signalling to foreign 
users of tungsten of the need to develop and locate other sources of supply or develop 
substitutes." According to China," [e]xport quot as create a dis-incentive to domestic Chinese 
producers to expand production (since the amount that can be sold to foreign consumers is limited), while simultaneously creating an incentive for foreign tungsten producers to initiate and 
expand production."
1034 
7.701.  The Panel now proceeds to examine these arguments.  7.7.2.1.3.1  Text of th e export quota measures 
7.702.  According to China, a number of the meas ures that together constitute China's tungsten 
export quota contain direct or indirect references to the goal of conserving exhaustible tungsten ore resources.  
7.703.  The first evidentiary basis that China puts forward as establishing a "close and genuine"
1035 
relationship between the export quota and conservation is the reference to conservation in the text of the P ublic Notice of the Qualification Standard s and Application Procedures of the 2012 
Tungsten, Antimony and Silver State Trading Ex port Enterprises, and Tungsten and Antimony 
Export Supply Enterprises .
1036 According to China, this Notice specifies the eligibility criteria for 
enterprises to participate in the 2012 quota allocation process for tungsten and indicates that these measures are adopted "[i]n order to protect the resources".  
                                               
1032 United States' comments on China's response to Panel's question Nos. 100, 108. 
1033 China's first written submission, para. 299. 
1034 China's first written submission, para. 307. 
1035 China's first written submission, para. 298. 
1036 See also  2012 Application Qualifications and Application Procedures of Tungsten Export (or Supply) 
Enterprises , (Exhibits CHN-100, JE-62). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 187 - 
 
  7.704.  The  Public Notice also specifies that it is adopted on the basis of the Provisional Measures 
on Administration of the Export Operations of Tungsten and Tungsten Products .1037 These 
measures state that their objective is to "strengthen[] the management of the export operations of tungsten and tungsten products," and express the objective of "conserving exhaustible non-
renewable resources".
1038 They also indicate that the export quota on tungsten is implemented 
together with "total quantity control of the extraction, production and sale of tungsten and tungsten products".
1039 In light of these references, China su bmits that the tungsten export quota 
aims to conserve exhaustible non-renewable resources and is an integral part of China's 
conservation policy, which also includes production restrictions on tungsten.  
7.705.  According to China, the fact that the 2012  tungsten export quota was adopted on the basis 
of measures that refer to China's conservation objective provides further evidence that the quota 
"relates to" conservation. The legal basis for using export quotas to conserve tungsten resources is 
contained in the following provisions: 
 Article 16(4) of the Foreign Trade Law1040 provides that the export of goods may be 
restricted "in order to effectively conserve exhaustible natural resources".  
 Article 35 of the Regulations on the  Administration of the Import and Export of Goods  
indicates that the export of goods that are considered to be exhaustible natural 
resources in need of conservation, "shall be restricted".1041    
 For tungsten, specific Measures for the Administration of Export Commodities Quotas  
apply. These measures specify that export quotas, adopted on the basis of Article 35 of the Regulations on the Administration of the Import and Export of Goods , and thus 
pursuing a conservation objective, are administered.
1042    
7.706.  The 2012 Export Licensing Catalogue , which specifies the goods subject to export 
quotas1043, MOFCOM's Announcement publishing th e total 2012 export quota volume for 
tungsten1044, and the Notices publishing the list of en terprises applying for the export quota1045, as 
well as the list of enterprises to which shares of the quota have been granted1046, all refer to the 
instruments mentioned above as the legal basis for export quotas to conserve resources.  
                                               
1037 2012 Application Qualifications and Application Procedures of Tungsten Export (or Supply) 
Enterprises , (Exhibits CHN-100, JE-62). See also  Administration Measures of the Export Operations of Tungsten 
and Tungsten Products , (Exhibit CHN-101). 
1038 Administration Measures of the Export Op erations of Tungsten and Tungsten Produ cts, Article 1, 
(Exhibit CHN-101). 
1039 Administration Measures of the Export Oper ations of Tungsten and Tungsten Products , Article 3, 
(Exhibits CHN-101, JE-49). 
1040 Foreign Trade Law , (Exhibits CHN-11, JE-49) Article 16(4). 
1041 Regulations on the Administration of  the Import and Export of Goods , Article 35, (Exhibits CHN-54, 
JE-50). Article 35 of the Regulations refers to Article 16(1), (2), (3) and (7) of the Foreign Trade Law , 
(Exhibits CHN-11, JE-49). Article 16(2) of the 1994 version of the Foreign Trade Law  specifies that export 
restrictions may be adopted to ensu re the "effective protection of exhaustible domestic resources". The Foreign 
Trade Law  was last amended in 2004, the corresponding provision dealing with conservation of exhaustible 
natural resources is Article 16(4). 
1042 Export Quota Administration Measures , (Exhibits CHN-96, JE-52), Article 3. 
1043 2012 Export Licensing Catalogue , introductory paragraph, (Exhibits CHN-8, JE-48) ("Pursuant to the 
Foreign Trade Law of the People's Republic of China and the Regulations on the Administration of the Import 
and Export of Goods of the People's Republic of China , the 2012 Export Licensing Management Goods List is 
hereby promulgated").  
1044 2012 Export Quota Amounts , (Exhibit CHN-97) ("Pursuant to the Regulations of the People's 
Republic of China on the Administration  of the Import and Export of Goods and the Measures for the 
Administration of Export Commodities Quotas , the 2012 total export quota quantity for Agricultural and 
industrial products are hereby announced".).  
1045 2012 List of Enterprises for the Export (or/and Supp ly) of Tungsten, and List of Enterprises for the 
Export of Molybdenum , (Exhibit CHN-98) ("… in accordance with the Foreign Trade Law of the People's Republic 
of China and the Regulations on the Administration of Import and Export of Goods, the list publishing online 
the State-Trading Exporting Enterprises of Tungsten, An timony and Silver of 2012 … are hereby published."). 
1046 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-99, JE-59) ("According to the Regulations on Administration of  Import and Export of Goods and 
the Measures for the Administration of Export Commodities Quotas,  the list of export (supply) enterprises … is 
hereby announced and the first batch of the quota is he reby granted."). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 188 - 
 
  7.707.  China argues that additional evidence of  a "close and genuine relationship" between the 
2012 export quota and the conservation objective can be found in the "context" of these measures, namely in the general policy documents for the tungsten conservation policy. In the 1991 Circular , tungsten was explicitly identified as be ing among the "special minerals under the 
national protective mining". As China explains, in 1991, China subjected certain minerals, including 
tungsten, to "protective mining" with a view to "reasonably develop, utilize and protect"
1047 these 
resources. Therefore, tungsten production  is subject to a total production plan1048, and MOFCOM 
determines export plans for this production1049 to conserve tungsten resources.  
7.708.  The complainants dispute the probative value of these references to "conservation" in 
China's export quota measures for several reasons. The complainants consider the references to the goal of conservation in China's export quota measures to be passing references, and argue 
that China fails to explain how the export quota makes a material contribution to that goal.
1050 The 
complainants note moreover that China's export quota measures, which have been imposed for over a decade, have only made passing reference to the goal of conservation since the beginning 
of 2012.
1051 The complainants also contend that cross-references to legal instruments such as the 
Foreign Trade Law  and regulations on the export quota measures are insufficient to meet China's 
burden under Article XX(g), since those instruments also list reasons other than conservation for 
which the export quotas could have been imposed.1052 With respect to the 1991 Circular , the 
complainants note that this document contains no explanation of the relationship between the export quota and the alleged conservation objective.
1053  
7.709.  The Panel begins by reiterating its finding above in the context of rare earths that, while a 
mere "passing reference" to conservation goals cannot by itself establish the existence of the 
required relationship between the challenged measure and the goal of conservation, references to conservation in the text of a challenged measure could in principle help to demonstrate that such 
measure "relates to" conservation. What matters is the nature of the reference(s) in question. 
Moreover, the Panel reaffirms that the mere fact that textual references to conservation were 
included for the first time in 2012 does not necessarily undermine their probative value. Again, 
what matters is the nature of the actual references themselves. As the Panel has noted, the 
Appellate Body has made clear that "Members of the WTO should not be assumed, in any way, to 
have continued previous protection or discrimination through the adoption of a new measure", since this "would be close to a presumption of bad faith".
1054 As such, the Panel cannot make any a 
priori judgments about the value and bona fides  of such references, but instead must closely 
examine them in their context.  
7.710.  The Panel has examined the measures referred to by China. It accepts China's argument 
that some of the export quota measures make reference to conservation-related objectives. 
H o w e v e r ,  t h e  P a n e l  a l s o  o b s e r v e s  t h a t  s o m e  o f  t h e  m e a s u r e s  p o i n t e d  t o  b y  C h i n a  i n c l u d e  references to other policies, including industrial policies. For instance, the Public Notice of the 
Qualification Standards and Application Procedur es of the 2012 Tungsten, Antimony, Silver State 
Trading Export Enterprises and Tungsten , Antimony, Export Supply Enterprises
1055 does, as China 
claims, refer to the objective of "protect[ing] th e resources and environment." However, the Panel 
notes that the full sentence referred to by China reads as follows: "In order to protect resources 
and environment, in coordination with industry policies of the nation , and further strengthen the 
                                               
1047 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , second introductory paragrap h, (Exhibit CHN-12, JE-72).  
1048 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , section 4, first subparagraph,  (Exhibit CHN-12, JE-72).  
1049 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , section 5, fourth subparagrap h, (Exhibit CHN-12, JE-72). 
1050 United States' second written submission, para. 201; European Union's second written submission, 
para. 237. 
1051 United States' second written submission, para. 202; European Union's second written submission, 
para. 237. 
1052 United States' second written submission, para. 203; European Union's second written submission, 
para. 238. 
1053 United States' second written submission, para. 204; European Union's second written submission, 
para. 239. 
1054 Appellate Body Report, Chile – Alcoholic Beverages , para. 74. 
1055 2012 Application Qualifications and Application Procedures of Tungsten Export (or Supply) 
Enterprises , (Exhibits CHN-100, JE-62). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 189 - 
 
  export administration of rare metal exports…".1056 In the Panel's opinion, the emphasized phrase is 
clearly a reference to industrial rather than conservation policy.  
7.711.  As the Panel explained above in the co ntext of rare earths, it is true that the 1991 Circular  
places certain minerals under "national protective  mining". However, as the Panel understands it, 
the focus of the Circular  is on preventing illegal mining to ensure that the comparative advantage 
China enjoys in non-ferrous metals is not undercut and protecting the State from "suffer[ing] significant losses".
1057 Although, as the Panel has said, maintaining a "comparative advantage" is 
not necessarily an anathema to the goal of conservation, the Panel believes that it is primarily an 
industrial policy objective.  
7.712.  Finally, the Panel also recalls that the Foreign Trade Law , which China claims is referenced 
in a number of its tungsten export quota measures, lists a number of policy grounds for the 
imposition of export quotas, including "national se curity", "shortage of domestic supply" and "other 
circumstances" as well as "conservation". As such, these cross-references do not provide strong evidence for China's position.  
7.713.  The Panel notes additionally that, like the Foreign Trade Law , the Regulations on the 
Administration of the Import and Export of G oods and the Measures for the Administration of 
Export Commodities Quotas  establish that export quotas can be imposed for a number of reasons 
besides conservation.  
7.714.  For instance, the Measures for the Administration of Export Commodities Quotas  provides 
for the imposition of export quotas in connection with "development plans, objectives and policies of the States in the relevant industries".
1058 Likewise, Article 35 of the Regulations on the 
Administration of the Import and Export of Goods , to which China refers in its first written 
submission, provides that "[t]he export of any g oods falling into any of the circumstances set forth 
in subparagraphs (1), (2), (3), and (7) of Articl e 16 of the Foreign Trade Law shall be restricted". 
But the paragraphs referred to by China concern re strictions for the purposes of (1) safeguarding 
national security, social and public interests, or public morals; (2) protecting human or animal health, or to protect the environment, (3) controll ing the import and export of gold and silver; and 
(7) establishing or accelerating the establishment of specific domestic industries.
1059 
Subparagraph 16(4) of the Foreign Trade Law , which refers to "effectivel y conserv[ing] exhaustible 
natural resources", is not explicitly mentioned in Article 35. 
7.715.  The Panel therefore has difficulty acce pting that the various references in China's 
measures to the Foreign Trade Law  and the Regulations on the Administration of the Import and 
Export of Goods  and the Measures for the Administration of Export Commodities Quotas  provide 
any strong support for China's argument that the texts of the export quota measures demonstrate 
or manifest a "close" and "substantial" relationship with the objective of conserving exhaustible 
tungsten resources.  
7.716.  Assessing the various references in China's measures holistically, the Panel considers that 
China's tungsten export quota measures reference a range of policies and objectives, including 
conservation and industrial development. The refe rences thus seem to the Panel to send mixed 
messages, and are ultimately ambiguous. The Panel therefore cannot find that China's export quota on tungsten "relates to" conservation on the basis of these references alone.  
7.717.  Additionally, and perhaps more importantly, the Panel believes that the texts of China's 
tungsten export quotas, including their references to conservation, do not explain how export 
quotas relate to the goal of conserving exha ustible tungsten ores. For instance, while the Public 
Notice of the Qualification Standards and Applic ation Procedures of the 2012 Tungsten, Antimony, 
Silver State Trading Export Enterprises and Tungsten, Antimony, Export Supply Enterprises
1060 
refers to object of "protect[ing] the resources", the document contains no indication or explanation 
                                               
1056 Emphasis added. 
1057 Circular on Listing Tungsten, Tin,  Antimony and Ionic Rare Earth Minerals as Specified Minerals 
under National Protective Mining , second introductory paragraph, (Exhibit CHN-12, JE-72). 
1058 Export Quota Administration Measures , (Exhibits CHN-96, JE-52), Article 10(3). 
1059 Foreign Trade Law  (Exhibit CHN-11, JE-49). 
1060 2012 Application Qualifications and Application Procedures of Tungsten Export (or Supply) 
Enterprises , (Exhibits CHN-100, JE-62). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 190 - 
 
  as to how the stated qualification conditions are closely or substantially related to conservation of 
exhaustible tungsten ores. The document states that the qualification conditions have been adopted "in order" to conserve exhaustible natura l resources, but the actual relationship between 
those conditions and the conservation objective is nowhere explained.  
7.718.  Similarly, while Article 1 of the Provisional Measures  refers to the "purpose of 
strengthening the management of the export operations of tungsten and tungsten products…maintaining the order of export operations of tungsten and tungsten products … and 
conserving exhaustible natural resources", the rela tionship between the export quota and the goal 
of conservation – and specifically how the ex port quota (as opposed to the extraction and 
production controls mentioned in Article 2) supports or furthers the conservation objective – is not discussed  
7.719.  As the Panel has explained, references to "conservation" simply cannot substitute for a full 
and proper explanation of how the challenged measures were designed to promote conservation. While the references to conservation that China has pointed to do suggest that the export quota 
measures were imposed with conservation-related concerns in mind, the Panel's task is to 
determine whether the design and architecture of the measures "relate to conservation", and the references to which China has pointed do not, in the Panel's opinion, substantially illuminate this 
inquiry.  
7.720.  In sum, it is the Panel's opinion that China cannot discharge its burden of proof simply by 
citing a number of references to conservation  in the text of a challenged measure without 
explaining how the challenged measure "relates to", supports, or furthers the goal of conserving 
exhaustible tungsten ores. Consequently, the Panel cannot conclude that China's export quota on 
tungsten "relates to" the conservation of tungsten ores on the basis of these references alone.  
7.7.2.1.3.2  Signalling 
7.721.  As the Panel noted above, China argues  that its export quota system enhances the 
effectiveness of its conservation policy by signalling to foreign tungsten users the need to locate and develop other sources of supply, and/or to deve lop substitutes. More specifically, according to 
China export quotas create a disincentive to domestic Chinese tungsten producers to expand 
production (since the amount that can be sold to foreign consumers is limited), while simultaneously creating an incentive for foreign tungsten producers to initiate and expand production in third countries. Thus, the demand for China's limited tungsten resources will lessen 
as the availability of foreign tungsten sources increases.
1061 
7.722.  According to China, by (i) limiting tota l domestic production and supplies available to 
Chinese users (through its restrictions on domestic tungsten production), and (ii) limiting the total 
volume of tungsten products available to foreign users, China is taking a significant step towards 
limiting the demand for its tungsten resources. In effect, it is providing clear notice to China-based tungsten operators and potential investors in China that they should curb any inclination to expand 
their tungsten operations, while at the same time providing a green light signal to investors and 
tungsten producers outside of China to expand investment and production because China is serious about conserving its dwindling tungsten resources. China concludes this point by submitting that the overall effect of the tungsten export quota measures is to facilitate its 
conservation objective.
1062  
7.723.  According to the United States, China's argument is hypothetical since it is not reflected in 
the government measures that establish the tung sten export quota. Moreover, the United Sates 
argues that China's export quotas create a two- tiered pricing structure in the tungsten market, 
and incentivize foreign users of tungsten to relocate to China. The United States points out that China fails to explain how the export quota, as opposed to domestic production restrictions that 
actually limit production, creates an incentive for foreign tungsten producers to increase 
production.
1063  
                                               
1061 China's first written submission, para. 307. 
1062 China's first written submission, para. 308. 
1063 United States' second written submission, paras. 205-208. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 191 - 
 
  7.724.  The European Union recalls that it was China's price-depressing competitiveness in the 
global tungsten market that caused tungsten businesses in other countries to close from the 1970s onwards, and thus finds China's argument that the export quota on tungsten is a signalling tool ironic.
1064 The European Union further argues that an export quota on tungsten is not an effective 
signalling tool, since substitutes for tungsten are not easily found.1065  
7.725.  The Panel has dealt with the argument that export quotas send a "signal" to foreign users 
above in its analysis of the export quota on rare earths, and considers that what was said there 
applies with equal force here. While the Panel accepts that export quotas do or at least can send 
conservation-related signals to foreign users, the Panel is concerned that such quotas can also send perverse signals to domestic consumers, and can even stimulate domestic demand, contrary to China's stated conservation goals. Moreover, the Panel has explained above why the imposition 
of an extraction and/or a production quota may not suffice to counteract or offset such perverse 
incentives. As was the case in the context of rare earths, the Panel is not convinced that the design and architecture of China's export quotas , even taken together with the extraction and 
production caps, is such as to counteract the perverse signals which are generally sent by export 
quotas. As such, the Panel has difficulty concluding that the export quota on tungsten, which risks encouraging or stimulating domestic demand
1066 and even leading, in the medium-long-term, to 
more, rather than less, illegal extraction and production, can be said to "relate to" conservation for 
the purposes of Article XX(g).  
7.726.  The Panel notes additionally the European Union's argument that signalling is ineffective 
since tungsten substitutes are not easily found. The European Union has not made this argument 
with respect to the rare earths, and so the Panel turns to consider it now. 
7.727.  The Panel has difficulty with the Europe an Union's argument for a number of reasons. 
7.728.  In the first place, the Panel notes that wh ile substitutes for tungsten may be difficult to 
come by, the European Union has not argued that there are no natural reserves of tungsten 
anywhere outside of China. China states in its first written submission1067 that China is estimated 
to hold about 61% of the world's tungsten reserves but bears a disproportionately high burden of 
producing 83% of the world's tungsten supply. Moreover, as China has noted, a number of 
western countries used to mine tungsten and other minerals but stopped due to environmental and costs-related issues. This suggests that other countries do have tungsten reserves. China's quota could, therefore, be effective in signalling the need for foreign consumers to start (or re-
start) tungsten mining in other countries.  
7.729.  Additionally, as a matter of principle, the fa ct that alternatives to tungsten are not easily 
found does not mean that China's signalling argument  is invalid. In the Panel's opinion, the ease or 
difficulty with which alternative sources can be developed is not a factor that affects the right of a 
resource-endowed Member to encourage investment and research in alternatives or substitutes in the interests of conservation – provided, of course, that such encouragement is consistent with 
WTO rules. The state of science and technology is in constant flux, and while alternatives to, or 
substitutes for, tungsten may be difficult to find today, further research and investment might very 
well lead to the discovery of just such alternativ es or substitutes. Indeed, in the Panel's opinion, 
the kind of signal China seeks to send to foreign tungsten consumers through its export quota 
measures may very well be the stimulus needed by consumers, investors, and scientists to 
conduct further research and exploration.  
7.730.  At any rate, and more fundamentally, the Pa nel believes that the absence of substitutes in 
no way affects China's right to adopt measures for the conservation of exhaustible natural 
resources. As the Panel has explained in its anal ysis of the legal test under Article XX(g), the 
sovereignty of all States over their own natural resources allows them to decide whether and how 
much of a given resource to extract. While resource-endowed Members may take the needs of 
other States or the availability of alternative resources into account when deciding how much of an exhaustible natural resource to extract, they are under no obligation to do so, and the absence of 
                                               
1064 European Union's second written submission, para. 241. 
1065 European Union's second written submission, para. 242. 
1066 Panel Reports, China – Raw Materials , para. 7.586. See the Panel's analysis in the context of rare 
earths in section 7.6.2.1.3.5 above. 
1067 China's first written submission, para. 285. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 192 - 
 
  an alternative to, or substitute for, a particul ar resource does not deprive Members of that 
fundamental right to decide how much, if any, of the resource in question should be extracted for 
sale into the market. China is under no obligation to extract its tungsten resources simply because alternatives to tungsten are not easily found. 
7.731.  As such, the Panel believes that the problem with China's export quota on tungsten is not 
that alternatives to tungsten are difficult to come by, but that the export quota sends a perverse signal to domestic consumers. For this reason, the Panel finds it difficult to accept China's 
argument that the challenged quota "relates to" the conservation of exhaustible tungsten ores.  
7.7.2.1.3.3  The possibility that unused expo rt quota volumes will be sold to domestic 
consumers 
7.732.  Finally, the Panel notes the European Unio n's argument that "if China were serious about 
conserving its resources, it would conserve the material that has not been used up by exports, 
instead of making it available to domestic producers".
1068 In the context of rare earths, China has 
responded to this claim by arguing that the domestic availability of unused export quota volumes 
does not undermine the existence of a substantia l relationship between the export quota system 
and the goal of conserving tungsten since the conservation levels determined in the extraction and production quota for any given year constitutes the level of conservation that China considered 
appropriate for that year. According to this argument, there is no harm, from a conservation 
perspective in allowing domestic tungsten co nsumers to use whatever quantity of export-
designated tungsten has not been used by foreign consumers. 
7.733.  The Panel disagrees with the European Union on this point. In the Panel's opinion, the 
mere fact that unused volumes are allowed to be sold into the domestic market does not in itself 
mean that the export quota system does not "relate to" conservation. Assuming that the extraction and/or production caps were "real" restrictions, i.e. were set below the level of expected 
demand for the relevant period (i.e. for 2012), then we believe the fact that China does not 
require unused export quotas to be preserved for use in future years does not necessarily cast doubt on its conservation objectives, since China is still pursuing conservation through the 
imposition, on an annual basis, of limits on extrac tion and production. Within these limits, there is 
nothing illegal or even contradictory about China pursuing its own industrial or other goals (so long as these are pursued in a non-discriminatory manner).  
7.734.  While taking into account the unused shar e of the export quota in the determination of 
extraction/production and export quotas for the foll owing year(s) may result in a higher degree of 
conservation, we believe that the Panel cannot find that China's measures as they stand do not "relate" to conservation merely because China has designed its export quota' system in such a way 
as to prohibit the stockpiling
1069 or exchange of unused export quota shares among exporters1070 
while allowing unused quota volumes to be sold into the domestic market. In our view, this is so even though taking into account such unused export quota's shares for future years' 
determinations would result in a higher level of conservation. China is entitled to identify and 
pursue its own level of conservation, and once such level of extraction/conservation is determined, where products are eventually consumed (abroad or  domestically) does not affect the relationship 
between the challenged measures and the goal of conservation.  
7.7.2.2  Second part: whether China's export  quota on tungsten is made effective in 
conjunction with restrictions on do mestic production or consumption 
7.735.  The Panel now turns to examine whether China's export quota on tungsten is "made 
effective in conjunction with restrictions on domestic production or consumption." 
                                               
1068 European Union's opening statement at th e first meeting of the Panel, para. 49. 
1069 Given the unused export quota volumes are required  to be handed back to  Chinese authorities by 
October 31, it is evident that exporters are no t able to stockpile such unused volumes. See Regulations on the 
Administration of the Import and Export of Goods, ( Exhibit CHN-54), Article 42. 
1070 China's responses to Panel's question Nos. 143 and 144 ("China can confirm that it is illegal to sell 
or transfer the export quota"). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 193 - 
 
  7.736.  China submits it has a distinct conservation policy1071 for tungsten that includes both 
export  and domestic  restrictions. Specifically, China argues that its conservation plan consists of 
four categories of domestic restrictions: access conditions; quotas on extraction, production and export; resource taxes; and a deposit for ecological recovery.
1072 China argues also that its 
restrictions on domestic production and consumption of tungsten are substantial. China claims that 
it meets the even-handedness requirement in Article XX(g) as long as it ensures that the burden of its tungsten conservation policy is not solely imposed on foreign consumers, but also on domestic 
consumers.
1073 The complainants rebut the four parts of China's argument, and maintain that 
China's conservation measures do not constitute "restrictions on domestic production or consumption" within the meaning of Articl e XX(g) of the GATT 1994. According to the 
complainants, China's alleged conservation policy for tungsten does not include any domestic 
restrictions that counter-balance the export quotas on tungsten products.
1074 The complainants 
thus argue that China's system is not even-handed.  
7.737.  The Panel now turns to consider whether: (i) China imposes "restrictions on domestic 
production or consumption" of tungsten; and (ii) whether the challenged export quota is "made 
effective in conjunction with" such restrictions on domestic production or consumption. 
7.7.2.2.1  Whether China has imposed rest rictions on domestic production or 
consumption of tungsten 
7.738.  In its first written submission, China identifies four categories of domestic measures that, 
it argues, restrict domestic production and consumption of tungsten in China.1075 These are: (a) 
access conditions; (b) resource taxes; (c) volume restrictions; and (d) a deposit for ecological 
recovery. The Panel will assess each of these measures individually.  
7.739.  In the following sections, the Panel will evaluate each legal instrument invoked by China as 
a restriction on domestic production or consumption, and will assess whether those alleged 
restrictions are real , i.e. restrictions that are capable of having a limiting effect. The Panel recalls 
that a measure claimed to be a restriction is capable of having a limiting effect only if it is accompanied by actual enforcement. Therefore, the Panel will consider not only whether there are 
restrictions in the text of the Chinese law, but also whether China has adopted measures to 
enforce its alleged restrictions. The Panel notes that, unlike in the context of its arguments on rare earths, China did not argue in its first written submission that it had measures to enforce its conservation policy on tungsten. However, China prov ided three exhibits in response to a question 
from the Panel after the second meeting, and claims that it has taken enforcement actions to 
ensure compliance with the alleged restrictions on domestic production or consumption of tungsten. The Panel considers that "enforcement measures" are part of the design, structure, and 
architecture of each of the four alleged restrictions, i.e. access conditions, resource taxes, volume 
restrictions, deposit for ecological recovery, and that they should therefore be assessed together with each of these four categories of measures. The Panel will also examine "enforcement 
measures" combating mining or production by illegal producers.  
7.7.2.2.1.1  Whether the access conditions are real and actual restrictions on domestic 
production or consumption of tungsten 
7.740.  China argues that it strictly limits the right to mine and produce tungsten, and that it 
moreover is seeking to create an industry that is organized in a rational and efficient manner.
1076 
According to China, enterprises desiring to ex plore and exploit mineral resources in China are 
required to obtain a mining licence.1077 China argues that the licensing requirements strictly 
                                               
1071 China's first written submission, section III. B and China's response to Panel question No. 108. 
1072 China's first written submission, paras. 292 and 311. 
1073 China's first written submission, para. 333. 
1074 United States' second written submission, paras. 247-249; European Union's second written 
submission, paras. 261-263; Japan does not rebut the "conservation measures" one by one in its second 
written submission, corresponding to the structure of China's first and second wr itten submission. However, 
Japan does rebut certain legal instruments incl uded in those three "conservation policies". 
1075 China's first written submission, para. 311. 
1076 China's first written submission, para. 313. 
1077 China's first written submission, para. 314 (referring to Rules for Implementation of the Mineral 
Resources Law , (Exhibit CHN-14) and Administration of Regi stration of Mining of Mineral Resources , 
(Exhibit CHN-15)). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 194 - 
 
  control access to China's tungsten resources, reduce the number of mines and producers, and 
thereby facilitate adherence to volume restrictions.1078 
7.741.  The measures invoked by China as access conditions to the tungsten industry are: 
a. Opinions on the Integration of Exploitation of Mineral Resources1079 of 2006; 
b. Rules for Implementation of the Mineral Resources Law1080 of 1994 
c. Administration of Registration of Mining of Mineral Resources1081 of 1998; 
d. Circular on Admission to Tungsten Industry1082of 2006.  
7.742.  The Opinions on the Integration of Exploitation of Mineral Resources  is a joint legal 
instrument of the Ministries of Land and Resources, the National Development and Reform Commission, and several other ministries, which together launched the integration of the mining industries of "key types of minerals" (including tungsten
1083). The Opinions on the Integration of 
Exploitation of Mineral Resources  provides that the integration work is to be carried forward in four 
stages, namely formulation of the overall plan, formulation of the implementation plan, actual implementation of the plan, and examin ation and inspection. According to the Opinions , the 
integration work was to be completed prior to th e end of 2008. China submits that an integrated 
exploitation of mineral resources is more efficient and more environmentally friendly.
1084  
7.743.  In the Panel's view, the initiation of integr ation of mining industries confirms the existence 
of governmental regulation and control over extr action of tungsten. The Panel also acknowledges 
China's argument that a rational industry structure, which China seeks to implement through the access conditions, facilitates the supervision of the Chinese tungsten enterprises' compliance with the applicable conservation measures for tungst en.  However, China has not provided the Panel 
with further explanation about how integration affects the access of miners to the tungsten 
industry, nor about the progress of the integration work, in particular regarding the tungsten mining industry. Neither has China demonstrated how an integrated tungsten industry could 
restrict the mining or production of tungsten, or how an integration project that was supposed to 
be completed prior to the end of 2008 could be a restriction on the mining or production of 
tungsten in 2012.  
7.744.  The Rules for Implementation of the Mineral Resources Law
1085 set out licensing 
requirements for mining enterprises in general. The Administration of Registration of Mining of 
Mineral Resources1086sets out the conditions and procedures for obtaining a mining licence. 
However, these two legal instruments do not refer to restrictions on the extraction or production of 
tungsten. 
7.745.  The Circular on Admission to Tungsten Industry1087 specifies access conditions for all 
tungsten metallurgy and processing projects. The Circular  addresses: (i) the establishment and 
composition of manufacturing enterprises, (ii) pr oduction scales for tungsten metallurgy, tungsten 
billet and carbide alloy (iii) resource recycling and energy consumption (including minimum production scale), (iv) environmental protection, (v) product quality, (vi) safe production and 
occupational disease prevention, and (vii) labour insurance.  
                                               
1078 China's first written submission, para. 317. 
1079 2006 Opinions on the Integration of Exploitation of Mineral Resources , (Exhibit CHN-17). 
1080 Rules for Implementation of  the Mineral Resources Law , (Exhibit CHN-14). 
1081 Administration of Registration of Mining of Mineral Resources , (Exhibit CHN-15). 
1082 Conditions for Admission to Tungsten Industry , (Exhibit CHN-93). 
1083 2006 Opinions on the Integration of Exploitation of Mineral Resources , (Exhibit CHN-17), 
Article IV(a). 
1084 China's first written submission, para. 313. 
1085 Rules for Implementation of  the Mineral Resources Law (Exhibit CHN-14). 
1086 Administration of Registration of Mining of Mineral Resources , (Exhibit CHN-15), Article 3(4) and 
Appendix. 
1087 Conditions for Admission to Tungsten Industry , (Exhibit CHN-93). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 195 - 
 
  7.746.  The Panel doubts how these access conditions, which control the entry of "new-comers" 
into the tungsten industry, could restrict the activity of tungsten producers who have already entered the tungsten industry, especially while th ere is no volume limit on the production of 
intermediate and finished tungsten products, such as tungsten metallurgy, tungsten billet and 
carbide alloy. The Panel notes that China only claims that it imposes a production quota on 
tungsten concentrates. The Panel will discuss whether or not this alleged production quota is a restriction on domestic production in the following section. Here it suffices to say that, while in the 
Panel's opinion access conditions make it hard er for new enterprises to enter the tungsten 
industry, they do not control the amount of tungsten metallurgy, tungsten billet, and/or carbide alloy that enterprises already in the industry may produce. As such, they also cannot control the amount of intermediate tungsten products that downstream industries in China will be able to 
obtain. The Panel therefore has difficulty finding that conditions such as a minimum production 
scale – which is designed to promote efficient production – are restrictions on domestic production.  
7.747.  In the Panel's opinion, the Opinions on the Integration of Exploitation of Mineral Resources , 
the Rules for Implementation of the Mineral Resources Law  and the Administration of Registration 
of Mining of Mineral Resources  are relevant to the tungsten mining industry; however, China has 
failed to explain the access conditions for tungsten mining enterprises. The Circular on Admission 
to Tungsten Industry
1088 is only relevant to tungsten metallurgy and processing. In sum, the Panel 
believes that China has failed to demonstrate that alleged access condition restrictions, which are designed to promote the efficiency of production, are real and actual restrictions.  
7.748.  The Panel understands that the access conditions set the qualification miners or producers 
must meet to enter the tungsten industry. The Panel also understands that the violation of access 
conditions will lead to a miner or producer losing its qualification to mine or produce, and therefore becoming an illegal miner or producer if they continue to mine or produce. The Panel will address 
the alleged actions against illegal mining and other violations of China's production requirements in 
a separate section.  
7.7.2.2.1.2  Whether the volu me restrictions are capabl e of restricting domestic 
production or consumption of tungsten 
7.749.  China argues that its 2012 conservation policy for tungsten includes volume restrictions on 
domestic production in the form of quotas on the volume of tungsten products that can be extracted and smelted and separated.
1089 China also posits that the collective effect of China's 
export and production quotas for tungsten is to limit the available amount for domestic Chinese 
consumption.1090  
7.750.  First, the Panel recalls that it cannot conclude that measures are capable of restricting the 
domestic production or consumption of tungsten solely on the basis of the existence of a volume 
cap on the extraction, production, or consumption of tungsten. In the first place, the level of the volume cap must be capable of having a limiting effect on domestic production or consumption. 
Additionally, the Panel also needs to determin e whether China has imposed measures that are 
capable of actually enforcing these volume caps. In the context of its analysis under the second phrase of Article XX(g), the Panel will examine the legal framework of the domestic restrictions and whether they have been implemented and are capable of being enforced. Whether the alleged 
non-enforcement of such restrictions constitutes disguised restrictions on trade or discrimination in 
the application of China's conservation programme will be discussed in the context of the Panel's 
analysis under the chapeau of Article XX.  
The extraction quota system applicable to tungsten  
7.751.  According to China, China's extraction quota determines how much tungsten concentrates 
can be legally produced each year.
1091 China invokes the following legal instruments and claims 
that it imposed a restriction on the extraction of tungsten in 20121092: 
                                               
1088 Conditions for Admission to Tungsten Industry , (Exhibit CHN-93). 
1089 China's first written submission, para. 318. 
1090 China's first written submission, para. 326. 
1091 China's second written submission, para. 319; China's response to Panel question 100(c). 
1092 China's first written submission, paras. 292, 319, and 320. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 196 - 
 
  a. Administration of Exploration and Mining of the Specified Minerals1093; 
b. 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores1094; 
c. Circular on Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 
2012.1095 
7.752.  The Panel recalls that these legal instrume nts have been discussed above in the context of 
China's alleged volume restriction on rare earths. In the present section of its report, the Panel only addresses the tungsten-related aspects of the three instruments.  
7.753.  The Panel notes that the Administration of Exploration and Mining of the Specified 
Minerals , referred to in Paragraph 5 of the Circular on Total Extraction Quotas of Tungsten, 
Antimony and Rare Earth Ores for 2012  provides for control of the amount of mining in general.  
7.754.  In 2011, the Ministry of Land and Resources issued the Circular on Total Extraction Quotas 
of Tungsten, Antimony and Rare Earth Ores for 2012 . That document sets the first batch of the 
extraction quota at 42,440 tonnes, "among which major quota accounts for 34,340 tonnes and comprehensive utilization quota accounts for 8,100 tonnes".
1096 Article I of the Circular  announces 
that the total extraction quotas for tungsten, antimony, and rare earth ores for the whole year will 
be issued at a proper time in the second quarter according to national policies and market changes.
1097   
7.755.  On 19 April 2012, the Ministry of Land and Resources issued the  2012 Total Extraction 
Controlling Quota of Tungsten, Antimony and Rare Earth Ores , which sets the total extraction 
quota of rare earths at 89,000 tonnes1098 and provides for allocation of the extraction quota at the 
regional level in 2012. The introductory paragraph of the 2 012 Total Extraction Controlling Quota 
of Tungsten, Antimony and Rare Earth Ores  states that the amount of the total extraction quota 
includes the amount of the first batch of the 2012  extraction quota. It appears to the Panel that 
China did not determine the total amount of material that Chinese miners could extract at the 
beginning of 2012, before mining enterprises made business plans. The second batch of the 
tungsten extraction quota, which was embodied in the 2012 Total Extraction Controlling Quota of 
Tungsten, Antimony and Rare Earth Ores , was issued in April 2012, a few months after the 
issuance of the first batch of the extraction quota for 2012. The Panel considers that the two 
batches of the extraction quota indicate the maximum amount that miners of tungsten could extract through the end of 2012.  
7.756.  The Panel notes that, according to Exhibit CHN-223, the level of extraction set by China in 
2012 (89,000 tonnes) was lower than the actual amount of tungsten extracted in 2011 
(119,875 tonnes). However, as the Panel explained in its discussion of the legal test under Article XX(g), the fact that a quantitative restriction on domestic production or consumption (here, 
the tungsten extraction plan) is, in a given year, set at a level lower than that at which it was set 
in a previous year does not necessarily mean that it constitutes a "restriction" within the meaning of Article XX(g). What matters, in the Panel's view, is that the quantitative restriction be set below 
the expected level of demand for the period in which the alleged restriction is intended to apply. 
Since expected demand may fluctuate from year to year, the mere fact that China's tungsten 
extraction was set in 2012 at a volume lower than  the actual level of extraction in 2011 does not 
of itself establish that the extraction plan consti tuted a "restriction". Instead, the Panel needs to 
determine whether the 2012 extraction quota was set at a level below the expected demand for 
2012.  
                                               
1093 Administration of Exploration and Mining of the Specified Minerals , (Exhibit CHN-18). 
1094 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19). 
1095 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20). 
1096 China's first written submission, paras. 24 and 175, footnote 32 (referring to 2012 Total Extraction 
Controlling Quota of Tungsten, Antimony and Rare Earth Ores , (Exhibit CHN-19) and 2012 Total Extraction 
Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , (Exhibit CHN-20)). 
1097 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20). 
1098 Tungsten Data (1999-2012)  (Exhibit CHN-138 updated), (Exhibit CHN-223). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 197 - 
 
  7.757.  Unfortunately, China has not provided any evidence as to the expected level of demand for 
2012 on the basis of which the Panel could assess whether the 2012 tungsten extraction plan constituted a "restriction" for the purposes of Article XX(g). As such, the Panel is unable to conclude that the 2012 tungsten extraction plan, as established by Chinese law, constituted a 
"restriction" for the purposes of Article XX(g). 
7.758.  With respect to enforcement, China has not explained in sufficient detail how it enforced 
the 2012 extraction quota of tungsten. In that co ntext the complainants assert, and China does 
not deny, that the actual extraction level of tungsten is almost 39% above the level set in China's 
extraction quota.
1099 The Panel has examined the exhibits and observes that the Circular on Total 
Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 , which refers to the 
Administration of Exploration and Mining of the Specified Minerals1100, provides that mining 
enterprises are required to sign a liability letter with the local MLR to confirm their obligation of 
compliance and their liability in case of breach. The 2012 Total Extraction Controlling Quota of 
Tungsten, Antimony and Rare Earth Ores1101, which refers to the Administration of the Quota for 
the Minerals Subject to the Total Extraction Quantity Control1102, provides that the local 
departments of the MLR are subject to the superv ision of the central MLR, to which they are 
required to report quarterly on the implementation of the total extraction quota.  
7.759.  The Panel doubts how the above-describ ed requirements were capable of actually 
enforcing the 2012 tungsten extraction quota. First, compared with the monthly reporting system for the 2012 rare earth extraction quota, the 2012 tungsten extraction quota only required 
enterprises to report quarterly. Second, China has not provided any evidence that it sanctions 
over-quota extraction. The Panel notes that the Administration of the Quota for the Minerals 
Subject to the Total Extraction Quantity Control , which is referred to in the 2012 Total Extraction 
Controlling Quota of Tungsten, Antimony and Rare Earth Ores , provides that over-extraction is a 
reason for reducing an enterprise's share of extrac tion quota at the provincial level. However, the 
text of the 2012 tungsten extraction quota does not appear to reflect the availability of that 
sanction. In this connection, the Panel notes that  although there was over-quota extraction in 
2011
1103, the 2012 tungsten extraction quota does not indicate reductions for any enterprise. On 
the contrary, the first batch of the 2012 tungsten extraction quota only mentions that any amount of the extraction quota that is not utilized cannot be used in the following year. In other words, the document concerns (or addresses situations of) under-extraction , but imposes no sanctions for 
over-extraction . In the case of tungsten however there was over-quota extraction in 2011. The 
Panel acknowledges that its task is to examine the domestic restrictions (if any) existing concurrently with the 2012 tungsten export quota. However, the absence in the 2012 extraction 
quota of any indication or information about sanctions for over-extraction in 2011 casts doubt on 
whether China really sanctions over-quota extraction of tungsten. The Panel also notes that actual extraction in 2012 reached 124,706 tonnes, which is  40% higher than the level set by the 2012 
tungsten extraction quota. In the Panel's view, su ch a high level of over-quota extraction in 2012 
confirms that China has not imposed any en forcement measure capable of capturing and 
sanctioning over-quota extraction.  
7.760.  With respect to measures for combating illegal mining
1104, China points to the following 
legal instruments and argues that China has measures to combat illegal mining of tungsten: 
a. Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law1105; 
b. Circular of Hebei Province on Issuing the Program of the Rectification of Metal and 
Non-Metal Mines according to Law .1106 
                                               
1099 Tungsten Data (1999-2012) , (Exhibit CHN-223). The extraction quota in 2012 was set at 
89,000 tonnes, whereas actual extraction reached 124,706 tonnes. 
1100 Administration of Exploration and Mining of the Specified Minerals , Article V, (Exhibit CHN-18). 
1101 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19). 
1102 Administration of the Quota for the Minerals Subject to the Total Extraction Quantity Control , 
(Exhibit CHN-43). 
1103 According to Tungsten Data  (1999-2012) (Exhibit CHN-138 updated), (Exhibit CHN-223), the 2011 
extraction quota was 87,000 tonnes, while the real extraction in 2011 reaches 119, 875 tonnes. 
1104 Panel question No. 109. 
1105 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 198 - 
 
  7.761.  The Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law  
was released by several ministries on 4 November 20121107 to organize and launch a mine 
rectification campaign from 2012 to 2015. The Opinions provides that: (i) mines which engage in 
illegal mining shall be identified and closed1108; (ii) mines which do not satisfy the safe production 
conditions after being granted a time-limited production suspension to enable the rectification of 
the situation shall be closed according to law1109; and (iii) mines with outdated processes, 
technologies, and devices, and mines which do not comply with industrial development policy, 
shall be closed within a limited time.1110  
7.762.  The Circular of Hebei Province on Issuing the Program of the Rectification of Metal and 
Non-Metal Mines according to Law  (promulgated on 26 December 2012) is adduced by China as an 
example of a provincial government formulating a rectification plan and launching rectification 
action according to the Opinions on the Rectification of Metal Mines and Non-Metal Mines .1111  
7.763.  The Panel notes that in Exhibit CHN-219, China provides examples of enforcement action 
taken against illegal mining of tungsten in 2012 and 2013.  
7.764.  The Panel acknowledges that China has made efforts to combat illegal mining. However, 
the Panel has difficulty seeing how the two above-mentioned legal instruments promulgated at the end of 2012 could have be enforced to combat illegal mining during 2012. Section I(II) of the 
Opinions sets the goal of combating illegal mining by the end of 2015.
1112 Section III(C) of the 
Circular provides that rectification and clampdown in Hebei province would occur from 1 February 
2013 to 31 December 2014.1113 The Panel considers that these two legal instruments provide for 
the combating of illegal production in the future, but not in 2012. Recalling that the Panel's task is 
to examine the domestic restrictions (if any) existing concurrently with the export restriction, the 
Panel considers that China has failed to demonstrate that the above-mentioned instruments constitute real restrictions on domestic mining of tungsten, at least within the relevant period.  
7.765.  In the Panel's opinion, in 2012 China imposed a quota on how much tungsten concentrates 
could be produced. However, it appears to the Panel that China did not have in place any enforcement mechanisms or measures capable of capturing and punishing over-extraction. As 
such, the Panel believes that the extraction quota did not constitute a real restriction on the 
extraction of tungsten concentrates.  
The production quota system applicable to tungsten 
7.766.  China also claims that its production quota is a domestic restriction imposed in conjunction 
with its export quota. China explains that its production quota determines how much tungsten 
concentrates can be produced each year.
1114 China invokes the following legal instruments in 
support of the claim that it imposed a restriction on the production of tungsten in 20121115: 
a. 2012 First Batch of the Directive Production Plan of Rare Metals1116; 
b. 2012 Second Batch of the Directive Production Plan of Rare Metals .1117 
                                                                                                                                               
1106 Program of the Rectification of Metal and Non-metal Mines in Hebei Province , (Exhibit CHN-220). 
1107 The Panel notes that the English version of the exhibit has a translation mistake on the date of 
promulgation of the document. 
1108 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218), Section II(I). 
1109 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218), Section II(II). 
1110 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218), Section II(III). 
1111 China's response to Panel question No. 109. 
1112 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218). 
1113 Program of the Rectification of Metal and Non-metal Mines in Hebei Province , (Exhibit CHN-220). 
1114 China's first written submission, para. 321. 
1115 China's first written submission, paras. 292 and 321. 
1116 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94). 
1117 Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 199 - 
 
  7.767.  The Panel notes that the MIIT issued the 2012 First Batch of the Directive Production Plan 
of Rare Metals  on 13 January 2012. This document sets the first batch of the tungsten production 
quota at 42,440 tonnes.1118 On 6 July 2012, the MIIT issued the 2012 Second Batch of the 
Directive Production Plan of Rare Metals , which sets the second batch of the tungsten production 
quota at 38,880 tonnes.1119 The annexes to these two instruments provide for the allocation of the 
production quota at the regional level.1120 The Panel considers that the two batches of the 
production quota together indicate the maximum amount of tungsten concentrates that could 
legally be produced through the end of 2012.  
7.768.  According to the data in Exhibit CHN-223, the total 2012 production quota (81,320 tonnes) 
was lower than the actual amount of tungsten  concentrates consumed in 2011 (119,875 tonnes). 
However, as the Panel has explained, the fact that a quantitative restriction on domestic 
production or consumption (here, the tungsten production plan) is, in a given year, set at a level 
lower than the level of actual production in a previous year does not necessarily mean that it constitutes a "restriction" within the meaning of Article XX(g). What matters, in the Panel's view, is 
that the quantitative restriction be set below the expected level of demand for the period in which 
the alleged restriction is intended to apply. Since expected demand may fluctuate from year to year, the mere fact that China's tungsten production was set in 2012 at a volume lower than the 
actual level of production in 2011 does not of itself  establish that the production plan constituted a 
"restriction". Instead, the Panel needs to determ ine whether the 2012 production quota was set at 
a level below the expected demand for 2012.  
7.769.  Unfortunately, China has not provided any evidence as to the expected level of demand for 
2012 on the basis of which the Panel could assess whether the 2012 tungsten production plan 
constituted a "restriction" for the purposes of Article XX(g). As such, the Panel is unable to conclude that the 2012 tungsten production plan, as established by Chinese law, constituted a real 
"restriction" for the purposes of Article XX(g). 
7.770.  With respect to enforcement, the Panel notes that China refers to the two 
above-mentioned legal instruments (i.e. the first and second batches of the 2012 Directive 
Production Plan of Rare Metals ) and describes the compliance requirements in two paragraphs in 
its first written submission. According to China, enterprises must report their use of and compliance with the production quota to the MIIT on a monthly basis. If an enterprise produces 
without a share of the production quota or beyond its share, it will be ordered to stop producing 
immediately and the source(s) of its ores products will be identified. Further enterprises 
conducting illegal purchases and sales of ore products are subject to punishment.
1121 The two legal 
instruments also indicate that enterprises that pr oduced beyond their share of the production plan 
in 2011, or that failed to comply with environmental requirements, will have their share of the 
2012 plan reduced or even cancelled. On the othe r hand, enterprises that strictly complied with 
the 2011 plan and met the safe production requ irements could have their share of the quota 
increased.1122  
7.771.  In sum, the Panel understands that the texts of the two batches of the 2012 Directive 
Production Plan of Rare Metals  sets a quota on the production of tungsten concentrates, and 
provides for sanctions for over-quota production. It also sets out various requirements that 
enterprises must comply with.  
7.772.  However, for the following reasons, the Panel doubts whether or not the 2012 tungsten 
production quota was capable of being enforced. 
7.773.  First, the Panel notes that, as China ha s admitted, the 2012 extr action quota and the 2012 
production quota were imposed on the same product, i.e. tungsten concentrates.1123 However, 
China has not provided a sufficiently detailed explanation as to why the extraction quota is 
89,000 tonnes, while the production quota is 81,320 tonnes. The Panel understands that, as a 
                                               
1118 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94). 
1119 Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). 
1120 First Batch of the 2012 Directive Production Plan of Rare Metals , Annex, (Exhibit CHN-94) and 
Second Batch of the 2012 Directive Production Plan of Rare Metals , Annex, (Exhibit CHN-95). 
1121 China's first written submission, para. 321. 
1122 China's first written submission, para. 322. 
1123 China's response to Panel question No. 100. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 200 - 
 
  general matter, the production plan is less than the extraction plan in order to account for 
materials lost during processing. But to fully appr eciate this point, the Panel would have needed 
more detailed information about the precise amount of materials lost, and how this loss is translated into the level established by the production quota. As a result of the differences in the 
two quotas, each enterprise might be allocate d two kinds of quotas imposed on the same 
products, but at different levels. It is unclear to the Panel, for example, how the MIIT would sanction an enterprise that produced over its production quota, but below its share of the 
extraction quota level set by the MLR.  
7.774.  Second, the Panel considers that the fact that the actual production of tungsten 
concentrate reached 124,706 tonnes in 2012, which is about 40% higher than the production quota, confirms that the production quota was not well enforced. Although the Panel does not 
believe that the assessment under the second phrase of Article XX(g) involves an effects test, the 
Panel notes that China does not deny the existence of significant overproduction and has not attempted to explain it or to justify it. It is therefore difficult for the Panel to conclude that China's 
production quota on tungsten was capable of having a limiting effect. 
7.775.  In the Panel's opinion, the 2012 tungsten production quota cannot be considered a 
restriction on domestic production.  
Whether there are volume restrictions on  domestic consumption of tungsten  
7.776.  China submits that the collective effect of China's export and production quotas on 
tungsten is to limit the amount of tungsten available for domestic consumption.
1124 China argues 
that by deducting the export quota from the production quota, the amount of newly produced 
tungsten products available for domestic consumption in 2012 (26,400 metal content tonnes) was 
significantly lower than the volume available in 2011 (29,020 metal content tonnes).1125 
7.777.  For several reasons, the Panel disagrees with China that China has imposed volume 
restrictions on domestic consumption.  
7.778.  First, China has not provided any evidence to demonstrate that it imposes a domestic 
consumption quota or any other form of regulatory control on domestic consumption. The Panel 
considers that domestic consumption of tungsten concentrates in China can easily exceed the level 
that China claims is set by the combined effect of its production and export quotas through over-quota production of tungsten concentrates. Tungsten concentrates produced over-quota would stay in the domestic market and remain available for China's domestic consumption.
1126 In light of 
this risk, the Panel considers that there is no limit on domestic consumption of tungsten. This is 
especially so given that, on the evidence we have before us, China does not appear to criminalize or otherwise punish the consumption  of illegally produced tungsten concentrates. As such, it 
seems to us that domestic users can consume any amount of the over-quota production without 
any risk of penalty.  
7.779.  Secondly, the Panel also notes that China has established measures, inter alia  VAT refunds 
for downstream users of tungsten concentrate, which could stimulate domestic consumption of 
tungsten by value-added producers wh o export their finished products.
1127 This sits uncomfortably 
with China's claim to be restricting domestic consumption.  
7.780.  In sum, the Panel does not accept that China has imposed volume restrictions on the 
domestic consumption of tungsten.  
                                               
1124 China's first written submission, para. 326. 
1125 China's first written submission, para. 327. 
1126 China's first written submission, para. 337; China's response to Panel question No. 111. 
1127 Japan's second written submission, para. 261; Un ited States' comments on  China's response to 
Panel question No. 103; European Union's comments on China's response to Panel question No. 103; Japan's 
comments on China's response to Panel question  No. 103. See discussion in footnote 863 above. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 201 - 
 
  7.7.2.2.1.3  Whether China's resource tax is  a restriction on domestic production or 
consumption of tungsten 
7.781.  China refers to the Decision of the State Council to Amend the Provisional Regulations on 
Resources Tax1128and the Implementation of the Provisional Regulations on Resource Tax1129, and 
submits that the resource tax imposed on tungsten miners is 9 RMB per tonne for 3rd class of ore, 
8 RMB per tonne for 4th class of ore, and 7 RMB per tonne for 5th class of ore. China claims that it increases the cost of tungsten production by imposing this tax on tungsten producers. 
7.782.  The Panel acknowledges that increased costs caused by the tax could, in the long run, lead 
to a reduction in demand and therefore limit production of tungsten ores. However, China has failed to provide price data on the tungsten ores
1130 that would have assisted the Panel in 
assessing whether or not the resource tax is capable of having a limiting effect. The Panel 
considers that China's argument on the resource tax, which consists of two sentences in its first 
written submission1131, is not sufficient to demonstrate that its resource tax on tungsten is a real 
restriction on domestic production or consumption.  
7.7.2.2.1.4  Whether environmental requir ements are restrictions on domestic 
production or consumption 
7.783.  China refers to the Opinions on Enhancing the Ecological Protection and Restoration of 
Mines1132 in its first written submission and argues that this measure increases the costs of 
tungsten production by requiring miners that have obtained a share of the extraction quota to make an ecological recovery de posit. However, the Panel notes that Exhibit CHN-32 is entitled 
Opinion on Strengthening Rare Earth Mine Ecological Protection and Governance and Recovery , 
and that this legal instrument does not refer to tungsten.  
7.784.  In response to Panel question No. 100, Ch ina invokes six exhibits and argues that it has 
legal instruments that impose environmental protection requirements on the tungsten industry. 
These instruments are:  
a. Conditions for Admission to the Tungsten Industry
1133; 
b. Circular of State Council Overall Rectification and Standardization of mineral Resources 
Development Order1134; 
c. Guideline Suggestions on Gradual Establishment of Responsibility System for mine 
Environmental Management and Ecological Recovery1135; 
d. Circular on Environmental Protection Inspection of Tungsten and Molybdenum 
Enterprises1136; 
e. 2012 First Batch of the Directive Production Plan of Rare Metals1137; 
f. 2012 Second Batch of the Directive Production Plan of Rare Metals .1138 
                                               
1128 Exhibit CHN-26. 
1129 Exhibit CHN-27. 
1130 The Panel notes that in Tungsten: Price Data , (Exhibit CHN-167), China provides APT price data. 
However, there is no data available on tungsten ores. 
1131 China's first written submission, para. 329. 
1132 Opinions on Enhancing the Ecological Protection and Restoration of Mines , Section IV, 
(Exhibit CHN-32). 
1133 Conditions for Admission to Tungsten Industry , (Exhibit CHN-93). 
1134 Circular on Overall Rectification and Standardization of Mineral Resources Development Order , 
(Exhibit CHN-215). 
1135 Guideline on Gradual Establishment of Responsibi lity System for Mine En vironmental Management 
and Ecological Recovery , (Exhibit CHN-216). 
1136 Circular on Environmental Prot ection Inspection of Tungsten  and Molybdenum Enterprises , General 
Office (Huan Ban Han [2013] No. 442), Ministry of Enviro nmental Protection, 24 April 2013, (Exhibit CHN-217). 
1137 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94). 
1138 Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 202 - 
 
  7.785.  The Panel will examine each of those ex hibits and assess whether they constitute real 
restrictions on domestic production or consumption. 
7.786.  The Conditions for Admission to the Tungsten Industry1139 elaborates Emissions Standards 
for Pollutants from the Tungsten Industry , and establishes compliance with these emission 
standards as one of the conditions for enterprises accessing the tungsten industry. The Panel notes 
that it has discussed this legal instrument in the section on "access conditions" and has expressed its doubt about how access conditions, which apply to "newcomers" seeking entry into the 
tungsten industry, could restrict the activity of tungsten producers that have already entered the 
tungsten industry, especially given that there is no volume limit on the production of intermediate and finished tungsten products such as tungsten metallurgy, tungsten billet and carbide alloy.  
7.787.  The Circular of State Council Overall Rectification and Standardization of Mineral Resources 
Development Order
1140 and the Guideline Suggestions on Gradual Establishment of Responsibility 
System for Mine Environmental Management and Ecological Recovery1141 require enterprises to 
enhance ecological protection and restoration of mines, including tungsten mines. However, the 
two legal instruments do not purport to restrict extraction, production, or consumption of 
tungsten. 
7.788.  The C ircular on Environmental Protection Inspection of Tungsten and Molybdenum 
Enterprises1142 provides for the inspection of tungsten companies' compliance with applicable 
environmental requirements and for the publication of a list of complying companies. However, the Circular  was issued in April 2013. China fails to explain how an environmental protection 
instrument issued in 2013 could have restricted ex traction, production, or consumption of tungsten 
during 2012. 
7.789.  According to the two batches of the Directive Production Plan of Rare Metals
1143, only 
enterprises on the list of enterprises that m eet the environmental protection requirements 
published by the Ministry of En vironmental Protection are eligib le to apply for a share of the 
production quota. However, the Panel fails to see how this environmental requirement, which is really a qualification requirement for entry into th e tungsten industry, could restrict the amount of 
tungsten produced by enterprises that have alre ady obtained a share of the production quota.  
7.790.  The Panel agrees with China that regulatory requirements will impose some compliance 
costs on concerned enterprises. However, the issue before the Panel is whether China's environmental regulatory requirements contribute to the conservation of tungsten. In the Panel's 
view, environmental costs are ordinary costs imposed on enterprises to address market 
externalities (e.g. environmental pollutions) caused by the production of tungsten.  
7.7.2.2.1.5  The cumulative effect of all domestic restrictions and even-handedness 
7.791.  China claims that the net effect  of the four categories of measures (i.e. access conditions, 
resource taxes, volume restrictions, and environmental requirements) is a lower rate of tungsten production in China than would otherwise have been the case.
1144 In this connection, the Panel 
recalls that subparagraph (g) does not call for an assessment of the effects of the concerned 
domestic measures. At any rate, China has not explained in sufficient detail how the "net effect" of 
the four categories of measures work together in the way China claims. As such, the Panel has difficulty accepting China's claim.  
                                               
1139 Conditions for Admission to Tungsten Industry , Section IV, (Exhibit CHN-93). 
1140 Circular on Overall Rectification and Standardization of Mineral Resources Development Order , 
(Exhibit CHN-215). 
1141 Guideline on Gradual Establishment of Responsibi lity System for Mine En vironmental Management 
and Ecological Recovery , (Exhibit CHN-216). 
1142 Circular on Environmental Prot ection Inspection of Tungsten  and Molybdenum Enterprises , General 
Office (Huan Ban Han [2013] No. 442), Ministry of Enviro nmental Protection, 24 April 2013, (Exhibit CHN-217). 
1143 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94) and Second Batch 
of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95) Article II. 
1144 China's first written submission, para. 361. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 203 - 
 
  7.7.2.2.2  Whether the 2012 export quotas  of tungsten were "made effective in 
conjunction with" restrictions on do mestic production or consumption 
7.792.  The Panel recalls that subparagraph (g) of Article XX requires that the trade-restrictive 
measures work together with domestic restrictions to conserve exhaustible natural resources.1145 
The Panel considers that the phrase "made effective in conjunction with" requires the simultaneous, or perhaps near-simultaneous, operation of the relevant foreign and domestic restrictions through regulation by the concerned Member's law-making apparatus. As the panel 
stated in China – Raw Materials,  "to benefit from the justification permitted under 
subparagraph (g), a Member cannot seek to rely on a future or potential domestic restriction; nor will measures enacted concurrently but which only have effect or are foreseen to have effect only in the future respect the Article XX(g) criteria, for they must not only exist concurrently; they must 
operate concurrently." In the Panel's view, the phrase "work together with" also suggests a degree 
of substantive operative complementarity between the trade and domestic restrictions.  
7.793.  China claims that its restrictions on domestic production and consumption of tungsten are 
substantial, and that domestic users, together with foreign consumers of tungsten, collectively 
bear the burden of China's conservation policy.  However, in the opinion of the Panel, China's 
argument does not explain how the export quotas operate and work together with restrictions on 
domestic production or consumption for conservation. On the contrary, for the following reasons, 
the Panel finds that China's export quota and the restrictions on domestic users or producers of tungsten referred to by China do not seem to work together towards the goal of conservation.  
7.7.2.2.2.1  The different levels of the 2012 extraction quota and production quota on 
tungsten  
7.794.  The Panel recalls that the 2012 tungst en extraction quota and the 2012 tungsten 
production quota are imposed on the same tungsten product, i.e. tungsten concentrates, by 
different Ministries (the MLR and the MIIT) and at  different levels. The 2012 tungsten extraction 
quota was 89,000 tonnes, and the 2012 production quota was 81,320 tonnes. Setting different extraction and production quotas in this manner could cause difficulties for producers. For 
example, if a specific enterprise is allocated an amount of the extraction quota that is more than 
the amount of the production quota to which that enterprise is entitled, the enterprise might be punished by the MIIT for producing more than its entitled production quota amount, even though it 
used less than its share of the extraction quota. 
7.795.  Moreover, the Panel notes that China did not announce the total amount of its extraction 
or production quota before the beginning of 2012 . The first batch of the 2012 extraction quota 
(42,440 tonnes) was issued at the end of 2011. The second batch of the 2012 extraction quota 
was issued on 19 April 2012. The first batch of the 2012 production quota (42,440 tonnes) was 
issued on 13 January 2012. The second batch of the 2012 production quota (38,880 tonnes) was issued on 4 July 2012. As an example, the Panel also notes that the first batch of the extraction 
quota allocated to Zhejiang province was 150 tonnes
1146 and the second batch of the extraction 
quota allocated to Zhejiang province was 150 tonnes.1147 However, the first batch of production 
quotas allocated to Zhejiang province was 175 tonnes1148 and there was no second batch of the 
production quota allocated to Zhejiang province.1149 
7.796.  The following table illustrates the different times at which China announced its extraction 
and production quotas on tungsten:  
7.797.  Extraction quota and production quot a allocation in 2012 for Zhejiang Province 
                                               
1145 Appellate Body Reports, China – Raw Materials, para. 356. 
1146 2012 Total Extraction Quotas of Tungsten, Antimony and Rare Earth Ores for 2012 (First Batch) , 
(Exhibit CHN-20). 
1147 2012 Total Extraction Controlling Quota of Tungsten, Antimony and Rare Earth Ores , 
(Exhibit CHN-19). 
1148 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94). 
1149 Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 204 - 
 
   End of 2011 January of 2012 April of 2012 July of 2012 
Extraction quota 150 tonnes (first 
batch)  150 tonnes (second 
batch)  
Production quota  175 tonnes (first 
batch)  0 tonnes (second 
batch) 
 
7.798.  From the above table, it seems that th e tungsten-producing enterprises in Zhejiang 
province might have been confused as to the exact amount of tungsten production allowed for 2012. Prior to April 2012, enterprises in Zhejiang Province might have been at risk of being 
sanctioned by the MLR, if they acted consistently with the first batch of the production quota 
allocated by the MIIT and produced less than 1 75 tonnes, but more than 150 tonnes of tungsten 
concentrates. In April 2012, those enterprises were informed that their share of the extraction quota was 300 tonnes in total for 2012. However, the fact that the MIIT did not allocate any 
amount from the second batch of the production quota to tungsten concentrate producers in 
Zhejiang Province in July 2012 would result in  those enterprises that had followed the MLR's 
allocation of extraction quota during May and J une 2012 potentially being sanctioned by MIIT for 
over-quota production. 
7.799.  As this example suggests, the uncertainty and instability caused by the differences in the 
amounts of the extraction quota and production quota setting may not be helpful for tungsten 
users, and might prevent them from rationally utili zing their tungsten resources. To the Panel, the 
setting of the various quotas at different levels is a structural feature of China's quota system that seems to undermine China's claim that the timing  of the 2012 tungsten extraction and production 
quotas work together with the 2012 export quot as on tungsten intermediate production for 
conservation. The Panel emphasizes that whether or not enterprises were in fact confused by this 
feature of the quota system is not material to the Panel's analysis: there is no "effects test" under subparagraph (g) of Article XX. Instead, what matter s is whether, on the basis of their architecture 
and structure, the challenged export quota "works together" with China's extraction and 
production quotas for the goal of conservation. For the reasons given above, the Panel is not convinced that the export quota and the extraction  and production quotas on tungsten cooperate 
or complement each other's operation.  
7.7.2.2.2.2  The different product scopes  of export quota, production quota and 
extraction quota  
7.800.  The Panel notes that the volume restrictions in China's conservation policy on tungsten, 
i.e. China's extraction quota, production quota,  and export quota, are imposed on products at 
different stages of the tungsten industry value-added chain.  
Mining products (tungsten 
concentrates) Upstream intermed iate products 
(such as APT) Downstream (such as cemented 
carbides) 
Export Quotas 
Production restrictions (extraction quota and production quota) 
 
7.801.  As represented in the above table, Chin a imposes extraction and production quotas on 
tungsten concentrates, while China's export quota covers not only tungsten concentrate, but also ammonium paratungstate (APT), tungstic acids and its salts, tungsten trioxide and blue tungsten 
oxide, and tungsten powder.
1150  
7.802.  China argues that it must include tungsten  intermediaries in its export quota to avoid the 
possibility of circumvention through exportation of the tungsten products after some basic processing.
1151 China does not provide any further explanation on the rationale of setting the 
product scope of its 2012 export quota on tungsten. 
7.803.  In the Panel's opinion, the inconsistent product scopes of the extraction, production, and 
export quotas seem to highlight China's industrial policy, which encourages tungsten 
intermediaries being used as inputs in the nation al production of value-added goods often destined 
                                               
1150 China's response to Panel question No. 100. 
1151 China's responses to Panel question No. 132. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 205 - 
 
  for export. The Panel does not see any connection between this inconsistency and the goal of 
conserving tungsten resources. Indeed, by restricting the export of certain tungsten products (such as APT) that are not included in the domestic production restriction, China seems to be reserving an amount of tungsten products for domestic consumption. This inconsistency therefore 
seems to encourage domestic use of the products Ch ina claims it is trying to conserve. As such, 
the Panel has difficulty seeing how the 2012 export  quota "works together with" the extraction and 
production quotas on tungsten concentrates for conservation.  
7.804.  Indeed, in the Panel's view, China's 2012 export quota was designed to reserve a certain 
amount of specific tungsten intermediaries for use by domestic downstream industries. In the 
Panel's opinion, this is industrial policy. Although the Panel has recognized that WTO Members have legitimate rights to impose industrial policies, it reiterates that industrial policies cannot be 
implemented under the guise of conservation. Ta king into account the design, structure, and 
architecture of China's export quota and the extr action and production quotas, the Panel considers 
that China has failed to explain how the product scope of its export quota works together with its 
extraction and production quotas on tungsten concentrates for the purpose of conservation. The 
Panel cannot identify any functional and operational complementarity between China's export quota and the domestic restrictions referred to by China for enhancing conservation. 
7.7.2.2.2.3  The different policies on domest ic consumption and foreign consumption of 
tungsten  
7.805.  As the Panel has noted, China's allege d "consumption cap", which results from the 
combined effect of the production and export qu otas, appears to function not as a consumption 
cap, but rather as a minimum supply guarantee for domestic consumption. 
7.806.  The Panel also believes that the restrictions imposed on producers of tungsten 
concentrates affect both domestic and foreign consumers, while the export quota on tungsten 
affects only foreign consumers. From a structural perspective, China's extraction and production 
restrictions therefore do not counterbalance its export restrictions and do not appear therefore to work well together. Moreover, the export quota is  not the only restriction imposed by China on 
exports of intermediate tungsten products. China imposes export duties on intermediate tungsten 
products. The Panel will discuss the combined effe ct of the export quota and export duties on 
tungsten in its analysis under the chapeau of Article XX.  
7.807.  Moreover, in contrast to its export restrictions on lower value-added products, China 
provides tax and export incentives through, for example, refunds of the value-added tax (VAT) 
upon the exportation of higher value-added tungsten products.
 Such tax incentives can only 
stimulate production for export and act contrary to conservation goals and restrictions. 
7.7.2.3  Even-handedness 
7.808.  The Panel recalls that subparagraph (g) of Article XX also requires even-handedness in the 
imposition of domestic restrictions for conservation. The Panel agrees with China that China's 
domestic regulations are inherent to any conservation programme and may be argued to be 
capable of imposing concurrent real restriction on consumption or production of tungsten. However, the Panel fails to see how such domestic actions can be said to be capable of imposing a burden even-handed with that resulting from its ex port quota on tungsten so that its export quota 
and its related domestic restrictions on tungsten work together for the conservation of tungsten 
concentrates. The Panel believes that the restrictions imposed on producers of tungsten concentrates affect both domestic and foreign consumers, while the export quota on tungsten 
affects only foreign consumers. From a structural perspective, China's production restrictions 
therefore do not counterbalance its export restrict ions and do not appear therefore to work well 
together.  
7.809.  Additionally, in the Panel's view the fact  that any unused export quota volume must be 
returned to Chinese authorities and is allowed to be consumed domestically, while there are no restrictions on domestic consumers consuming the tungsten products designated for export in the export quota, suggests that China has not impo sed even-handed restrictions on domestic and 
foreign consumption. Although, as the Panel has indicated, the mere fact that unused export quota 
volumes can be sold into the domestic market does not, of itself, lead to the conclusion that WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 206 - 
 
  China's export quota does not "relate to" conservation, it does seem to favour domestic over 
foreign users. The Panel considers that there is nothing in the design and the structure of the conservation policy imposed on domestic consumers to counter-balance the policy that allows domestic consumption of the unused export quota of tungsten products. Therefore, there is no 
even-handedness in the imposition of export quot a and the domestic restrictions referred to by 
China. 
7.7.2.4  Conclusion 
7.810.  As explained above, the Panel is of the vi ew that all the elements of subparagraph (g) aim 
at ensuring that the challenged measure works with domestic restrictions for conservation and ensures that its burden is distributed in an even-handed manner between foreign and domestic 
users. The Panel has reviewed the design and ar chitecture of China's export quota system on 
tungsten, and has considered whether it works jointly with domestic restrictions for conservation 
and is therefore justified under Article XX(g). 
7.811.   In the Panel's opinion, it is difficult to conclude that China's export quota relates to the 
conservation of tungsten, or that it is made effective in conjunction with restrictions on domestic 
production or consumption.  
7.812.  With respect to the requirement that measures "relate to" conservation, the Panel is not 
convinced by China's argument that the text s of its export quota measures themselves 
demonstrate the existence of a "close" and "real" relationship with the goal of conserving exhaustible tungsten resources. As the Panel has ex plained, many of the references pointed to by 
China are indirect, referring not to the goal of conservation but to the Foreign Trade Law , which 
lists a number of grounds other than conservation justifying the imposition of export quotas. As 
such, these references do not provide sufficient ev idence of the challenged measures' relationship 
with the goal of conserving tungsten. Moreover, even those texts that do refer to conservation 
simply refer to the "goal" of conserving exhaustible resources, but fail to explain how that goal is 
furthered or promoted through the imposition of an  export quota. As the Panel has explained, such 
references to the goal of conservation, without any further explanation as to how the measure is 
designed in such a way as to assist, support or enhance China's conservation programme, do not 
suffice to establish the requisite relationship between the export quota measures and the conservation objective in Article XX(g).  
7.813.  The Panel is also not convinced that Chin a's tungsten export quota is made effective in 
conjunction with restrictions on domestic production or consumption.  
7.814.  First, the Panel recalls that it has been una ble, on the basis of the evidence presented, to 
find that China's extraction and production caps on tungsten constitute "restrictions" within the 
meaning of Article XX(g). China has not provided th e Panel with evidence of the expected demand 
for tungsten during 2012, and as such the Panel cannot determine whether China's extraction and production caps were set at levels lower than the expected demand for the period of time over 
which the restriction was intended to apply (here, 2012). 
7.815.  Second, the Panel has found that China did not have in place any enforcement 
mechanisms capable of capturing and punishing over-extraction during the relevant period. In this context, the Panel recalls that actual extraction in 2102 reached 124,706 tons, which is 40% 
higher than the level set by the 2012 tungsten ex traction quota. As such, the Panel believes that 
the extraction quota did not constitute a real restriction. Moreover, the fact that the actual production of tungsten concentrate reached 124,706 tonnes in 2012, which is about 40% higher 
than the production quota, confirms for the Pane l that the production quota was not well enforced 
and, importantly, China does not deny the existence of significant over-production or attempt to explain it or to justify it. It is therefore difficult for the Panel to conclude that China's production 
quota on tungsten was capable of having a limiting effect. 
7.816.  The Panel considers that some of the domestic measures indicated by China, including the 
entry conditions, resource tax, and environmental regulations, could have had some limiting effect. Nevertheless, overall the Panel considers that China has not provided sufficient evidence to 
prove that such measures did have a limiting effect during the relevant period. Also, and 
importantly, the Panel notes that some of the addi tional restrictions pointed to by China were not WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 207 - 
 
  in force at the same time as the challenged export quota, and as such cannot be said to have 
"worked together" with such quota.  
7.817.  As the Panel has discussed in detail, the product scope of China's export quota is broader 
than the scope of its production quota. China argues that it must include tungsten intermediaries 
in its export quota to avoid the possibility of circumvention through the exportation of tungsten 
products after some basic processing.1152 In the Panel's opinion, this feature of China's export 
quota on tungsten seems geared towards promotin g China's industrial policy, which encourages 
tungsten intermediaries being used as inputs in the national production of value-added goods 
often destined for exports. The Panel does not see any connection with the conservation objective. The Panel has difficulty seeing how the 2012 export quota, with the current product scope on tungsten intermediaries "works together with" the extraction and production quotas on tungsten 
concentrates for conservation.  
7.818.  The Panel also notes measures inconsistent with the goal of policies, such as VAT refunds 
for downstream users of tungsten concentrate, which could stimulate domestic consumption of 
tungsten by value-added producers who export th eir finished products. This sits uncomfortably 
with China's claim to be restricting domestic consumption.  
7.819.  In sum, the Panel's view is that China's 2012 export quota was designed to reserve a 
certain amount of specific tungsten intermediaries for use by domestic downstream industries. In 
the Panel's opinion, this is industrial policy. Although the Panel has recognized that WTO Members have legitimate rights to impose industrial policies, it reiterates that industrial policies cannot be implemented under the guise of conservation. Ta king into account the design, structure, and 
architecture of China's export quota and the extr action and production quotas, the Panel considers 
that China has failed to explain how its export quota works together with its extraction and production quotas on tungsten concentrates for the purpose of conservation. The Panel cannot 
identify any functional and operational complementarity between China's export quota and the 
domestic restrictions referred to by China for enhancing conservation. 
7.820.  Accordingly, the Panel concludes that China's export quota on tungsten does not relate to 
the conservation of tungsten, and is not made effective in conjunction with restrictions on 
domestic production or consumption.  
7.821.  Nonetheless, in order to fully discharge its responsibility under Article 11 of the DSU, the 
Panel proceeds to consider whether the application of China's export quota on tungsten complies 
with the requirements of the chapeau of Article XX. 
7.7.3  Application of the chapeau of Articl e XX to China's export quota on tungsten 
7.7.3.1  Whether China has demonstrated th at its export quota on tungsten was not 
applied in a manner that constitutes arbitr ary or unjustifiable discrimination or a 
disguised restriction on international trade 
7.822.  China argues that its 2012 export quota on tungsten makes no distinction in respect of the 
destination of the exported tungsten products. Th erefore, China argues, the export quota is not 
applied "in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail".
1153 
7.823.  China adds that the application of the 2012 export quota on tungsten does not constitute a 
"disguised restriction on international trade" because significant quantities of tungsten products 
were imported into China during 2011 and 2012. According to China , this suggests that China's 
conservation policy is effective in restricting production and consumption of tungsten originating in 
China, as Chinese consumers are importing significant quantities of tungsten from abroad. China 
adds that these imports of tungsten demonstrate that foreign consumers of tungsten were also 
capable of securing supplies of tungsten outside of China. If Chinese users were able to secure 
tungsten on the world market, then this implies that foreign consumers of tungsten would have 
                                               
1152 China's response to Panel question No. 132. 
1153 China's first written submission, para. 336. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 208 - 
 
  been able to do the same. This demonstrates that the export quota does not constitute a disguised 
restriction on international trade. 1154   
7.824.  The European Union argues that if, quod non , China's export quota were to satisfy the 
requirements of subparagraph (g), it nevertheless does not meet the test under the chapeau of 
Article XX.1155 The European Union also notes that China's submission fails to provide an 
explanation for the differential treatment that its export quota accords to China as compared to all other WTO Members.
1156 Specifically, the European Union co ntends that the export quota on 
tungsten imposes an additional restriction on foreign consumption of Chinese tungsten which does 
not exist with respect to domestic consumption.1157  
7.825.  The European Union submits that China's line of defence oversimplifies and underestimates 
the impact of China's tungsten ex port quota on the world market.1158 China presently produces 
83% of the world's tungsten supply. Holding such an important share of the world market 
necessarily means that any reduction in the quantity  available will produce economic effects on the 
world market for tungsten. The European Union adds that, in assessing the trade distortive impact 
of China's measure, it is also important to consider that China did not and continues not to disclose 
the criteria on the basis of which the quotas are set for each year, making its yearly decisions entirely arbitrary and unpredictable and thereby accentuating their negative effects.
1159 According 
to the European Union, China's export restrictions on tungsten do not pursue conservation goals, 
but are rather motivated by protectionist objectives.1160 The quota's objective of providing an 
advantage to Chinese tungsten-consuming industries over their competitors in the territories of other WTO Members is apparent from its "design, architecture and revealing structure", as well as 
from its effects. 
7.826.  The Panel recalls that, according to WTO jurisprudence, the same facts can lead to 
conclusion on unjustifiable or arbitrary discrimination, and/or disguised restrictions on trade, and 
that often these concepts overlap. In the present dispute, China's own argumentation is 
intertwined between these two overlapping conc epts. The Panel considers that unjustified 
discrimination can constitute a disguised restriction on trade, but a disguised restriction on trade 
may exist even if there is no discrimination. For ease of exposition, the Panel will examine China's 
tungsten export quota under both of these concepts together.  
7.827.  All parties agree that the requirement that a measure not be "applied in a manner which 
would constitute arbitrary or unjustifiable discrimination between countries where the same 
conditions prevail" is a requirement that the measure not discriminate among other Members, or 
between other Members and the Member maintaining the measure.
1161   
7.828.  The Panel now proceeds to examine whether China has demonstrated that the application 
of its export quota on tungsten does not cause arbitrary or unjustified discrimination or a disguised 
restriction on international trade. The Panel will first determine whether there is discrimination and/or a disguised restriction on international trade. It will then consider whether such 
discrimination or disguised restriction is based on, or explained by, a conservation rationale. 
Finally, the Panel will assess whether one or more WTO-consistent alternative measures exist, and will then reach a conclusion on China's compliance with the chapeau of Article XX.  
7.829.  China asserts that its export quota on tungsten does not constitute a disguised restriction 
on international trade because China imported significant quantities of tungsten during 2011 and 
2012.
1162 The Panel accepts that China imported a significant amount of tungsten, and notes that 
this seems to confirm the existence of a strong demand for tungsten among Chinese industries. 
The Panel does not understand China's argument that, because Chinese domestic users can import 
                                               
1154 China's first written submission, para. 337. 
1155 European Union's second written submission, para. 269. See also United States' second written 
submission, para. 234. 
1156 European Union's second written submission, para. 272. 
1157 European Union's second written submission, para. 274. 
1158 European Union's second written submission, para. 275. 
1159 European Union's second written submission, para. 276. 
1160 European Union's second written submission, para. 277. 
1161 Appellate Body Report, US – Gasoline , pp. 23-24, DSR 1996:I, 3, pp 21-22; parties' responses to 
and comments on Panel question No. 47. 
1162 China's first written submission, para. 337. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 209 - 
 
  tungsten, there is no problem with China's export restrictions on tungsten. In the Panel's view, the 
fact that China imports tungsten neither excuses nor justifies its export quota on tungsten, unless China argues and demonstrates that the export quota and its imports of tungsten somehow work 
together for conservation, and unless China explains how its imports of tungsten are evidence that 
its tungsten export quota does not discriminate in favour of its domestic users. The Panel recalls 
that the chapeau of Article XX is concerned with the way the challenged export quota is applied to other WTO Members. Clearly, if other WTO Members with tungsten reserves do not impose export 
restrictions, other WTO Members, including China, will be able to import tungsten from them; but 
this does not justify China's export restrictions on tungsten. In fact, the Panel considers that this situation seems to confirm the complainants' argument that China reserves its tungsten raw materials for Chinese manufacturers of downstream products through, inter alia , export restraints 
that create two markets (one domestic and one international) for the supply and demand of the 
raw materials, resulting in benefits to the development and export capacity of Chinese industries involved in tungsten processing and higher value-added manufacturing.
1163 In the Panel's view, it 
seems that China imposes an export quota on tung sten to discourage the export of tungsten. The 
Panel notes that China is fully entitled to pursue industrial policies that favour the production and export of value-added processed goods and discourage the export of raw materials. However, in 
doing so it must act consistently with its WTO rights and obligations regarding, inter alia , export 
quotas.  
7.830.  China also asserts that the relatively small size of the gap between foreign and domestic 
prices for tungsten in 2012 shows that its export quota was not targeted to provide a competitive 
advantage to the Chinese downstream sector using tungsten. Price data presented in Figure 5 of 
China's second written submission
1164 show a gap between foreign and domestic prices ranging 
approximately between 5% and 20% during 2012. Si nce even a small price difference in tungsten 
may provide a significant advantage to the downstream sector using tungsten, the evidence before 
the Panel does not allow us to exclude that exis ting price differences have indeed provided a 
competitive advantage to Chinese producers of value-added products containing tungsten. 
7.831.  Furthermore, when the Panel asked China for details on its pricing methodology for 
tungsten, the Panel understood China's response to mean that, for all three products including tungsten, Metal Pages  (China's source of price data for tungsten)
1165 uses estimated pricing that 
may well not reflect actual pricing1166, and that "this practice could lead to both the over-
estimation of the likely foreign price as well as the under-estimating of the foreign price."1167 Thus, 
the Panel does not consider it appropriate to rely on this price data evidence to establish non-discrimination. In addition, as discussed in the context of rare earths, neither is the Panel 
persuaded by the methodology used by China to calculate the price gaps. China subtracts the 
amount of the export duty from the f.o.b. price of  tungsten before comparing it to domestic prices. 
However, export duties and quotas interact, and in the case of tungsten, China has failed to justify 
the removal of the export duty from the f.o.b. pr ice on the ground that the removal of the export 
duty would not increase exports to the level necessary to fill the quota on tungsten.  
7.832.  Given the above, the Panel is not convince d that China's evidence regarding the price gap 
is sufficient to demonstrate that China's export quota on tungsten was not applied in a manner 
that would constitute arbitrary or unjustifiable discrimination or a disguised restriction on 
international trade. 
7.833.  Moreover, even accepting quod non  that, as China claims, the 2012 quota had no actual  
discriminatory impact in terms, for example, of price differences or other economic effects, the 
Panel is still of the view that the very structur e of the export quota system, which imposes unique 
and special burdens on foreign consumers on the basis of their being located outside of China, is 
                                               
1163 United States' comments on China's response to Panel question No. 25. 
1164 China's second written submission, figure 5 and para. 188. 
1165 China's responses to Panel question Nos. 40-42 and 85. 
1166 China's Second Written Submission, paragraph 126;  China's response to Panel question No. 85. 
1167 China's answer to Panel question No. 85. The Pane l recalls that, as explained in para. 6.21 of its 
Reports, on 17 June 2013, it sent an email to the part ies revising its question No. 85 and asking China to 
provide more pricing information for tungsten and mo lybdenum as well as for rare  earths. Even if China 
intended not to respond to the Panel's request for furt her pricing information on tungsten, the Panel is still 
entitled to raise the same doubts with respect to the reliability of the Metal Pages  data on tungsten as it raises 
with respect to the data  on rare earths, since Metal Pages  contains data on all three products at issue, and 
China has relied on Metal Pages  data in its arguments on all three products.  WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 210 - 
 
  discriminatory in violation of the requirements of  the chapeau of Article XX. The measures that 
China alleges constitute "restrictions on domestic production on consumption", and especially China's extraction and production quotas and its taxes on extraction, potentially restrict both domestic and foreign consumption of Chinese raw materials, while the export quota applies only to 
foreign users: there is no corresponding burden, such as a domestic consumption quota, imposed 
by China on Chinese consumers. Regardless of whether such a structural imbalance meets the "even-handedness" requirement under subparagraph (g) of Article XX, the Panel believes that it is 
discriminatory, insofar as it imposes added burdens on foreign consumers simply on the basis of 
their being located outside China, and with no conservation-related justification. 
7.7.3.2  Whether the rationale for the discri mination or the disguised restriction on 
international trade created by the applicatio n of China's export quota on tungsten is 
concerned with conservation 
7.834.  In accordance with the Appellate Body report in Brazil – Retreaded Tyres
1168, the Panel 
now proceeds to determine whether the discrimination that results from the application of China's 
export quota on tungsten is nevertheless justified and rationally linked to conservation goals. In 
Brazil – Retreaded Tyres , the Appellate Body explained that arbitrary or unjustifiable discrimination 
exists when the reason(s) for discrimination bear(s) no rational connection to the Article XX 
objective on the basis of which a Member claims to be regulating, or else contradicts or 
undermines that objective. This is why the determination whether a measure is discriminatory in violation of the chapeau of Article XX should not depend exclusively on its quantitative impact, but must consider also whether the rationale for the discrimination relates to the legitimate objective 
that the measure allegedly pursues (in this case, conservation of exhaustible tungsten resources). 
Therefore, to determine whether China has demons trated that its tungsten export quota is not 
unjustifiably discriminatory in violation of the chapeau of Article XX, the Panel needs to consider 
whether the rationale that China provides for the discrimination relates to the alleged conservation 
objective of the export quota. 
7.835.  The Panel recalls that more than 60% of tungsten extracted in China is consumed in 
China.
1169 Moreover, the Panel notes that according to China's own data, the 2012 extraction quota 
was exceeded by more than 40,000 tonnes. The Panel finds it difficult to understand the function of an export quota in such situation where, as the figures indicate, the main threat to the conservation of Chinese tungsten reserves, is domestic consumption. For the Panel, the export 
quota's main effect is to guarantee that domestic consumption benefits from a minimum amount 
of the extracted tungsten. The Panel recalls also that China has not suggested that price discrimination created by its export quota system is based on conservation considerations.  
7.836.  In the Panel's view, China has not demo nstrated that the distortion created by the 
application of its export quota system is merely incidental to conservation considerations. Indeed, China denies the existence of any discrimination. On the contrary, in the Panel's opinion the 
discrimination seems to result from aspects of China's export quota system that reflect industrial 
policy considerations. For example, the fact that  the quota system requires unused export quota 
shares to be returned to Chinese authorities
1170 and allows such returned volumes to be sold in the 
domestic market1171 seems to point towards industrial policy considerations, especially when 
exporting firms can only trade their non-used export  quota shares for tungsten products higher in 
the industrial chain (i.e. further-processed tungsten products). As we have noted previously, Members are free to pursue their own industrial policies, but they must do so consistently with 
their WTO commitments. 
                                               
1168 Appellate Body Report, Brazil – Retreaded Tyres , para. 226. 
1169 China has not provided data on the level of domestic tungsten consumption in 2012. However, the 
Panel notes that, according to Exhibi t CHN-223, the actual level of tungsten extraction in 2012 was 124,706, 
whereas only 15,863 (measured in metal content) or 19,916 (measured in gross weight) tonnes were actually exported. The Panel considers that the actual level of domestic consumption can be approximated by subtracting the level of actual export s from the level of actual extraction. 
1170 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. 
1171 China's response to Panel question No. 36. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 211 - 
 
  7.7.3.3  WTO-consistent alternatives 
7.837.  In the context of conducting an analysis under the chapeau of Article XX of a measure 
provisionally justified under subparagraph (g), the Appellate Body has examined whether a WTO-
consistent or less trade-restrictive alternative would be available and would enable the regulating 
Member to achieve its legitimate policy goals with  the same degree of efficiency and efficacy.1172 
According to the Appellate Body, discrimination can be considered arbitrary or unjustifiable where alternative measures exist which would have avoided or at least diminished the discriminatory 
treatment. For this reason, the Panel now proceed s to examine alternative measures put forward 
by the complainants. 
7.838.  The complainants put forward various alternatives that, they claim, China could use 
instead of export quotas and which, they claim, would provide China with the same level of 
conservation effectiveness while avoiding the discriminatory and distorting effects that the export 
quota has on foreign users. The parties expanded on these alternatives in response to a Panel question and the complainants discussed alternative measures for China's rare earths, tungsten, 
and molybdenum export quotas together. The Panel therefore refers to its discussion and analysis 
of alternative measures in section 7.6.3.3 above of its findings on the rare earths export quota.  
7.839.  China has not commented extensively on  these various, allegedly non-discriminatory 
alternatives, except to say that it already uses an export licensing system in addition to its export 
quota system. As the Panel has noted in its discussion of rare earths, China argues that nothing is able to replace the quota because the export quot a also fulfils a number of additional functions. 
Most importantly, it ensures that not only Chinese users but also foreign users receive a signal 
that China's tungsten supply is not unlimited and that they should explore alternative sources of 
supply.  
7.840.  With respect to the export quota's alleged signalling function, the complainants argue that 
China could have sent the relevant conservation-related signals to both domestic and foreign users 
alike in a non-discriminatory manner by tightening its production restrictions. The complainants insist that such signalling is clearly feasible, since China can simply enforce existing domestic 
production limits or adopt consumption limits to convey such signals. Such non-discriminatory 
signalling would be much more effective at controlling excessive production or consumption of tungsten, and would create an undistorted market and therefore a climate for long-term investments.
1173 To the extent that the current system reserves the lion's share of Chinese 
production for domestic industries, the export quota only reduces the incentive for domestic 
industrial users to take steps to conserve tungsten or to seek substitutes. 
7.841.  The Panel notes that China does not comment on the complainants' claim that all their 
suggested alternatives are WTO-consistent, whereas the export quota China uses is inconsistent 
with Article XI:1 of the GATT 1994. In the Panel's opinion, China needs to explain why such WTO-consistent or less trade-restrictive alternatives are not available to China. In the Panel's view, 
China has not done so.  
7.842.  The Panel recalls again that it is not as ked to assess the efficiency or effectiveness of 
China's conservation policy, but only to determine whether the export quotas it argues are part of 
its conservation programme are really about conservation rather than another policy reason, and 
whether any discrimination caused is justified on the basis of conservation. This requires the Panel 
to consider whether China has explored the use of WTO-consistent or less trade-restrictive alternatives that could achieve the same conservation goal with the same efficiency and 
effectiveness. China has not satisfied the Panel that it has fully explored and justifiably rejected 
the alternatives proposed by the complainants. 
7.843.  The Panel therefore concludes that the di scrimination and trade distortions engendered by 
China's export quota measures were both foreseeable and avoidable, including through the use of 
                                               
1172 Appellate Body Reports, US – Gasoline , pp. 25-29, DSR 1996:I, 3, pp. 23-27 and US – Shrimp , 
para. 171 ("The Inter-American Convention thus provides convincing demonstration that an alternative course 
of action was reasonably open to the United States fo r securing the legitimate po licy goal of its measure a 
course of action other than the unilateral and non-co nsensual procedures of th e import prohibition under 
Section 609".) 
1173 European Union's closing statement at th e second meeting of the Panel, para. 10. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 212 - 
 
  WTO-consistent alternative means such as border controls and policing and/or by imposing 
domestic taxes and consumption restrictions that would at least reduce the level of discrimination against foreign users.  
7.7.3.4  Conclusion 
7.844.  In light of the above, the Panel concludes that China has not demonstrated that its 2012 
export quota on tungsten was not applied in a manner that constitutes arbitrary or unjustifiable discrimination or a disguised restriction on international trade.
1174  
7.7.4  Overall conclusion on Ch ina's export quota on tungsten 
7.845.  For the reasons given above, the Panel concludes that China's export quota on tungsten is 
inconsistent with Article XI:1 of the GATT 1994 and Paragraphs 162 and 165 of China's Working Party Report. The Panel also concludes that China's export quota on tungsten is not justified under 
either subparagraph (g) or the chapeau of Article XX of the GATT 1994.  
7.8  Application of Article XX(g) to  China's export quota on molybdenum 
7.8.1  Application of subparagraph (g) to China's export quota on molybdenum 
7.8.1.1  Introduction 
7.846.  The Panel will now apply the legal test under Article XX(g) to China's export quota on 
molybdenum. The Panel will first assess whether th e export quota complies with subparagraph (g), 
and will then proceed to consider whether the export quota is justified under the chapeau of 
Article XX, before reaching an overall conclusion on the quota's WTO-consistency. 
7.8.1.2  First part: Whether China's export quota on molybdenum "relates to the 
conservation of exhaustible natural resources" 
7.847.  The Panel now turns to consider whether China's export quota on molybdenum "relates to 
the conservation of exhaustible natural resources". The Panel will begin by considering whether the products subject to China's export quota are "exhaustible natural resources". It will then proceed 
to consider whether China's measures "relate to" the "conservation" of such exhaustible natural 
resources. 
7.848.  Before proceeding, the Panel notes that the parties have focused less attention on 
molybdenum than on rare earths. China's second written submission has only four pages on 
molybdenum
1175, and does not include any argumentation on whether the export quota on 
molybdenum relates to the conservation of exhaustible natural resources.1176 Japan's second 
written submission does not specifically a ddress the quota on molybdenum in detail.  
7.849.  Additionally, many of the parties' ar guments on molybdenum draw on and incorporate 
their arguments on rare earths. As such, the Panel's findings on China's export quota on molybdenum are shorter than its findings on rare  earths, and, where appropriate, incorporate 
some of the analysis already set forth above.  
7.8.1.2.1  "exhaustible natural resources" 7.850.  China submits that molybdenum is susceptible to depletion by intense exploitation, and 
thus is an "exhaustible natural resource" within the meaning of Article XX(g) of the GATT 1994.
1177 
                                               
1174 In view of the nature of the ex port quota system described above, the Panel's finding is with respect 
to the series of measures comprising the relevant frame work legislation, the implem enting regulations, other 
applicable laws and the specific annual measures imposing the export quotas existing at the date of the Panel's establishment. 
1175 China's second written submission, paras. 191-205. 
1176 These paragraphs are solely concerned with whethe r China's export quotas on molybdenum result in 
a price advantage for Chinese consumers. 
1177 China's first written submission, para. 352. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 213 - 
 
  According to China, it has 43.9% of the worl d's known molybdenum reserves, and produces 38% 
of the world's molybdenum supply.1178 
7.851.  The United States submits that China's argument is based on a simplified assumption that 
"molybdenum" in the abstract is an exhaustible natural resource; however, China's export quota 
covers 14 tariff codes ranging from molybdenum ores and concentrates to molybdenum scrap and 
intermediate molybdenum products.1179 The United States recalls that the forms of bauxite and 
fluorspar subject to the challenged export restrictions in China – Raw Materials were clay minerals 
which, like molybdenum ores and concentrates, are basically in the form in which they are mined 
from the earth.1180 In contrast to Raw Materials , the United States notes that in the present 
dispute China's export quota covers not just ores but also a number of products that "might not themselves be considered 'exhaustible natural resources' because they are intermediately 
processed products".
1181  
7.852.  The European Union does not contest the fa ct that "molybdenum" is a "natural resource". 
However, the European Union stresses that the ex port quota that China imposes on "molybdenum" 
is also imposed on various forms of "molybde num" products which have undergone some degree 
of further processing.1182 
7.853.  As the Panel has explained above in the co ntext of China's export quotas on rare earths 
and tungsten, measures can "relate to the conserva tion of exhaustible natural resources" even if 
they do not act directly upon the resource sought to be conserved. Article XX(g) is not only available for measures that apply directly to the raw form of the resource in question, but to any measure that bears a "close", "real", or "substantial" relationship with the conservation of an 
exhaustible natural resource, regardless of the particular product that is the subject of the 
challenged measure. 
7.854.  All the parties seem to agree that molybdenum ores are exhaustible natural resources.
1183 
As such, the Panel does not need to determine whether semi-processed molybdenum products are 
themselves "exhaustible natural resources", but will instead focus its attention on whether China's export quota on semi-processed molybdenum products are "closely" or "substantially" related to 
the conservation of molybdenum ores.  
7.8.1.2.2  "conservation" 7.855.  China argues that it has adopted a cons ervation policy for its exhaustible molybdenum 
resources, and argues that the 2012 export quot a on molybdenum challenged by the complainants 
is both an integral part of this policy and works together with several other restrictions on the 
domestic production and consumption of molybdenum resources.
1184 
7.856.  China explains that the legal basis of its conservation policy for molybdenum is found in 
the Mineral Resources Law1185, and the Foreign Trade Law .1186 China recalls that Article 16 of the 
Mineral Resources Law1187 provides that for certain minerals "protective mining is prescribed by 
the State".1188 Further, Article 16(4) of the Foreign Trade Law1189 provides that the export of goods 
may be restricted "in order to effectively conserve exhaustible natural resources".  
                                               
1178 China's first written submission, para. 352. 
1179 United States' second written submission, paras. 261-262. 
1180 United States' second written submission, para. 265. 
1181 United States' second written submission, para. 267. 
1182 European Union's second written submission, para. 283. 
1183 United States' second written submission, para. 265; European Union's second written submission, 
para. 283; China's first written submission, para. 352.  
1184 China's first written submission, para. 342. 
1185 Mineral Resources Law , (Exhibit CHN-10). 
1186 Foreign Trade Law , (Exhibits CHN-11, JE-49). 
1187 Mineral Resources Law , (Exhibit CHN-10). 
1188 Mineral Resources Law , Article 16(3), (Exhibit CHN-10). 
1189 Foreign Trade Law , (Exhibits CHN-11, JE-49), Article 16(4). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 214 - 
 
  7.857.  According to China1190, China's conservation policy for molybdenum consists of the 
following categories of measures: 
 Measures limiting and controlling access  to the molybdenum industry1191; 
 Measures directly controlling the volume  of resources being produced and exported, 
consisting of a total production quota in a Directive Production Plan1192 and an export 
quota1193; 
 A resource tax  on molybdenum producers to ensure that the price of the resources 
reflects their costs1194; and 
 A measure requiring mines to make a deposit for ecological recovery.1195 
7.858.  In response to questions from the Panel, China conceded that it does not have an 
extraction quota on molybdenum.1196 Instead, China's arguments focus on the relationship 
between the challenged export quota and the goal of conserving exhaustible molybdenum ores.  
7.859.  The Panel begins by noting that China's conservation policy for molybdenum is similar in 
structure to China's conservation policy for rare earths, except that it contains fewer measures. 
Despite this difference, the Panel believes that its analysis in the context of rare earths is largely 
applicable in the context of molybdenum as well.  
7.860.  The Panel accepts that China has a conservation policy for its exhaustible molybdenum ore 
resources. As the Panel observed in the context of rare earths, it is certainly in China's own 
interests to conserve its molybdenum resources, and none of the parties have argued that China has no conservation policy with respect to such materials.
1197  
7.861.  As such, the Panel's sole task is to objectively assess China's export quota on molybdenum 
for compliance with the requirements of Article XX(g). Where the Panel looks at other measures 
that are also claimed to form part of China's molybdenum conservation policy, it does so only for the light such measures throw on the challenged export quota.  
7.862.  The Panel now proceeds to consider whether China's export quota on molybdenum "relates 
to" the conservation of molybdenum ores.  
7.8.1.2.3  Does China's export quota on molybdenum "relate to" the conservation of 
exhaustible molybdenum resources? 
7.8.1.2.3.1  Text of th e export quota measures 
7.863.  China's export quota on molybdenum is embodied in the following measures
1198: 
 2012 Export Licensing Management Commodities List1199; 
                                               
1190 China's first written submission, para. 346. The Pa nel notes that in paras. 342, 343, and 345 and in 
the title of chapter B (page 115) of China's first written submission, the reference is to "China's conservation policy for molybdenum". 
1191 Conditions for Admission to the Molybdenum Industry , (Exhibit CHN-108). 
1192 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94) and Second Batch 
of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). 
1193 2012 Export Licensing Catalogue , (Exhibits CHN-8, JE-48), Paragraph I(i), indicating that 
molybdenum is subject to export quotas. The expo rt quotas are administered on the basis of the Regulations 
on the Administration of the Import and Export of Goods , (Exhibits CHN-54, JE-50) and Export Quota 
Administration Measures , (Exhibits CHN-96, JE-52). 
1194 Amendment of the Provisional Regulations on Resource Tax , (Exhibit CHN-26) and Implementation 
Rules for the Provisional Regulations on Resource Tax,  (Exhibit CHN-27). 
1195 Opinions on Enhancing the Ecological Protection and Restoration of Mines , Section IV, 
(Exhibit CHN-32). 
1196 Panel question Nos. 114 and 141. 
1197 European Union's second written submission, para. 280. 
1198 China's first written submission, para. 347. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 215 - 
 
   Announcement of the Ministry of Commerce, No. 71 of 2011 Publishing the Total Export 
Quantity Quota for Agricultural and Industrial Products in 20121200; 
 Public Notice of Application Conditions and Application Procedures for the 2012 Export 
Quotas of Indium, Molybdenum and Tin1201; 
 Notice Publishing the List of the State Trading Export Enterprises of Tungsten, Antimony 
and Silver, the Enterprises Exporting and Supplying Tungsten and Antimony, and the Enterprises Applying for the Export Quot as for Indium and Molybdenum in 2012
1202; and 
 2012 Notice on List of Export (Supply) Enterprises and First Batch Export Quota of 
Tungsten, Antimony and Other Non-Ferrous Metals .1203  
7.864.  China argues that the texts of the measures embodying the 2012 export quota for 
molybdenum show a "close and genuin e relationship of ends and means"1204 between China's 
molybdenum export quota and the conservation objective.  
7.865.  According to China, the first evidentiar y basis establishing such relationship is the 
reference to conservation in the Public Notice of Application Conditions and Application Procedures 
for the 2012 Export Quotas of Indium, Molybdenum and Tin , which specifies the eligibility criteria 
for enterprises to participate in the quota allocation process. It notes that this Notice  states that it 
has been adopted "[i]n order to protect the resources".1205 
7.866.  China argues that further evidence of the "real" and "substantial" relationship between the 
export quota and the objective of conserving moly bdenum is found in the fact that the measures 
embodying the 2012 molybdenum export quota were  adopted on the basis of legal instruments 
that refer to China's conservation objective. China explains that the legal basis for using an export 
quota to conserve resources is contained in the following provisions: 
 Article 16(4) of the Foreign Trade Law1206 provides that the export of goods may be 
restricted "in order to effectively conserve exhaustible natural resources".  
 Article 35 of the Regulations on the Administration of the Import and Export of Goods 
indicates that the export of goods that  are considered to be exhaustible natural 
resources in need of conservation, "shall be restricted".1207   
                                                                                                                                               
1199 United States' Panel Request, pa ge 3, third bullet; European Unio n's Panel Request, page 3, third 
bullet; Japan's Panel Request, pa ge 3, third bullet. See also 2012 Export Licensing Catalogue , (Exhibits CHN-8, 
JE-48). 
1200 United States' Panel Request, pa ge 3, fifth bullet; European Unio n's Panel Request, page 3, fifth 
bullet; Japan's Panel Request, pa ge 3, fifth bullet. See also 2012 Export Quota Amounts , (Exhibits CHN-97, 
JE-58). 
1201 United States' Panel Request, pa ge 3, twelfth bullet; European Union's Panel Request, page 3, 
twelfth bullet; Japan's Panel Request, page 3, twelfth bullet. See also 2012 Application Qualifications and 
Application Procedures for Molybdenum Export Quota , (Exhibits CHN-107, JE-63). 
1202 United States' Panel Request, pa ge 3, seventh bullet; European Union's Panel Request, page 3, 
seventh bullet; Japan's Panel Request, page 3, seventh bullet. See also 2012 List of Enterpri ses for the Export 
(or/and Supply) of Tungsten, and List of Enterprises for the Export of Molybdenum , (Exhibits CHN-98, JE-65). 
1203 United States' Panel Request, page 3, ninth bull et; European Union's Panel Request, page 3, ninth 
bullet; Japan's Panel Request, page 3, ninth bullet. See also  2012 First Batch Export Quotas of Tungsten, 
Antimony and Other Non-Ferrous Metals , (Exhibits CHN-99, JE-59). 
1204 Appellate Body Reports, China – Raw Materials , para. 355 (citing Appellate Body Report, US – 
Shrimp , para. 136). 
1205 2012 Application Qualifications and Application Procedures for Molybdenum Export Quota , 
Introductory Paragraph, (Exhibits CHN-107, JE-63). 
1206 Foreign Trade Law , (Exhibits CHN-11, JE-49), Article 16(4). 
1207 Regulations on the Administration of  the Import and Export of Goods  (Exhibit CHN-54, JE-50), 
Article 35. Article 35 of the Regulations refers to Article 16(1), (2), (3) and (7) of the Foreign Trade Law , 
(Exhibits CHN-11, JE-49). Article 16(2) of the 1994 version of the Foreign Trade Law , (Exhibit CHN-61)  
specifies that export restrictions may be adopted to en sure the "effective protection  of exhaustible domestic 
resources". The Foreign Trade Law was last amended in 2004, the corresponding provision dealing with 
conservation of exhaustible natural resources is Article 16(4). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 216 - 
 
   For molybdenum, specific Measures for the Administration of Export Commodities Quotas 
apply as well. These Measures specify how export quotas, adopted on the basis of Article 35 of the Regulations on the Administration of  the Import and Export of Goods , 
and thus pursuing a conservation objective, are to be administered.
1208   
7.867.  According to China, the 2012 Export Licensing Catalogue , which specifies the goods 
subject to export quotas1209, MOFCOM's Announcement publishing the total export quota volume 
for molybdenum1210, the Public Notice of Application Conditions and Application Procedures for the 
2012 Export Quotas of Indium, Molybdenum and Tin1211 specifying the eligibility criteria for 
enterprises to participate in the quota allocation process, the Notices publishing the list of 
enterprises  applying for the export quota1212, and the list of enterprises to which part of the quota 
is granted1213 all refer to the instruments above as the legal basis for the imposition of export 
quotas to conserve resources.  
7.868.  The complainants dispute the probative value of these references to "conservation" in 
China's export quota measures for several reasons. The complainants consider them to be passing 
references.1214 They note moreover that China's export quota measures, which have been imposed 
for over a decade, have only made passing reference to the goal of conservation since the beginning of 2012.
1215 The complainants also contend that cross-references to legal instruments 
such as the Foreign Trade Law and Regulations  in the export quota measures are insufficient to 
meet China's burden under Article XX(g), since those instruments also list reasons other than conservation for which the export quota could have been imposed.
1216    
7.869.  The Panel begins by observing that it has discussed a number of the instruments invoked 
by China in its discussion above on rare earths and tungsten. Most importantly, the Panel has 
analysed the Foreign Trade Law  and the Regulations on the Administration of the Import and 
Export of Goods , and concluded that references to these documents in the texts of China's quota 
measures are insufficient to establish the required degree of correspondence between the 
challenged measures and the goal of conserving exhaustible natural resources. The Panel will not repeat what it has written above, but finds that the analysis given in the context of rare earths and 
tungsten is applicable also in the context of molybdenum.  
7.870.  It appears to the Panel that the only new exhibit as regards molybdenum is the Public 
Notice of Application Conditions and Application Procedures for the 2012 Export Quotas of Indium, Molybdenum and Tin . The Panel has examined this document and takes note that, as China has 
argued, it refers in its preamble to the goal of "protect[ing] the resources and environment". 
                                               
1208 Export Quota Administration Measures , (Exhibits CHN-96, JE-52), Article 3. 
1209 2012 Export Licensing Catalogue , Introductory Paragraph, (Exhibits CHN-8, JE-48) ("Pursuant to the 
Foreign Trade Law of the People's Republic of China and the Regulations on the Administration of the Import 
and Export of Goods of the People's Republic of China , the 2012 Export Licensing Management Goods List is 
hereby promulgated").  
1210 2012 Export Quota Amounts , Introductory Paragraph, (Exhibits CHN-97, JE-58) ("Pursuant to the 
Regulations of the People's Republic of China on th e Administration of the Im port and Export of Goods  and the 
Measures for the Administration  of Export Commodities Quotas , the 2012 total export quota quantity for 
agricultural and industrial prod ucts is hereby announced."). 
1211 2012 Application Qualifications and Application Procedures for Molybdenum Export Quota , 
Introductory Paragraph, (Exhibits CHN-107, JE-63) ("… according to the relevant provisions of the Foreign 
Trade Law of the People's Republic of China  and The People's Republic of  China Regulation on the 
administration on import and export of goods…"). 
1212 2012 List of Enterprises for the Export (or/and Supp ly) of Tungsten, and List of Enterprises for the 
Export of Molybdenum , (Exhibits CHN-98, JE-65), Introductory Para graph ("… in accordance with the Foreign 
Trade Law of the People's Republic of China and the Regu lations on the Administration  of Import and Export of 
Goods , … the list publishing online the enterprises applying  for the export quota fo r indium and molybdenum 
are hereby published."). 
1213 2012 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , 
(Exhibits CHN-99, JE-59) ("According to the Regulation s on Administration of Im port and Export of Goods  and 
the Measures for the Administrati on of Export Commodities Quotas , the list of export (supply) enterprises … is 
hereby announced and the first batch of the quota is hereby granted".). 
1214 United States' second written submission, para. 201; European Union's second written submission, 
para. 237. 
1215 United States' second written submission, paras. 202; European Union's second written submission, 
para. 237. 
1216 United States' second written submission, para. 203; European Union's second written submission, 
para. 238. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 217 - 
 
  However, the Panel observes that the full sentence  referred to by China reads as follows: "In order 
to protect the resources and environment, in coordination with industry policies of the nation , and 
further strengthen the export administration of the rare metal exports…".1217 In the Panel's 
opinion, the italicized phrase is clearly a reference to industrial rather than conservation policy. 
Although, as the Panel has noted, conservation and industrial policies are not necessarily 
incompatible, the Panel considers that the juxtaposition of references to conservation and industrial policies in the Public Notice  sends mixed messages, and thus the Panel cannot conclude 
on the basis of this document alone that China's export quota on molybdenum "relates to" 
conservation. 
7.871.  Additionally, and perhaps more importantly, the Panel believes that the texts of China's 
molybdenum export quota measures, including their references to conservation, do not explain 
how the export quota relates to the goal of co nserving exhaustible molybdenum. For instance, 
while the Public Notice of Application Conditions and Application Procedures for the 2012 Export 
Quotas of Indium, Molybdenum, and Tin  refers to the object of "protect[ing] the resources"
1218, the 
document contains no indication or explanation as to how the stated qualification conditions are 
closely or substantially related to the conservation of exhaustible molybdenum. The document states that the qualification conditions have b een adopted "in order" to conserve exhaustible 
natural resources, but the actual relationship between those conditions and the conservation 
objective is nowhere explained.  
7.872.  As the Panel has explained in the context of China's export quotas on rare earths and 
tungsten, references to "conservation" simply cannot substitute for a full and proper explanation of 
how the export quota on molybdenum was designed to promote conservation. While the 
references to conservation that China has pointed to do suggest that the export quota measures were imposed with conservation-related concerns  in mind, the Panel's task is to determine 
whether the design and architecture of the measur es "relate to conservation", and the references 
to which China has pointed do not, in the Panel's opinion, significantly illuminate this inquiry.  
7.873.  In sum, it is the Panel's opinion that China cannot discharge its burden of proof simply by 
citing a number of references to "conservation"  in the text of a challenged measure without 
explaining how the challenged measure "relates to", supports, or furthers the goal of conserving exhaustible molybdenum ores. Consequently, the Panel cannot conclude that China's export quota on molybdenum "relates to" the conservation of molybdenum ores on the basis of these 
references. 
7.874.  The Panel notes that, unlike in the contex t of rare earths and tungsten, China has not 
provided any further arguments explaining the relationship between its export quota on 
molybdenum and the goal of conserving exhaustibl e natural resources. It has not, for instance, 
argued that the export quota on molybdenum sends a signal to foreign and/or domestic users that China is serious about conserving its exhaustible natural resources.  
7.8.1.2.3.2   The possibility that unused ex port quota volumes will be sold to domestic 
consumers 
7.875.  The Panel notes that the European Union's argument that "if China were serious about 
conserving its resources, it would conserve the material that has not been used up by exports, 
instead of making it available to domestic producers".
1219 In the context of its arguments on rare 
earths, China has responded to this claim by arguing that the domestic availability of unused export quota volumes does not undermine the existence of a substantial relationship between the 
export quota system and the goal of conserving molybdenum, since the conservation levels 
determined in the production quota for any given year constitutes the level of conservation that China considers appropriate for that year.
1220 On this argument, there is no harm, from a 
conservation perspective, in allowing domestic molybdenum consumers to use whatever quantity 
of export-designated molybdenum has not been used by foreign consumers. 
                                               
1217 Emphasis added. 
1218 2012 Application Qualifications and Application Procedures for Molybdenum Export Quota , 
(Exhibits CHN-107, JE-63). 
1219 European Union's opening statement at th e first meeting of the Panel, para. 49. 
1220 China's response to Panel question No. 36. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 218 - 
 
  7.876.  The Panel disagrees with the European Union on this point. In the Panel's opinion, the 
mere fact that unused volumes are allowed to be sold into the domestic market does not in itself mean that the export quota system does not "relate to" conservation. Assuming that the extraction and/or production cap was a "real" restri ction, i.e. were set below the level of expected 
demand for the relevant period (i.e. for 2012), then we believe that the fact that China does not 
require unused export quotas to be preserved for use in future years does not necessarily cast doubt on its conservation objectives, since China is still pursuing conservation through the 
imposition, on an annual basis, of limits on produc tion. Within these limits, there is nothing illegal 
or even contradictory about China pursuing its own industrial or other goals (so long as these are pursued in a non-discriminatory manner).  
7.877.  While taking into account the unused shar e of the export quota in the determination of 
production and export quotas for the following year(s) may result in a higher degree of 
conservation, we believe that the Panel cannot find that China's measures as they stand do not "relate" to conservation merely because China has designed its export quota system in such a way 
as to prohibit the stockpiling or exchange of unused export quota shares among exporters while 
selling unused export quota volumes into the domestic  market. In our view, this is so even though 
taking into account such unused export quota shares for future years' determinations would result 
in a higher level of conservation. China is entitled to identify and pursue its own level of 
conservation, and once such level of conservation is determined, where products are eventually consumed (abroad or domestically) does not affect the relationship between the challenged measures and the goal of conserving exhaustible natural resources.  
7.8.1.3  Second part: whether China's export  quota on molybdenum is made effective in 
conjunction with restrictions on do mestic production or consumption 
7.878.  The Panel now turns to examine whether China's export quota on molybdenum is "made 
effective in conjunction with restrictions on domestic production or consumption." 
7.879.   China submits that it has a distinct conservation policy
1221 for molybdenum, including both 
export and domestic restrictions. Specifically, China argues that its conservation plan consists of 
four categories of domestic restriction: access conditions; quotas on extraction, production and 
export; resource taxes; and deposit for ecological recovery.1222 China also argues that its 
restrictions on domestic production and consumption of molybdenum are substantial. China argues that it meets the even-handedness requirement in A r t i c l e  X X ( g )  a s  l o n g  a s  i t  e n s u r e s  t h a t  t h e  
burden of its molybdenum conservation policy is not imposed solely on foreign consumers, but also 
on domestic consumers.
1223 The complainants rebut the four lines of China's argument, and 
maintain that China's conservation measures do not constitute "restrictions on domestic production 
or consumption" within the meaning of Arti cle XX(g) of the GATT 1994. According to the 
complainants, China's alleged conservation policy for molybdenum contains no domestic measure that counterbalances the export quota on moly bdenum products, and is therefore not even-
handed.
1224 
7.880.  The Panel now has to determine whether (i) China imposes  restrictions on domestic 
production or consumption of molybdenum; (ii) whether China's export quota is "made effective in conjunction with" such restrictions on domestic production or consumption; and (iii) whether 
China's domestic and foreign restrictions are "even-handed". 
7.8.1.3.1  Whether China has imposed rest rictions on domestic production or 
consumption of molybdenum 
7.881.  In its first written submission, China identifies four categories of measures that it argues 
restrict the domestic production or consumption of Chinese molybdenum resources.
1225 As noted, 
these categories are (a) access conditions; (b) resource taxes; (c) volume restrictions; and (d) 
                                               
1221 China's first written submission, section IV.B; China's response to Panel question No. 108. 
1222 China's first written submission, paras. 346 and 360. 
1223 China's first written submission, para. 333. 
1224 United States' second written submission, paras. 275-290; European Union's second written 
submission, paras. 287-306. 
1225 China's first written submission, para. 311. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 219 - 
 
  deposit for ecological recovery. The Panel will assess each of China's domestic measures 
individually.  
7.882.  In the following sections, the Panel will evaluate each legal instrument invoked by China as 
a restriction on domestic production or consumption, and assess whether these alleged restrictions 
are capable of having a limiting effect . The Panel recalls that a measure claimed to be a restriction 
is capable of having a limiting effect only if it is accompanied by actual enforcement. The Panel will therefore consider not only whether there are restrictions in the text of Chinese law, but also 
whether there China has adopted measures to enforce these alleged restrictions.  
7.883.  The Panel notes that, unlike in the context of its arguments on rare earths, China has not 
argued that it has measures to enforce its conservation policy on molybdenum. In response to a question from the Panel after the second meeting of the Panel with the parties, China provided 
three exhibits and claimed it has taken enforcement actions to ensure compliance with the alleged 
restrictions on domestic production or consumption of molybdenum. The Panel will assess these "enforcement actions". The Panel considers that "enforcement measures" are part of the design, 
structure, and architecture of each of the four alleged categories of restriction, and should be 
assessed together with each of those four categories. The Panel will also examine "enforcement measures" combating mining or production by illegal producers. The Panel recalls that domestic 
restrictions must be real and actual, which means that they must be in force, implemented and 
enforced. Accordingly, the Panel will consider the respective enforcement of each domestic legal instruments invoked by China pursuant to the second phrase of subparagraph (g).  
7.8.1.3.1.1  Whether the access conditions ar e restrictions on domestic production or 
consumption of molybdenum 
7.884.  China argues that it strictly limits acce ss to the molybdenum industry, and that, moreover, 
it is seeking to create a molybdenum industry that is organized in a rational and efficient 
manner.
1226 According to China, a rational industry structure facilitates supervision of the 
enterprises' compliance with the applicable conservation measures for molybdenum (including volume restrictions). China explains that strictly controlling access to the molybdenum industry 
also reduces the number of mines and producers, thus restricting total production.
1227 
7.885.  The measures invoked by China as access conditions to the molybdenum industry are: 
a. Opinions on the Integration of Exploitation of Mineral Resources1228 of 2006; 
b. Announcement on Admission to Molybdenum Industry1229of 2012.  
7.886.  The Panel has addressed the Opinions on the Integration of Exploitation of Mineral 
Resources  in its discussion of China's conditions on access to the tungsten industry. The same 
provisions of the legal instrument regarding the integration of the mining industries of "key types 
of minerals" (including molybdenum1230) are also applicable to the molybdenum industry. As we 
said in the context of tungsten, the Panel acknowledges China's argument that a rational industry structure facilitates the supervision of the enterprises' compliance with the applicable conservation 
measures for molybdenum (including the production quota). According to China, strictly controlling 
the access to the industry also reduces the number of mines and producers, and thus restricts total production. However, the Panel considers that China has not provided any explanation about how the integration work would affect the access of miners to the molybdenum industry, or on the 
progress of the integration work, in particular regarding the molybdenum mining industry. In the 
Panel's opinion, China has not demonstrated how an integrated molybdenum industry would necessarily restrict the mining or production of molybdenum. While access conditions may prevent 
new enterprises from entering the molybdenum industry, the Panel is not convinced that they 
could limit the amount of molybdenum produced by enterprises already in the market. Moreover, access conditions do not appear to control the amount of molybdenum produced by newly 
                                               
1226 China's first written submission, para. 362. 
1227 China's first written submission, para. 365. 
1228 2006 Opinions on the Integration of Exploitation of Mineral Resources , (Exhibit CHN-17). 
1229 Conditions for Admission to the Molybdenum Industry , (Exhibit CHN-108). 
1230 2006 Opinions on the Integration of Exploitation of Mineral Resources , (Exhibit CHN-17), 
Article IV(a). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 220 - 
 
  qualifying enterprises once they have met the conditions. Moreover, the Panel acknowledges that 
its task is to examine the domestic restriction existing concurrently  with the 2012 molybdenum 
export quota. China has failed to explain how an integration project that was supposed to be completed prior to the end of 2008 could be a restriction on the mining or production of 
molybdenum in 2012. 
7.887.  The Announcement on Admission to Molybdenum Industry
1231 specifies access conditions 
for mining and production enterprises seek ing entry into the molybdenum industry. The Circular  
addresses: (a) the establishment and layout of production enterprises; (b) production scale and 
equipment; (c) recovery of resources and ener gy consumption (minimum recovery rate); (d) 
environmental protection; (e) product quality; (f) safe production and occupational disease prevention and control; and (g) labour insurance.  
7.888.  The Panel notes that the Announcement on Admission to Molybdenum Industry  was made 
effective only in July 2012. The Panel doubts how this legal instrument could contribute to restricting production of molybdenum prior to July 2012 (including in the period 
January-June 2012).  
7.889.  The Panel also doubts how the access conditions described above, which restrict the entry 
of newcomers into the molybdenum industry, co uld restrict the activity of intermediate 
molybdenum producers who have already entered the molybdenum industry when there are no 
volume limits on the production of intermediate molybdenum. The Panel considers that the access conditions make it harder for new enterprises to enter the molybdenum industry, but considers 
that they do not control the amount of molybdenum that enterprises already in the industry may 
produce. The Panel therefore has difficulty finding that conditions such as a minimum production 
scale – which was designed to promote the efficiency of production after July 2012 – really  restrict 
domestic production.  
7.890.  The Panel understands that China's access conditions set the qualifications for miners 
and/or producers to enter the molybdenum industry. Violation of the access conditions will lead to a miner or producer losing its licence to produce,  and therefore becoming an illegal producer if 
they continue to mine or produce. The Panel will address the alleged actions against mining 
without a licence and violations of other production requirements in a separate section of its report.  
7.8.1.3.1.2  Whether the volume  restriction (production quota)  is capable of restricting 
domestic production of molybdenum 
7.891.  China argues that its 2012 conservation policy for molybdenum includes volume 
restrictions on domestic production, in the form of quotas set by the MIIT on the volume of 
molybdenum concentrates that can be produced from molybdenum ores.
1232 In response to a 
question from the Panel, China explains that it has not yet imposed an extraction quota on molybdenum as it does for rare earths and tungsten. According to China, this is attributable to the 
fact that molybdenum was not included in the 1991 "Circular on Including Tungsten, Tin, Antimony 
Ion-Absorption-Type Rare Earth Minerals into Special Minerals under the National Protective Mining ." As a result, the Ministry of Land and Resources (MLR) does not have the competence to 
set an extraction quota on molybdenum.
1233 
7.892.  China invokes the following legal instruments in support of its claim that it has imposed a 
restriction on the production of molybdenum concentrates in 20121234: 
a. 2012 First Batch of the Directive Production Plan of Rare Metals1235; and 
b. 2012 Second Batch of the Directive Production Plan of Rare Metals1236 
                                               
1231 Conditions for Admission to the Molybdenum Industry , (Exhibit CHN-108). 
1232 China's first written submission, para. 366. 
1233 China's response to Panel question No. 114. 
1234 China's first written submission, paras. 346 and 366. 
1235 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94). 
1236 Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 221 - 
 
  7.893.  The Panel notes that the MIIT issued the 2012 First Batch of the Directive Production Plan 
of Rare Metals on 13 January 2012, which specified the fi rst batch of the production quota of 
molybdenum (100,000 tonnes).1237 On 6 July 2012, the MIIT issued the 2 012 Second Batch of the 
Directive Production Plan of Rare Metals,  which  specified the second batch of the production quota 
of molybdenum (94,520 tonnes).1238 The annexes to these two instruments specify the allocation 
of the production quota at the regional level.1239 The Panel considers that these two batches of 
production quota together indicate the maximum amount of molybdenum concentrates that could 
be produced by the end of 2012. According to  the data in Exhibit CHN-224, the total 2012 
production quota (194,520 tonnes) was lower than the actual amount of molybdenum concentrates (229,600 tonnes) produced in 2011.  
7.894.  However, as the Panel explained above in its discussion of the legal test under 
Article XX(g), the fact that a quantitative restriction on domestic production or consumption (here, 
the molybdenum production plan) is, in a given year, set at a level lower than that at which it was set in a previous year does not necessarily mean that it constitutes a "restriction" within the 
meaning of Article XX(g). What matters, in the Panel's view, is that the quantitative restriction be 
set below the expected level of demand for the period in which the alleged restriction is intended to apply. Since expected demand may fluctuate fr om year to year, the mere fact that China's 
molybdenum production was set in 2012 at a volume lower than the actual level of production in 
2011 does not of itself establish that the production  quota constituted a "restriction". Instead, the 
Panel needs to determine whether the 2012 production quota was set at a level below the expected demand for 2012.  
7.895.  Unfortunately, China has not provided any evidence as to the expected level of demand for 
2012 on the basis of which the Panel could assess whether the 2012 molybdenum production plan constituted a "restriction" for the purposes of Article XX(g). As such, the Panel is unable to 
conclude that the 2012 molybdenum production quot a, as established by Chinese law, constituted 
a real "restriction" for the purposes of Article XX(g). 
7.896.  With respect to enforcement, the complainants note that China has not argued that the 
production target actually restricted production of molybdenum in 2012.
1240 Moreover, according to 
the complainants, the fact that extraction exceeded the production quota in 2012 shows that China does not have restrictions or limitations on domestic production.
1241 Indeed, the complainants refer 
to the data provided by China, and note that the volume of molybdenum extraction and domestic 
consumption has increased dramatically in the last decade.1242 
7.897.   China refers to the first and second batches of the Directive Production Plan of Rare 
Metals  and describes the compliance requirements in two paragraphs in its first written 
submission. According to China, utilization of an d compliance with the production quota must be 
reported on a monthly basis to the MIIT. In case an enterprise produces without a share of the export quota or beyond its share of the quota, "it will be ordered to stop producing immediately 
and the sources of ore products will be traced". Further, "punishments are imposed on enterprises 
conducting illegal purchases and sales of…ore products".
1243 The two legal instruments also 
indicate that "[f]or those enterprises that produced beyond the plan in 2011 and that with 
environmental pollution and safety risk, the plan qu ota shall be reduced or even cancelled". On the 
other hand, "for those enterprises that strictly fo llowed the plan, and meet the requirement of safe 
production, the quota may be properly increased".1244  
7.898.  In the Panel's view, the texts of the two batches of the 2012 Directive Production Plan of 
Rare Metals  appear to set a quota on the production of molybdenum concentrates, and entail 
                                               
1237 First Batch of the 2012 Directive Production Plan of Rare M etals, (Exhibit CHN-94). 
1238 Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95). 
1239 First Batch of the 2012 Directive Production Plan of Rare Metals , Annex, (Exhibit CHN-94) and 
Second Batch of the 2012 Directive Production Plan of Rare Metals , Annex, (Exhibit CHN-95). 
1240 United States' second written submission, para. 278; European Union's second written submission, 
para. 295. 
1241 United States' second written submission, para. 280; European Union's second written submission, 
para. 293. 
1242 European Union's second written submission, paras. 293-294. 
1243 China's first written submission, para. 369; First Batch of the 2012 Directive Production Plan of Rare 
Metals , paras. III, IV and V, (Exhibit CHN-94). 
1244 China's first written submission, para. 368. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 222 - 
 
  compliance requirements as well as sanctions on over-quota production. However, China has not 
put forward any evidence regarding enforcement or  sanctions against over-quota production of 
molybdenum concentrates in 2012. The Panel notes that the text of the 2012 production quota measures mention sanctions for over-quota production and for violations of the safe production 
requirements that occurred in 2011. The Pane l considers that China needed to put forward 
evidence, e.g. the text of 2013 production quota, which might have mentioned sanctions for over-quota production and for violations of the safe production requirements that occurred in 2012. As 
it stands, the Panel considers that China has not adduced evidence indicating the number of 
enterprises fined for the over production in 2012, and whether and by how much their share of the production quota was reduced or even cancelled. 
7.899.  Moreover, the Panel notes that China has not demonstrated how exactly over-quota 
producers are sanctioned. For instance, at the Panel's second meeting with the parties in June 
2013, by which time the 2013 annual production qu ota for molybdenum should have been issued 
and allocated to each molybdenum concentrate prod ucer, China had still not indicated whether this 
quota had actually been implemented and if any sanctions had been imposed on those enterprises 
that produced over their quota limit. 
7.900.  The Panel notes that, according to China's own statistics, actual production of molybdenum 
concentrate reached 267,947 tonnes in 2012, which is approximately 38% higher than the 
production quota. In the Panel's opinion, this suggests that the quota was not sufficiently enforced. Although the Panel has stated earlier that it does not consider that there is an effects test under the second part of Article XX(g), the Panel notes that China does not deny this over production and 
has not attempted to explain or justify it. 
7.901.  In sum, the Panel is not convinced that China imposed enforcement actions capable of 
effectively capturing and sanctioning any violatio n of the production quota. As such, the Panel 
believes that the production quota was not a restriction on domestic production as required under 
Article XX(g).  
7.8.1.3.1.3  Whether China's resource tax is  a restriction on domestic production or 
consumption of molybdenum 
7.902.  China refers to the Decision of the State Council to Amend the Provisional Regulations on 
Resources Tax
1245, Implementation of the Provisional Regulations on Resource Tax1246 and Circular 
on Taxation on Adjusting the Applicable Tax Rate of Resource Tax for Tin and Other Ores1247, and 
indicates that it increased the resource tax imposed on molybdenum miners in February 2012. The 
tax rate after adjustment is 12 RMB per tonne for 1st class of ore, 11 RMB per ton for 2nd class, 
10RMB per tonne for 3rd class, 9 RMB per tonne for 4th class and 8 RMB per tonne for 5th class of 
ore.1248  
7.903.  To support its argument, China provides  the following data from a "major molybdenum 
supplier", Jinmu Group, and argues that, faced wi th significantly increased costs for operating 
molybdenum mines, these mines will want to pass on part, it not all, of these costs to downstream 
consumers. According to China, the increased resource tax will lead to higher molybdenum prices and thus limit domestic consumption.
1249 
Mine Ore grade Extraction in 
2011 Original 
resource tax Adjusted 
resource tax Increase in 
cost (RMB) 
Jinduicheng Mine 0.099% 10,000,000 6 RMB/ton 10 RMB/ton 40,000,000 
Ruyang Mine 0.12% 1,650,000 8 RMB/ton 12 RMB/ton 6,600,000 
 7.904.  The Panel acknowledges that increased costs caused by the tax could, in the long run, lead 
to a reduction in demand and therefore limit pr oduction of molybdenum ores. However, China did 
                                               
1245 Amendment of the Provisional Regulations on Resource Tax , (Exhibit CHN-26). 
1246 Implementation Rules for the Provisional Regulations on Resource Tax , (Exhibit CHN-27). 
1247 Circular on Adjusting the Applicable Tax Ra te of Resource Tax for Tin and Other Ores , 
(Exhibit CHN-112). 
1248 China's first written submission, footnote 547. 
1249 China's first written submission, paras. 372-373 (ref erring to Zhang Fang, Guo Xiaolu, "An Analysis 
on Resource Tax Adjustment" , China Securities Research , 22 February 2012, (Exhibit CHN-109). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 223 - 
 
  not submit any evidence about either the percenta ge of such tax on producers or the price of 
molybdenum ores1250 that could have enabled the Panel to assess whether the resource tax is 
capable of limiting the production or consumption of molybdenum. In other words, the evidence presented by China does not explain, on a percen tage basis, how much of the overall cost of 
production is attributable to the tax, and how much is due to the companies' scale of production. 
The Panel considers that evidence from two particular enterprises
1251 is not sufficient to 
demonstrate that the resource tax on molybdenum is a real and actual restriction on domestic 
production or consumption.  
7.8.1.3.1.4  Whether environmental requir ements are restrictions on domestic 
production or consumption 
7.905.  China refers to the Opinions on Enhancing the Ecological Protection and Restoration of 
Mines1252 in its first written submission and argues that this measure increases the costs of 
molybdenum production by requiring that, once a mi ning company obtains an extraction right, it 
must make an ecological recovery deposit. Howeve r, the Panel notes that Exhibit CHN-32, entitled 
Opinion on Strengthening Rare Earth Mine Ecological Protection and Governance and Recovery , 
does not refer to molybdenum.  
7.906.  In response to a question from the Panel1253, China submits that it has four relevant legal 
instruments applicable to the molybdenum industry relating to emission standards, ecological 
protection, restoration of mines, and inspection of compliance. These are: 
a. Announcement on Admission to Molybdenum Industry of 2012 ; 
b. Circular on Environmental Protection Inspection of Tungsten and Molybdenum 
Enterprises;  
c. 2012 First Batch of the Directive Production Plan of Rare Metals  ; 
d. 2012 Second Batch of the Directive Production Plan of Rare Metals . 
7.907.   China claims that these legal instruments contain a link to the Directive Production Plan . 
The Panel will examine each instrument and assess whether the environmental requirements 
contained therein are real restrictions on domestic production or consumption. 
7.908.  The Announcement on Admission to Molybdenum Industry1254 elaborates emission 
standards for pollutants from the molybdenum industry, and establishes compliance with the emission standards as one of the conditions for enterprises accessing the molybdenum industry. The Panel notes that it has discussed this legal instrument in the section on "access conditions" 
and has expressed doubt about how the access conditions, which apply to newcomers seeking 
access to the industry, could restrict the activity of molybdenum producers who have already entered the molybdenum industry.  
7.909.  The Circular on Environmental Protection Inspection of Tungsten and Molybdenum 
Enterprises
1255 provides for the inspection of molybdenum companies' compliance with applicable 
environmental requirements and for the publication of a list of complying companies. However, the 
Circular was issued in April 2013. China has not explained how a legal instrument put in place in 
2013 could restrict extraction, production, or consumption of molybdenum in 2012. This measure is not concurrent and is therefore not relevant  to the disputed 2012 molybdenum export quota. 
                                               
1250 The Panel notes that in Molybdenum roasted concentrates: Price Data , (Exhibit CHN-169), China 
provides molybdenum ro asted concentrates price data. However, th ere is no data available on molybdenum 
ores. 
1251 China's first written submission, para. 372. 
1252 Opinions on Enhancing the Ecological Protection and Restoration of Mines , Section IV, 
(Exhibit CHN-32). 
1253 Panel question No. 100. 
1254 Conditions for Admission to the Molybdenum Industry , (Exhibit CHN-108). 
1255 Circular on Environmental Prot ection Inspection of Tungsten  and Molybdenum Enterprises  , General 
Office (Huan Ban Han [2013] No. 442), Ministry of Enviro nmental Protection, 24 April 2013, (Exhibit CHN-217). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 224 - 
 
  7.910.  Additionally, according to the two batches of the  Directive Production Plan of Rare 
Metals1256, only enterprises on the list of enterpri ses that meet the environmental protection 
requirements published by the Ministry of Environm ental Protection are eligible to apply for a share 
of the production quota. However, the Panel fa ils to see how this environmental requirement, 
acting as a qualification requirement, could restrict the amount of molybdenum produced by 
enterprises that have already obtained a share of the production quota.  
7.911.  The Panel is aware that any regulatory requirement will impose compliance costs on the 
concerned enterprises. However, the issue before the Panel is whether China's environmental 
regulatory requirements restrict domestic production or consumption so as to conserve molybdenum. 
7.912.  In the Panel's view, China has not addu ced detailed evidence to establish that the 
environmental costs it invokes would have any price pass-through effect on consumers such that 
production of molybdenum would be restricted. In the Panel's view, environmental costs are 
ordinary production costs imposed on enterprises to address market externalities (in the present 
context, environmental pollution caused by the production of molybdenum).  
7.8.1.3.1.5  Whether measures for combating illegal mining ar e restrictions on domestic 
production or consumption 
7.913.  In response to a question from the Panel
1257, China referred to the following legal 
instruments and submitted that China has measures in place to combat the illegal mining of molybdenum: 
a. Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law
1258; 
b. Circular of Hebei Province on Issuing the Pr ogram of the Rectification of Metal and Non-
Metal Mines according to Law .1259 
7.914.  The Panel has addressed these legal inst ruments when considering enforcement action 
against the illegal mining of tungsten. The same provisions of the legal instruments are applicable 
to the molybdenum industry. They address illegal mining, violation of safe production conditions, and mines with outdated processes, technologies and devices.
1260 
7.915.  The Panel notes that in Exhibit CHN-219, Ch ina provides examples of ways in which it has 
cracked down on illegal molybdenum mining in 2012.  
7.916.  The Panel acknowledges that China has made efforts to combat illegal mining. However, 
the Panel has difficulties seeing how the two above-mentioned legal instruments promulgated at 
the end of 2012 could be used to combat illegal mining during 2012. Section I(II) of the Opinions 
sets the goal of combating ill egal mining by the end of 2015.1261 Section III(C) of the Circular 
provides that the period of rectification and clampdown in Hebei province would be from 
1 February 2013 to 31 December 2014.1262 Therefore, the Panel considers that while the two legal 
instruments provide for the future combating of illegal production, they do not establish a mechanism applicable or operative in 2012. Reca lling that our task is to examine whether 
domestic restrictions exist concurrently with the challenged export restrictions, the Panel considers 
that China has failed to demonstrate that the above-mentioned instruments were capable of having a "limiting effect". 
                                               
1256 First Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-94), Article II and 
Second Batch of the 2012 Directive Production Plan of Rare Metals , (Exhibit CHN-95), Article II. 
1257 Panel question No. 109. 
1258 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218). 
1259 Program of the Rectification of Metal and Non-metal Mines in Hebei Province , (Exhibit CHN-220). 
1260 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , Section II, 
(Exhibit CHN-218) and Program of the Rectification of Metal and Non-metal Mines in Hebei Province , Section II, 
(Exhibit CHN-220). 
1261 Opinions on the Rectification of Metal Mines and Non-Metal Mines according to Law , 
(Exhibit CHN-218). 
1262 Program of the Rectification of Metal and Non-metal Mines in Hebei Province , (Exhibit CHN-220). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 225 - 
 
  7.8.1.3.1.6  The cumulative effect of all domestic restrictions and even-handedness 
7.917.  China claims that the net effect  of the four categories of measures (i.e. access conditions, 
resource taxes, volume restrictions, and environmental requirements) is a lower rate of molybdenum production in China than would otherwise have been the case.
1263 The Panel recalls 
first that subparagraph (g) does not call for an assessment of the effects of the concerned 
domestic measures. However, even if the Panel wanted to consider this argument, China has not explained in sufficient detail how the net effect of the four categories of measures work together in 
the way China claims. As such, the Panel has difficulty accepting China's claim.  
7.918.  In sum, the Panel does not understand how China's production restrictions on molybdenum 
can be considered as working together coherently for the purpose of conservation. 
7.8.1.3.2  Whether the 2012 export quota on molybdenum was "made effective in 
conjunction with" restrictions on do mestic production or consumption 
7.919.  The Panel recalls that subparagraph (g) requires that GATT-inconsistent trade measures 
work together with domestic restrictions to conserve exhaustible natural resources.
1264 The Panel 
considers that the phrase "made effective in co njunction with" requires the simultaneous or 
perhaps near-simultaneous operation of the relevant foreign and domestic restrictions. As the panel stated in China – Raw Materials , "to benefit from the justification permitted under 
subparagraph (g), a Member cannot seek to rely on a future or potential domestic restriction; nor 
will measures enacted concurrently but which only have effect or are foreseen to have effect only in the future respect the Article XX(g) criteria, for they must not only exist concurrently; they must 
operate concurrently.1265" In the Panel's view, the phrase "work together with" also suggests a 
degree of substantive operative complementarity between the trade and domestic restrictions.  
7.920.  China claims that its restrictions on domestic production and consumption of molybdenum 
are substantial, and that domestic users, together with foreign consumers of molybdenum, 
collectively  bear the burden of China's conservation policy. In the Panel's view, China's argument 
does not explain how the export quota works together with restrictions on domestic production or consumption for conservation. On the contrary, for the following reasons, the Panel finds that 
China's export quota and the restrictions on domestic users or producers of molybdenum referred 
to by China do not appear to always work coherently towards the goal of conservation. 
7.8.1.3.2.1  The different product scopes of China's export quota and production quota  
7.921.  The Panel notes that the volume restrictions in China's conservation policy on 
molybdenum, i.e. China's production and export quotas, are imposed on products at different 
stages of the molybdenum industry value-added chain.  
Mining products (molybdenum ores 
and concentrates) Upstream intermed iate products 
(such as molybdenum oxide) Downstream (such as finished 
stainless steel products) 
Export quota 
Production restrictions 
 
7.922.  As represented in the above table, Ch ina imposes a production quota on molybdenum 
concentrates, while China's export quota covers not only molybdenum concentrates but also semi-processed molybdenum products such as molybdenum oxides and hydroxides, ammonium 
molybdates, other molybdates, ferro-molybdenum, molybdenum powders, and unwrought 
molybdenum, including bars and rods obtained simply by sintering, etc.
1266  
7.923.  China argues that it must include molybde num intermediaries in its export quota to avoid 
the possibility of circumvention through export ation of molybdenum products after some basic 
processing.1267 China does not provide any further explanation of the rationale for setting the 
                                               
1263 China's first written submission, para. 361. 
1264 Appellate Body Reports, China – Raw Materials , para. 356. 
1265 Panel Reports,  China – Raw Materials, para. 7.455  (emphasis original) . 
1266 China's response to Panel question No. 100. 
1267 China's response to Panel question No. 132. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 226 - 
 
  product scope of its 2012 export quota on molybdenum differently from that of its domestic 
production restriction. 
7.924.  The Panel also notes that in announcing the second batch of the export quota for 2012, 
China indicated that as of 1 August 2012, export  companies allocated quota shares for specific 
molybdenum products would be allowed to adjust their export quota allowances to apply to 
molybdenum products higher up in the industrial chain, without first seeking authorization from MOFCOM.
1268 These quota shares may be freely allocated to molybdenum products higher in the 
industrial chain, but may not be reallocated to molybdenum products with a lesser degree of 
processing. 
7.925.  In the Panel's opinion, this inconsistency appears to be linked to China's industrial policy, 
which requires molybdenum intermediaries for use as inputs in the national production of value-
added goods often destined for exports. The Panel does not see any connection with conservation 
considerations. The Panel has difficulty seeing  how the 2012 export quota, with the current 
product scope on molybdenum intermediaries, "work[s] together with" the production quota on 
molybdenum for conservation.  
7.926.  In the Panel's view, China's 2012 export quota was designed to reserve a certain amount 
of specific molybdenum intermediaries for use by domestic downstream industries. In the Panel's 
opinion, this is industrial policy. Although the Panel recognizes that WTO Members have the right 
to pursue industrial policies, industrial poli cies cannot be implemented under the guise of 
conservation. Taking into account the design, stru cture, and architecture of China's export quota 
and the production quota, the Panel considers th at China has failed to explain how the product 
scope of its export quota works together with its production quota on molybdenum concentrates 
for the purpose of conservation. The Panel cannot identify any functional and operational complementarity between China's export quota and its alleged domestic restrictions for enhancing 
conservation. 
7.8.1.3.2.2  A global quota while demand may be product specific 
7.927.  The Panel recalls that China imposes a global export quota (in addition to export duties) on 
exports of molybdenum. The export quota for molybdenum is further allocated among the 
following three molybdenum product categories: (1) primary raw molybdenum; (2) chemical molybdenum products; and (3) molybdenum products.
1269 One aspect of the operation and 
application of China's export quota system the Panel finds troubling is the fact that molybdenum 
export quota shares cannot be exchanged amongst exporters or reallocated to different exporters 
if unused. Under China's Regulations on the Administration of the Import and Export of Goods , the 
holder of an export quota is required to return any unused quota volume by 31 October of the year 
for which the export quotas have been issued.1270 Exporting enterprises may be subject to sanction 
if they fail to do so and also fail to fully use their quota by the end of the year.1271 Enterprises may 
also face sanctions for exporting without permissi on, exceeding the quantitative limitations, or 
buying or selling quota certificates or other documents without approval. Thus, unused export 
quota shares can only be handed back to the Ch inese authorities, from which point they may be 
sold domestically.1272 However, as noted above, the notice announcing the "second batch" export 
quota clarified that, as of 1 August 2012, the export companies allocated quota allowances for 
specific molybdenum products may adjust the export quota allowances to apply to molybdenum 
products higher in the industrial chain, wi thout first seeking authorization from MOFCOM.1273 
                                               
1268 The Notice indicates the industrial chain for mo lybdenum proceeds as follows: molybdenum furnace 
materials (primary raw molybdenum)  molybdenum chemical products  molybdenum products. See 2012 
Second Batch Export Quotas of Tungsten , Antimony and Other Non-Ferrous Metals , (Exhibits CHN-165, JE-60). 
1269 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals 
(Exhibits CHN-99, JE-59); 2012 Second Batch Export Quotas of Tung sten, Antimony and Other Non-Ferrous 
Metals  (Exhibits CHN-165, JE-60). 
1270 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. 
1271 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. 
1272 China's response to Panel question No. 36. 
1273 The Notice indicates the industrial chain for mo lybdenum proceeds as follows: molybdenum furnace 
materials (primary raw molybdenum)  molybdenum chemical products  molybdenum products. See 2012 
Second Batch Export Quotas of Tungsten , Antimony and Other Non-Ferrous Metals , (Exhibits CHN-165, JE-60). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 227 - 
 
  According to the notice, these quota shares may be freely allocated to molybdenum products 
higher in the industrial chain, but may not be reallocated to molybdenum products with a lesser degree of processing.  
7.928.  In the Panel's opinion, this is problematic for two reasons. First, the "first batch" export 
quota shares for molybdenum, which indicates the specific amount of specific categories of 
molybdenum allocated to specific enterprises
1274, provides no flexibility for exporters to fulfil the 
demand for any specific form of molybdenum product other than the amount allocated to specific 
enterprises.1275 Second, the "second batch" allows only reallocation of export quota shares to 
molybdenum products higher in the industrial chain. The result of allocating specific products to specific enterprises is that the overall export quota volume may be unused, and thus partly available for domestic consumption, while foreign demand may still be unsatisfied for one or more 
specific molybdenum products. It is therefore possible that the export quota for molybdenum 
might go unfilled even though demand for one or  more molybdenum products remains unsatisfied. 
7.929.  In the Panel's opinion, this inconsistency appears to be linked to China's industrial policy, 
which requires molybdenum intermediaries for use as inputs in the national production of value-
added goods often destined for exports. The Panel does not see any connection with conservation considerations. The Panel has difficulty seeing  how the 2012 export quota, with the current 
product scope on molybdenum intermediaries, work together with" the production quota on 
molybdenum for the purpose of conservation.  
7.930.  In the Panel's view, China's 2012 export qu ota seems rather designed to reserve a certain 
amount of specific molybdenum intermediaries for use by domestic downstream industries. In the 
Panel's opinion, this is industrial policy. Although the Panel has recognized that WTO members 
have the right to pursue industrial policies, in dustrial policies cannot be implemented under the 
guise of conservation. Taking into account the desi gn, structure, and architecture of China's export 
and production quotas, the Panel considers that China has failed to explain how the product scope 
of its export quota works together with its prod uction quota on molybdenum concentrates for the 
purpose of conservation. The Panel cannot identify any functional and operational complementarity 
between China's export quota and the domestic restrictions referred to by China for enhancing 
conservation. 
7.8.1.3.2.3  Policies on domestic consumpt ion and foreign consumption of molybdenum  
7.931.  In the Panel's view, the fact that unused export quota volumes are allowed to be 
consumed domestically, while there are no measures restricting domestic consumers from 
consuming some or even all of the volume of molybdenum products that were designated for 
export, suggests that China has not been ev en-handed in imposing foreign and domestic 
restrictions. Although, as the Panel has explained above, the mere fact that unused export quota 
volumes can be sold into the domestic market does not, of itself, indicate that China's export quota does not "relate to" conservation, it does s eem to favour domestic over foreign users. The 
Panel considers that there is nothing in the design and structure of the conservation policy 
imposed on domestic consumers to counterbalance the policy that allows domestic consumption of the unused export quota of molybdenum products. Th erefore, there is no even-handedness in the 
imposition of export quota and the domestic restrictions referred to by China.  
7.932.  The Panel also observes that there was no limitation on the production of molybdenum 
concentrates prior to 2010, although there has been an export quota on molybdenum products 
since 2007. China does not argue that it has imposed any restriction on the domestic consumption 
of molybdenum. The Panel notes that prior to 2010, China's domestic molybdenum downstream 
users (such as finished stainless steel producers) could consume an unlimited amount of molybdenum products. After 2010, the available amount of molybdenum was maintained at a level 
at least twice that of the yearly molybdenum export quota.
1276 In the Panel's view, this makes it is 
difficult to understand how China's export quota and domestic restrictions work together to enhance conservation. 
                                               
1274 Annex 2 of 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals  
(Exhibits CHN-99, JE-59). 
1275 Annex 2 of 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals  
(Exhibits CHN-99, JE-59). 
1276 Molybdenum Data  (1999-2012)  (Exhibit CHN-139 updated), (Exhibit CHN-224). WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 228 - 
 
  7.933.  In the Panel's opinion, restrictions im posed on producers of molybdenum concentrates 
affect both domestic and foreign consumers, wh ile the export quota on molybdenum affects only 
foreign consumers. From a structural perspective, China's production restrictions therefore do not counterbalance its export restrictions, and so do not appear to work well together for the purpose 
of conserving exhaustible molybdenum resources.  Moreover, export quotas are not the only 
restrictions imposed by China on exports of intermediate molybdenum products. China also imposes export duties on intermediate molybdenum  products. The Panel will discuss the combined 
effect of export quotas and export duties on molybdenum in its analysis under the chapeau of 
Article XX. Additionally, in contrast to its export  restrictions on lower value-added products, China 
provides tax and export incentives through, for example, refunds of the VAT upon the exportation 
of higher value-added molybdenum products.
1277 Such tax incentives can only stimulate production 
for export, and seem to act contrary to conservation goals and restrictions. 
7.8.1.4  Even-handedness 7.934.  The Panel recalls that subparagraph (g) of Article XX also requires even-handedness in the 
imposition of domestic restrictions for conservation. The Panel agrees with China that China's 
domestic regulations are inherent to any conservation programme and may be argued to be capable of imposing concurrent real restriction on consumption or production of molybdenum. 
However, the Panel fails to see how such domestic actions can be said to be capable of imposing a 
burden even-handed with that resulting from its export quotas on molybdenum so that the export 
quota and its related domestic restrictions on molybdenum work together for conservation. The Panel believes that the restrictions imposed on producers of molybdenum affect both domestic and 
foreign consumers, while the export quota on molybdenum affects only foreign consumers. From a 
structural perspective, China's production restrictions therefore do not counterbalance its export restrictions and do not appear therefore to work well together.  
7.935.  Additionally, in the Panel's view the fact that any unused export quota volume is allowed to 
be consumed domestically, while there are no restrictions on domestic consumers consuming the molybdenum products designated for export in the export quota, suggests that China has not 
imposed even-handed restrictions on domestic an d foreign consumption. Although, the mere fact 
that unused export quota volumes can be sold into the domestic market does not, of itself, indicate that China's export quota does not "rel ate to" conservation, it does seem to favour 
domestic over foreign users. The Panel considers that there is nothing in the design and the 
structure of the conservation policy imposed on domestic consumers to counter-balance the policy 
that allows domestic consumption of the unused export quota of molybdenum products. Therefore, there is no even-handedness in the imposition of export quota and the domestic restrictions 
referred to by China. 
7.8.1.5  Conclusion 7.936.  As explained above, the Panel is of the vi ew that all the elements of subparagraph (g) aim 
at ensuring that the challenged measure works with domestic restrictions for conservation and 
ensures that its burden is distributed in an even-handed manner between foreign and domestic 
users. The Panel has reviewed the design and ar chitecture of China's export quota system on 
molybdenum, and has considered whether the export quota relates to conservation and whether it 
works jointly with domestic restrictions for conservation, and is therefore justified under 
Article XX(g). 
7.937.  In the Panel's opinion, it is difficult to conclude that China's export quota relates to the 
conservation of molybdenum, or that it is made effective in conjunction with restrictions on 
domestic production or consumption.  
7.938.  With respect to the requirement that measures "relate to" conservation, the Panel is not 
convinced by China's claim that the texts of its export quota measures themselves demonstrate 
the existence of a "substantial", "close" and "ge nuine" relationship with the goal of conserving 
exhaustible molybdenum resources. As the Panel has explained, many of the references pointed to 
by China are indirect, referring not to the goal of conservation but to the Foreign Trade Law , which 
lists a number of grounds justifying the imposition of an export quota. As such, these references 
                                               
1277 Japan's second written submission, paras. 261 and 294; United States' comments on China's 
response to Panel's question No. 103. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 229 - 
 
  do not provide sufficient evidence of the challe nged measures' relationship with the goal of 
conserving molybdenum. Moreover, even those texts that do refer to conservation simply refer to the "goal" of conserving exhaustible resources, but fail to explain how that goal is furthered or 
promoted through the imposition of an export quot a. As the Panel has explained, such references 
to the goal of conservation, without any further explanation or demonstration as to how the export 
quota is designed in such a way as to assist, support, or enhance China's conservation programme, do not suffice to establish the requisite relationship between the export quota 
measures and the conservation objective in Article XX(g).  
7.939.  The Panel is also not convinced that China's molybdenum export quota is made effective in 
conjunction with restrictions on domestic production or consumption.  
7.940.  First, the Panel recalls that there was no  extraction limit imposed on molybdenum in 2012. 
Although China did impose a production cap in 2012,  the Panel recalls that it has been unable, on 
the basis of the evidence presented, to find that  this cap constituted a "restriction" within the 
meaning of Article XX(g). China has not provided th e Panel with evidence of expected demand for 
molybdenum during 2012, and as such the Panel cannot determine whether the production 
restriction China imposed on molybdenum was set at a level lower than the expected demand for the period of time over which the restriction was intended to apply (here, 2012). 
7.941.  Second, the Panel believes that by setting the level of the export quota significantly below 
the level of its production cap, China has effectively set aside specific quantities of molybdenum products for domestic consumption. Far from rese rving specific quantities for export, the export 
quota scheme seems to the Panel to allow domestic users to purchase  molybdenum that might 
otherwise be exported. Adding to this the fact that unexported molybdenum products are sold into 
the domestic market, it appears to the Panel that  the design and structure of China's molybdenum 
export quota system tends to support and stimulate  rather than restrict domestic demand and 
consumption.  
7.942.  Third, the Panel is not convinced that the various categories of alleged restrictions on 
domestic consumption, including the entry conditions, resource tax, and environmental 
regulations, are capable of restricting domestic  production or consumption in an even-handed 
manner. In the first place, some of the measures pointed to by China were not in force at the same time as the challenged export quota, and as such cannot be said to have "worked together" with such quota. Additionally, as the Panel has explained, entry requirements may be effective at 
controlling the number of participants in the mo lybdenum industry, but they do not appear to 
restrict in any way the amount of molybdenum products that enterprises already operating in the molybdenum industry can extract and/or produce. Fina lly, with respect to China's resource tax, the 
Panel has explained that regulatory costs are a no rmal part of doing business. In any case, China 
has not established the effective level (and thus the potential restrictive impact) of this tax, and has put forward as evidence only one example rela ting to one company. In the Panel's opinion, 
such limited evidence is insufficient to meet China's burden of proof. At any rate, as the Panel has 
explained above, the evidence provided by Chin a does not allow a clear assessment of the tax's 
restrictive effect. Without details about the price of the tax on a percentage basis, the Panel is unable to determine to what extent the tax increa sed the costs borne by the Jinmu Group, and to 
what extent that company's increased costs are attributable to other factors, including expanded 
production. As such, the Panel has insufficient evidence to conclude that the tax represents a restriction on domestic production or consumption.  
7.943.  Finally, as the Panel has discussed in deta il, the product scope of China's export quota, 
which is more extensive than the scope of its production quota, and in particular the fact that molybdenum intermediates are not covered by the pr oduction quota but are covered by the export 
quota suggests to the Panel that the real goal of China's molybdenum quota system is to promote 
Chinese economic development. At the very least,  the different product scopes of the export and 
production quotas prevent the Panel from concluding that the two caps work together well for the purpose of conserving molybdenum. WTO-consistent alternative measures could provide China 
with equivalent conservation benefits.  
7.944.  In sum, the Panel concludes that China's export quota on molybdenum does not "relate to" 
the conservation of molybdenum, and is not made effective in conjunction with restrictions on 
domestic production or consumption. Nevertheless, in order to fulfil its obligation under Article 11 WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 230 - 
 
  of the DSU, the Panel will now proceed to consider whether, if China's export quota were justified 
under Article XX(g), it also satisfies the requirements of the chapeau of Article XX.  
7.8.2  Application of the chapeau of Articl e XX of the GATT 1994 to China's export quota 
on molybdenum 
7.8.2.1  Whether China has demonstrated th at its export quota on molybdenum was not 
applied in a manner that constitutes arbitr ary or unjustifiable discrimination or a 
disguised restriction on international trade 
7.945.  The Panel begins by noting that China has not developed its arguments on molybdenum to 
the same extent as those on rare earths. Nevertheless, just as in the context of rare earths, China needs to show that its export quota on molybdenum is not applied in a manner that would constitute arbitrary or unjustifiable discrimination between countries where the same conditions 
prevail or a disguised restriction on international trade. 
7.946.  China argues that in 2011, its molybdenum export quota was not completely used; 
information from China Customs on actual exports in 2011 shows that actual exports reached only 
54.6% of the 2011 quota. According to China, th is is evidence that the volume of molybdenum 
exports set in the 2011 molybdenum export quota was more than sufficient to meet foreign demand, and this demonstrates the absence of any disguised restriction on trade in the application 
of the 2012 molybdenum export quota.
1278 
7.947.  China submits that the absence of a disgui sed restriction on trade is further evidenced by 
the fact that enterprises that wanted to obta in a share of the 2012 molybdenum quota had to 
apply for a share of the quota, and that MOFCOM allocated the quota taking into account the 
"export performance, the quota utilization rate, the operation capacity, the production scale and 
the resource status … of that commodity". A ccording to China, by requiring exporters to 
demonstrate proven export performance, the quot a system sought to select exporters in China 
that were capable of supplying the export quota share allocated to them.1279 
7.948.  In its second written submission1280, China provides information regarding the price of 
molybdenum, and argues that domestic molybdenum pr ices are consistently higher than prices of 
Chinese and non-Chinese molybdenum available on the European market. China argues that this 
demonstrates the absence of any causal connection between its molybdenum export quota and any commercial advantage enjoyed by downstream Chinese consumers of molybdenum.
1281 
7.949.  The Panel notes also that only the European Union has developed separate arguments 
under the chapeau of Article XX for China's molybdenum export quota. The United States and 
Japan rebut China's arguments under the chapeau of  Article XX for all three products in the same 
discussion, although Japan tends to focus its discussion on China's export quota on rare earths.  
7.950.  The European Union argues that China has failed to meet its burden of showing that the 
export quota on molybdenum satisfies the conditions of the chapeau, notably with respect to the requirement that GATT-inconsistent measures not be applied in a manner which would constitute 
arbitrary or unjustifiable discrimination. In assessing the trade-distortive impact of China's 
molybdenum export quota, the European Union insists that China did not, and continues not to, disclose the criteria on the basis of which the molybdenum quota is set each year, thus making its yearly decisions entirely arbitrary and unpredictable and thereby accentuating their negative 
effects. 
7.951.  With respect to the requirement that GATT-inconsistent measures not constitute a 
disguised restriction on international trade, the complainants note that China relies on the 
arguments it made with respect to the non-utilization of the rare earths export quota, i.e. that its 
export quota on molybdenum has not been fully utilized in 2011 and 2012, and hence cannot be considered as a disguised restriction.
1282 The complainants submit that, for the reasons they 
                                               
1278 China's first written submission, para. 378. 
1279 China's first written submission, para. 379. 
1280 Response to Panel question No. 42. 
1281 China's second written submission, para. 191. 
1282 European Union's second written submission, para. 310. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 231 - 
 
  advanced in the context of rare earths, China's arguments concerning the relevance of actual 
quota consumption rate should be rejected.1283 
7.952.  As noted in our discussion on the legal test under Article XX(g) above, WTO jurisprudence 
recognizes that in a dispute the same facts can lead to a conclusion on both unjustifiable or 
arbitrary discrimination and/or disguised restrict ions on trade, and that often these concepts 
overlap. In the present dispute, China's own argumentation intertwines these two overlapping 
concepts. The Panel considers that unjustified discrimination can constitute a disguised restriction 
on trade, but a disguised restriction on trade may ex ist even if there is no discrimination. For ease 
of exposition, the Panel will examine China's molybdenum export quota under both of these 
concepts together.  
7.953.  All parties agree that the requirement that a measure not be "applied in a manner which 
would constitute arbitrary or unjustifiable discrimination between countries where the same 
conditions prevail" is a requirement that the measure not discriminate among other Members, or between other Members and the Member maintaining the measure.
1284 In light of the legal test 
discussed earlier, the Panel will examine whether China has demonstrated that the application of 
its export quota on molybdenum does not cause arbitrary or unjustified discrimination or a disguised restriction on international trade. The Panel will first determine whether there is 
discrimination and/or a disguised restriction on international trade, then whether such 
discrimination or disguised restriction is based on, or explained by, a conservation rationale, and finally whether WTO-consistent alternative measures exist, before concluding on China's compliance with the chapeau of Article XX.  
7.954.  The Panel concluded above, in the context of analysing the export quota on rare earths, 
that the evidence submitted by China on the non- use of the quota and price differences does not 
suffice to enable the Panel to conclude that the design and architecture of China's export quota do 
not lead to discrimination; this is also the case with respect to China's export quota on 
molybdenum.  
7.955.  China asserts that its export quota is no t a disguised restriction on international trade 
because it was not filled. According to China, it follows from this fact that the quota cannot have 
had any effect on access to supplies by foreign purchasers of Chinese molybdenum.
1285 As 
discussed in the context of the rare earths export quota, the Panel is not convinced that an unfilled 
quota is sufficient evidence of non-discrimination and/or the absence of trade restrictiveness in the 
circumstances of this case. Export quotas (and duties) on molybdenum have been in place since 
2007. It is highly likely that these measures have altered normal conditions of competition and have imposed a disproportionate cost on foreign consumers of molybdenum over time, including 
through higher uncertainty costs for foreign consumers than domestic, thereby depressing foreign 
demand and resulting in the unfilled quota. The circumstances of this case lead the Panel to conclude that, at least in part, China's export quota is unfilled because of the cumulative effects of 
China's export restrictions.  
7.956.  In addition, China asserts that, since January 2007, domestic prices of roasted 
molybdenum concentrate have been " consistently  higher than prices paid by European 
purchasers".
1286 The conclusion drawn by China is that "[t]he price comparison … refutes the 
notion that China's export quota for molybdenum provided Chinese domestic users with any 
pricing advantage vis-à-vis their European competitors". When the Panel asked China for details on its pricing methodology for molybdenum, the Pa nel understood China's response to mean that, 
for all three products including molybdenum, Metal Pages  (China's source of price data for 
molybdenum)
1287 uses estimated pricing that may well not reflect actual pricing1288, and that "this 
practice could lead to both the over-estimation of the likely foreign price as well as the under-
                                               
1283 European Union's second written submission, para. 312. 
1284 Appellate Body Report, US – Gasoline , pp. 23-24, DSR 1996:I, 3, pp. 21-22; parties' responses to 
and comments on Panel question No. 47. 
1285 China's second written submission, para. 203. 
1286 China's second written submission para. 191. 
1287 China's responses to Panel question No. 85. 
1288 China's Second Written Submission, paragraph 126; China's response to Panel question Nos. 40-42 
and 85. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 232 - 
 
  estimating of the foreign price."1289 Thus, the Panel does not consider it appropriate to rely on this 
price data evidence to establish non-discrimination. 
7.957.  The Panel recalls that the export quota system requires exporters to return unexported 
quantities of molybdenum to Chinese authorities by 31 October,1290 after which point they may be 
sold into the domestic market,1291 but exporting firms are not entitled to exchange their export 
quota shares with other exporting firms. In the Panel's opinion, this results in discrimination against foreign users, since this functioning of the export quota allows and perhaps even 
encourages domestic stockpiling of molybdenum, while ensuring that exporters are never able to 
build up their own stocks of Chinese molybdenum for export. To the Panel, this is clearly discriminatory, insofar as it restricts the access of foreign consumers far more than that of domestic consumers. 
7.958.  The Panel also observes that China im posed no limitation on the production of 
molybdenum concentrates prior to 2010, and so prior to 2010 China's domestic molybdenum downstream users (such as finished stainless steel producers) could consume unlimited amounts 
of molybdenum products. After 2010, the available amount of molybdenum – that is, the amount 
allowed to be produced under the production plan – measured in metal content – has been maintained at a level approximately four times higher that of the molybdenum export quota.
1292 
The Panel notes as well that China has been maintaining an export quota on molybdenum products 
since 2007. For all of these reasons, it is difficult for the Panel to accept China's argument that the main goal of its export quota is to enforce its production quota. Rather, in the Panel's view, China's export quota system seems designed and operated  i n  s u c h  a  w a y  t h a t  i t  w i l l  a l w a y s  f a v o u r  
domestic producers.  
7.959.  Finally, the Panel is concerned about the uneven and unbalanced structure of China's 
export quota measures. As the complainants have noted throughout this dispute, the measures 
that China alleges constitute "restrictions on dome stic production on consumption," and especially 
China's extraction and production quotas and its taxes on extraction, also restrict foreign consumption of Chinese raw materials. In other words, every restriction on domestic consumption 
of Chinese raw materials also applies to foreign consumption. On the other hand, China's export 
quotas impact only on foreign users: there is no corresponding burden, such as a domestic consumption quota, imposed by China on Chin ese consumers. Regardless of whether such 
structural imbalance meets the "even-handedness" requirement under subparagraph (g) of 
Article XX, the Panel believes that it is clearly discriminatory, insofar as it imposes added burdens 
on foreign consumers simply on the basis of thei r being located outside of China. Moreover, even 
accepting quod non  that, as China alleges, the quota in 2012 had no actual discriminatory impact, 
the Panel is still of the view that the very st ructure of the export quota system, which imposes 
unique and special burdens on foreign consumers on  the basis of their being located outside of 
China, is discriminatory, in violation of the requirements of the chapeau of Article XX.  
7.8.2.2  Whether the rationale for the discrimination or the disguised restriction on trade 
created by the application of China's expo rt quota on molybdenum is concerned with 
conservation 
7.960.  The Panel now proceeds to determine whether the discrimination that results from the 
application of China's export quota on molybdenum is nevertheless justified and rationally linked 
to the goal of conserving exhaustible molybdenum resources. In Brazil – Retreaded Tyres , the 
Appellate Body explained that arbitrary or unjusti fiable discrimination exists when the reason(s) 
                                               
1289 China's answer to Panel question No. 85. The Pane l recalls that, as explained in para. 6.21 of its 
Reports, on 17 June 2013, it sent an email to the part ies revising its question No. 85 and asking China to 
provide more pricing information for tungsten and mo lybdenum as well as for rare  earths. Even if China 
intended not to respond to the Panel's request for furthe r pricing information on molybdenum, the Panel is still 
entitled to raise the same doubts with respect to the reliability of the Metal Pages  data on molybdenum as it 
raises with respect to the data on rare earths, since Metal Pages  contains data on all three products at issue, 
and China has relied on Metal Pages  data in its arguments on all three products.  
1290 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42.  
1291 China's response to Panel question No. 36. 
1292 Molybdenum Data (1999-2012)  (Exhibit CHN-139 updated), (Exhibit CHN-224). When measured by 
gross weight, the production plan has been maintained at a level a little less than twice that of the export 
quota. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 233 - 
 
  for discrimination bear(s) no rational connection to the Article XX objective on the basis of which a 
Member claims to be regulating, or contradicts or undermines that objective.1293 This is why the 
determination whether a measure is discriminatory in violation of the chapeau of Article XX should not depend exclusively on its quantitative impact, but must consider also whether the rationale for 
the discrimination relates to the legitimate objective that the measure allegedly pursues (in this 
case, the conservation of exhaustible natural resources). To determine whether China has demonstrated that its export quota on molybdenum does not impose unjustifiable discrimination in 
violation of the chapeau of Article XX, the Panel ne eds to consider whether the rationale that China 
provides for the discrimination relates to the alleged conservation objective of the export quota. 
7.961.  In the Panel's view, China has not demo nstrated that the distortion created by the 
application of its export quota system is merely incidental to its conservation policy considerations. 
Rather, the discrimination seems to result from aspects of the export quota systems that reflect 
industrial policy considerations. For example the fact that the quota system requires unused export quotas to be returned to Chinese authorities
1294 and allows such returned volumes to be sold in the 
domestic market1295 seems to point towards industrial policy considerations, especially when 
exporting firms can only trade their unused export quota share in favour of molybdenum products higher in the industrial chain (i.e. further-processed molybdenum products).  
7.962.  Although China has since 2010 imposed a production quota on molybdenum, China's own 
data shows that the actual level of extraction, measured in tonnes, has consistently exceeded the production plan. In 2012, the production plan was set at 194,520 tonnes, but the actual level of extraction was 267,947 tonnes.
1296 This raises the question what is being done with extracted 
molybdenum ores that cannot legally be produced (i.e. further processed). Since they cannot 
legally be exported, the Panel presumes that they  are being stockpiled in China for later use by 
domestic value-added industries. All of this suggests to the Panel that very significant quantities of 
molybdenum ores are being extracted and stockpiled in China, and thus that the first threat to the 
conservation of Chinese molybdenum reserves is domestic. In these circumstances, it is difficult to understand the function of an export quota, sinc e the most serious conservation risk does not 
come from foreign demand but domestic activity inside China. For the Panel, the main effect of 
China's export quota is to guarantee a minimum amount for domestic consumption from the limited amount of the extracted molybdenum. The Panel fails to see any conservation considerations in this aspect of China's export quota system.  
7.8.2.3  WTO-consistent alternatives 
7.963.  As noted earlier, in the Panel's view, discrimination can also be arbitrary or unjustifiable 
where alternative measures exist which would have avoided or at least diminished the 
discriminatory treatment. In the context of conducting an analysis under the chapeau of Article XX 
of a measure provisionally justified under subparagraph (g), the Appellate Body has examined whether a WTO-consistent or less trade-restrictive alternative is available that would enable the 
regulating Member to achieve its legitimate poli cy goals with the same degree of efficiency and 
efficacy.
1297 
7.964.  The complainants put forward various altern atives that China could use instead of export 
quotas which, they claim, would provide China with the same level of conservation effectiveness 
while avoiding the discriminatory and distorting e ffects that its export quotas have on foreign 
users. The parties have expanded on these alternatives, which include tracing, export licensing, and the imposition of a domestic consumption limit, in response to a Panel question
1298, and the 
complainants discussed alternative measures for China's rare earths, tungsten, and molybdenum 
                                               
1293 Appellate Body Report, Brazil – Retreaded Tyres , para. 226. 
1294 Regulations on the Administration of  the Import and Export of Goods , (Exhibits CHN-54, JE-50), 
Article 42. 
1295 China's response to Panel question No. 36.  
1296 Molybdenum Data (1999-2012), (Exhibit CHN-224). 
1297 Appellate Body Reports, US – Gasoline , pp. 25-29, DSR 1996:I, 3, pp. 23-27 and US – Shrimp , 
para. 171 ("The Inter-American Convention thus provides convincing demonstration that an alternative course 
of action was reasonably open to the United States fo r securing the legitimate po licy goal of its measure a 
course of action other than the unilateral and non-co nsensual procedures of th e import prohibition under 
Section 609".). 
1298 Panel question No. 123. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 234 - 
 
  export quotas together. The Panel therefore refers  to its discussion and analysis of alternative 
measures in section 7.6.3.3 above of its findings on the rare earths export quotas.  
7.965.  China did not comment extensively on these various, allegedly non-discriminatory 
alternatives, except to say that it already uses an export licensing system in addition to its export 
quota system. China also argues that export quotas enhance the functioning of China's 
conservation policy through supply management. A ccording to China, nothing is able to replace 
quotas because export quotas fulfil a number of additional functions.1299 
7.966.  The Panel notes that China has not commented on the complainants' claim that all their 
suggested alternatives are WTO-consistent, whereas the export quota China uses is inconsistent with Article XI:1 of the GATT 1994. In the Panel's opinion, even if China's export quotas were as 
effective as the alternatives suggested by the complainants, China would nonetheless need to 
explain why such WTO-consistent or less trade-restrictive alternatives are not available to China.  
7.967.  The Panel recalls again that it is not as ked to assess the efficiency or effectiveness of 
China's conservation policy, but only to determine whether the export quotas it argues are part of 
its conservation programme are really about conservation rather than another policy reason, and 
whether any discrimination caused is justified on the basis of conservation. This requires the Panel to consider whether China has explored the use of WTO-consistent or less trade-restrictive 
alternatives that could achieve the same conservation goal with the same efficiency and 
effectiveness. In the Panel's view, China has not fully explored and justifiably rejected the alternatives proposed by the complainants.  
7.968.  In the Panel's view, China has not demo nstrated that the distortion caused by the 
operation of its export quota or its discriminatory treatment of foreign users of molybdenum 
extracted in China is based on conservation considerations. For the Panel, such trade distortion caused by the export quota was both foreseeabl e and avoidable, including through the use of 
WTO-consistent alternative means of licensing, borders control, and policing, and/or through the 
imposition of domestic taxes and consumption restrictions that would at least reduce the level of discrimination against foreign users.
  
7.8.2.4  Conclusion 
7.969.  In view of the above, the Panel concludes that China has not demonstrated that its 2012 
export quota on molybdenum was not applied in a manner that constituted arbitrary or unjustifiable discrimination or a disguised restriction on international trade.
1300 
7.8.3  Overall conclusion on Ch ina's export quota on molybdenum 
7.970.  For the reasons given above, the Panel concludes that China's export quota on 
molybdenum is inconsistent with Article XI:1 of the GATT 1994 and Paragraphs 162 and 165 of 
China's Working Party Report. The Panel also concludes that China's export quota on molybdenum 
is not justified under either subparagraph (g) or the chapeau of Article XX of the GATT 1994.  
7.9  Trading rights 
7.9.1  Introduction 
7.971.  In addition to their claims concerning the imposition of export quotas on rare earths, 
tungsten, and molybdenum, the complainants claim that particular aspects of China's administration of certain of the export quotas breach China's "trading rights commitments". 
7.972.  The complainants argue that requirements to demonstrate export performance, to 
demonstrate prior export experience, and to comply  with a minimum capital requirement, so as to 
                                               
1299 See the Panel's discussion on the application of th e chapeau to China's export quota on rare earths, 
above section 7.6.3. 
1300 In view of the nature of the ex port quota system described above, the Panel's finding is with respect 
to the series of measures comprising the relevant frame work legislation, the implem enting regulations, other 
applicable laws and the specific annual measures imposing the export quotas existing at the date of the Panel's establishment. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 235 - 
 
  be eligible to participate in the quota allocation process for rare earths and molybdenum quotas, 
are inconsistent with Paragraph 5.1 of China's Accession Protocol and Paragraphs 83 and 84 of China's Working Party Report, as incorporated in to Paragraph 1.2 of China's Accession Protocol. 
The complainants submit that China expressly undertook in its Accession Protocol and Working 
Party Report to eliminate these specific requirements, and they maintain that China is obliged to 
accord to all foreign enterprises and individuals, as well as to all enterprises in China, the right to export goods except those listed in Annex 2A of the Accession Protocol. The complainants' claims 
are made in respect of rare earths and molybdenum. These products are not listed in Annex 2A. 
The claims do not extend to tungsten, which is listed in Annex 2A.
1301   
7.973.  The European Union makes an addition al claim that the prior export performance 
conditions that China imposes on applicants for the molybdenum export quota violate China's 
commitments in Paragraph 84(b) of China's Work ing Party Report. According to the European 
U n i o n ,  b y  v i r t u e  o f  2012 Application Qualifications and Application Procedures for Molybdenum 
Export Quota , China fails to "grant trading rights to foreign enterprises in a non-discretionary 
way".1302  
7.974.  China responds that its trading rights commitments do not mean that China can no longer 
regulate trade, including by means of export qu otas to conserve exhaustible natural resources. 
China refers to the Appellate Body finding in China – Publications and Audiovisual Products  that 
China's obligations in Paragraph 5.1 are qualified by the opening clause of this Paragraph, which 
specifies that China's trading rights commitments are "[w]ithout prejudice to China's right to regulate trade in a manner consistent with the WTO Agreement".
1303  
7.975.  The Panel has concluded above that China's export quotas are inconsistent with its 
obligations under Article XI:1 of the GATT 19 94 and Paragraphs 162 and 165 of China's Working 
Party Report and cannot be justified pursuant to Article XX(g) of the GATT 1994. Thus, the quotas 
being administered are not "WTO-consistent". Consequently, the Panel must decide whether this 
leads necessarily to a finding that China has also breached its trading rights commitments by maintaining its export quotas. This question arises because China argues that when China 
regulates trade in rare earth products using export quotas that are justified under Article XX(g), 
the prior export performance and minimum registered capital criteria are also justified under Article XX(g) as an integral part of the export quota system. We do not agree with China. In our 
view, it is possible for the eligibility criteria that quota applicants have to comply with to be 
consistent with China's trading rights commitments even if Chinas' export quotas are WTO-
inconsistent, and vice versa.  
7.976.  Having determined that our finding under Article XI:1 of the GATT 1994 is not 
determinative of the issues regarding the eligibility criteria and trading rights, the Panel will turn 
now to consider whether the measures at issue are inconsistent with Paragraph 5.1 of China's Accession Protocol and Paragraphs 83 and 84 of Chin a's Working Party Report. In this context, the 
Panel will also consider whether it should examine claims made under Paragraphs 83 and 84 of 
China's Working Party Report before or after th ose made under Paragraph 5.1 of its Accession 
Protocol. It will then turn to China's defence under Article XX(g) of the GATT 1994. The Panel will then examine the European Union's separate claim. 
7.9.2  Claims under Paragraph 5.1 of China' s Accession Protocol and Paragraphs 83 and 
84 of China's Working Party Report  
7.977.  The Panel will begin its analysis with a review of the obligations contained in Paragraph 5.1 
of China's Accession Protocol and Paragraphs 83 and 84 of China's Working Party Report. The 
Panel will then review the evidence provided by the complainants in support of their claim that 
China maintains eligibility criteria in violation of these obligations.  
                                               
1301 Tungsten is listed in Annex 2A, see, United States' first written submission, para. 127. See also 
European Union's first written submission, para. 149,  and Japan's first written submission, para. 175. 
1302 European Union's first written submission, para. 158. 
1303 China's first written submission, para. 270. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 236 - 
 
  7.9.2.1  The obligations in Paragraph 5.1 of China's Accession Protocol and 
Paragraphs 83 and 84 of China's Working Party Report 
7.978.  Prior to China's accession to the WTO, only specialized enterprises had the right to import 
into or export from China. These foreign trade op erators had to meet certain conditions and obtain 
permission to import or export goods. Different requirements applied to foreign-invested 
enterprises. During China's accession negotiations, some WTO Members expressed concern that the right to import and export goods from China was available only to some Chinese enterprises, 
and that foreign-invested enterprises could only import or export after meeting certain 
conditions.
1304 
7.979.  In response to these concerns, China made  a commitment to "progressively liberalize the 
availability and scope of the right to trade". China further committed that within three years of its 
WTO accession, all enterprises would have the right to trade in all goods throughout the customs 
territory of China. These legal obligations were included in Paragraph 5.1 of China's Accession 
Protocol. 
7.980.  Article 5.1 of China's Accession Protocol provides: 
Without prejudice to China's right to regulate trade in a manner consistent with the 
WTO Agreement, China shall progressively liberalize the availability and scope of the 
right to trade, so that, within three years after accession, all enterprises in China shall 
have the right to trade in all goods throughout the customs territory of China, except for those goods listed in Annex 2A which continue to be subject to state trading in accordance with this Protocol. Such right to trade shall be the right to import and 
export goods ... For those goods listed in Annex 2B, China shall phase out limitation 
on the grant of trading rights pursuant to  the schedule in that Annex. China shall 
complete all necessary legislative procedures to implement these provisions during the 
transition period 
7.981.  Paragraph 1.2 of the Accession Protocol provides : 
The WTO Agreement to which China accedes sh all be the WTO Agreement as rectified, 
amended or otherwise modified by such legal instruments as may have entered into 
force before the date of accession. This Protocol, which shall include the commitments referred to in paragraph 342 of the Working Pa rty Report, shall be an integral part of 
the WTO Agreement. 
7.982.  Paragraph 342 of the Working Party Report provides (underlining added): 
The Working Party took note of the explanat ions and statements of China concerning 
its foreign trade regime, as reflected in this Report. The Working Party took note of 
the commitments given by China in relation to certain specific matters which are 
reproduced in paragraphs … 83-84, … and noted that these commitments are 
incorporated in paragraph 1.2 of the Draft Protocol. 
7.983.  The complainants make claims under Paragraphs 83(a), 83(b), 83(d), 84(a), and 84(b) of 
China's Working Party Report. These provisions are reproduced below: 
83(a) The representative of China confirmed that, upon accession, China would 
eliminate for both Chinese and foreign-invested enterprises any export performance, 
trade balancing, foreign exchange balancin g and prior experience requirements, such 
as in importing and exporting, as criteria for obtaining or maintaining the right to import and export. 
(b) With respect to wholly Chinese-invested enterprises, the representative of China 
stated that although foreign-invested enterprises obtained limited trading rights based on their approved scope of business, whol ly Chinese-invested enterprises were now 
required to apply for such rights and the relevant authorities applied a threshold in 
                                               
1304 China's Working Party Report, para. 82. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 237 - 
 
  approving such applications. In order to accelerate this approval process and increase 
the availability of trading rights, the repr esentative of China confirmed that China 
would reduce the minimum registered capital requirement (which applied only to wholly Chinese-invested enterprises) to obtain trading rights to RMB 5,000,000 for 
year one, RMB 3,000,000 for year two, RMB 1,000,000 for year three and would 
eliminate the examination and approval system  at the end of the phase-in period for 
trading rights. 
(d) The representative of China also confirmed that within three years after 
accession, all enterprises in China would be granted the right to trade. Foreign-invested enterprises would not be required to establish in a particular form or as a separate entity to engage in importing an d exporting nor would new business licence 
encompassing distribution be required to engage in importing and exporting. 
84(a) The representative of China reconfirmed that China would eliminate its system 
of examination and approval of trading righ ts within three years after accession. At 
that time, China would permit all enterprises in China and foreign enterprises and 
individuals, including sole proprietorships of other WTO Members, to export and import all goods (except for the share of pr oducts listed in Annex 2A to the Draft 
Protocol reserved for importation and exportation by state trading enterprises) 
throughout the customs territory of China. Such right, however, did not permit importers to distribute goods within China.  Providing distribution services would be 
done in accordance with China's Schedule  of Specific Commitments under the GATS. 
(b) With respect to the grant of trading rights to foreign enterprises and individuals, 
including sole proprietorships of other WTO members, the representative of China confirmed that such rights would be granted in a non-discriminatory and non-
discretionary way. He further confirmed that any requirements for obtaining trading 
rights would be for customs and fiscal purposes only and would not constitute a barrier to trade. The representative of Ch ina emphasized that foreign enterprises and 
individuals with trading rights had to comply with all WTO-consistent requirements 
related to importing and exporting, such as those concerning import licensing, TBT and SPS, but confirmed that requirements  relating to minimum capital and prior 
experience would not apply. 
7.984.  In China – Publications and Audiovisual Products
1305, the Appellate Body used the term 
"trading rights commitments" to refer to the obligations of China in respect of the right to trade that are contained in Paragraph 5.1 of China's Accession Protocol, as well as Paragraphs 83(d) and 
84(a) of China's Working Party Report, which conf irm China's obligation to grant the right to 
trade.
1306 Paragraphs 83 and 84 also provide additional restrictions on China's right to regulate 
trade. In particular, Paragraph 83(a) directs Ch ina to eliminate export performance and prior 
experience requirements for both Chinese and foreign-invested enterprises, while Paragraph 83(b) 
directs China to eliminate any "examination and ap proval system", within three years of accession, 
including the minimum registered capital requiremen ts. Paragraph 84(b) states that "trading rights 
would be granted in a non-discriminatory way" and, in granting trading rights to foreign 
enterprises in China, China explicitly committed to eliminate prior experience and minimum 
registered capital requirements.1307 We recall that the Appellate Body concluded in China – 
Publications and Audiovisual Products  that "the applicability of China's trading rights commitments 
to a measure is triggered when that measure concerns who may import a good".1308 In the same 
vein, we consider that China's trading rights commitments are also triggered when the measure at issue concerns who may export a good. Neither China nor any other party has suggested 
otherwise. 
                                               
1305 Appellate Body Report, China – Publications and Audiovisual Products , para. 133. 
1306 Appellate Body Report, China – Publications and Audiovisual Products , para. 167. See also Panel 
Reports, China – Raw Materials , para. 7.655. 
1307 Panel Reports, China – Raw Materials , para. 7.666. 
1308 Appellate Body Report, China – Audiovisual Products , para. 196. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 238 - 
 
  7.9.2.2  The measures at issue 
7.985.  The complainants submit that there are five measures that contain eligibility criteria with 
which export quota applicants must comply so as to be eligible to apply for part of the rare earths and molybdenum quota allocation. The Panel provided a description of the eligibility criteria in the 
challenged measures in section 7.4.1.3 above. The following is thus confined to a brief description 
of the challenged measures.  
7.986.  The complainants submit that, under the Export Quota Administration Measures  which 
applies to the administration and allocation of, inter alia , the molybdenum export quota, MOFCOM 
is directed to take into account (i) the export pe rformance of the good; (ii) the utilization rate of 
the export quota; (iii) the "operation capacity" of the applicant; and (iv) the "production scale and resources status, etc., of the applicant enterprise s or regions" during the previous three years 
when distributing quotas.
1309 The 2012 Application Qualifications and Procedures for Rare Earth 
Export Quotas  requires applicants to have had actual export performance and prior export 
experience in a given time period and have a minimum registered capital that is above a certain 
amount, though the precise nature of these requ irements may vary depending on the type or 
nature of enterprise.1310 The 2012 Application Qualifications and Application Procedures for 
Molybdenum Export Quota  specifies that, to apply for the molybdenum export quota, the 
enterprise must have exported the requisite amount of molybdenum in the previous three-year 
period, or have supplied for export the requisite amount of molybdenum in the previous three-year period. In addition, trading companies are also required to have a minimum registered capital that is above a certain amount.
1311 The allocation equations found in the 2012 First Batch Rare Earth 
Export Quotas (Supplement)  and the 2012 First Batch Export Quotas of Tungsten, Antimony and 
Other Non-Ferrous Metals  rely on the prior export experien ce and export performance of the 
applicant in allocating the quota.1312 
7.987.  As noted above, the complainants argu e that requirements to demonstrate export 
performance and prior export experience and to co mply with a minimum capital requirement so as 
to be eligible to participate in the quota allocation process for rare earths and molybdenum quotas 
are inconsistent with Paragraph 5.1 of China's Accession Protocol and Paragraphs 83 and 84 of 
China's Working Party Report. The complainants submit that China expressly undertook in its Accession Protocol and Working Party Report to el iminate these specific requirements and to give 
all foreign enterprises and individuals, as well as all enterprises in China, the right to export goods, 
other than those listed in Annex 2A of the Accession Protocol.    
7.988.  China responds that these three criteria are WTO-consistent because they are an integral 
part of China's export quota system, which, it argues, is itself WTO-consistent because it complies 
with Article XX(g) of the GATT 1994. Therefore, a ccording to China, the criteria are necessarily 
WTO-consistent.
1313 The complainants disagree, and argue that the export performance, prior 
experience, and minimum registered capital criteria must comply with the relevant provisions of 
China's Protocol of Accession and Working Part y Report. The Panel will examine this argument 
below. 
7.989.  China also maintains that its trading rights obligations under Paragraph 5.1 of the 
Accession Protocol are not absolute, but are instea d qualified by the opening clause of the first 
sentence of that provision, which reads as follows: "[w]ithout prejudice to China's right to regulate 
trade in a manner consistent with the WTO Agreement…". Further, this was confirmed by the Appellate Body in China – Publications and Audiovisual Products , which stressed that this 
introductory phrase means that China's trading rights obligations cannot "affect, encroach upon, or 
impair" China's right to regulate trade in a WTO-consistent manner. China states that this finding 
                                               
1309 Export Quota Administration Measures , (Exhibits CHN-96, JE-52), Article 19. China confirms that 
this Article requires exporters to demonstrate proven export performance, see para. 379 of China's first written submission. 
1310 2012 Application Qualifications and Procedures for Rare Earth Export Quotas, (Exhibits CHN-38, 
JE-61) Sections 1(1) and 1(2)) . 
1311 2012 Application Qualifications and Application Procedures for Molybdenum Export Quota,  
(Exhibits CHN-107, JE-63) paras. II(ii)2 and II(ii)3. 
1312 2012 First Batch Rare Earth Export Quotas (Supplement)  (Exhibits CHN-57, JE-56), Annex 1 and 
2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals , (Exhibits CHN-99, 
JE-59), Annex 2. 
1313 See, e.g., China's response to Panel question No. 11, para. 24. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 239 - 
 
  confirms that Paragraph 5.1 entitles China to adopt export quotas that are contrary to Article XI:1 
of the GATT 1994, provided that they are justified under an exception, e.g. Article XX(g) of the 
GATT 1994.1314 In addition, China argues that Paragraph 5.1 entitles China to administer these 
quotas through an examination and approval system, including through quota allocation criteria 
that are consistent with China's WTO obligations or, even if individual elements in this quota 
system were to violate China's WTO obligations, are justified under, e.g. Article XX(g) of the GATT 1994. China submits that, as a consequence, when it regulates trade in rare earth products 
through WTO-consistent export quotas it can use eligibility criteria, including prior export 
performance and minimum registered capital requir ements, to ensure the effectiveness of these 
quotas. In this context, China stresses that the Panel should find that the obligations in Paragraphs 83 and 84, as elaborations of the general commitments reflected in Paragraph 5.1 of 
the Accession Protocol, must be read together.
1315   
7.990.  China also adds that in response to concerns by some WTO Members, China made a 
commitment in Paragraph 5.1 of its Accession Protocol to "progressively liberalize the availability 
and scope of the right to trade". This commitment was further elaborated in Paragraphs 83 and 84 
of the Working Party Report. Today, after amendment of the Foreign Trade Law , China no longer 
applies such pre-conditions to foreign trade operators.1316 Hence, in 2012, all enterprises in China 
have the right to trade in all goods. China submits that the Foreign Trade Law  no longer applies 
qualification conditions to enterprises that intend to engage in the import and export of goods. Foreign trade operators only have to register with MOFCOM, unless it is provided that no such registration is necessary.  
7.9.2.2.1  Whether the Panel should consid er claims under Paragraphs 83 and 84 prior 
to claims under Paragraph 5.1 
7.991.  The Panel, noting that the complainants had made claims under Paragraphs 83 and 84 of 
the Working Party Report as well as under Paragraph 5.1 of the Accession Protocol, asked the 
parties for their views regarding the order in which the Panel should analyse these claims. The Panel also asked whether, assuming it examined  the complainants' claims under Paragraphs 83 
and 84 first, it would also be necessary to make additional findings under Paragraph 5.1.
1317 The 
complainants responded that the Panel should analyse the more specific obligations first, i.e. those under Paragraphs 83 and 84, and that a violation of these paragraphs would necessarily mean a violation of the more general obligation in Paragraph 5.1.
1318 While China stressed the importance 
of applying Paragraphs 83 and 84 together with Paragraph 5.1, it also stated that it did not 
consider it "relevant" whether or not the Panel examines Paragraph 83 and 84 prior to examining Paragraph 5.1, "since the commitments in all these Paragraphs are without prejudice to China's 
right to regulate trade in goods by means of WTO-consistent export quotas and quota allocation 
criteria".
1319 
7.992.  Taking note that the complainants all agree on the order of analysis and that China does 
not consider the order of examination "relevant" , the Panel has decided to proceed by examining 
first whether China has breached the commitments it undertook in Paragraphs 83 and 84 of its Working Party Report. 
7.9.2.2.2  Whether China's measures are in consistent with Paragraphs 83 and 84 of 
China's Working Party Report 
7.993.  At this point, and before considering the parties' claims regarding Paragraphs 83 and 84, 
we consider it useful to comment on a discrepancy in how the United States and the European 
Union referred to the eligibility criteria in their first submissions compared with their second 
                                               
1314 China's first written submission, paras. 270-271. 
1315 China's first written submission, paras. 275, 276,  399, and footnote 565; China's response to Panel 
question No. 12, paras. 55 and 59; Ch ina's comments on the complainants' response to Panel question No. 8, 
para. 18. 
1316 China's first written submission, para. 266; footnote 399 of China's first written submission states: 
"See the current version of the Foreign Trade Law : (Exhibit CHN-11)…". 
1317 Panel question No. 12. 
1318 Responses to Panel question No. 12, United States  , para. 26; European Union, para. 13; and Japan, 
para. 13. 
1319 China's comment on complainants' responses to Panel question No. 12, para. 26. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 240 - 
 
  submissions. There was also a difference in how China referred to these criteria compared with 
how the complainants referred to them, as the Panel explains below. 
7.9.2.2.2.1  Parties' descriptio n of the challenged criteria  
7.994.  In their requests for establishment of a panel, the complainants asserted that "China 
imposes restrictions on the trading rights of enterprises seeking to export various forms of rare 
earths and molybdenum, such as prior export performance and minimum registered capital 
requirements".1320 In their first submissions, the complainants all described the eligibility criteria as 
export performance, prior export experience, and minimum registered capital requirements, but in 
their second submissions, the United States and the European Union no longer referred to the 
experience criterion.1321 Throughout these proceedings, China referred to prior export performance 
and minimum registered capital requirements. 
7.995.  In response to Panel questions on this , the three complainants confirmed they were 
challenging the three criteria described in the preceding paragraph.1322 The complainants submit 
that export performance is a subset of prior export  experience; that is, by requiring an exporter to 
satisfy specific prior export performance requirements for rare earths and molybdenum and by 
basing the quota allocation on prior export amount s, China also requires exporters to demonstrate 
prior export experience.1323 
7.996.  China did not take issue with or in any way challenge the complainants' assertion that prior 
export performance is a subset of prior export ex perience. In its comments on this question, China 
focused on the argument that there was no prescrib ed level of required prior export performance: 
"no matter the difference between the terms "prior export performance" and "export experience", 
any level of prior export performance during the mentioned time period is sufficient to meet the 
criterion. Indeed, the measures do not specify a minimum level of prior export performance that is required."
1324 
7.997.  The Panel agrees with the complainants that the prior export performance and export 
experience criteria are related. For an entity to comply with the prior export performance criterion 
implies that that entity has export experience, as  export performance would confer experience in 
exporting activities. Conversely, an entity cannot ha ve acquired export experience if it has never 
previously exported anything, i.e. if it is unable to comply with the export performance criterion, it cannot comply with the prior export experience criterion either.
1325 Therefore, the Panel agrees 
with the complainants that satisfying an export  performance requirement necessarily requires a 
demonstration of prior export experience. The Panel therefore concludes that all complainants 
have challenged and continue to challenge the ex port performance, prior export experience, and 
minimum registered capital criteria.  
7.9.2.2.2.2  The three challenged eligibility criteria 
7.998.  China does not deny that it imposes prior export performance and minimum registered 
capital requirements. To the contrary, it assert s that Paragraphs 1.2 and 5.1 of the Accession 
Protocol, read in combination with Paragraphs 83 and 84 of the Working Party Report, permit 
China to regulate export trade through these criteria "in a manner consistent with the WTO Agreement". China also argues that  the complainants' challenge to the Foreign Trade Law  is 
without merit because that Law no longer contains eligibility criteria.
1326  
                                               
1320 WT/DS431/6, WT/DS432/6, and WT/DS433/6. 
1321 See, for example, para.152 of the United States' first written submission, para. 137 of the European 
Union's first written submission; para. 330 of the United States' second written submission, and heading 5.1.1 of the European Union's second written submission. 
1322 United States' response to Panel question No. 135,  para. 78; and the European Union's response to 
Panel question No. 135, para. 117. See also Ja pan's response to Panel question No. 138. 
1323 Complainants' responses to Panel question No. 133. 
1324 China's comments on parties' responses to question No. 133. 
1325 The Panel also notes that in th eir oral responses to this questi on at the second meeting, the 
European Union and the United States stated that they had adopted the terminology used by China in its first 
written submission. 
1326 China's first written submission, para. 266. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 241 - 
 
  7.999.  Turning first to China's argument that there are no longer any eligibility criteria in the 
Foreign Trade Law , the Panel acknowledges that China has removed certain pre-conditions for 
obtaining the right to trade that we re found in the 1994 version of the Foreign Trade Law . 
However, these restrictions and pre-conditions on trading rights are still found in instruments 
other than the Foreign Trade Law .1327  
7.1000.  The Panel thus agrees with China's argument that the Foreign Trade Law does not contain 
any pre-conditions that apply in respect of obtaining the right to trade. 
7.1001.  The Panel turns next to the complainants ' challenge of the minimum registered capital, 
export performance, and prior export  experience requirements found in 2012 Application 
Qualifications and Procedures for Rare Earth Export Quotas Application Procedures , the 2012 
Application Qualifications and Application Procedures for Molybdenum Export Quota , the 2012 First 
Batch Rare Earth Export Quotas (Supplement) , and the 2012 First Batch Export Quotas of 
Tungsten, Antimony and Other Non-Ferrous Metals . The Panel observes that China does not deny 
that it uses eligibility criteria in determining successful quota applicants. In fact, to the contrary, 
China asserts that it is entitled to use such eligibility criteria to administer its export quotas.  
7.1002.  The Panel recalls that in Paragraph 83(a) of its Working Party Report, China undertook to 
eliminate upon accession any export performanc e and prior experience requirements for both 
Chinese and foreign-invested companies. Paragraph 83(b) confirms China's commitment to 
eliminate the "examination and approval" system for enterprises to be granted trading rights, 
including by eliminating any minimum registered  capital requirements. Paragraph 83(d) of the 
Working Party Report confirms the obligation contained in Paragraph 5.1 of the Accession Protocol, 
viz. China's commitment to provide trading rights to all enterprises in China by 11 December 
2004. Likewise, Paragraph 84(a) of the Working Party Report confirms China's obligations with respect to trading rights, as set out in Paragraph 5.1 of the Accession Protocol. Paragraph 84(b) 
confirms that no minimum capital or prior experience related-requirements will be imposed on 
foreign companies for obtaining trading rights and that "trading rights [will] be granted in a non-discriminatory way". 
7.1003.  However, as the Panel outlined above and briefly recalls here, the Export Quota 
Administration Measures , relevant for the administration and allocation of the molybdenum (and 
tungsten) export quotas, specifically require MOFCOM to take into account certain performance indicators when distributing quotas. The 2012 Application Qualifications and Procedures for Rare 
Earth Export Quotas  and 2012 Molybdenum Export Quota
1328 prescribes the application process for 
the allocation of export quotas for rare eart hs and molybdenum in 2012. These measures detail 
the requirements applicants must satisfy in order to be eligible to export under the 2012 quotas. 
Two of these requirements are that, first, an ente rprise must have had actual export performance 
and prior export experience in a given time period, and secondly, a trading enterprise must have registered capital that is above a certain minimum amount.
1329 In addition, the allocation 
equations found in the 2012 First Batch Rare Earth Export Quotas (Supplement) and the 2012 First 
Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals rely on the prior export 
experience and export performance of th e applicant in allocating the quota.  
7.1004.  In our view, requiring an enterprise to have achieved a certain level of export 
performance to qualify for a share of the export qu ota, or to have prior experience, are precisely 
the type of requirements that China explicitly committed to eliminate in Paragraph 83(a) of its Working Party Report. Similarly, China imposes a minimum registered capital requirement; the 
Panel finds that this is the type of requirement that China committed, pursuant to Paragraph 83(b) 
                                               
1327 The Foreign Trade Law (Exhibits CHN-11, JE-49) sets out th e underlying legal framework for the 
imposition and administration of export quotas. Article 16 of the Foreign Trade Law  authorizes the imposition of 
restrictions on the importation or exportation of goods. Article 18 of the Foreign Trade Law  authorizes MOFCOM 
to issue catalogues of goods restricted  or prohibited from export or import. Article 19  authorizes the use of 
quotas on goods that are subject to export restrictio ns, and Article 20 gives MOFCOM  and other ministries the 
authority to allocate quota rights. 
1328 2012 Application Qualifications and Procedures for Rare Earth Export Quotas, (Exhibits CHN-38, 
JE-61); Export Quota Administration Measures,  (Exhibits CHN-96, JE-52), 2012 Application Qualifications and 
Application Procedures for Molybdenum Export Quota (Exhibits CHN-107, JE-63), 2012 First Batch Export 
Quotas of Tungsten, Antimony and Other Non-Ferrous Metals (Exhibits CHN-99, JE-59) . 
1329 2012 Application Qualifications and Procedures for Rare Earth Export Quotas , (Exhibits CHN-38, 
JE-61) . WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 242 - 
 
  of the Working Party Report, to abolish completely by 11 December 2004. The Panel also notes 
that China repeated its commitment not to impose either type of requirement, namely "requirements relating to minimum capital and prior experience," in the third sentence of paragraph 84(b) of its Working Party Report. These eligibility criteria mean that not all enterprises 
in China have the right to trade rare earths and molybdenum, contrary to commitments China 
undertook in Paragraphs 83(d) and 84(a) of the Working Party Report. 
7.1005.  The Panel therefore concludes that the Export Quota Administration Measures, 2012 
Application Qualifications and Procedures for Rare Earth Export Quotas, the 2012 First Batch Rare 
Earth Export Quotas (Supplement) , as well as the 2012 Application Qualifications and Application 
Procedures for Molybdenum Export Quota , and the 2012 First Batch Export Quotas of Tungsten, 
Antimony and Other Non-Ferrous Metals , contain eligibility criteria. Therefore, these measures 
breach the commitments that China undertook in Paragraphs 83(a), 83(b), 83(d), 84(a), and 
84(b) of its Working Party Report, as incorporated into its Accession Protocol by virtue of Paragraph 1.2.  
7.9.2.2.3  Whether China's measures are also inconsistent with Paragraph 5.1 of China's 
Accession Protocol 
7.1006.  As requested by the complainants, the Pa nel will now consider whether China has also 
violated the obligation it undertook in Paragraph 5.1 of the Accession Protocol. 
7.1007.  There are three elements in the obligation found in Paragraph 5.1 of China's WTO 
Accession Protocol: China shall (a) grant the "right to trade" to "all enterprises in China"; (b) grant the right to trade with respect to "all goods," exce pt for those listed in Annexes 2A and 2B; and (c) 
"complete all necessary legislative procedures to implement" its trading rights commitments 
"within three years after accession". The Pa nel will address each of these in turn. 
7.1008.  The first element, the "right to trade", is  defined in the second sentence of Paragraph 5.1 
as the "right to import and export goods" into or  from the entire customs territory of China. The 
first element of Paragraph 5.1 also notes that Ch ina has committed to grant the right to trade to 
"all enterprises in China". There are no additional conditions or restrictions on which enterprises 
shall have the right to trade in this Paragraph.  
7.1009.  The second element of the obligation cont ained in paragraph 5.1 provides that the right 
to trade applies to “all goods” except those listed in Annexes 2A and 2B.  Annex 2A consists of two 
parts – Annex 2A1 entitled “Products Subject to State Trading (Import)” and Annex 2A2 entitled 
“Products Subject to State Trading (Export).”  As the U.S. claim of inconsistency regarding China’s 
obligations contained in paragraph 5.1 concerns the right to export, only Annex 2A2 is relevant here.
1330 Rare earths and molybdenum are not covered by Annex 2A2 
7.1010.  The third element of Paragraph 5.1 estab lishes that within three years of its accession, 
China is required to complete all necessary legislative procedures to implement its obligations with respect to the right to trade. This three-year period expired on 11 December 2004.  
7.1011.  Accordingly, the Panel finds that by vi rtue of the three elements of Paragraph 5.1 
described above, China is obliged to ensure that all enterprises in China have the right to export rare earths and molybdenum. 
7.1012.  The Panel concluded in the preceding section, and indeed China does not deny, that 
China applies eligibility criteria in selecting enterprises to receive a share of the export quota on 
rare earths and molybdenum. Thus, contrary to the obligation in Paragraph 5.1, there are conditions or restrictions imposed on enterprises in China, meaning that not all enterprises in 
China have the right to trade rare earths and molybdenum. Consequently, the Panel finds that 
China is in breach of its obligation in Paragraph 5.1 of its Accession Protocol to grant all enterprises in China the right to trade rare earths and molybdenum. 
                                               
1330 Annex 2A comprises two parts: Annex 2A1 entitled "Products Subject to State Trading (Import)" and 
Annex 2A2 entitled "Products Subject to State Trading (Export)". WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 243 - 
 
  7.9.2.3  Conclusion 
7.1013.  The Panel finds that China is in breach of its trading rights commitments in Paragraph 5.1 
of China's Accession Protocol and in Paragraphs 83(a), 83(b), 83(d), 84(a), and 84(b) of China's Working Party Report. 
7.1014.  The Panel turns now to consider whether China's WTO-inconsistent measures are 
justifiable under Article XX(g) of the GATT 1994. 
7.9.3  Defence under Article XX(g) of the GATT 1994 
7.1015.  The Panel has found that the eligibility criteria in the 2012 Application Qualifications and 
Procedures for Rare Earth Export Quotas , the 2012 Application Qualifications and Application 
Procedures for Molybdenum Export Quota , the 2012 First Batch Rare Earth Export Quotas 
(Supplement) , the 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous  
Metals , and the Export Quota Administration Measures  breach China's commitments in 
Paragraphs 83(a), 83(b), 83(d), 84(a), and 84(b) of China's Working Party Report and Paragraph 5.1 of China's Accession Protocol. 
7.9.3.1  Whether China's commitments in Paragraphs 83 and 84 are subject to the 
general exceptions in Article XX because th ese commitments like those in Paragraph 5.1 
are qualified by China's right to regulate trade 
7.1016.  China acknowledges that it is required to grant the right to trade to all enterprises, and 
that it must eliminate minimum registered capital and prior export performance requirements as conditions on the availability of the right to trade generally.
1331 However, China submits that there 
are situations where it is entitled to maintain an export quota for various forms of rare earths and 
molybdenum and that, in such situations, it may establish quota allocation rules that restrict the 
right to trade. China submits that such rules may include minimum registered capital and prior 
export performance requirements.1332 China also argues that, in any event, the criteria at issue in 
this dispute concern the administration of WTO-consistent export quotas and are not limitations on 
the right to trade. Consequently, argues China, it s use of these quota allocation criteria is not 
prevented by the commitments in Paragraphs 83 and 84. China argues further that the 
commitments in Paragraphs 83 and 84 are subject to the general exceptions in Article XX because 
they are qualified by China's right to regulate trade through WTO-consistent measures, including export quotas justified under Article XX(g). China ex plains that this is so because its obligations in 
respect of trading rights under Paragraph 5.1 of  the Accession Protocol are not absolute and 
therefore its obligations in Paragraphs 83 and 84 of the Working Party Report are also qualified in 
light of China's right to regulate trade.
1333 In this regard, China emphasizes that the obligations in 
Paragraphs 83 and 84, as elaborations of the general commitments reflected in Paragraph 5.1, 
must be read together with Paragraph 5.1.1334 China further argues that the prior export 
performance and minimum registered capital criter ia are an integral part of the export quota 
system, which is itself justified under Article XX(g).1335 
7.1017.  The complainants state that China expressly committed not to use export performance, 
prior export experience, and minimum registered capital criteria, and that Article XX(g) is not 
available for these criteria.1336 Japan asserts that, in the absence of a reference in Paragraph 1.2 
of the Accession Protocol or in Paragraphs 83 or 84 of the Working Party Report to the language 
that appears in Paragraph 5.1, namely, "Without pr ejudice to China's right to regulate trade in a 
manner consistent with the WTO Agreement ", Paragraphs 83 and 84 are not qualified by China's right to regulate trade in a WTO-consistent manner.
1337 The United States, noting the absence in 
Paragraphs 83 and 84 of the language reproduced  above, states that although minimum capital 
                                               
1331 See, for example, China's first written submission, para. 284. 
1332 China's first written submission, para. 284. 
1333 China's first written submission, para. 270, 398; China's response to Panel question No. 11, 
para. 47, China's comments on the United States and Japan's responses to Panel question No. 8, para. 16. 
1334 China's first written submission, paras. 275, 39 9; China's response to Panel question No. 12. 
1335 See, for example, China's first written submission, paras. 11, 261, 280, and 389 and China's 
response to Panel question No. 11. 
1336 Complainants' responses to Panel question No. 8. 
1337 Japan's response to Panel question No. 8, para. 9. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 244 - 
 
  and prior experience requirements might in prin ciple be WTO-consistent, in the sense of being 
consistent under, for example, the GATT 1994, China agreed in its Accession Protocol not to use those requirements.
1338 The European Union considers that while Article XX of the GATT 1994 is 
applicable to the trading rights commitments that  China undertook pursuant to Paragraph 5.1 of 
the Accession Protocol and Paragraphs 83 and 84 of the Working Party Report, it is not applicable 
to minimum capital and prior experience requirem ents, which China expressly excluded from what 
can be considered as WTO-consistent regulation of trade.1339 
7.1018.  More particularly, the complainants em phasize that China explicitly confirmed in 
Paragraph 84(b) that minimum capital and prior export experience criteria would not apply, and therefore, these are excluded from what can be co nsidered as WTO-consistent regulation of trade. 
It will be recalled that Paragr aph 84(b) provides as follows: 
With respect to the grant of trading rights to foreign enterprises and individuals, 
including sole proprietorships of other WTO members, the representative of China confirmed that such rights would be granted in a non-discriminatory and non-
discretionary way. He further confirmed that any requirements for obtaining trading 
rights would be for customs and fiscal purposes only and would not constitute a barrier to trade. The representative of Ch ina emphasized that foreign enterprises and 
individuals with trading rights had to comply with all WTO-consistent requirements 
related to importing and exporting, such as those concerning import licensing, TBT and SPS, but confirmed that requirements  relating to minimum capital and prior 
experience would not apply. 
7.1019.  According to the European Union, China is wrong to allege that the Appellate Body 
confirmed that the subset of governmental regulati on that constitutes an exercise of regulatory 
powers that the covered agreements affirmativel y recognize includes minimum capital and prior 
experience requirements.
1340 The United States points to the use of the disjunctive "but" in the last 
sentence to distinguish between prior export pe rformance and minimum capital requirements and 
those types of regulatory activity that might, by virtue of the qualifying language in Paragraph 5.1, 
be permitted. According to the United States, Chin a relies on the first part of the phrase in the 
third sentence of Paragraph 84(b) to argue that it  is permitted to impose prior export performance 
and minimum capital requirements, but ignores the disjunctive "but".1341 Japan makes a similar 
observation.1342 
7.1020.  The Panel notes that the Appellate Body in China – Publications and Audiovisual Products,  
in its consideration of the phrase "right to regulate trade" in Paragraph 5.1 of China's Accession Protocol, held that when China regulates trade, it must do so "in a manner consistent with the 
WTO Agreement". The Appellate Body explained that: 
WTO Members' regulatory requirements may be WTO-consistent in one of two ways. 
First, they may simply not contravene any WTO obligation. Secondly, even if they 
contravene a WTO obligation, they may be justified under an applicable exception.
1343   
7.1021.  The Appellate Body went on to comment that Paragraph 84(b) of China's Working Party 
Report: 
[ I ] n  p a r t i c u l a r ,  s e e m s  t o  u s  t o  i d e n t i f y  a  s u b s e t  o f  g o v e r n m e n t a l  r e g u l a t i o n  t h a t  
constitutes an exercise of regulatory powers that the covered agreements 
affirmatively recognize as accruing to WTO Members. … We read this as a confirmation that China's obligation to grant the right to trade cannot impair China's 
power to impose WTO-consistent import licensing, TBT, and SPS measures, [as well as 
                                               
1338 United States' response to Pa nel question No. 8, para. 16. 
1339 European Union's response to Panel question No. 8, para. 11. 
1340 European Union's response to Panel question No. 8. 
1341 United States' second written submission, para. 317. 
1342 Japan's second written submission, para. 212. 
1343 Appellate Body Report, China – Publications and Audiovisual Products , para. 223. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 245 - 
 
  other] types of regulatory measures in respect of trade in goods that the covered 
agreements affirmatively recognize that China may take.1344 
7.1022.  The Panel will now consider whether China specifically committed to exclude prior export 
performance and minimum capital requirements in  Paragraph 84(b) of its Working Party Report 
from what could be considered as WTO-consistent regulation of trade, as the complainants allege. 
7.1023.  In our view, the complainants have misconstrued Paragraph 84(b) because they have 
failed to read the third sentence as a whole. The Panel recalls that the two criteria mentioned in 
Paragraph 84(b) – minimum capital and prior experience – were not at issue in the China – 
Publications and Audiovisual Products  dispute and thus were not referred to by the Appellate Body 
in its consideration of this paragraph. In the Panel's view, a proper reading of the third sentence entails reading the sentence as a whole and then applying the Appellate Body's findings to the 
entire sentence. The complainants rather focus on the first part of the sentence and consider the 
applicability of the Appellate Body's discussion of the term "WTO-consistent" to this part of the 
sentence only, while excluding the second part of the sentence, which they consequently consider 
to be an absolute commitment incapable of justification under an applicable exception and hence 
incapable of being WTO-consistent. In our view, the third sentence cannot be parsed into two separate and unrelated obligations, either legall y or grammatically. Accordingly, the Appellate 
Body's guidance cannot be applied only to part of the sentence. The Panel understands the third 
sentence of Paragraph 84(b) in the context of this dispute as follows: foreign enterprises and individuals with trading rights have to comply with all WTO-consistent requirements related to exporting, but requirements relating to minimu m capital and prior experience cannot be used, 
even if the export quotas were to be WTO-consistent. The only way China would be able to use 
minimum capital and prior experience as eligibility criteria for WTO-consistent quota allocation is if these criteria in and of themselves can be justified under an applicable exception. To put it another 
way, and to borrow the Appellate Body's language cited in paragraph 7.1020 above, if "they" 
(minimum capital, export performance and prior experience regulatory requirements) "contravene 
a WTO obligation" (i.e. Paragraphs 83 and 84 of China's Working Party Report), "they may be 
justified under an applicable exception" (e.g. Article XX(g) of the GATT 1994). 
7.1024.  In sum, we understand that China's right to regulate trade under Paragraph 5.1 of its 
Accession Protocol is not impaired by its trading rights commitments as long as the eligibility criteria imposed on such trade can be justified under an applicable exception. The question is 
whether this qualified obligation regarding trading rights in Paragraph 5.1 of the Accession Protocol 
can also be found in Paragraphs 83 and 84 of China's Working Party Report, such that China could seek to establish that the breaches of its tradin g rights commitments found by the Panel are both 
justifiable and justified under Article XX(g). 
7.1025.  In deciding this issue, the Panel notes that Paragraphs 83 and 84 do not contain the 
same introductory language as Paragraph 5.1, i.e. "without prejudice to China's right to regulate 
trade in a manner consistent with the WTO Agreement …", which permits China to rely upon 
Article XX of the GATT 1994 to seek to justify breaches of its WTO obligations. Consequently, in the absence of this explicit textual link to the GATT 1994, whether China's commitments in Paragraphs 83 and 84 are qualified in the same manner will depend on whether there is some 
other basis, textual or otherwise, for such qualific ation. We have found three such bases, which we 
explain below.  
7.1026.  First, the Panel observes that Paragr aph 5.1 and Paragraphs 83 and 84 deal with the 
same subject-matter; indeed they fall under sections with similar titles: "Right to Trade" and 
"Trading Rights". Further, it is accepted by all parties to this dispute, and the Panel agrees, that the trading rights commitments in Paragraphs 83 and 84 are elaborations of the general obligation 
to grant the right to trade under Paragraph 5.1 of the Accession Protocol. As part of its analysis of 
the introductory clause of Paragraph 5.1, the Ap pellate Body noted that certain paragraphs of 
China's Working Party Report, which elaborate China's trading rights commitments, may "provide context for and inform the scope of the WTO-consistent governmental regulation that may not be 
impaired by China's obligation to grant the right to trade." 
1345 In particular, the Appellate Body 
noted that "Paragraph 84(b), in particular, seem s to us to identify a subset of government 
                                               
1344 Appellate Body Report, China – Publications and Audiovisual Products , paras. 224-225. 
1345 Appellate Body Report, China – Publications and Audiovisual Products , para. 224. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 246 - 
 
  regulation that constitutes an exercise of regulatory power".1346 Thus, the Appellate Body itself has 
shed some light on the relationship between  Paragraphs 83 and 84 and Paragraph 5.1. The 
Appellate Body also stated that it "s[aw] the obligations assumed by China in respect of trading rights, which relate to traders, and the obligations imposed on all WTO Members in respect of their 
regulation of trade in goods [as] closely intert wined," and explained that this "interlinkage was 
reflected in paragraph 5.1 itself".
1347 The Panel finds that this interlinkage is also reflected in 
Paragraphs 83 and 84; for example, Paragraph 84(b) refers to WTO-consistent requirements 
related to importing and exporting, such as th ose concerning import licensing, TBT, and SPS 
measures. Further and as already noted above, Paragraphs 83(d) and 84(a) of China's Working Party Report confirm China's obligation to grant th e right to trade. The Panel considers that it 
would be anomalous and legally incoherent if China's obligation to grant the right to trade was 
qualified under Paragraph 5.1 of China's Accession Protocol but not under Paragraphs 83 and 84. 
7.1027.  This brings the Panel to its second basis for concluding that China's commitments in 
Paragraphs 83 and 84 are qualified similarly to  the commitments under Paragraph 5.1. The panel 
in China – Publications and Audiovisual Products  found that the obligations in Paragraph 83(d) 
"should be interpreted so as to be consistent with those of paragraph 5.1": 
[W]e note that, unlike paragraph 5.1, paragraph 83(d) does not explicitly 
state that the obligation to grant the right to trade to all enterprises in 
China is without prejudice to China's right to regulate trade in a WTO-consistent manner. We do not consider that one can logically infer from this that the commitment set out in paragraph 83(d) is intended to 
deprive China of the right to regula te trade. We think the purpose of 
paragraph 83(d) is to "confirm" the obligation to grant the right to trade to enterprises in China. If that is the case, it was not essential to provide 
specific clarification whether this obligation detrimentally affects China's 
right to regulate trade. Furthermore, we recall that paragraph 5.1 is part 
of the context of paragraph 83(d). In view of the close substantive 
similarity between the first sentence of paragraph 5.1 and 
paragraph 83(d), we believe the provisions of paragraph 83(d) should be interpreted so as to be consistent with those of paragraph 5.1. For these reasons, we conclude that the obligation stipulated in paragraph 83(d) 
should be understood as being without prejudice to China's right to 
regulate trade in a WTO-consistent manner.
1348 
7.1028.  The panel in China – Publications and Audiovisual Products  also made a similar finding in 
respect of Paragraph 84(a).1349  
7.1029.  The Panel finds this reasoning by the panel in China – Publications and Audiovisual 
Products  equally apt here, and considers that it should also interpret the obligations in 
Paragraphs 83(d) and 84(a) so as to be consistent with Paragraph 5.1. Consequently, the Panel 
finds that the obligations in those paragraphs to grant the right to trade should be understood as being without prejudice to China's right to regulate trade in a WTO-consistent manner. Paragraphs 83(d) and 84(a) do not explicitly state that the obligation to grant the right to trade to 
all enterprises in China is "without prejudice to China's right to regulate trade in a WTO-consistent 
manner". However, in the Panel's opinion, it does not necessarily follow from this that Members intended to deprive China of the right to regulate trade.
1350   
7.1030.  The third reason for the Panel's conclusion that China is entitled to seek to justify 
breaches of its commitments in Paragraphs 83 and 84 is also found in the Appellate Body report in 
China – Publications and Audiovisual Products . In this report, the Appellate Body found that:  
[T]he introductory clause of paragraph 5.1 cannot be interpreted in a way that would 
allow a complainant to deny China access to a defence merely by asserting a claim under paragraph 5.1 and by refraining from asserting a claim under other provisions 
                                               
1346 Ibid. 
1347 Appellate Body Report, China – Publications and Audiovisual Products , para. 226. 
1348 Panel Report, China – Publications and Audiovisual Products, para. 7.310. 
1349 Panel Report, China – Publications and Audiovisual Products, para. 7.315. 
1350 Panel Report, China – Publications and Audiovisual Products, paras. 7.310 and 7.315. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 247 - 
 
  of the covered agreements relating to trade in goods that apply to the same or closely 
linked measures, and which set out obligations that are closely linked to China's trading rights commitments.
1351 
7.1031.  The Panel considers that this finding is particularly relevant in the current proceedings. If 
the Panel were to find that China could not invoke Article XX(g) under Paragraphs 83 and 84 in 
order to seek to justify its WTO-inconsistent measures, a complainant could simply assert a claim regarding China's trading rights commitments under  those provisions only without making a claim 
"under other provisions of the covered agreements  relating to trade in goods that apply to the 
same or closely linked measures", in this case Paragraph 5.1 of China's Accession Protocol, thereby denying China access to a defence under the introductory clause of Paragraph 5.1.
 In this 
way, a complainant could too easily circumvent the defence offered by Paragraph 5.1 and assert 
its claims only under Paragraphs 83 and 84 of China's Working Party Report. 
7.1032.  Having found that China can seek to justify violations of its trading rights commitments, 
we observe that the Appellate Body has cautioned that not every measure that breaches China's 
trading rights commitments can be justified under Article XX of the GATT 1994:  
[W]hether China may, in the absence of a specific claim of inconsistency with the 
GATT 1994, justify its measure under Article XX of the GATT 1994 must in each case 
depend on the relationship between the measure found to be inconsistent with China's 
trading rights commitments, on the one hand, and China's regulation of trade in goods, on the other hand.
1352 
7.1033.  Thus, to sum up, the Panel concludes that breaches of China's trading rights 
commitments in Paragraphs 83 and 84 can be justified under an applicable exception of the GATT. 
However, to establish that its measures are actually justifiable, China has to show, in the words of the Appellate Body, that they have a "clearly discernible, objective link to the regulation of trade" 
in rare earths and molybdenum.
1353 
7.9.3.2  Whether the breaches of China's trading rights commitments are justified 
pursuant to Article XX(g) of the GATT 1994 
7.1034.  The Panel has concluded that the commitments in Paragraphs 83 and 84 are subject to 
the general exceptions of Article XX of the GATT 1994 insofar as measures regulating trade in goods are concerned. We note that the Appellate Body has held that in certain circumstances, 
"[a]ny exercise of China's right to regulate trade will be protected under the introductory clause of 
paragraph 5.1 … and that China may seek to show that, because its measure complies with the 
conditions of a GATT 1994 exception, the measure represents an exercise of China's power to regulate trade in a manner consistent with the WTO Agreement and, as such, may not be impaired 
by China's trading rights commitments".
1354 The Appellate Body has also held that "successful 
justification of these provisions, however, requires China to have demonstrated that they comply with the requirements of Article XX of the GATT 1994".
1355 
7.1035.  The complainants have requested the Panel to find, in the event that it concludes that 
China is entitled to invoke a WTO exception, that China has conflated the issues of whether the export quotas are justified by Article XX(g) and wh ether the trading rights restrictions are justified 
by Article XX(g). The complainants assert that these are two separate issues to be addressed 
independently, and that China has failed to demo nstrate that its requirements for prior export 
performance, prior export experience, and mi nimum registered capital are justified by 
Article XX(g).
1356  
                                               
1351 Appellate Body Report, China – Publications and Audiovisual Products, para. 229. 
1352 Appellate Body Report, China – Publications and Audiovisual Products, para. 229. 
1353 Appellate Body Report, China – Publications and Audiovisual Products, para. 230. 
1354 Appellate Body Report, China – Publications and Audiovisual Products, para. 230. 
1355 Appellate Body Report, China – Publications and Audiovisual Products, para. 233. 
1356 United States' response to Pa nel question No. 11, para. 22; United States' second written 
submission, para. 321; European Union's second writte n submission, para. 321; Japan's response to Panel 
question No. 11. and Japan's second written submission, para. 217. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 248 - 
 
  7.1036.  As noted in the preceding section, according to China, it is not necessary for China to 
justify separately the prior export performance and minimum capital requirements under Article XX 
of the GATT 1994. China argues that the criteria at issue are not limitations on trading rights. 
Rather, the prior export performance and minimu m capital requirements are quota allocation 
criteria that constitute an integral part of China's export quota system. China submits that if the 
complainants wanted to challenge separately China's quota allocation criteria, they should have challenged these measures under the specific WTO obligations applicable to quota allocation rules, 
including the following: Article X:1 of the GA TT 1994 requiring that quota allocation rules be 
published; Article X:3(a) imposing disciplines on the manner in which quota administration rules are administered; and Article XIII of the GATT 1994 imposing a series of disciplines specifically on quota administration. As the complainants did not invoke any of these provisions in respect of 
China's administration of its 2012 export quotas, there is no need for China to justify separately 
the consistency of these export quota eligibility criteria.
1357 
7.1037.  The Panel notes that throughout these proceedings China has emphasized that the 
criteria at issue relate to the administration of WTO-consistent export quotas and are not 
limitations on the right to trade.1358 While the Panel acknowledges that China characterizes its 
minimum capital, export performance, and prior experience requirements as quota allocation 
criteria – and at the same time notes that China often refers to them as eligibility criteria1359 – 
relating to the administration of its export quotas, it nonetheless has already found that the disputed measures contain exactly the type of restrictions that China expressly committed to eliminate. The Panel has concluded that in Paragraphs 83 and 84 of its Working Party Report, 
China expressly committed to eliminating export pe rformance or prior experience requirements as 
criteria for obtaining or maintaining the right to export, and to phase out completely its minimum registered capital requirements. 
7.1038.  The Panel recognizes that China did seek to provide justification for its eligibility criteria, 
but only as part as of its export quota system.
1360 For example, in the case of rare earths, China 
states that requiring an applicant to demons trate export performance enables the Chinese 
authorities to ensure that the exporter has the commercial expertise necessary to participate in 
complex international transactions and that "this application requirement ensures that enterprises to which part of the export quota is allocated ar e capable of supplying the export volumes that are 
allocated to them".
1361 China asserts that trading enterprises must also have registered capital 
over 50 million RMB in the case of rare earths1362, and submits that imposing minimum registered 
capital requirements ensures the exporter's fi nancial soundness, the absence of which might 
hamper its ability to source the materials and comply with international contracts.  
7.1039.  However, as we observed above, China explains that the export performance and 
minimum registered capital criteria eligibility requirements are an integral part of China's 2012 export quota system as they serve to ensure the effectiveness of its quota system and as such are 
also justified under Article XX(g).
1363  
7.1040.  The Panel considers that the imposition of  export quotas in breach of the commitment set 
forth in Article XI:1 of the GATT 1994 not to impose quantitative restrictions on the one hand, and the imposition of prior export performance, prior export experience, and minimum capital 
requirements in breach of the commitments in China's Accession Protocol not to impose prior 
export performance, export experience, and mini mum capital requirements on the other hand, are 
distinct breaches of distinct commitments. As such, these breaches must be justified separately. 
Therefore, we must examine each invoked exception individually to determine if the conditions of 
the exceptions asserted have been met.  
                                               
1357 China's comments on the United States' and Japan's responses to Panel question No. 11. 
1358 See, for example, China's comments on the United  States' and Japan's responses to Panel question 
No. 8, para. 15 and question No. 11, para. 23. 
1359 See, for example, China's first written submission, paras. 272, 279, and 280. 
1360 See, for example, China's first written submission, paras. 241, 244, and 280 and China's opening 
oral statement at the first me eting of the Panel, para. 53. 
1361 China's first written submission, paras. 239 and 385. 
1362 China's first written submission, para. 240 referring to 2012 Application Qualifications and 
Procedures for Rare Earth Export Quotas , (Exhibits CHN-38, JE-61), Article I.2.2, and para. 395, referring to 
2012 Application Qualifications and Application Procedures for Molybdenum Export Quota  (Exhibits CHN-107, 
JE-63). 
1363 China's first written submission, para. 280. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 249 - 
 
  7.1041.  China acknowledges that specific WTO obligations applicable to quota allocation rules are 
subject to obligations that include Articles X:1, X:3(a) and XIII of the GATT 1994. It is not clear to 
the Panel, however, why China recognizes that it would have to justify separately the consistency of the eligibility criteria if these provisions had been invoked, but maintains that it is not required 
to do so for claims made under Paragraph 5.1 of the Accession Protocol and Paragraphs 83 and 84 
of the Working Party Report. According to China's line of argument, its quota allocation rules could be classified, and accordingly justified, as integral parts of China's export quota system. However, 
as we explained above, in our view, the justifications must be made separately for each of China's 
obligations.  
7.1042.  The Panel now turns to the analysis of the justification itself. As the Panel has already 
discussed extensively elsewhere what China, as the party invoking the exception, needs to 
establish to justify its WTO-inconsistent measures pursuant to Article XX(g), we will only make 
brief reference to those requirements here. Purs uant to the two-tier test established by the 
Appellate Body in US – Gasoline , the application of Article XX(g) requires "first, provisional 
justification by reason of characterization of the measure under XX(g); and second, further 
appraisal of the same measure under the intr oductory clauses of Article XX" i.e. the chapeau . 
Thus, specifically under the first part of the two-tier test, China must demonstrate that its 
measures (i) "relate to conservation of exhaustible natural resources", and (ii) are "made effective 
in conjunction with restrictions on domestic production or consumption".  
7.1043.  The Panel has already found that the impo sition of export quot as in breach of the 
commitment set forth in Article XI:1 of the GA TT 1994, and the imposition of prior export 
performance, export experience, and minimum re gistered capital requirements in breach of 
Accession Protocol commitments, are separate and distinct breaches, and must be justified 
separately. However, contrary to its Article XX(g) defence of export quotas, China has not 
provided specific arguments explaining why the eligibility criteria contained in the measures at 
issue relate to "conservation of exhaustible natural resources".  
7.1044.  Even in its defence of its export quotas, where China makes reference to the eligibility 
criteria and offers some reasons therefor, the reasons provided are not offered within the 
framework of the requirements of an Article XX(g) defence as set out in this paragraph. The Panel 
notes that this is consistent with China's assertion that "as an integral part of the export quota system, the prior export performance and minimum registered capital criteria are also justified 
under Article XX(g)"
1364, and hence China does not separately justify these criteria.1365 Specifically, 
and with reference to the examples noted in para graph 7.1038 above, China states that requiring 
an applicant to demonstrate prior export performance enables the Chinese authorities to ensure 
that the exporter has the commercial expertise necessary to participate in complex international 
transactions. China also states that it sets minimum capital requirements to "ensure the exporter's financial soundness, the absence of which might hamper its ability to source the materials and 
comply with international contracts."
1366 In the Panel's opinion, these are not conservation-related 
concerns. 
7.1045.  In the light of the foregoing, and bearing in  mind that the burden of establishing that the 
requirements set out in an exception have been met lies with China as the party seeking to rely on 
it, the Panel concludes that China has not established that its violations of its trading rights 
commitments can be justified pursuant to Article XX(g). 
7.9.3.3  Conclusion 
7.1046.  The Panel finds that China is entitled to invoke Article XX(g) of the GATT 1994 to seek to 
defend violations of its trading rights commitmen ts in Paragraphs 83(a), 83(b), 83(d), 84(a), and 
84(b) of China's Working Party Report. Furtherm ore, the Panel finds that these are distinct 
breaches of distinct commitments and that they must  be justified separately to establish that they 
meet the conditions of the exception asserted. The Panel also finds that China has failed to make a 
                                               
1364 China's first written submission, paras. 261 and 280. 
1365 China's comments on the complainants' responses to Panel question No. 11, para. 25. 
1366 China's first written submission, para. 239. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 250 - 
 
  prima facie  case that the violations of its trading rights commitments are justified pursuant to 
Article XX(g).1367 
7.9.4  The European Union's additional clai m under Paragraph 84(b) of China's Working 
Party Report  
7.9.4.1  Introduction 
7.1047.  The European Union claims that, by virtue of the 2012 Application Qualifications and 
Application Procedures for Molybdenum Export Quota , China is in breach of its obligation to grant 
trading rights to foreign enterprises wanting to export molybdenum products in a non-
discretionary way.1368 
7.9.4.2  Obligation under Paragraph 84 (b) of China's Working Party Report 
7.1048.  In Paragraph 84(b) of the Working Party Report, China confirmed that: 
With respect to the grant of trading rights to foreign enterprises and individuals, 
including sole proprietorships of other WTO members, the representative of China confirmed that such rights would be granted in a non-discriminatory and non-
discretionary way.  
7.9.4.3  The measure at issue 7.1049.  According to the European Union, the prio r export performance requirement applies to all 
enterprises that have previously acquired export quotas, including foreign enterprises. The 2012 
Application Qualifications and Application Procedures for Molybdenum Export Quota does not 
quantify the export performance required to qua lify for a quota – the European Union refers to a 
benchmark
1369 – thus allowing China freedom to choose, based essentially on its own preference 
and considerations, how much a company has to have exported in order to meet the export 
performance criterion and qualify for a quota share. As a result, China does not grant trading rights to foreign enterprises in a non-discretionary way, and for this reason breaches its obligation 
under paragraph 84(b) of the Working Party Report and thus paragraph 1.2 of the Accession 
Protocol.
1370 
7.1050.  China responds that the European Union does not provide any evidence to support its 
allegation that trading rights to foreign enterprises would be granted in a discretionary manner. 
China also states that "[s]howing any level of past export performance would satisfy this 
requirement".1371  
7.1051.  In the course of answering Panel question s on the European Union's additional claim, an 
issue arose regarding the translation of a certain term in Chinese found in Article II.1.2 of the 
2012 Application Qualifications and Application Procedures for Molybdenum Export Quota . 
Specifically, the issue is whether the term should be understood as "reached actual export 
performance", as the European Union argued, or whether it should be understood as "have export 
performance", as China stated, meaning the existence of prior exports (at any level). China also states that it is irrelevant whether the term is translated as "actual export performance" or just 
"export performance". For China, the sentence should  be read as a whole, and even if one were to 
add the word "actual" to "export performance", it would not add any additional elements, as all "export performance" after verification is "actual".
1372 
                                               
1367 In view of the nature of the ex port quota system described above, the Panel's finding is with respect 
to the series of measures comprising the relevant frame work legislation, the implem enting regulations, other 
applicable laws and the specific annual measures imposing the export quotas existing at the date of the Panel's establishment. 
1368 European Union's first written submission, paras. 157-158. 
1369 European Union's response to Panel question No. 17, para. 29. 
1370 European Union's first written submission, para. 158. 
1371 China's first written submission, para. 405. 
1372 China's comments on European Union's resp onse to Panel question No. 136, para. 125. WT/DS431/R • WT/DS432/R • WT/DS433/R 
 
- 251 - 
 
  7.1052.  The Panel has taken note of the translation issues raised by China and the European 
Union. However, we do not consider that the translation of the relevant Chinese characters has any particular bearing in resolving this issue. To recall, the European Union claimed that the 2012 
Application Qualifications and Application Procedures for Molybdenum Export Quota does not 
quantify the export performance required to qu alify for a quota, meaning that China does not 
grant trading rights to foreign enterprises in a non-discretionary way. In the course of these proceedings, China asserted that "showing any level  of past export performance would satisfy this 
requirement". The Panel has taken note of this undertaking by China and has no reason to 
question this statement.
1373   
7.9.4.4  Conclusion 7.1053.  Having taken note of China's statement referred to in paragraph 7.1052 above, the Panel 
concludes that the European Union has not met its burden to prove that the prior export 
performance criterion in the 2012 Application Qualifications and Application Procedures for 
Molybdenum Export Quota breaches the commitment in Paragraph 84(b) of China's Working Party 
Report that trading rights to foreign enterprises will be granted in a non-discriminatory and non-
discretionary way.
1374 
                                               
1373 See also Panel Reports, China – Raw Materials , para. 7.944. 
1374 In view of the nature of the ex port quota system described above, the Panel's finding is with respect 
to the series of measures comprising the relevant frame work legislation, the implem enting regulations, other 
applicable laws and the specific annual measures imposing  the export quota existing at the date of the Panel's 
establishment. WT/DS431/R 
 
- US-252 - 
 
   
8  CONCLUSIONS AND RECOMMENDATIONS 
8.1  Complaint by the United States (DS431) 8.1.1  Conclusions 
8.1.  In respect of claims concerning export duties
1375: 
a. The Panel finds that the export duties that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue1376 are 
inconsistent with Paragraph 11.3 of China's Accession Protocol; 
b. The Panel finds that China may not seek to justify the export duties it applies to various 
forms of rare earths, tungsten, and molybdenum pursuant to Article XX(b) of the GATT 1994. Even assuming arguendo  that China could seek to justify the application of 
export duties under Article XX(b), the Panel finds that China has not demonstrated that 
the export duties it applies to various forms of rare earths, tungsten, and molybdenum are justified pursuant to subparagraph (b) of Article XX of the GATT 1994. In addition, 
the Panel finds that China has not demonstrated that the measures are applied in a 
manner that satisfies the chapeau of Article XX. 
8.2.  In respect of claims concerning export quotas
1377: 
a. The Panel finds that the export quotas that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue1378 are 
inconsistent with Article XI:1 of the GATT 1994; 
b. The Panel finds that the export quotas that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue are inconsistent 
with Paragraphs 162 and 165 of China's Working Party Report as incorporated into China's Accession Protocol by virtue of Paragraph 1.2;  
c. The Panel finds that China has not demonstrated that the export quotas that China 
applies to various forms of rare earths, tungsten, and molybdenum are justified pursuant to subparagraph (g) of Article XX of the GATT 1994. In addition, the Panel finds that 
China has not demonstrated that the measures are applied in a manner that satisfies the 
chapeau of Article XX. 
8.3.  In respect of claims concerning export quota administration and allocation
1379: 
a. The Panel finds that the restrictions on the trading rights of enterprises exporting rare 
earths and molybdenum (i.e. the prior expo rt experience requirement, the export 
performance requirement, and the minimum re gistered capital requirement) that China 
applies by virtue of the series of measures at issue1380 are inconsistent with 
Paragraphs 83(a), 83(b), 83(d), 84(a), and 84(b) of China's Working Party Report, as 
incorporated into China's Accession Protocol by virtue of Paragraph 1.2; 
b. The Panel finds that the restrictions on the trading rights of enterprises exporting rare 
earths and molybdenum (i.e. the prior expo rt experience requirement, the export 
performance requirement, and the minimum re gistered capital requirement) that China 
                                               
1375 The specific forms of the raw materials subject to the United States' claims are identified in 
Exhibit JE-3 and para. 2.16 of these Reports. 
1376 See section 7.3.1.2 above. 
1377 The specific forms of the raw materials subject to the United States' claims are identified in 
Exhibit JE-3 and para. 2.16 of these Reports.  
1378 See discussion in sections 7.4.1.2-7.4.1.3 above. 
1379 The specific forms of the raw materials subject to the United States' claims are identified in 
Exhibit JE-3 and para. 2.16 of these Reports. 
1380 See discussion in sections 7.4.1.2-7.4.1.3 above. WT/DS431/R 
 
- US-253 - 
 
  applies by virtue of the series of measures at issue1381 are inconsistent with 
Paragraph 5.1 of China's Accession Protocol; 
c. The Panel finds that China is entitled to seek to justify the restrictions on the trading 
rights of enterprises exporting rare earths and molybdenum referred to in paragraph 8.3 
pursuant to Article XX(g) of the GATT 1994; 
d. The Panel finds that China has failed to make a prima facie  case that the violations of its 
trading rights commitments are justified pursuant to Article XX(g). 
8.1.2  Nullification and impairment 
8.4.  Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed 
under a covered agreement, the action is considered prima facie  to constitute a case of 
nullification or impairment of benefits under that agreement. Accordingly, we conclude that where 
China has acted inconsistently with Article XI:1 of the GATT 1994; Paragraphs 1.2, 5.1 and 11.3 of 
China's Accession Protocol; and Paragraphs 83, 84, 162, and 165 of China's Working Party Report as incorporated into its Accession Protocol by virt ue of Paragraph 1.2, it has nullified or impaired 
benefits accruing to the United States under the WTO Agreement.  
8.1.3  Recommendations 8.5.  Pursuant to Article 19.1 of the DSU, having  found that China has acted inconsistently with 
Article XI:1 of the GATT 1994; Paragraphs 1.2, 5.1 and 11.3 of China's Accession Protocol; and 
Paragraphs 83, 84, 162 and 165 of China's Working Party Report, the Panel recommends that the Dispute Settlement Body requests China to bring th e existing measures at issue into conformity 
with its obligations under the GATT 1994, China's Accession Protocol and China's Working Party 
Report. In respect of findings concerning export duties and export quotas on various forms of rare 
earths, tungsten, and molybdenum, and restrictions on the trading rights of enterprises exporting rare earths and molybdenum, the Panel has found that the series of measures have operated to 
impose export duties and export quotas on various forms of rare earths, tungsten, and 
molybdenum, and restrictions on the trading rights of enterprises exporting rare earths and molybdenum (i.e. the prior export experience requ irement, the export performance requirement, 
and the minimum registered capital requirement), that are inconsistent with China's WTO 
obligations. The Panel, therefore, recommends that the Dispute Settlement Body requests China to bring its measures into conformity with its WTO obligations such that the series of measures does not operate to bring about a WTO-inconsistent result.  
 
                                               
1381 See discussion in sections 7.4.1.2-7.4.1.3 above. WT/DS432/R 
 
- EU-254 - 
 
   
8.2  Complaint by the European Union (DS432) 
8.2.1  Conclusions 8.6.  In respect of claims concerning export duties
1382: 
a. The Panel finds that the export duties that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue1383 are 
inconsistent with Paragraph 11.3 of China's Accession Protocol; 
b. The Panel finds that China may not seek to justify the export duties it applies to various 
forms of rare earths, tungsten, and molybdenum pursuant to Article XX(b) of the GATT 1994. Even assuming arguendo  that China could seek to justify the application of 
export duties under Article XX(b), the Panel finds that China has not demonstrated that 
the export duties it applies to various forms of rare earths, tungsten, and molybdenum 
are justified pursuant to subparagraph (b) of Article XX of the GATT 1994. In addition, the Panel finds that China has not demonstrated that the measures are applied in a 
manner that satisfies the chapeau of Article XX. 
8.7.  In respect of claims concerning export quotas
1384: 
a. The Panel finds that the export quotas that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue1385 are 
inconsistent with Article XI:1 of the GATT 1994; 
b. The Panel finds that the export quotas that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue are inconsistent 
with Paragraphs 162 and 165 of China's Working Party Report as incorporated into 
China's Accession Protocol by virtue of Paragraph 1.2;  
c. The Panel finds that China has not demonstrated that the export quotas that China 
applies to various forms of rare earths, tungsten, and molybdenum are justified pursuant 
to subparagraph (g) of Article XX of the GATT 1994. In addition, the Panel finds that China has not demonstrated that the measures are applied in a manner that satisfies the 
chapeau of Article XX. 
8.8.  In respect of claims concerning export quota administration and allocation
1386: 
a. The Panel finds that the restrictions on the trading rights of enterprises exporting rare 
earths and molybdenum (i.e. the prior expo rt experience requirement, the export 
performance requirement, and the minimum re gistered capital requirement) that China 
applies by virtue of the series of measures at issue1387 are inconsistent with 
Paragraphs 83(a), 83(b), 83(d), 84(a), and 84(b) of China's Working Party Report, as 
incorporated into China's Accession Protocol by virtue of Paragraph 1.2; 
b. The Panel finds that the restrictions on the trading rights of enterprises exporting rare 
earths and molybdenum (i.e. the prior expo rt experience requirement, the export 
performance requirement, and the minimum re gistered capital requirement) that China 
                                               
1382 The specific forms of the raw materials subject to  the European Union's claims are identified in 
Exhibit JE-3 and para. 2.16 of these Reports. 
1383 See section 7.3.1.2 above. 
1384 The specific forms of the raw materials subject to  the European Union's claims are identified in 
Exhibit JE-3 and para. 2.16 of these Reports.  
1385 See discussion in sections 7.4.1.2-7.4.1.3 above. 
1386 The specific forms of the raw materials subject to  the European Union's claims are identified in 
Exhibit JE-3 and para. 2.16 of these Reports. 
1387 See discussion in sections 7.4.1.2-7.4.1.3 above.  WT/DS432/R 
 
- EU-255 - 
 
  applies by virtue of the series of measures at issue1388 are inconsistent with 
Paragraph 5.1 of China's Accession Protocol; 
c. The Panel finds that China is entitled to seek to justify the restrictions on the trading 
rights of enterprises exporting rare earths and molybdenum referred to in paragraph 8.8  
pursuant to Article XX(g) of the GATT 1994; 
d. The Panel finds that China has failed to make a prima facie  case that the violations of its 
trading rights commitments are justified pursuant to Article XX(g); and 
e. The Panel finds that the European Union has not established that the prior export 
performance criterion in the 2012 Application Qualifications and Application Procedures 
for Molybdenum Export Quota  is inconsistent with the commitment in Paragraph 84(b) of 
China's Working Party Report as incorporated into China's Accession Protocol by virtue of 
Paragraph 1.2. 
8.2.2  Nullification and impairment 8.9.  Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed 
under a covered agreement, the action is considered prima facie  to constitute a case of 
nullification or impairment of benefits under that agreement. Accordingly, we conclude that where China has acted inconsistently with Article XI:1 of the GATT 1994; Paragraphs 1.2, 5.1 and 11.3 of 
China's Accession Protocol; and Paragraphs 83, 84, 162, and 165 of China's Working Party Report, 
it has nullified or impaired benefits accruing to the European Union under the WTO Agreement.  
8.2.3  Recommendations 8.10.  Pursuant to Article 19.1 of the DSU, having  found that China has acted inconsistently with 
Article XI:1 of the GATT 1994; Paragraphs 1.2, 5.1 and 11.3 of China's Accession Protocol; and 
Paragraphs 83, 84, 162, and 165 of China's Working Party Report, the Panel recommends that the Dispute Settlement Body requests China to bring th e existing measures at issue into conformity 
with its obligations under the GATT 1994, China's Accession Protocol and China's Working Party 
Report. In respect of findings concerning export duties and export quotas on various forms of rare earths, tungsten, and molybdenum, and restrictions on the trading rights of enterprises exporting 
rare earths and molybdenum, the Panel has found that the series of measures have operated to 
impose export duties, and export quotas on various forms of rare earths, tungsten, and molybdenum, and restrictions on the trading rights of enterprises exporting rare earths and molybdenum (i.e. the prior export experience requ irement, the export performance requirement, 
and the minimum registered capital requirement), that are inconsistent with China's WTO 
obligations. The Panel, therefore, recommends that the Dispute Settlement Body requests China to bring its measures into conformity with its WTO obligations such that the series of measures does 
not operate to bring about a WTO-inconsistent result.  
                                               
1388 See discussion in sections 7.4.1.2-7.4.1.3 above. WT/DS433/R 
 
- JPN-256 - 
 
   
8.3  Complaint by Japan (DS433) 
8.3.1  Conclusions 8.11.  In respect of claims concerning export duties
1389: 
a. The Panel finds that the export duties that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue1390 are 
inconsistent with Paragraph 11.3 of China's Accession Protocol; 
b. The Panel finds that China may not seek to justify the export duties it applies to various 
forms of rare earths, tungsten, and molybdenum pursuant to Article XX(b) of the GATT 1994. Even assuming arguendo  that China could seek to justify the application of 
export duties under Article XX(b), the Panel finds that China has not demonstrated that 
the export duties it applies to various forms of rare earths, tungsten, and molybdenum 
are justified pursuant to subparagraph (b) of Article XX of the GATT 1994. In addition, the Panel finds that China has not demonstrated that the measures are applied in a 
manner that satisfies the chapeau of Article XX. 
8.12.  In respect of claims concerning export quotas
1391: 
a. The Panel finds that the export quotas that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue1392 are 
inconsistent with Article XI:1 of the GATT 1994; 
b. The Panel finds that the export quotas that China applies to various forms of rare earths, 
tungsten, and molybdenum by virtue of the series of measures at issue are inconsistent 
with Paragraphs 162 and 165 of China's Working Party Report as incorporated into 
China's Accession Protocol by virtue of Paragraph 1.2;  
c. The Panel finds that China has not demonstrated that the export quotas that China 
applies to various forms of rare earths, tungsten, and molybdenum are justified pursuant 
to subparagraph (g) of Article XX of the GATT 1994. In addition, the Panel finds that China has not demonstrated that the measures are applied in a manner that satisfies the 
chapeau of Article XX. 
8.13.  In respect of claims concerning export quota administration and allocation
1393: 
a. The Panel finds that the restrictions on the trading rights of enterprises exporting rare 
earths and molybdenum (i.e. the prior expo rt experience requirement, the export 
performance requirement, and the minimum re gistered capital requirement) that China 
a p p l i e s  b y  v i r t u e  o f  t h e  s e r i e s  o f  m e a s u r e s  a t  i s s u e1394, are inconsistent with 
Paragraphs 83(a), 83(b), 83(d), 84(a), and 84(b) of China's Working Party Report, as 
incorporated into China's Accession Protocol by virtue of Paragraph 1.2; 
b. The Panel finds that the restrictions on the trading rights of enterprises exporting rare 
earths and molybdenum (i.e. the prior expo rt experience requirement, the export 
performance requirement, and the minimum re gistered capital requirement) that China 
                                               
1389 The specific forms of the raw mate rials subject to Japan's claims are identified in Exhibit JE-3 and 
para. 2.16 of these Reports. 
1390 See section 7.3.1.2 above. 
1391 The specific forms of the raw mate rials subject to Japan's claims are identified in Exhibit JE-3 and 
para. 2.16 of these Reports.  
1392 See discussion in sections 7.4.1.2-7.4.1.3 above. 
1393 The specific forms of the raw mate rials subject to Japan's claims are identified in Exhibit JE-3 and 
para. 2.16 of these Reports. 
1394 See discussion in sections 7.4.1.2-7.4.1.3 above. WT/DS433/R 
 
- JPN-257 - 
 
  applies by virtue of the series of measures at issue1395 are inconsistent with 
Paragraph 5.1 of China's Accession Protocol; 
c. The Panel finds that China is entitled to seek to justify the restrictions on the trading 
rights of enterprises exporting rare earths and molybdenum referred to in paragraph 
8.13 pursuant to Article XX(g) of the GATT 1994; 
d. The Panel finds that China has failed to make a prima facie  case that the violations of its 
trading rights commitments are justified pursuant to Article XX(g). 
8.3.2  Nullification and impairment 
8.14.  Under Article 3.8 of the DSU, in cases where there is infringement of the obligations 
assumed under a covered agreement, the action is considered prima facie  to constitute a case of 
nullification or impairment of benefits under that agreement. Accordingly, we conclude that where 
China has acted inconsistently with Article XI:1 of the GATT 1994; Paragraphs 1.2, 5.1 and 11.3 of 
China's Accession Protocol; and Paragraphs 83, 84, 162, and 165 of China's Working Party Report, it has nullified or impaired benefits accruing to Japan under the WTO Agreement.  
8.3.3  Recommendations 
8.15.  Pursuant to Article 19.1 of the DSU, having  found that China has acted inconsistently with 
Article XI:1 of the GATT 1994; Paragraphs 1.2, 5.1 and 11.3 of China's Accession Protocol; and 
Paragraphs 83, 84, 162 and 165 of China's Working Party Report, the Panel recommends that the 
Dispute Settlement Body requests China to bring th e existing measures at issue into conformity 
with its obligations under the GATT 1994, China's Accession Protocol and China's Working Party Report. In respect of findings concerning export duties and export quotas on various forms of rare 
earths, tungsten, and molybdenum, and restrictions on the trading rights of enterprises exporting 
rare earths and molybdenum, the Panel has found that the series of measures have operated to impose export duties and export quotas on various forms of rare earths, tungsten, and 
molybdenum, and restrictions on the trading rights of enterprises exporting rare earths and 
molybdenum (i.e. the prior export experience requ irement, the export performance requirement, 
and the minimum registered capital requirement), that are inconsistent with China's WTO 
obligations. The Panel, therefore, recommends that the Dispute Settlement Body requests China to 
bring its measures into conformity with its WTO obligations such that the series of measures does not operate to bring about a WTO-inconsistent result. 
 
 
__________  
                                               
1395 See discussion in sections 7.4.1.2-7.4.1.3 above.