WT/AB/29  
 
28 May 2019 
(19-2933) Page: 1/184 
    
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
APPELLATE  BODY  
 
 
ANNUAL REPORT FOR 20 18 
 
 
 
 
 
MARCH  2019  
  WT/AB/29  
 
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The Appellate  Body welcomes comments and inquiries  
regarding this Annual Report at the  
following address:  
 
Appellate  Body Secretariat  
World Trade Organization  
Rue de Lausanne 154  
CH-1211 Geneva  2, Switzerland  
e-mail: appellatebody.registry@wto.org  
<https://www.wto.org/english/tratop_e/dispu_e/ap pellate_body_e.htm > 
  WT/AB/29  
 
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  CONTENTS  
FOREWORD  ................................ ................................ ................................ ......................  6 
1   INTRODUCTION  ................................ ................................ ................................ ..........  8 
2   COMPOSITION OF T HE APPELLATE  BODY  ................................ ................................ .. 11 
3   APPEALS  ................................ ................................ ................................ ...................  13 
3.1   Appellate  Body Report, Russia – Anti-Dumping Duties on Light Commercial Vehicles from 
Germany and Italy , WT/DS479/AB/R  ................................ ................................ .................... 15 
3.2   Appellate  Body Report, European Communities and Certain Member States – Measures 
Affecting Trade in Large Civil Aircraft – Recourse to Article  21.5 of the DSU by the United  States , 
WT/DS316/AB/RW  ................................ ................................ ................................ ............. 25 
3.3   Appellate  Body Report, European  Union – Countervailing Measures on Certain Polyethylene 
Terephthalate from Pakistan , WT/DS486/AB/R  ................................ ................................ ......54 
3.4   Appellate  Body Report, Indonesia – Safeguard on Certain Iron or Steel Products , 
WT/DS490/AB/R, WT/DS496/AB/R  ................................ ................................ ....................... 60 
3.5   Appellate  Body Reports, Brazil – Certain Measures Concerning Taxation and Charges , 
WT/DS472/AB/R, WT/DS497/AB/R  ................................ ................................ ....................... 64 
3.6   Appellate  Body Report, United  States – Measures Concerning the Importation, Marketing and 
Sale of Tuna and Tuna Products – Recourse to Article  21.5 of the D SU by the United  States / 
United  States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna 
Products – Second Recourse to Article  21.5 of the DSU by Mexico , WT/DS381/AB/RW/USA, 
WT/DS381/AB/RW2  ................................ ................................ ................................ ........... 88 
4   PARTICIPANTS AND  THIRD PARTICIPANTS IN APPEALS  ................................ ........  106  
5   PROCEDURAL ISSUE S ARISING IN APPEALS  ................................ ...........................  107  
6   ARBITRATIONS UND ER ARTICLE  21.3(C) O F THE DSU  ................................ ............  112  
7   OTHER ACTIVITIES  ................................ ................................ ................................ . 116  
ANNEX 1  ................................ ................................ ................................ ......................  118  
ANNEX 2  ................................ ................................ ................................ ......................  122  
ANNEX 3  ................................ ................................ ................................ ......................  124  
ANNEX 4  ................................ ................................ ................................ ......................  130 
ANNEX 5  ................................ ................................ ................................ ......................  135  
ANNEX 6  ................................ ................................ ................................ ......................  138  
ANNEX 7  ................................ ................................ ................................ ......................  140  
ANNEX 8  ................................ ................................ ................................ ......................  142  
ANNEX 9  ................................ ................................ ................................ ......................  144  
ANNEX 10 ................................ ................................ ................................ .....................  146  
 
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  ABBREVIATIONS  USED IN THIS ANNUAL  REPORT  
Abbreviation  Description  
ACP African Caribbean Pacific  
AIDCP  Agreement on the International Dolphin Conservation 
Program  
BCI Business confidential information  
CFR Code of Federal Regulations  
COFINS  Contribution to Social Security Financing  
DDSR  Digital Dispute Settlement Registry  
Digital Inclusion programme  programme for Digital Inclusion  
DIMD  Department for Internal Market Defence of the EEC  
DPCIA  Dolphin Protection Consumer Information Act  
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures Governing the 
Settlement of Disputes  
EADS  European Aeronautic Defence and Space Company N.V.  
ECAs economic complementation agreements  
EEC Eurasian Economic Commission  
ELSA European Law Students' Association  
Enabling Clause  Decision on Differential and More Favourable Treatment, 
Reciprocity, and Fuller Participation of Developing 
Countries, Decision of 28  November  1979 
ETP Eastern Tropical Pacific  
GATT  1994 General  Agreement on Tariffs  and Trade 1994  
GSM Global System for Mobile Communications  
Hogarth  ruling  United  States Court of Appeals for the Ninth Circuit, 
Earth Island Institute v. Hogarth , 494 F.3d 757 (9th Cir. 
2007); United  States Court of Appeals for the Ninth 
Circuit, Earth Island Institute v. Hogarth , 494 F.3d 1123 
(9th Cir. 2007)  
HSBI Highly sensitive business information  
ICT Information and communication technology  
ICT programmes  Informatics, PADIS, PATVD, and Digital Inclusion 
programmes  
INMETRO  National Institute of Metrology, Quality and Technology  
INOVAR -AUTO programme  programme of Incentive to the Technological Innovation 
and Densification of the Automotive Supply Chain  
IPI tax  Tax on Industrialised Products  
IPR Intellectual property rights  
IUU illegal, unreported, and unregulated  
LA/MSF  "Launch Aid" or "Member State Financing"  
LCA Large civil aircraft  
LCVs Light commercial vehicles  
LTF-EOP Long Term Financing of Export -Oriented Projects  
MBS Manufacturing Bond Scheme  
NEPAD  New Partnership for Africa's Development  WT/AB/29  
 
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  Abbreviation  Description  
NMFS  National Marine Fisheries Service  
PADIS programme  programme of Incentives for the Semiconductors Sector  
PATVD programme  programme of Support for the Technological 
Development of the Industry of Digital TV Equipment  
PBR Potential Biological Removal  
PEC Predominantly Exporting Companies  
PEC programme  regime for Predominantly Exporting Companies  
PET polyethylene terephthalate  
PPBs Basic Productive Processes  
R&D Research and development  
RECAP programme  Special Regime for the Purchase of Capital Goods for 
Exporting Enterprises  
Rules of Conduct  Rules of Conduct for the Understanding on Rules and 
Procedures Governing the Settlement of Disputes  
S&D  special and differential  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
SRP Single Rate Presumption  
TBT Agreement  Agreement on Technical Barriers to Trade  
TRIMs  Agreement  Agreement on Trade -Related Investment Measures  
TTFs Tuna Tracking Forms  
URAA  Uruguay Round Agreements Act  
USDOC  United States Department of Commerce  
VLA Very large aircraft  
W-T weighted -average to transaction  
Working Procedures  Working Procedures for Appellate Review  
WTO World Trade Organization  
WTO Agreement  Marrakesh Agreement Establishing the World Trade 
Organization  
  WT/AB/29  
 
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  FOREWORD  
For the Appellate  Body, 2018 was an unusual year, reflecting continuity as well as potentially 
disruptive challenges. The Appellate  Body's docket continued to grow with increasingly complex 
appeals, while its composition was further reduced from four to three members.  
In some respects, 2018 represented business as usual. Throughout the y ear, the Appellate  Body 
was engaged in appellate proceedings and circulated nine Appellate  Body reports concerning six 
matters1, including the Appellate  Body report in EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US). The matters add ressed by these reports included those relating to the 
Anti-Dumping  Agreement, the SCM  Agreement, the GATT  1994, the TRIMS  Agreement , the 
TBT Agreement, and the DSU. These disputes dealt with sensitive issues spanning prohibited and 
actionable subsidies, a nimal welfare, domestic tax regimes, and unfair trade. The exceptionally large 
appeal in US – Large Civil Aircraft (2nd complaint) (Article  21.5 – EU), filed in 2017, continued to 
occupy a significant portion of the resources of the Appellate  Body and its Secretariat in 2018. The 
Secretariat also assisted an Arbitrator in issuing his award concerning the reasonable period of time 
for implementation of the panel and Appellate  Body reports in US – Anti-Dumping Methodologies 
(China)  (Article 21.3(c)) . Additionally, 12  panel reports concerning 11 matters were appealed  
in 2018.2 In sum, the heavy workload of the Appellate  Body shows no signs of abating in the near 
term.  
These figures reflect the rich legacy of the Appellate  Body and the value it provides  to WTO Members. 
In resolving disputes, the Appellate  Body has endeavoured to do justice to the founding principles 
of the DSU by clarifying the existing provisions of the covered agreements in accordance with 
customary rules of interpretation of public in ternational law. Moreover, by emphasizing consistency 
across its reports, the Appellate  Body has contributed to the security and predictability of the 
multilateral trading system. The Appellate  Body's success as an impartial arbiter is not only 
evidenced b y the sheer number of disputes brought before it, but also by the high rate of compliance 
with the recommendations and rulings  of the DSB . While losing parties and sometimes other WTO 
Members have criticized individual rulings, to date, no WTO Member has e xplicitly chosen not to 
implement a ruling in a dispute that it has lost.  
These indicators suggest WTO Members' commitment to the appellate system as a key component 
of a robust and effective dispute settlement mechanism. At the same time, they stand in st ark 
contrast to the institutional crisis we are currently facing. As of 31  December 2018, there were four 
vacant Appellate  Body seats. Despite the numerous DSB meetings held from February 2017 to date, 
including the discussion of a joint proposal put forwa rd by more than 70 Members, Members remain 
unable to reach a consensus to initiate the selection processes for the appointment of new 
Appellate  Body members.  
Starting in 2017 and continuing through 2018, WTO Members have debated several procedural and 
substantive issues concerning the functioning of the Appellate  Body. For example, WTO Members 
have discussed the increase in the number of Appellate  Body reports that are issued after the 90 -day 
period prescribed in the DSU. In addition, Members have reviewed the operation of Rule  15 of the 
Working Procedures for Appellate Review , which allows an Appellate  Body member whose term has 
expired to complete the disposition of any appeal to which he or she was assigned while a member. 
Members have also debated the va lue that WTO adjudicators should place on previous panel and 
Appellate  Body reports, as well as the role of the Appellate  Body in addressing issues relating to 
municipal law  and in reviewing a panel's objectivity in its assessment of the matter before it. These 
and other issues raised by Members suggest to me that Members remain fully invested in the dispute 
settlement mechanism and are interested in improving its functioning for it to better serve the 
multilateral trading system. That said, these issues, w eighty as they are, must be debated and 
                                                
1 The Appellate  Body reports circulated in 2018 were : Russia – Commercial Vehicles ; EC and certain 
member States – Large Civil Aircraft (Article  21.5 – US); EU – PET (Pakistan) ; Indonesia – Iron or Steel 
Products (Viet  Nam)/ Indonesia - Iron and Steel Products (Chinese Taipei) ; Brazil – Taxation (EU) /Brazil – 
Taxation (Japan) ; and US – Tuna II (Mexico) (Article  21.5 – US) / US – Tuna II (Mexico) (Article  21.5 – 
Mexico  II). 
2 Korea  – Radionuclides ; US – Countervailing Measures (China) (Article  21.5 – China) ; Korea – 
Pneumatic Valves  (Japan) ; Australia – Tobacco Plain Packaging (Honduras) / Australia – Tobacco Plain 
Packaging (Dominican Republic) ; Ukraine – Ammonium Nitrate ; Russia – Railway Equipment ; US – 
Supercalendered Paper ; EU – Energy Package ; Colombia – Textiles (Article  21.5 – Colombia) / Colombia – 
Textiles (Article  21.5 – Panama) ; Morocco – Hot-Rolled Steel (Turkey ); India – Iron and Steel Products.  WT/AB/29  
 
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  resolved as quickly as possible. They should not be instrumentalized in a way that jeopardizes the 
health and life of the Appellate  Body. Left unresolved, this impasse will become a festering sore on 
the legitimacy o f the Appellate  Body, and the WTO dispute settlement mechanism, as a whole.  
We have already begun to suffer the consequences of the lack of a full complement of Appellate  Body 
members in several ways. The diminished number of Appellate  Body members  has seriously 
undermined the collegiality of our deliberations, envisaged in Rule  4 of the Working Procedures for 
Appellate Review. Second, a smaller membership of the Appellate  Body has resulted in dwindling 
representation of the WTO Membership, which in  itself threatens the legitimacy of the 
Appellate  Body. Third, the decrease in serving members is likely to cause further delays in appellate 
proceedings. Indeed, by the end of my term as Chair in 2018, the Appellate  Body could form only 
one Division of th ree Appellate  Body members.  
It must be emphasized that the consequences of the ongoing stalemate extend beyond the 
Appellate  Body. Any paralysis of the Appellate  Body will taint panel proceedings. When a panel report 
is appealed, the current DSU rules pro vide that adoption of that report is suspended pending the 
appeal. If the Appellate  Body cannot conduct proceedings because a Division cannot be composed, 
any losing party could prevent the adoption of the panel report by appealing it to a paraly zed 
Appell ate Body. The likely result is therefore not a reversion to the pre -GATT  1994 regime. Instead, 
an institutional paralysis stretching across panel and appellate proceedings will manifest. This will 
then impact the rights of Members to procedures under Artic les 21 and 22 of the DSU as regards 
surveillance and implementation. Furthermore, the prospects of securing agreement to new 
multilateral trade rules diminish if negotiating Members cannot rely on the principled and effective 
enforcement of those rules. Th e possible paralysis of the Appellate  Body therefore concerns the 
operation of the multilateral trading system as a whole.  
Despite these challenges, we continue our efforts to maintain high standards of quality and 
coherence in our reports. Engagement and dialogue between Members and the institution are also 
crucial. As Chair of the Appellate  Body, I held consultations with several delegations, particularly 
those that make frequent use of WTO dispute settlement. Most, while airing some concerns, 
reaffirmed their desire to preserve the system in its current configuration.  
In making these efforts to engage broadly and frequently with WTO Members, I recogni ze that any 
lasting solutions to the challenges faced by the dispute settlement mechanism lie firmly with WTO 
Members. For more than two decades, WTO Members have demonstrated unwavering commitment 
to independent and impartial dispute settlement. The curren t impasse is a test of that commitment. 
If the trust in and credibility of the dispute settlement mechanism are to be preserved, it is essential 
that WTO Members engage in serious debate on the questions raised regarding the functioning of 
the appellate sy stem. Given the shared commitment of Members, we remain hopeful that the process 
of constructive dialogue will lead to lasting solutions that will further enhance the efficiency of dispute 
resolution in the WTO.  
Ujal Singh Bhatia  
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  WORLD TRADE ORGANIZA TION  
APPELLATE  BODY  
ANNUAL REPORT FOR 20 18 
1  INTRODUCTION  
This Annual Report  summarizes the activities of the Appellate  Body and its Secretariat for the 
year 2018.  
Dispute settlement  in the World Trade Organization (WTO) is regulated by the 
Understanding  on Rules and Procedures Governing the Settlement of Disputes (DSU), which is 
contained in Annex  2 of the Marrakesh  Agreement Establishing the World Trade Organization 
(WTO  Agreement).  Article  3.2 of the DSU identifies the purpose and role of the dispute settlement 
system as follows: "T he dispute settlement system of the WTO  is a central element  in providing 
security and predictability to the multilateral trading system." Further, Artic le 3.2 provides that the 
dispute settlement system "serves to preserve the rights and obligations of Members under the 
covered agreements, and to clarify the existing provisions of those agreements in accordance with 
customary rules of interpretation of pu blic international law." The dispute settlement system is 
administered by the Dispute Settlement Body (DSB), which is composed of all WTO  Members.  
A WTO  Member may have recourse to the rules and procedures established in the DSU if it "considers 
that any benefits accruing to it directly or indirectly under the covered agreements are being 
impaired by measures taken by another Member."3 The DSU procedures apply to disputes arising 
under any of the covered agreements listed in Appendix 1 to the DSU, which inc lude the 
WTO Agreement and all the multilateral agreements annexed to it relating to trade in goods4, trade 
in services5, and the protection of intellectual property rights6, as well as the DSU itself. Pursuant to 
Article  1.2 of the DSU, the special or add itional rules and procedures listed in Appendix  2 of the DSU 
prevail over those contained in the DSU to the extent that there is  an inconsistency. The application 
of the DSU to disputes under the plurilateral trade agreements annexed to the WTO  Agreement7 is 
subject to the adoption of a decision by the parties to each of  these agreements setting out the 
terms for its application to the individual agreement.8 
Proceedings under  the DSU take place in stages. In the first stage, Members are required to hold 
consultations with a view to reaching a mutually agreed solution to the matter in dispute.9 If these 
consultations fail to produce a mutually agreed solution, the dispute may advance to the adjudicative 
stage in which the complaining Member requests the DSB t o establish a panel to examine the 
matter.10 Panelists are chosen by agreement of the parties, based on nominations proposed by the 
Secretariat.11 However, if the parties cannot agree, either party may request the 
WTO Director -General to determine the compos ition of the panel.12 Panels shall be composed of 
well-qualified governmental and/or non -governmental individuals  with expertise in international 
trade law or policy.13 In discharging its adjudicative function, a panel is required to " make an 
objective asses sment of the matter before it, including an objective assessment of the facts of the 
case and the applicability of and conformity with the relevant covered agreements, and make such 
other findings as will assist the DSB in making the recommendations or in giving the rulings provided 
for in the covered agreements."14 The panel process includes written submissions by the main parties 
and also by third parties that have notified their interest in the dispute to the DSB. Panels usually 
hold two meetings with the  parties, one of which also includes a session with third  parties. Panels 
set out their factual and legal findings in an interim report that is subject to comments by the parties. 
                                                
3 Article  3.3 of the DSU. 
4 Annex 1A to the WTO Agreement . 
5 Annex 1B to the WTO Agreement . 
6 Annex 1C to the WTO Agreement . 
7 Annex 4 to the WTO Agreement . 
8 Appendix 1 to the DSU.  
9 Article  4 of the DSU.  
10 Article  6 of the DSU.  
11 Article  8.6 of the DSU.  
12 Article  8.7 of the DSU. 
13 Article  8.1 of the DSU.  
14 Article  11 of the DSU.  WT/AB/29  
 
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  The final report is first issued to the parties and subsequently circulated to all WTO  Members  in the 
three official languages of the WTO  (English, French, and  Spanish), at which time it is also posted 
on the WTO  website . 
Article  17 of the DSU establishes a standing Appellate  Body. The Appellate  Body is composed 
of seven members w ho are each appointed to a four -year term, with a possibility to be reappointed  
once. The expiration dates of terms are staggered in order to ensure that not all members begin and 
complete their terms at the same time. Members of the Appellate  Body must be  persons 
of recognized authority, with demonstrated expertise in law, international trade, and the subject 
matter of the covered agreements generally. They shall be unaffiliated with any government. 
Moreover, the Appellate  Body membership shall be broadly representative of the membership of the 
WTO. Appellate  Body members elect a Chair to serve a one -year term, which can be extended for 
an additional one -year period . The Chair is responsible for the overall direction of Appellate  Body 
business. Each appeal is heard by a Division of three Appellate  Body members. The process for the 
selection of Divisions is designed to ensure randomness, unpredictability, and  opportunity for all 
members to serve, regardless of their national origin. To ensure consistency and coherence in 
decision -making, Divisions exchange views with the other four members of the Appellate  Body 
before finalizing Appellate  Body reports. The Appellate  Body receives legal and  administrative 
support from its Secretariat. The conduct of members of the Appellate  Body and its staff is regulated 
by the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement 
of Disputes15 (Rules of Conduct). These Rules emphasize that Appellate  Body members shall be 
independent and imparti al, avoid any direct or indirect conflict of  interest, and maintain the 
confidentiality of appellate proceedings.16 
Any party to a dispute, other than WTO Members that were third parties  at the panel stage , 
may appeal a panel report to the Appellate  Body. These third parties may , however , participate 
and make written and oral submissions in the appellate proceedings. The appeal is limited to  issues 
of law covered in the panel report and legal interpretations developed by the panel. Appellate 
proceedings are conducted in accordance with the procedures established in the DSU and the 
Working Procedures for Appellate Review17 (Working Procedures), drawn up by the  Appellate  Body 
in consultation with the Chair of the DSB and the Director -General of  the WTO, and communicated 
to WTO  Members. Proceedings involve the filing of written submissions by the participants and third 
participants, as well as an oral hearing. The Appellate  Body report is to be circulated within 90 days 
of the date when the appeal was initiated, and  it is posted on the WTO  website immediately upon 
circulation to Members. In its report, the  Appellate  Body may uphold, modify, or reverse the legal 
findings and conclusions of a panel.  
Panel and Appellate  Body reports must be adopted by WTO  Members acting collectively through the 
DSB. Under the reverse -consensus rule, a report is adopted unless the DSB decides by consensus 
not to adopt the report.18 Upon adoption, Appellate  Body reports and panel reports (as  modified by 
the Appellate  Body) become binding upon the parties.  
Following the adoption by the DSB of a panel or Appellate  Body report that includes a finding 
of inconsistency  of a measure of the resp onding Member with its WTO  obligations, Article  21.3 of  the 
DSU provides that the responding Member should, in principle, comply immediately. However,  where 
immediate compliance is " impracticable", the responding Member shall have a  "reasonable period of 
time" to implement the DSB's recommendations and rulings. The  "reasonable period of time" may 
be determined by the DSB, by agreement between the parties, or through binding arbitration 
pursuant to Article  21.3(c) of the DSU. In such arbitration, a  guideline  for the arbitrator is that the 
reasonable period of time to implement panel or Appellate  Body recommendations should not exceed 
15 months from the date of adoption of the panel or Appellate  Body report. However, that time may 
be shorter or longer, dependi ng upon the particular circumstances. Arbitrators have indicated that 
                                                
15 The Rules of Conduct, as adopted by the DSB on 3  December 1996 (WT/DSB/RC/1), are incorporated 
into the Working Procedures for Appellate Review (WT/AB/WP/6), as Annex I I thereto. (See  WT/DSB/RC/2, 
WT/AB/WP/W/2)  
16 Former Appellate  Body member s, Secretariat staff , and interns are subject to Post -Employment 
Guidelines, which facilitate compliance with relevant obligations of conduct following a term of service  
(WT/AB/22 ). 
17 Working Procedures for Appellate Review, WT/AB/WP/6, 16  August  2010.  
18 Articles  16.4 and 17.14 of the DSU.  WT/AB/29  
 
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  the reasonable period of time shall be the shortest time possible in the implementing Member's legal 
system.  
Where the parties disagree "as to the existence or consistency with a covered  agreement 
of measures taken to comply", the matter may be referred to the original panel in compliance 
proceedings under Article  21.5 of the DSU. In these Article  21.5 compliance proceedings, a panel 
report is issued and may be appealed to the Appellate  Body. Upon their adoption by the DSB, panel 
and Appellate  Body reports in Article  21.5 compliance proceedings become binding on the  parties.  
If the responding Member does not bring its WTO -inconsistent measure into compliance with its 
obligations under the covered agreements within the reasonable period of time, the complaining 
Member may request negotiations with the responding Member with a view to reaching an 
agreement on compensation as a temporary and voluntary alternative to full compliance. 
Compensati on is subject to acceptance by the complaining Member  and must be consistent with the 
WTO agreements. If no satisfactory compensation is agreed upon, the complaining Member may 
request authorization from the DSB, pursuant to Article  22 of the DSU, to suspe nd the application 
of concessions or other obligations under the WTO  agreements to the responding Member. The level 
of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to 
the level of the nullification or impairm ent resulting from non -compliance with the DSB 's 
recommendations and rulings . The responding Member may request arbitration under Article  22.6 
of the DSU if it objects to the level of suspension proposed or considers that the principles and 
procedures conc erning the suspension of concessions or other obligations have not been followed. 
In principle, the suspension of concessions or other obligations must relate to the same trade sector 
or agreement as the measure found to be inconsistent. However, if this i s impracticable or ineffective 
for the complaining Member, and if circumstances are serious, the complaining Member may seek 
authorization to suspend concessions with respect to other sectors or agreements. The a rbitration 
under Article  22.6 shall be carri ed out by the original panel, if its members are available. 
Compensation and the suspension of concessions or  other obligations are temporary measures; 
neither is to be preferred to full implementation of a  recommendation to bring a measure into 
conformity  with the covered agreements.19 
A party to a dispute may request good offices, conciliation, or mediation as alternative methods of 
dispute resolution at any stage of dispute settlement proceedings.20 In addition, under Article  25 
of the DSU, WTO  Members may  have recourse to arbitration as an alternative to the regular 
procedures set out in the DSU.21 Recourse to arbitration, including the procedures to be followed in 
such arbitration proceedings, is subject to mutual agreement of the parties.22 
  
                                                
19 Article  22.1 of the DSU.  
20 Article  5 of the DSU.  
21 There has been only one recourse to Article  25 of the DSU , and it was not in lieu of panel or 
Appellate  Body proceedings. Rather, the purpose of that arbitration was to set an amount of compensation 
pending full compliance by the responding Member. (See Award of the Arbitrator , US – Section  110(5) Copyright 
Act (Article  25)) 
22 Articles  21 and 22 of the DSU apply mutatis mutandis  to decisions by arbitrators.  WT/AB/29  
 
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  2  COMPOSITION O F THE APPELLATE  BODY  
The Appellate  Body is a standing body normally composed of seven members, each to be appointed 
by the DSB for a term of four years with the possibility of being reappointed once for another four -
year term.  
In January 2018, the Appellat e Body was composed of four members.23 The selection processes for 
the appointment of new Appellate  Body members was discussed at DSB meetings throughout the 
year24, but Members were not able to reach a consensus to launch and fill the outstanding vacancies.  
At all 12 regular DSB meetings in 2018, several revised versions25 of the proposal regarding the 
selection processes for Appellate  Body members, first introduced at the DSB meeting on 
22 November 2017 on behalf of 52 Members26, submitted and discu ssed. All versions of these 
proposals were substantively the same in that they provided for selection processes to appoint 
Appellate  Body members for the vacancies (the three vacancies that had arisen as a result of the 
expiry of the second terms of office  of Messrs Ricardo Ramírez -Hernández and 
Peter Van den Bossche, and the resignation of Mr Hyun Chong Kim in 2017). In addition, a fourth 
vacancy arose upon the expiry of the first term of office of Mr  Shree  Baboo  Chekitan  Servansing on 
30 September  2018. T he proposals were made on behalf of a growing number of proponents, with 
52 Members supporting the first proposal at the DSB meeting on 22  November  2017, increasing to 
60 Members at the DSB meeting on 22  January  201827 and to 71 Members at the DSB meeting o n 
18 December  2018.28 The proponents of the proposals stressed "the urgency and importance of 
filling vacancies in the Appellate  Body … so that it can carry out its functions properly".29 The 
proponents then proposed to launch selection processes for all the  vacancies, establish a Selection 
Committee, allow Members to submit nominations of candidates, and request the Selection 
Committee to make a recommendation within a certain period. However, no consensus could be 
reached to launch the selection processes a t DSB meetings throughout 2018. During the year, 
Members discussed a number of substantive and systemic concerns regarding the functioning of the 
Appellate  Body.30 
At the DSB meeting held on 28  May 2018, the DSB Chair alerted WTO Members that the first term 
of office of Mr Servansing would expire on 30  September  2018, and informed WTO Members that 
she had received a letter from Mr Servansing conveying his interest to the DSB in being considered 
for reappointment.31 The Chair sought views on the matter fro m the delegations and subsequently 
engaged in informal consultations.32 At the meeting on 27  August  2018, the Chair reported to the 
DSB that the process of informal consultations on the issue of possible reappointment of Mr 
                                                
23 The second term of office of Mr Ricardo Ramírez -Hernández  expired on 30  June 2017. On the same 
day, the Chair of the Appellate  Body notified by letter the Chair of the DSB that, in accordance with Rule 15 of 
the Working Procedures, the Appellate  Body had authorized Mr  Ramírez -Hernández  to complete the dispositio n 
of the appeals to which he had been assigned before his term expired. Mr  Ramírez -Hernández 's last appeal 
under Rule 15 ( EC and certain member States – Large Civil Aircraft ) ended with the circulation of the 
Appellate  Body report on 15  May 2018.  
The secon d term of office of Mr  Peter Van den Bossche  expired on 11  December  2017. On 
24 November  2017, the Chair of the Appellate  Body notified by letter the Chair of the DSB that, in accordance 
with Rule 15 of the Working Procedures, the Appellate  Body had author ized Mr  Van den Bossche  to complete 
the disposition of the appeals to which he had been assigned before his term expired. Mr  Van den Bossche  
carried out his duties under Rule 15 throughout 2018.  
24 See, for example, WT/DSB/M/4 07, WT/DSB/M/4 09, WT/DSB/M/41 0, WT/DSB/M/41 2, 
WT/DSB/M/413 , WT/DSB/M/41 4, WT/DSB/M/41 5, and WT/DSB/M/41 7. 
25 The revised versions of the proposal discussed during the DSB meetings in 2018 are 
WT/DSB/W/609/Rev.1, WT/DSB/W/609/Rev.2, WT/DSB/W/609/Rev.3, WT/DSB/W/609/Rev.4, 
WT/DSB/W/609/Rev .5, WT/DSB/W/609/Rev.6, and WT/DSB/W/609/Rev.7.  
26 WT/DSB/M/4 04 and WT/DSB/W/609 . 
27 WT/DSB/M/4 07. 
28 WT/DSB/W/609/Rev.7.  
29 WT/DSB/W/609/Rev.7.  
30 These concerns are discussed in WT/DSB/M/407 , WT/DSB/M/409 , WT/DSB/M/410 , WT/DSB/M/412 , 
WT/DSB/M/413 , WT/DSB/M/414 , WT/DSB/M/415 , WT/DSB/M/417 , WT/GC/W/752/Rev. 2 , WT/GC/W/753 , 
WT/GC/W/754/Rev. 2 , JOB/DSB/2 , and WT/DSB/M/415.  
31 WT/DSB/M/4 13. 
32 WT/DSB/M/4 14 and WT/DSB/M/4 15. WT/AB/29  
 
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  Servansing had been concluded, an d that based on her consultations, there would be no consensus 
to reappoint Mr Servansing for a second term.33 
As a result of the above events, the Appellate  Body was composed of four members until the expiry 
of the first term of office of Mr Servansing on 30 September 2018. Thereafter, it was composed of 
three members for the remainder of the year as shown in Table 1 below:  
Table 1: Composition of the Appellate  Body in 2018  
Name  Nationality  Term(s) of office  
Ujal Singh Bhatia  India 2011-2015 
2015-2019 
Thomas R. Graham  United  States  2011-2015 
2015-2019 
Shree Baboo Chekitan Servansing * Mauritius  2014-2018 
Hong Zhao  China  2016-2020 
* Shree Baboo Chekitan Servansing 's term as Appellate  Body member ended on  30 September 2018. 
Pursuant to Rule 15 of the Working Procedures, he has been authorized to complete the disposition of 
appeals he had been assigned to while being a member of the Appellate  Body.34 
 
On 31  December  2017, pur suant to Rule  5.1 of the Working Procedures, the members of the 
Appellate  Body elected Mr  Ujal Singh  Bhatia to serve for a second term as Chair of the 
Appellate  Body, from 1  January to 31  December  2018.35 On 12  December  2018, the members of the 
Appellate  Body elected Madame  Hong Zhao to serve as Chair of the Appellate  Body as of 1  January 
2019 until 30  June 2019, and Mr Thomas R. Graham as Chair from 1  July 2019 to 
31 December  2019.36 
Biographical information about the members of the Appellate  Body is provide d in Annex  5. A list of 
former Appellate  Body members and Chair s is provided in Annex  6. 
The Appellate  Body receives legal and administrative support from the Appellate  Body Secretariat, 
in accordance with Article  17.7 of the DSU. As at 31  December  2018, t he Secretariat comprised a 
Director, 19 lawyers, 1 administrative assistant, and 5 support staff. Werner  Zdouc is the Director 
of the Appellate  Body Secretariat.  
  
                                                
33 WT/DSB/M/4 17. 
34 On 28  September  2018, the Chair of the Appellate  Body notified b y letter the Chair of the DSB that, in 
accordance with Rule 15 of the Working Procedures, the Appellate  Body had authorized Mr  Servansing to 
complete the disposition of the appeals to which he had been assigned before the expiry of his term on 
30 September  2018. The participants and third participants in the appeals concerned were informed on the 
same day.  
35 WT/DSB/75.  
36 WT/DSB/7 7. WT/AB/29  
 
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  3  APPEALS  
Pursuant to Rule 20(1) of the Working Procedures and Article  16(4) of the DSU, an ap peal is 
commenced by a party to the dispute giving written notice to the DSB and filing a Notice of Appeal 
with the Appellate  Body Secretariat. Rule 23(1) of the Working Procedures allows a party to the 
dispute other than the initial appellant to join the appeal, or appeal on the basis of other alleged 
errors, by filing a Notice of Other Appeal within five days of the filing of the Notice of Appeal.  
Twelve  panel reports concerning 11 matters were appealed in 201 8, the Appellate  Body's work on 
one appeal filed in 2016 was completed , and its work on one appeal filed in 2017 continued 
through out the year . Two of the appeals filed in 201 8 related to compliance proceedings, while all 
remaining disputes related to origi nal proceedings. "Other  appeals" were filed pursua nt to Rule 23(1) 
of the Working  Procedures in 8 of the 12 new appeals . Table 2 sets out further information regarding 
the appeals filed  in and pending  throughout  2018. Further information on the number of a ppeals 
filed each year since 1996 is provided in Annex 7. 
The percentage  of panel reports that have been appealed from 1996 to 201 8 is approximately 67%. 
A breakdown of the percentage of panel reports appealed each year is provided in Annex 8. 
Table 2: Appeals filed in and pending throughout  2018  
Panel report 
appealed  Date of appeal  Appellanta Document  
symbol  Other  
appellantb Document  
symbol  
US – Large Civil 
Aircraft 
(2nd complaint) 
(Article  21.5 – EU) 29 June 2017 European  
Union  WT/DS353/27  United  States  WT/DS353/28  
Korea – 
Radionuclides  9 April 2018 Korea  WT/DS495/8  Japan  WT/DS495/9  
US – Countervailing 
Measures (China) 
(Article  21.5 – 
China)  27 April 2018 United  States  WT/DS437/24  China  WT/DS437/25  
Korea – Pneumatic 
Valves (Japan)  28 May 2018 Japan  WT/DS504/5  Korea  WT/DS504/6  
Australia – Tobacco 
Plain Packaging 
(Honduras) / 
Australia – Tobacco 
Plain Packaging 
(Dominican 
Republic)  19 July 2018 Honduras  WT/DS435/23  --- --- 
23 August  2018 Dominican 
Republic  WT/DS441/23  --- --- 
Ukraine – 
Ammonium Nitrate  23 August 2018  Ukraine  WT/DS493/6  --- --- 
Russia – Railway 
Equipment  27 August  2018 Ukraine  WT/DS499/6  Russia  WT/DS499/7  
US – 
Supercalendered 
Paper  27 August  2018 United  States  WT/DS505/6  --- --- 
EU – Energy Package  21 September  2018 European  
Union  WT/DS476/6  Russia  WT/DS476/7  
Colombia – Textiles 
(Article  21.5 – 
Colombia) / 
Colombia – Textiles 
(Article  21.5 – 
Panama)  20 November  2018 Panama  WT/DS461/28  Colombia  WT/DS461/29  WT/AB/29  
 
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  Panel report 
appealed  Date of appeal  Appellanta Document  
symbol  Other  
appellantb Document  
symbol  
Morocco – Hot-Rolled 
Steel (Turkey)  20 November  2018 Morocco  WT/DS513/5  Turkey  WT/DS513/6  
India – Iron and 
Steel Products  14 December  2018 India WT/DS518/8  Japan  WT/DS518/9  
a Pursuant to Rule 20(1) of the Working Procedures . 
b Pursuant to Rule 23(1) of the Working Procedures . 
Appellate  Body Reports  
Nine Appellate  Body reports concerning six matters were circulated in 201 8, the details of which are 
summarized in Table  3. As of the end of 201 8, the Appellate  Body had circulated a total 
of 159 reports.37 
Table 3: Appellate  Body reports circulated in 2018  
Case  Document symbol  Date circulated  Date adopted  
by the DSB  
Russia – Commercial Vehicles  WT/DS479/AB/R  22 March  2018 9 April 2018 
EC and certain member 
States  – Large Civil Aircraft 
(Article  21.5 – US) WT/DS316/AB/RW  15 May 2018 28 May 2018 
EU – PET (Pakistan)  WT/DS486/AB/R  16 May 2018 28 May 2018 
Indonesia – Iron or Steel 
Products * WT/DS490/AB/R  
WT/DS496/AB/R  15 August  2018 27 August  2018 
Brazil – Taxation * WT/DS472/AB/R  
WT/DS497/AB/R  13 December  2018 11 January  2019 
US – Tuna II (Mexico) 
(Article  21.5 – US) /  
US – Tuna II (Mexico) 
(Article  21.5 – Mexico II) * WT/DS381/AB/RW/USA  
WT/DS381/AB/RW/2  14 December  2018 11 January  2019 
* In these matters , Appellate  Body reports bearing two separate document symbols were issued.  
Table 4 below shows which WTO  agreements were addressed in the Appellate  Body reports 
circulated in 201 8. 
Table 4: WTO  Agreements addressed in Appellate  Body reports circulated in 2018  
Case  Document symbol  WTO  agreements addressed  
Russia – Commercial Vehicles  WT/DS479/AB/R  Anti-Dumping Agreement  
GATT  1994 
DSU 
EC and certain member 
States  – Large Civil Aircraft 
(Article  21.5 – US) WT/DS316/AB/RW  SCM Agreement  
GATT  1994 
DSU 
EU – PET (Pakistan)  WT/DS486/AB/R  SCM Agreement  
GATT  1994 
DSU 
Indonesia – Iron or Steel 
Products  WT/DS490/AB/R  
WT/DS496/AB/R  Agreement on Safeguards  
GATT  1994 
DSU 
                                                
37 Further details regarding the circulated Appellate  Body reports, by year of circulation, are provided in 
Annex  10: Table II. WT/AB/29  
 
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  Case  Document symbol  WTO  agreements addressed  
Brazil – Taxation  WT/DS472/AB/R  
WT/DS497/AB/R  GATT  1994 
Enabling Clause  
SCM Agreement  
TRIMs  Agreement  
DSU 
US – Tuna II (Mexico) 
(Article  21.5 – US) /  
US – Tuna II (Mexico) 
(Article  21.5 – Mexico II)  WT/DS381/AB/RW/USA  
WT/DS381/AB/RW/2  TBT Agreement  
GATT  1994 
DSU 
The findings and conclusions contained in the Appellate  Body reports circulated in 2018 are 
summarized below.  
3.1  Appellate  Body  Report, Russia – Anti-Dumping Duties on Light Commercial Vehicles 
from Germany and Italy , WT/DS 479/AB/R  
This dispute concerned the levying of anti -dumping duties on certain light  commercial vehicles 
(LCVs) from Germany and Italy by Russia pursuant to Decision No. 113 of 14  May 2013 of the Board 
of the Eurasian Economic Commission (EEC), including related notices and reports of the Department 
for Internal Market Defence of the EEC (DIMD). The anti -dumping investigation underlying the 
measure at issue in this dispute was initiated on 16  November  2011, following an applicat ion on 
3 October  2011 by Sollers -Elabuga LLC (Sollers), a Russian manufacturer of LCVs. The LCVs 
investigated were those with a gross vehicle weight varying between 2.8 tonnes to 3.5 tonnes 
inclusive, van -type bodies, diesel engines with cylinder capacity not exceeding 3.000 cc, designed 
for the transport of cargo of up to two tonnes (cargo all -metal van version) or for the combined 
transport of cargo and passengers (combi cargo and passenger van version).  
While the European  Union challenged anti -dumping du ties imposed by Russia, it was the DIMD that 
had completed the anti -dumping investigation underlying the decision to impose those duties. When 
the European  Union  requested consultations with Russia in relation to this dispute on 21  May 2014, 
Russia was the  only WTO  Member that was part of the then -called Customs Union between Belarus, 
Kazakhstan, and Russia (the CU), which is now the Eurasian Economic Union  (EAEU). Before the 
Panel, the European  Union  claimed that the measure at issue was inconsistent with Articles 1, 
3.1-3.2, 3.4 -3.5, 4.1, 6.5, 6.5.1, 6.9, and 18.4 of the Anti -Dumping Agreement and Article  VI of the 
GATT  1994. 
In relation to the definition of domestic industry , the Panel found that the DIMD had acted 
inconsistently with Articles  3.1 and 4.1  of the Anti -Dumping  Agreement by defining the domestic 
industry as Sollers only after it received the questionnaire responses from both Sollers and 
Gorkovsky A vtomobilny Zavod ( GAZ).  
In relation to price suppression , the Panel found that the DIMD had act ed inconsistently with 
Articles  3.1 and 3.2 of the Anti -Dumping  Agreement by failing to take into account the impact of the 
financial crisis in determining the appropriate rate of return in its price suppression analysis.  
In relation to the injury analysi s, the Panel found that the DIMD had acted inconsistently with 
Article  3.4 of the Anti -Dumping  Agreement by failing to evaluate the magnitude of the margin of 
dumping.  
In relation to the causation analysis , the Panel found that the DIMD had acted inconsis tently with 
Articles  3.1 and 3.5 of the Anti -Dumping  Agreement insofar as it had relied on its WTO -inconsistent 
price suppression analysis in its causation determination. In addition, the Panel found that the DIMD 
had acted inconsistently with Articles  3.1 and 3.5 by failing: (i)  to examine whether the alleged 
overly ambitious business plan of Sollers, in particular in relation to the level of capacity, was causing 
injury to the domestic industry at the same time as dumped imports; and if so (ii) to separat e and 
distinguish the injurious effects of that factor from the injurious effects of dumped imports.  WT/AB/29  
 
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  In relation to the treatment of confidential information , the Panel found that the DIMD had acted 
inconsistently with Article  6.5 of the Anti -Dumping  Agreement by treating certain information as 
confidential in the absence of any showing of "good cause" for such treatment.  
In relation to disclosure of essential facts , the Panel found that the DIMD had acted inconsistently 
with Article  6.9 of the Anti -Dumpi ng Agreement by failing to inform all interested parties of the 
information listed in items (d) to (o) of Table 12 of the Panel Report.  
Finally, in relation to the European  Union 's consequential claims , the Panel found that Russia had 
acted inconsistently  with Article  1 of the Anti -Dumping Agreement and Article  VI of the GATT  1994, 
but reject ed the claim under Article  18.4 of the Anti -Dumping Agreement.  
3.1.1   Definition of domestic industry  
Russia appealed the Panel's finding that the DIMD had acted inconsistent ly with Articles  3.1 and  4.1 
of the Anti -Dumping  Agreement when defining the domestic industry. Russia argued that an injury 
determination would be inconsistent with Article  3.1 if an investigating authority were to rely on 
deficient information provided b y domestic producers of the like product. To Russia, producers that 
provided such deficient information could not be included in the definition of domestic industry under 
Article  4.1. To the European  Union, the Panel correctly found that Article  4.1 implie s that an 
investigating authority cannot define a "domestic industry" on the basis of the allegedly deficient 
information provided by one producer.  
Article  4.1 of the Anti -Dumping Agreement defines the term "domestic industry" as referring to: 
(i) the domestic producers as a whole of the like products; or (ii) those producers whose collective 
output of the products constitutes a major proportion of the total domestic production of those 
products. By using the term "major  proportion", the second meth od of defining the domestic industry 
focuses on the question of how much  production must be represented by those producers of the like 
product. The Appellate  Body has read the "major proportion" requirement in Article  4.1 as having 
both quantitative and qu alitative connotations. Regarding the quantitative element, Article  4.1 does 
not stipulate a specific proportion for evaluating whether a certain percentage constitutes a "major 
proportion". The qualitative element, in turn, is concerned with ensuring that  the domestic producers 
of the like product that are included in the definition of domestic industry are representative of the 
totality of domestic producers. The Appellate  Body has explained that there is an inverse relationship 
between, on the one hand, the proportion of total production included in the domestic industry and, 
on the other hand, the existence of a material risk of distortion in the definition of domestic industry 
and in the assessment of injury.  
Article  4.1 does not refer to the non -inclusion of producers of the like product in the domestic 
industry definition based on the investigating authority's consideration of alleged deficiencies in the 
information submitted by domestic producers. The Appellate  Body has read the definition of 
domesti c industry in Article  4.1 together with the requirement in Article  3.1 that the determination 
of injury "be based on positive evidence and involve an objective examination". To ensure the 
accuracy of an injury determination, an investigating authority must  not act so as to give rise to a 
material risk of distortion in defining the domestic industry.  
If an investigating authority were permitted to leave out, from the definition of domestic industry, 
domestic producers of the like product that provided allege dly deficient information, a material risk 
of distortion would arise in the injury analysis. The non -inclusion of this category of producers could 
make the domestic industry definition no longer representative of the total domestic production, 
thereby unde rmining the accuracy of the injury analysis. Rather than leaving a producer of the like 
product that provided allegedly deficient information out of the domestic industry, the investigating 
authority should seek to obtain additional information from that d omestic producer. Tools exist under 
the Anti -Dumping  Agreement to address the inaccuracy and incompleteness of information. The 
Appellate  Body therefore disagreed with Russia's proposition that, in order to ensure the accuracy 
of the injury analysis, an investigating authority needs, from the outset, to leave out of the definition 
of domestic industry the domestic producers of the like product t hat provide allegedly deficient 
information.  
The Appellate  Body has recognized the difficulty of obtaining information regarding domestic 
producers in certain situations, such as fragmented industries with numerous producers. In such WT/AB/29  
 
- 17 - 
 
  special cases, the te rm "major proportion" in Article  4.1 allows an investigating authority a certain 
degree of flexibility in defining the domestic industry. Nevertheless, an investigating authority 
continues to bear the obligation to ensure that the way in which it defines t he domestic industry 
does not introduce a material risk of distortion into the injury analysis. To the Appellate  Body, the 
situation where an investigating authority is unable to collect any information at all from every 
domestic producer due to the fragme nted nature of the industry is different from the situation where 
a domestic producer has sought to cooperate in the investigation and submitted information that 
the investigating authority, however, considered to be deficient.  
The Appellate  Body considere d that the Panel correctly recognized that an investigating authority 
could define the domestic industry as a "major proportion" of the total domestic production as long 
as both the quantitative and qualitative elements are satisfied. The Panel also correc tly found that 
Article  4.1 does not allow an investigating authority to leave out of the definition of domestic industry 
the domestic producers of the like product who have provided allegedly deficient information. 
Contrary to Russia's claim on appeal, the  Appellate  Body did not consider that the Panel's 
interpretation of Article  4.1 of the Anti -Dumping  Agreement reduces the term "major proportion" in 
this provision to inutility. The Appellate  Body's interpretation of the "domestic industry" based on a 
"major proportion of total domestic production" does not take into account the timing of the definition 
of domestic industry. Rather, it is concerned with ensuring that the domestic producers of the like 
product selected for inclusion in the domestic industry are sufficiently representative of the total 
domestic production.  
For these reasons, the Appellate  Body found  that the Panel did not err in its interpretation and 
application of Articles  3.1 and 4.1 of the Anti -Dumping  Agreement in finding that the DIMD h ad 
acted inconsistently with these provisions in its definition of "domestic industry".  
3.1.2   Price suppression  
3.1.2.1   The 2009 rate of return used to construct the target domestic price  
Russia challenged the Panel's findings that the DIMD had acted inconsistently with  Articles 3.1 and 
3.2 of the Anti -Dumping  Agreement by failing to take into account the impact of the financial crisis 
in determining the rate of return used to construct the target domestic price. To Russia, the focus 
on one particular factor – such as th e financial crisis – would lead to a biased price suppression 
analysis. This is because the rate of return could be potentially influenced by a number of factors, 
and Article  3.2 does not require an analysis of "all known factors" causing injury within the  meaning 
of Article  3.5. The European  Union disagreed with Russia's contention that an investigating authority 
is not obliged to consider evidence that questions the rate of return used to construct the domestic 
target price.  
The Appellate  Body explained that, pursuant to the second sentence of Article  3.2 of the 
Anti-Dumping  Agreement, an investigating authority shall consider whether the effect of dumped 
imports is to prevent price increases, which otherwise would have occurred, to a significant degree. 
By asking the question "whether the effect of" the dumped imports is significant price suppression, 
the second sentence specifically instructs an investigating authority to consider whether certain price 
effects are the consequences of dumped imports. In t his respect, the Appellate  Body in China – 
GOES  stated that an investigating authority is required to consider whether dumped imports have 
"explanatory force" for the occurrence of significant price suppression. In this regard, an authority 
may not disrega rd evidence regarding elements that call into question the explanatory force of 
dumped imports for significant price suppression.  
The inquiry into whether dumped imports have "explanatory force" for significant suppression of 
domestic prices under Article  3.2 is distinct from the injury causation and non -attribution analysis 
under Article  3.5 of the Anti -Dumping Agreement. While the assessments under both provisions are 
interlinked elements of the single, overall injury analysis, the inquiry under each prov ision has a 
distinct focus. The analysis under Article  3.2 focuses on the relationship between dumped imports 
and domestic prices . In contrast, the analysis under Article  3.5 focuses on the causal relationship 
between dumped imports and injury  to the domes tic industry. Therefore, while an investigating 
authority is not required under Article  3.2 to conduct an analysis of all known factors that may cause 
injury  to the domestic industry, as required by Article  3.5, the authority must consider under WT/AB/29  
 
- 18 - 
 
  Article  3.2 whether dumped imports have "explanatory force" for the occurrence of significant 
suppression of domestic prices . 
To the Appellate  Body, the fact that several factors or elements could potentially influence the rate 
of return used to construct the target  domestic price does not allow an investigating authority to 
disregard evidence regarding any particular factor or element that calls into question the explanatory 
force of dumped imports for significant price suppression. Thus, the Appellate  Body disagree d with 
Russia's argument that the consideration of evidence regarding elements – such as, in this dispute, 
the financial crisis – that call into question the explanatory force of dumped imports would lead to a 
biased analysis simply because there could be other factors that could also potentially affect the 
selected rate of return. In addition, the Appellate  Body did not consider that the Panel's 
interpretation of Article  3.2 suggests that an investigating authority is required to conduct a 
non-attribution analysis of all known factors that may be causing injury  to the domestic industry in 
the context of its price suppression analysis.  
For the reasons above, the Appellate  Body found  that the Panel did not err in its interpretation and 
application of Article s 3.1 and 3.2 of the Anti -Dumping Agreement when finding that the DIMD had 
acted inconsistently with these provisions by failing to take into account the impact of the financial 
crisis in its price suppression analysis.  
3.1.2.2   Article  11 of the DSU  
The European  Union challenged certain Panel findings concerning the explanatory force of the 
dumped imports for price suppression and the degree of such price suppression. The European  Union 
claimed that, in making these findings, the Panel acted inconsistently with Art icle 11 of the DSU. 
This is because, to the European  Union, the Panel's reasoning at issue was inconsistent and 
incoherent with its earlier finding that the DIMD had acted inconsistently with Articles  3.1 and 3.2 
of the Anti -Dumping Agreement by failing to  take into account the impact of the financial crisis when 
using the 2009 rate of return for constructing the target domestic price. Russia responded that the 
European  Union had not demonstrated that the Panel's assessment was not objective within the 
mean ing of Article  11 of the DSU.  
The Appellate  Body noted that, when the Panel stated that the "methodology itself" ensures that the 
failure of actual domestic prices to rise to the level of the target domestic price is an effect of the 
dumped imports, the Pa nel was referring to the DIMD's application of its methodology in the 
anti-dumping investigation at issue. To the Appellate  Body, this finding was not coherent and 
consistent with the Panel's earlier finding that the manner in which the DIMD had used the 2 009 
rate of return to determine the target domestic price was WTO -inconsistent because the DIMD's 
application of its methodology had been based on the use of the 2009 rate of return .  
The Appellate  Body also considered that the Panel's finding that the lon g-term price trends 
corroborated the DIMD's counterfactual analysis was not coherent and consistent with its earlier 
finding concerning the DIMD's construction of the target domestic price on the basis of the 2009 
rate of return. This is because the DIMD's  counterfactual analysis relied on the target domestic price, 
and the Panel had found earlier that the manner in which the DIMD had used the 2009 rate of return 
to determine the target domestic price was WTO -inconsistent.  
Finally, the Appellate  Body expla ined that the Panel could not have relied on the target domestic 
price, in particular on the difference between the actual domestic prices and the target domestic 
prices, in its assessment of the degree of price suppression, given that it had found earlier  that the 
DIMD's construction of the target domestic price was WTO -inconsistent. To the Appellate  Body, the 
Panel's findings concerning the significant degree of price suppression were also not coherent and 
consistent with its earlier finding concerning th e 2009 rate of return.  
For these reasons, the Appellate  Body found  that the Panel acted inconsistently with Article  11 of 
the DSU, and reversed the Panel findings at issue.  
3.1.2.3   The ability of the market to absorb further price increases  
The European  Union appe aled the Panel's finding that the evidence on the investigation record did 
not require the DIMD to examine whether the market could absorb further price increases. To the WT/AB/29  
 
- 19 - 
 
  European  Union , the Panel erred in its interpretation and application of Articles  3.1 and 3.2 of the 
Anti-Dumping Agreement because, where there is evidence on the record of significant price and 
production cost increases, an investigating authority must consider whether the market would 
absorb further price increases. Russia responded tha t there is no explicit requirement in Articles 3.1 
and 3.2 to consider whether the market would accept price increases and that an investigating 
authority has to examine this issue only if it is faced with evidence that calls into question the ability 
of the market to absorb price increases.  
The Appellate  Body explained that, when an investigating authority's determination rests upon 
assumptions, these assumptions should be derived as reasonable inferences from a credible basis 
of facts, and should be suff iciently explained so that their objectivity and credibility can be verified. 
Moreover, an investigating authority is required, under the second sentence of Article  3.2, to 
consider whether dumped imports are preventing domestic price increases "which othe rwise would 
have occurred" to a significant degree. Were an investigating authority to rely on a methodology 
that concerned price increases that would not have occurred in the absence of dumped imports, it 
would not be able to consider objectively, pursuan t to Article  3.2, whether the effect of dumped 
imports was to suppress significantly domestic prices. An investigating authority is also required to 
consider whether dumped imports have "explanatory force" for the occurrence of significant 
suppression of domestic prices. In this respect, an investigating authority may not disregard 
evidence regarding elements that call into question the explanatory force of dumped imports for 
significant price suppression.  
The Appellate  Body considered that the question before the Panel was whether the DIMD had 
properly considered, in light of the circumstances of the underlying anti -dumping investigation, 
relevant evidence in relation to whether the market could absorb additional price increa ses. There 
was evidence on the DIMD's investigation record relating to increases in domestic prices and cost of 
production as well as alleged quality issues with the domestic product. To the Appellate  Body, this 
evidence was relevant to an assessment of wh ether the domestic market at issue in the anti -dumping 
investigation could absorb additional price increases. The DIMD should have explained in its 
investigation report, at a minimum, why this evidence did not show that the target domestic price 
relied on by the DIMD was a price that would not have occurred in the absence of dumped imports.  
In addition, the Appellate  Body recalled that it is not for a panel to conduct a de novo review of the 
facts of the case or substitute its judgement for that of the inve stigating authority. The Panel in this 
dispute could not have reached a conclusion about whether the DIMD should have examined certain 
evidence on the basis of the Panel's own appreciation of this evidence. The conclusion of whether 
the evidence effectivel y undermines or confirms the investigating authority's price suppression 
analysis under Article  3.2 can only be reached on the basis of the authority's review of the evidence 
within the particular circumstances of each investigation.  
For these reasons, the  Appellate  Body found  that the Panel erred in its application of Articles  3.1 
and 3.2 in finding that the evidence on the investigation record did not require the DIMD to examine 
whether the market could absorb further price increases.  
Having reversed the  Panel's finding at issue , the Appellate  Body turned to the European  Union's 
request to complete the analysis. After noting specific pieces of evidence on the DIMD's record, the 
Appellate  Body considered that the DIMD did not examine evidence relevant to w hether the market 
would accept additional domestic price increases. Thus, the Appellate  Body found  that the DIMD had 
acted inconsistently with Articles 3.1 and 3.2 by failing to examine evidence relevant to whether the 
market would accept additional domest ic price increases.  
3.1.3   Confidential report  
3.1.3.1   Article  11 of the DSU and Article  17.6 of the Anti -Dumping Agreement  
The European  Union claimed that the Panel acted inconsistently with Article  11 of the DSU and 
Article  17.6 of the Anti -Dumping Agreement by basing its evaluation of the European  Union's claims 
concerning the domestic industry's return on investments, actual and potential effects on cash flow, 
and the ability to raise capital or investments on the confidential investigation report without 
asses sing whether that document formed part of the DIMD's investigation record. In the 
European  Union 's view, instead of requiring Russia to show that certain parts of the confidential WT/AB/29  
 
- 20 - 
 
  investigation report actually formed part of the investigation record, the P anel simply accepted that 
the entire content of it formed part of the investigation record.  
The Appellate  Body recalled that the confidential investigation report was submitted by Russia 
together with Russia's first written submission to the Panel and tha t the European  Union could not 
have been aware of the contents of the confidential investigation report before receiving it. Having 
examined the European  Union 's written submissions to the Panel and answers to the Panel's 
questions, the Appellate  Body disagreed with Russia that, on appeal, the European  Union 
misrepresented the arguments that it had made before the Panel.  
The participants agreed that, in principle, a panel could rely on parts of a confidential version of an 
investigation report in its examin ation of claims under Articles  3.1 and 3.4 of the Anti -Dumping 
Agreement. The Appellate  Body observed that the absence of any indication in the non -confidential 
investigation report that the three injury factors at issue were analysed may raise issues of d ue 
process. The Appellate  Body remarked, however, that the issue of whether an investigating authority 
can conduct its analysis of the mandatory injury factors in a confidential version of an investigation 
report, without referring to it in a public versio n of the investigation report, was not before it in this 
appeal.  
Turning to its analysis under Article  11 of the DSU and Article  17.6 of the Anti -Dumping Agreement, 
the Appellate  Body noted the difficulty faced by the European  Union  in obtaining and provi ding 
evidence to the Panel in support of its contention that the relevant parts of the confidential 
investigation report may not have formed part of the investigation record. The nature and scope of 
the evidence that might be reasonably expected by an adju dicator in order to establish a fact or 
claim in a particular case will depend on a range of factors, including the type of evidence that is 
made available by a Member's regulating authority. In a specific case, a panel may have a sufficient 
basis to reach  an affirmative finding regarding a particular fact or claim on the basis of inferences 
that can be reasonably drawn from circumstantial rather than direct evidence. A party cannot be 
reasonably expected to meet its evidentiary burden when information is i n the exclusive possession 
of another party.  In light of the circumstances of this case, t he Appellate  Body did not consider that 
the European  Union had to prove conclusively that the relevant parts of the confidential investigation 
report did not form par t of the investigation record at the time the determination was made. Rather, 
the Panel should have requested from Russia evidence demonstrating that the confidential 
investigation report formed part of the investigation record at the time the determinatio n was made.  
The Appellate  Body observed that, when faced with a claim that a report, or parts of it, on the basis 
of which an anti -dumping measure was imposed did not form part of the investigation record at the 
time the determination was made, a panel has  to take certain steps to assess objectively and assure 
itself of the report's validity and whether or not it formed part of the contemporaneous written record 
of the investigation. In the Appellate  Body's view, the manner in which a panel can assure itsel f of 
whether an investigation report, or parts of it, formed part of the investigation record will depend 
on the facts of the particular case and may include, in addition to posing questions to the submitting 
party, examining additional evidence demonstrat ing that the contested report, or parts of it, formed 
part of the investigation record. The Appellate  Body highlighted that, in the present dispute, the 
Panel had not posed pertinent questions to Russia or sought otherwise to assure itself that the 
relevan t parts of the confidential investigation report formed part of the investigation record at the 
time the determination was made. Thus, the Appellate  Body found  that the Panel acted inconsistently 
with Article  11 of the DSU and Article  17.6 of the Anti -Dump ing Agreement by relying, in its 
examination of the European  Union 's claims, on the confidential investigation report without assuring 
itself of whether the relevant parts of it formed part of the investigation record at the time the 
determination to impos e the anti -dumping measure was made. Accordingly, the Appellate  Body 
reversed  the Panel's finding at issue.  
3.1.3.2   Completion of the analysis  
Having reversed the Panel findings, the Appellate  Body addressed the European  Union 's request that 
the Appellate  Body complete the analysis. The Appellate  Body considered that it would be in the 
position to address the European  Union 's request on the basis of the non -confidential investigation 
report only if it were first to determine for itself that it could not re ly on the confidential investigation 
report. In light of the absence on the record of this dispute of a discernible attempt by the Panel to 
assure itself of whether the confidential investigation report formed part of the investigation record 
and, in parti cular, the absence of questions being posed to Russia concerning the confidential WT/AB/29  
 
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  investigation report, the Appellate  Body considered that it could not determine for itself whether it 
could rely on the analysis contained in the confidential investigation r eport for purposes of the 
assessment of the European  Union's claims under Articles  3.1 and 3.4 of the Anti -Dumping 
Agreement. The Appellate  Body thus considered that it could not complete the analysis  with respect 
to the European  Union's claims under Artic les 3.1 and  3.4 concerning the three injury factors at issue 
and reach a conclusion as to whether the DIMD acted inconsistently with Articles  3.1 and 3.4.  
3.1.4   Related dealer  
The European  Union  claimed that the Panel erred in its interpretation and application of Articles  3.1 
and 3.4 of the Anti -Dumping  Agreement by finding that an investigating authority is generally not 
required to consider the inventories of a dealer related to a domestic producer of the like product, 
but not itself part of the domestic indus try. To the European  Union, the Panel's interpretation would 
wrongly allow a single economic entity to manipulate inventory data by shifting products from the 
legal entity that produced them to the legal entity that sells those products, and thus prevent a n 
objective assessment based on positive evidence of the state of the domestic industry. Russia 
responded that the text of Article  3 does not support a proposition that an investigating authority is 
generally required to analyse the data of entities that a re not part of the domestic industry.  
Article  3.4 of the Anti -Dumping  Agreement provides that the examination under that provision "shall 
include an evaluation of all relevant economic factors and indices having a bearing on the state of 
the industry". The  clause "having a bearing on the state of the industry" focuses the evaluation on 
the factors and indices relevant to the state of the domestic industry. In addition, the reference to 
"all" relevant economic factors and indices does not imply a narrow scop e of evaluation. These 
factors and indices include those expressly listed in Article  3.4, as well as additional ones if they are 
relevant to the assessment of the state of the domestic industry. Thus, to the Appellate  Body, 
evidence on the record concernin g all relevant economic factors and indices that influence the state 
of the domestic industry falls within the scope of an investigating authority's evaluation under 
Article  3.4. In this respect, evidence pertaining to inventories of a related dealer that does not 
produce the like product and is not formally part of the domestic industry may be pertinent, in a 
particular case, to the evaluation of a relevant economic factor or index having a bearing on the 
state of the domestic industry.  
The Appellate  Body did not consider the degree of proximity in the relationship between different 
entities to be dispositive, without more, of whether evidence relating to the inventory of a related 
dealer is pertinent to the evaluation of the injury factor "inventories" un der Article  3.4. The focus of 
the evaluation under this provision is not on the nature of the relationship between companies such 
as producers and dealers; it centres instead on the relevant economic factors and indices having a 
bearing on the state of the  domestic industry. Thus, regardless of whether a domestic producer 
included in the domestic industry and a dealer are independent from one another, related to each 
other, or part of the same economic entity, an investigating authority is required to asses s whether 
the evidence on record concerns a relevant economic factor or index having a bearing on the state 
of the domestic industry. To the extent that this includes evidence relating to a dealer, an 
investigating authority is required to examine it under  Article  3.4. Where it is not plainly discernible 
that evidence on the record is pertinent to the evaluation of economic factors or indices having a 
bearing on the state of the domestic industry, interested parties must provide an explanation or 
reasons as  to why they deem the evidence to be pertinent to the assessment of the state of the 
industry under Article  3.4. 
Turning to the European  Union's claim that the Panel erred in its application of Articles  3.1 and 3.4 
of the Anti -Dumping Agreement, the Appell ate Body noted that the European  Union's challenge 
hinges upon its claim of error regarding the Panel's interpretation  of these provisions. T he thrust of 
the European  Union 's argument concerned the nature of the relationship between Sollers and Turin 
Auto.  The European  Union had not sought to argue, on the basis of the particular evidence before 
the DIMD, how the inventory information of Turin Auto was specifically pertinent to the evaluation 
of "inventories" in relation to the state of Sollers.  
For these reasons, the Appellate  Body found  that the Panel did not err in its interpretation and 
application of Articles  3.1 and 3.4 of the Anti -Dumping  Agreement.  WT/AB/29  
 
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  3.1.5   Article  6.9 of the Anti -Dumping Agreement  
The participants appealed different aspects of the Panel's i nterpretation and application of Article  6.9 
of the Anti -Dumping Agreement. Russia claimed that, in reaching its conclusions, the Panel erred by 
interpreting and applying Article  6.9 in a way that suggests that, with respect to essential facts 
treated as c onfidential, a finding of inconsistency with Article  6.5 of the Anti -Dumping Agreement 
will automatically entail an inconsistency with Article  6.9. Russia also raised claims of error under 
Articles 7 and 15.2 of the DSU with respect to an allegedly new fin ding concerning information 
originating from the electronic customs database that the Panel added to its Report at the interim 
review stage.  
The European  Union claimed that the Panel erred in its interpretation and application of Article  6.9 
by concluding  that the source of information cannot be an "essential fact" and finding that the source 
of information concerning import volumes and values in the DIMD's investigation report does not 
constitute "essential facts" under Article  6.9. In the European  Union' s view, this error stemmed from 
two earlier interpretative errors made by the Panel in finding that: (i) a methodology is not an 
essential fact; and (ii) not every essential fact is required to be disclosed, but rather only those 
essential facts that are a dditionally shown to be "under  consideration".  
3.1.5.1   Relationship between Articles 6.5 and 6.9 of the Anti -Dumping Agreement  
The Appellate  Body first recalled that essential facts are those that "form the basis for the decision 
whether to apply definitive measu res" and those that ensure the ability of interested parties to 
defend their interests. Thus, the term "essential facts" refers to those facts that are significant in 
the process of reaching a decision whether to apply definitive measures. Such facts are t hose that 
are salient for a decision to apply definitive measures as well as those that are salient for a contrary 
outcome. Whether a particular fact is essential or "significant in the process of reaching a decision" 
depends on the nature and scope of the  particular substantive obligations, the content of the 
particular findings needed to satisfy the substantive obligations at issue, as well as the factual 
circumstances of each case, including the arguments and evidence submitted by the interested 
parties.  
With respect to the relationship between Articles 6.5 and 6.9, the Appellate  Body noted that the text 
of these provisions does not suggest that a finding of inconsistency under Article  6.5 would 
automatically lead to a finding of inconsistency under Artic le 6.9. While the notions of essential facts 
under Article  6.9 and confidential information within the meaning of Article  6.5 may overlap, they 
are not co -extensive. An assessment under Article  6.5 focuses on whether confidential treatment 
was conferred to  information on the investigation record upon a proper showing of "good cause". By 
contrast, an assessment under Article  6.9 concerns whether all essential facts have been disclosed 
in a timely manner so as to ensure the ability of interested parties to de fend their interests. 
Accordingly, an inquiry under Article  6.9 is separate and distinct from an assessment under 
Article  6.5 of the Anti -Dumping Agreement. Regardless of whether or not the essential facts at issue 
were properly treated as confidential und er Article  6.5, a panel must examine whether any disclosure 
made – including that made through non -confidential summaries pursuant to Article  6.5.1 – meets 
the legal standard under Article  6.9. Thus, an inconsistency with Article  6.5 in relation to informa tion 
that constitutes essential facts may not be presumed to result in an inconsistency with Article  6.9. 
Turning to Russia's appeal, the Appellate  Body recalled that the Panel had emphasized that the "dual 
obligation" in Articles 6.5 and 6.9 could be met through the use of non -confidential summaries 
"where  essential facts are properly  treated as confidential". The Appellate  Body also recalled that 
the Pa nel had further stated that " the condition precedent  for treatment as confidential of such 
information by the investigating authority, a showing of good cause, was not met and therefore that 
information, including the essential facts at issue, was not properly treated as confidential in the 
investigation. " In its subsequent analysis, the Panel referred to its previous finding of inconsistency 
with Article  6.5 and found that, to the extent that the DIMD failed to disclose information that was 
not properly tr eated as confidential, it acted inconsistently with Article  6.9. To the Appellate  Body, 
these statements suggest that the Panel considered that the requirements of Article  6.9 could be 
met by disclosing essential facts through non -confidential summaries on ly where no inconsistency 
with Article  6.5 had been established. Disagreeing with the Panel's understanding, the 
Appellate  Body reiterated that, regardless of whether or not the essential facts at issue were treated 
as confidential consistently with the re quirements of Article  6.5, a panel must examine whether any 
disclosure made meets the requirements of Article  6.9. Having made a finding of inconsistency with WT/AB/29  
 
- 23 - 
 
  Article  6.5, the Panel could not simply conclude, on that basis alone, that the DIMD had failed t o 
comply with the requirements of Article  6.9. Rather, the Panel should have examined whether or not 
the alleged disclosure made through the non -confidential summaries met the requirements of 
Article  6.9. 
The Appellate  Body thus found  that the Panel erred in its interpretation and application of Article  6.9, 
and reversed the Panel findings at issue.  
3.1.5.2   Electronic customs database  
With respect to Russia's claim that the Panel acted inconsistently with Articles 7 and 15.2 of the DSU 
by adding, in its Final Repor t, paragraph 7.270, which had not appeared in the Panel's Interim 
Report, the Appellate  Body recalled that paragraph 7.270 was added by the Panel in response to 
Russia's request. At the interim report stage, Russia had requested the Panel to reflect the re ason 
why essential facts, which were determined on the basis of electronic customs database submitted 
to the DIMD by the national customs authorities of the Member States of the Customs Union on a 
confidential basis, did not meet the requirements of Articl e 6.5 of the Anti -Dumping Agreement.  
The Appellate  Body considered that, in adding the finding in paragraph 7.270 of the Panel  Report, 
the Panel incorporated an element of analysis under Article  6.5 into its assessment under Article  6.9. 
In the Appellate  Body's view, this approach was premised on the Panel's u nderstanding that, in 
circumstances where information that constitutes essential facts under Article  6.9 was improperly 
treated as confidential under Article  6.5, the requirements that apply under Article  6.9 to essential 
facts could not be met by means of  the disclosure of non -confidential summaries within the meaning 
of Article  6.5.1. The Appellate  Body thus did not consider that paragraph  7.270 of the Panel  Report 
contained a separate finding of inconsistency with Article  6.5 of the Anti -Dumping Agreemen t. 
Rather, the Appellate  Body saw it as an error in application that stemmed from the Panel's erroneous 
interpretation of Article  6.9. The Appellate  Body thus disagreed with the Panel's analysis in 
paragraph 7.270 of the Panel  Report.  
The Appellate  Body found that, as a result of its erroneous interpretation of Article  6.9 of the 
Anti-Dumping Agreement, the Panel erred in finding, in paragraph 7.270 of the Panel Report, that, 
to the extent that the DIMD failed to disclose information that was not properly t reated as 
confidential, it acted inconsistently with Article  6.9 of the Anti -Dumping Agreement. The 
Appellate  Body thus reversed  the Panel's finding, in paragraph 7.270, and the Panel 's relevant 
conclusions relating to the information originating from the electronic customs database. In light of 
this reversal, the Appellate  Body did not address the remainder of Russia's claims at issue, including 
its claims of error under Articles  7 and 15.2 of the DSU . 
3.1.5.3   Completion of the analysis  
Having reversed the relevant Panel findings, the Appellate  Body turned to address the 
European  Union's request for completion of the analysis. The European  Union requested that the 
Appellate  Body find that the DIMD acted inconsistently with Article  6.9 by failing to disclose the 
essential facts listed in paragraphs  7.250 and 7.278, Table 12, of the Panel Report.  
The Appellate  Body recalled the Panel's finding that the draft investigation report constitutes Russia's 
disclosure under Article  6.9, which was not appealed. Having r eviewed the draft investigation report, 
the Appellate  Body concluded that the DIMD did not disclose the relevant essential facts, listed in 
items (d) and (f) to (o) of Table 12 in paragraph 7.278 of the Panel Report. The Appellate  Body also 
noted that, in response to questioning at the hearing, Russia indicated that the information 
concerning the weighted average export prices of LCVs produced by Daimler AG and Volkswagen AG 
was disclosed in the additional disclosure letter. The Appellate  Body remarked that  the Panel had 
not referred to the additional disclosure letter in its analysis under Article  6.9. The Appellate  Body 
thus did not consider that there were sufficient factual findings by the Panel and uncontested 
evidence on the Panel  record that would all ow it to complete the analysis and rule on whether Russia 
had disclosed the information concerning the weighted average export prices of LCVs produced by 
Daimler AG and Volkswagen AG.  WT/AB/29  
 
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  The Appellate  Body thus found  that the DIMD had acted inconsistently wi th Article  6.9 of the 
Anti-Dumping Agreement by failing to disclose the essential facts contained in items (d) and (f) to 
(o) of Table 12 in paragraph 7.278 of the Panel Report.  
3.1.5.4   Source of information  
The European  Union  took issue with three aspects of the Panel's analysis: (i) the Panel's statement 
that Article  6.9 does not require the disclosure of methodologies because they do not constitute 
"facts" or "essential facts"; (ii) the Panel's statement that Article  6.9 does not require the disclosure 
of "every  'essential fact'", but of those that are "under consideration"; and (iii) the Panel's finding 
that the source of information in itself and the source of information with respect to import volumes 
and values used by the DIMD do not constitute essential fac ts.  
The Appellate  Body first recalled the Panel's observation that not every "essential fact" is required 
to be disclosed, and that Article  6.9 requires the disclosure of "essential facts under consideration ". 
In the Appellate  Body's view, the Panel appea red to have summarized its understanding of the 
relevant Appellate  Body's statements in China – GOES , according to which Article  6.9 does not 
require the disclosure of all the facts that are before an authority but, instead, those that are 
"essential". The  Appellate  Body considered that, in rephrasing the Appellate  Body's statement in 
China – GOES , the Panel may have cursorily stated that "[n]ot every 'essential fact' is required to 
be disclosed", instead of saying that not every fact  is required to be disc losed, but only those that 
are under consideration and form the basis for the decision whether to apply definitive measures.  
The Appellate  Body had reservations with the Panel statement to the extent that the Panel could be 
read as having distinguished bet ween two categories of information: (i) essential facts (some of 
which are not required to be disclosed); and (ii)  essential  facts under consideration (that are 
required to be disclosed). Given that the Panel correctly expressed its understanding of this a spect 
of the legal standard under Article  6.9 elsewhere in its Report, the Appellate  Body did not consider 
that the Panel's rephrasing of the Appellate  Body's statement in China – GOES , in itself, amounted 
to a reversible error of law.  
Second, the Appellat e Body examined the Panel's statement that "Article  6.9 requires the disclosure 
of facts: the information underlying a decision rather than the reasoning, calculation or methodology 
that led to a determination." In China – HP-SSST (Japan) / China – HP-SSST  (EU), the 
Appellate  Body had found that the calculation methodology used by the investigating authority to 
determine the margin of dumping constituted an essential fact within the meaning of Article  6.9. 
The Appellate  Body noted that disclosure of the data underlying a dumping de termination alone may 
not enable an interested party to defend its interests, unless that interested party was also informed 
of the methodology applied by the investigating authority to determine the margin of dumping. 
At the same time, the Appellate  Body observed that not all methodologies used by an investigating 
authority may constitute essential facts within the meaning of Article  6.9. Rather, only those 
methodologies the knowledge of which is necessary for the participants to understand the basis of 
the investigating authority's decision and to defend their interests would be essential facts under 
Article  6.9. An assessment of whether a particular methodology constitutes an essential fact should 
therefore be made on a case -by-case basis. Consequently, t he Appellate  Body disagreed with the 
Panel's statement to the extent that the Panel considered that a methodology cannot constitute an 
"essential fact" under Article  6.9 of the Anti -Dumping Agreement.  
Finally, the Appellate  Body examined the Panel's state ments that "[i]n itself, the source of data is 
not an essential fact under  consideration " and that "[k]nowledge of the sources of data might be 
useful to establish the credibility of information used by investigating authorities, but the sources of 
data ar e not themselves essential facts under consideration." The Appellate  Body noted that, in 
certain circumstances, knowledge of the data itself may not be sufficient to enable an interested 
party to properly defend itself, unless that party is also informed o f the source of such data and how 
it was used by the investigating authority. Thus, knowing the source of data may be pivotal to the 
ability of an interested party to defend itself. In particular, knowing the source of information may 
enable the party to c omment on the accuracy or reliability of the relevant information and allow it 
to propose alternative sources for that information. For these reasons, the Appellate  Body disagreed 
with the Panel's general statement that sources of data are not essential fa cts within the meaning 
of Article  6.9. The Appellate  Body noted that the Panel relied on this interpretation as the reason for 
finding that the European  Union  had failed to demonstrate that the source of information concerning 
import volumes and values, an d volumes of dumped imports used by the DIMD constitutes an WT/AB/29  
 
- 25 - 
 
  essential fact under Article  6.9. Accordingly, the Appellate  Body also disagreed with this Panel 
conclusion.  
The Appellate  Body thus found  that the Panel erred in its interpretation of Article  6.9 as to whether 
methodologies and sources of information may qualify as essential facts and in its subsequent 
application of this general understanding to the facts of this case. The Appellate  Body thus reversed  
the Panel's findings at issue.  
3.1.5.5   Completion of the analysis  
The Appellate  Body then turned to address the European  Union 's request to complete the analysis 
and find that, by failing to disclose the source of information concerning import volumes and values 
in the context of its dumping and injury analy ses, the DIMD acted inconsistently with Article  6.9 of 
the Anti -Dumping Agreement.  
The Appellate  Body recalled that, having considered that sources of information in general do not 
constitute essential facts, the Panel found that the source of the informat ion concerning the import 
volumes and values used by the DIMD in its dumping determination was not an essential fact. In 
the Appellate  Body's view, the Panel did not engage further with the European  Union's and Russia's 
arguments and did not examine the co ntents of the draft investigation report. Consequently, the 
Panel proceedings were conducted without the Panel sufficiently exploring with the parties the issue 
of whether the sources of information of import volumes and values used by the DIMD in its dump ing 
determination constituted essential facts and were actually disclosed in this case. The Appellate  Body 
also noted that it was not clear whether the participants agreed on whether the additional letter, 
which Russia referred to at the oral hearing, was a disclosure document.  
In these circumstances, the Appellate  Body did not consider that there were sufficient factual 
findings by the Panel and uncontested evidence on the Panel record that would allow the 
Appellate  Body to complete the analysis and rule o n whether the DIMD had to, and in fact did, 
disclose the source of information concerning import volumes and values that it used in its dumping 
and injury determinations.  
3.2  Appellate  Body  Report, European Communities and Certain Member States – 
Measures Affe cting Trade in Large Civil Aircraft – Recourse to Article  21.5 of the DSU by 
the United  States , WT/DS316/AB/RW  
This dispute concerned the implementation by the European  Union of the DSB 's recommendations 
and rulings in European Communities and Certain Member States – Measures Affecting Trade in 
Large Civil Aircraft .  
3.2.1   The original proceeding  
The underlying dispute concerned a challenge brought by the United  States against over 300 alleged 
instances of subsidization, over the course of four decades, by the  European Communities and four 
of its member States – France, Germany, Spain, and the United Kingdom – with respect to large 
civil aircraft (LCA) developed, produced, and sold by Airbus  SAS and its predecessor entities. The 
measures at issue in the origina l proceedings included:  
• "Launch Aid" or "Member State Financing" (LA/MSF) for the development of various Airbus LCA, 
consisting of the A300, A310, A320, A330/A340 (including the A330 -200 and A340 -500/600 
variants), A350, and A380;  
• loans from the European I nvestment Bank to Airbus entities between 1988 and 2002;  
• infrastructure and infrastructure -related grants by the four member State governments;  
• corporate restructuring measures undertaken by the French and German Governments; and  
• research and technological development funding granted to Airbus entities by the four member 
State governments.  WT/AB/29  
 
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  The United  States claimed before the original Panel that each challenged measure was a specific 
subsidy within the meaning of Articles  1 and 2 of the Agreeme nt on Subsidies and Countervailing 
Measures (SCM  Agreement), and that the European Communities and the four member States, 
through the use of these subsidies, had caused adverse effects to the United  States' interests within 
the meaning of Articles  5 and 6  of the SCM  Agreement. In addition, the United  States claimed that 
certain of the LA/MSF measures were prohibited export subsidies within the meaning of Article  3 of 
the SCM  Agreement. The Panel and the Appellate  Body ruled in favour of many of the claims made 
by the United  States. At the same time, some other claims did not lead to findings of inconsistency, 
because they were found not to be sufficiently substantiated.  The Panel and Appellate  Body reports 
in the original dispute were adopted by the DSB on 1 June 2011.  
Specifically, the original panel and Appellate  Body found in the underlying dispute that the 
United  States had demonstrated that the European Communities and certain member States had 
caused adverse effects, in the form of certain kinds of ser ious prejudice to the United  States' 
interests, within the meaning of Articles  5(c), 6.3(a), (b) and (c) of the SCM  Agreement, through 
the use of the following specific subsidies:  
• LA/MSF provided to Airbus for the development of the models of Airbus LCA li sted above (except 
for the A350);  
• "capital contributions" that the French and German Governments provided in connection with 
the corporate restructuring of Aérospatiale and Deutsche Airbus, both corporate entities of the 
Airbus Consortium; and  
• "infrastruct ure-related measures" provided by German and Spanish authorities.  
As a result of these findings, and consistent with Article  7.8 of the SCM  Agreement , the original 
panel and Appellate  Body recommended that the European  Union "take appropriate steps to remo ve 
the adverse effects or … withdraw the subsidy". The original Panel also concluded that the German, 
Spanish, and UK A380 LA/MSF measures constituted prohibited export subsidies within the meaning 
of Article  3.1(a) and footnote  4 of the SCM  Agreement . The Appellate  Body reversed this finding but 
could not complete the relevant legal analysis because of a lack of uncontested facts and relevant 
findings by the original panel.  
3.2.2   The compliance panel proceeding  
On 1 December  2011, the European  Union informed the  DSB that it had taken "appropriate steps to 
bring its measures fully into conformity with its WTO obligations and to comply with the DSB's 
recommendations and rulings". The European  Union provided information in relation to its alleged 
compliance "steps" in an annex containing 36 numbered paragraphs. The United  States considered 
that the European  Union's 36 alleged compliance "steps" failed to satisfy the European  Union's 
obligation to bring the measures into conformity with the rulings and recommendations  adopted by 
the DSB. In addition, the United  States argued that the European  Union and certain member States 
worsened the compliance situation by providing allegedly subsidized LA/MSF for Airbus' newest 
model of LCA, the A350XWB, during the course of the o riginal proceeding.  
At the organi zational meeting held on 1  May 2012, the parties requested the Panel to adopt 
additional procedures for the protection of confidential and highly sensitive business information, 
submitting a joint proposal. After consideri ng the parties' request and their joint proposal, the Panel 
adopted the Additional Procedures to Protect Business Confidential Information and Highly Sensitive 
Business Information (BCI/HSBI Procedures) on 11  May 2012.  
The Panel held one substantive meeti ng with the parties on 16 -18 April 2013. A session with the 
third parties took place on 17  April 2013. At the request of the parties, the Panel's meeting with the 
parties was opened to the public by means of a delayed video showing. A portion of the Panel' s 
meeting with the third parties was also opened to the public by means of a delayed video showing.  
The United  States argued that the European  Union and certain member States failed to comply with 
the DSB 's recommendations and rulings for two main reasons . First, the United  States claimed that 
the European  Union and certain member States had failed to act in conformity with the obligation in 
Article  7.8 of the SCM  Agreement to "take appropriate steps to remove the adverse effects" or WT/AB/29  
 
- 27 - 
 
  "withdraw the subsidy"  on the grounds that the subsidies found to have caused adverse effects in 
the original proceeding continued to cause adverse effects, and because by agreeing to provide 
Airbus with LA/MSF for Airbus' latest model of LCA, the A350XWB, France, Germany, Spai n, and the 
United Kingdom "continued and even expanded" the subsidization of Airbus' LCA activities, thereby 
causing "additional adverse effects" to the United  States' interests, within the meaning of 
Articles  5(c) and 6.3 of the SCM  Agreement. Second, the  United  States claimed that France, 
Germany, Spain, and the United Kingdom failed to comply with the recommendations and rulings 
adopted by the DSB because, according to the United  States, the A350XWB and A380 LA/MSF 
measures are prohibited export and/or i mport substitution subsidies, within the meaning of Articles 
3.1 and 3.2 of the SCM  Agreement.  
The European  Union rejected the entirety of the United  States' claims. In particular, the 
European  Union maintained that the subsidies found to cause adverse eff ects in the original 
proceeding had either been "withdrawn" or were no longer a "genuine and substantial" cause of 
"adverse effects". Moreover, the European  Union argued that the United  States' claims against the 
A350XWB LA/MSF measures and the prohibited subsidy claims raised by the United  States against 
the A380 LA/MSF subsidies were outside of the scope of the compliance proceeding or, in any case, 
without merit.  
3.2.2.1   Prohibited subsidy claims  
The first part of the Panel's evaluation of the United  States' pro hibited subsidy claims against the 
A350XWB LA/MSF measures was focused on determining the merits of the United  States' claim that 
each measure amounted to a specific subsidy, within the meaning of Articles 1 and 2 of the 
SCM Agreement .  
The United  States a rgued that each of the A350XWB LA/MSF measures entered into by Airbus and 
France, Germany, Spain, and the United Kingdom was a "financial contribution" in the form of a 
"loan", within the meaning of Article  1.1(a)(1)(i) of the SCM  Agreement , that conferred  a "benefit" 
on Airbus, within the meaning of Article  1.1(b) of the SCM  Agreement , by virtue of the below -market 
interest rates Airbus was charged for the financing. The European  Union did not contest the 
United  States' characterization of the LA/MSF measu res as "financial contributions". However, 
according to the European  Union, the A350XWB LA/MSF measures did not confer a "benefit" upon 
Airbus because the United  States could not show that the financing was provided at below -market 
interest rates.  
The Pan el began its analysis of the parties' positions by reviewing the terms of the four A350XWB 
LA/MSF contracts and comparing them to the core terms of the LA/MSF contracts associated with 
previous models of Airbus LCA that were at issue in the original procee ding. The Panel found that, 
not unlike the LA/MSF contracts entered into for the purpose of financing the development of 
previous models of Airbus LCA, the A350XWB LA/MSF measures involved the provision of financing 
for a portion of the development costs a ssociated with an Airbus LCA on the basis of repayment 
terms that were, overall, back -loaded, primarily levy -based, tied to the proceeds of aircraft sales 
and unsecured by any assets. The Panel concluded that, as with the LA/MSF measures at issue in 
the or iginal proceeding, full repayment of the principal, interest , and any royalties due under each 
of the A350XWB LA/MSF measures would be dependent upon achieving the A350XWB revenue and 
sales targets projected at the time of the conclusion of those contracts . 
Turning to the question of "benefit", the Panel explained that, consistent with the approach taken in 
the original proceeding, it would first determine the "rates of return" of each of the relevant LA/MSF 
contracts and then subsequently compare these wit h a benchmark for the market interest rate that 
would be charged for comparable loans by a market lender.  
The Panel found that neither party had advanced entirely credible estimates of the rates of return 
that would be payable by Airbus under each of the LA/MSF contracts in the event that the A350XWB 
would be developed and sold as anticipated at the time of entry into force of the relevant contracts. 
Nevertheless, the Panel continued its analysis on the basis of the European  Union's "unvalidated" 
figures, preferring not to use the United  States' estimates because they did not account for expected 
royalty revenues and certain fees and charges, which the Panel considered should be included in the 
calculation.  WT/AB/29  
 
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  In the next step of its analysis, the Panel examin ed the parties' positions with respect to the 
benchmark for the market interest rate – that is, the interest rate that a market lender would ask 
Airbus to pay for the provision of financing on comparable terms to the A350XWB LA/MSF measures. 
Both parties h ad constructed this rate by adding a project -specific risk premium to a corporate 
borrowing rate. The project -specific risk premium represented the premium that a market lender 
would charge Airbus for the provision of financing, the full repayment of which  would depend upon 
the success of the A350XWB programme , and the corporate borrowing rate represented the number 
of basis points that a market lender would charge Airbus for borrowing intended to be used for a 
general, non -project -specific purpose.  
In eva luating the parties' arguments on the market interest rate benchmark, the Panel analysed in 
detail what would be an appropriate project -specific risk premium. The ultimate question that the 
Panel considered was whether the project -specific risk premium use d in the original proceeding in 
relation to the A380 LA/MSF measures could also be used for the A350XWB LA/MSF measures. The 
Panel answered this question by exploring inter alia  the parties' submissions concerning the 
similarities and differences between t he relative development and marketing risks of the A380 and 
the A350XWB. The Panel concluded that the development risks of the A350XWB were at least as 
high as, or sufficiently similar to, those associated with the A380, and that the respective marketing 
risks, although different in nature, were overall comparable in their importance. Thus, the Panel 
found that the overall project -specific risks of the A380 and the A350XWB programmes were 
sufficiently similar to justify applying the risk premium associated with the A380 LA/MSF measures 
in the original proceeding to the A350XWB LA/MSF measures.  
After constructing the relevant market interest rate benchmarks, the Panel compared the results 
with the internal rates of return determined for each of the relevant L A/MSF contracts and found 
that, in each case, the rates of return were, to differing degrees, below the market interest rate 
benchmark. Thus, the Panel found that the A350XWB LA/MSF measures were provided at below -
market interest rates. Accordingly, the Pa nel concluded that the terms of the A350XWB LA/MSF 
measures conferred a "benefit" upon Airbus, making them subsidies, within the meaning of Article  1 
of the SCM  Agreement . The Panel went on to find that the A350XWB LA/MSF subsidies were also 
specific, with in the meaning of Article  2 of the SCM  Agreement . The European  Union did not contest 
the United  States allegations concerning specificity.  
Finally, the Panel turned to discuss certain additional pieces of evidence concerning the extent to 
which the Europea n Union member States had undertaken formal project appraisals of the A350XWB 
programme before entering into the LA/MSF agreements. The Panel found the additional evidence 
to demonstrate that: (i) the governments of France, Germany, and Spain did not under take any 
written appraisal of the A350XWB project; (ii) to the extent that any unwritten appraisals were 
performed by the same governments, they were based on information from Airbus that did not 
address the development risks associated with the A350XWB; ( iii) the "detailed analysis" of the 
"technical viability" of the A350XWB project undertaken by the United Kingdom was based on 
information that was not provided by Airbus about the technical specifications and/or development 
risks associated with the A350X WB; and (iv) information on projected revenue streams necessary 
for France, Germany, and the United Kingdom to accurately determine the internal rates of return 
of their respective LA/MSF contracts, including royalties , was not provided. After recalling certain 
statements made by the Appellate  Body in the original proceeding, which the Panel considered 
recognized that a commercial investor would be normally expected to perform a certain degree of 
due diligence in relation to the current and futu re "economic conditions" of a particular project before 
agreeing to enter into a loan contract, the Panel found that the facts it had highlighted suggested 
that in agreeing to the A350XWB LA/MSF measures, each of the Airbus governments, to differing 
degree s, fell short of the standard that one would expect a commercial lender to normally satisfy. 
For the Panel, this evidence suggested that the relevant European  Union member States entered 
into the A350XWB LA/MSF contracts in a manner that was inconsistent w ith the standard of a 
commercial lender, thereby confirming its finding of subsidization.  
The second part of the Panel's evaluation of the United  States' prohibited subsidy claims focused on 
determining whether the A350XWB and A380 LA/MSF measures were pr ohibited export subsidies, 
within the meaning of Article  3.1(a) and footnote 4 of the SCM  Agreement . 
The United  States claimed that the A380 LA/MSF measures and the A350XWB LA/MSF measures are 
prohibited export subsidies because they envisage the granting of subsidies contingent in fact  upon 
export performance. The Panel rejected the United  States' claims.  WT/AB/29  
 
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  Although the compliance Panel found that the United  States had demonstrated that the challenged 
measures were subsidies  granted in anticipation of export  performance, the Panel found that the 
United  States had not demonstrated that the granting of those subsidies was, in fact, contingent  
upon export performance.  
In making this finding, the Panel followed the guidance provided by the Appellate  Body in the original 
proceeding in relation to the correct legal standard for demonstrating de facto  export contingency, 
namely, that the granting of a subsidy must be shown to be "geared to induce the promotion of 
future export performance by the recipient". The United  States attempted to demonstrate that it 
had satisfied this standard by performing the comparison, which the Appellate  Body had explained 
in the original proceeding could be used to inform the analysis – a comparison of the ratio of 
anticipated e xport sales to anticipated domestic sales of the subsidized LCA with and without the 
LA/MSF subsidies (ratios analysis).  
The Panel found that the "ratios analysis" described by the Appellate  Body and applied by the 
United  States could not by itself demons trate de facto  export contingency, and that in order to avoid 
false positive and false negative conclusions, it needed to be combined with a meaningful analysis 
of the extent to which the design and structure of a subsidy contributes to the presence of an 
incentive for a recipient to favour export sales over domestic sales. Thus, the Panel dismissed the 
United  States' claims because, in effect, the United  States had only relied upon a "ratios analysis" 
to make out its case of de facto  export contingency. In  any case, the Panel went on to examine the 
validity of the United  States' "ratios analyses", finding that the evidence the United  States relied 
upon could not be used to represent the ratio of export sales to domestic sales with respect to both 
the A350XW B and the A380. Accordingly, the Panel concluded that the United  States had failed to 
demonstrate that the A350XWB and A380 LA/MSF agreements were prohibited export subsidies 
within the meaning of Article  3.1(a) and footnote 4 of the SCM  Agreement.  
The thi rd part of the Panel's evaluation of the United  States' prohibited subsidy claims focused on 
determining whether the A350XWB LA/MSF measures were prohibited import substitution subsidies, 
within the meaning of Article  3.1(b) of the SCM  Agreement . 
The Unite d States claimed that the A350XWB LA/MSF measures are prohibited import substitution 
subsidies because, to the extent that they explicitly provide for the granting of subsidies contingent 
upon Airbus producing certain domestic LCA -related goods, which are subsequently assembled or 
used to make Airbus LCA, the LA/MSF measures envisage the granting of subsidies contingent in 
law and/or in fact upon the use of domestic over imported goods. The Panel rejected the 
United  States' claim.  
The Panel found that even if the A350XWB LA/MSF contracts were contingent on the domestic 
production  of certain LCA -related goods that were then used in the production of Airbus  LCA, as the 
United  States claimed, this fact alone could not establish that the subsidy measures were contingent , 
whether in law or in fact, on the use of domestic over imported goods. In other words, while it was 
clear that the domestically  produced LCA -related goods would be used by Airbus in the development 
and manufacture of LCA, the Panel found that thi s was not enough to find that the LA/MSF measures, 
by subsidizing the production  of those LCA -related goods, were tied to the use of domestic over 
imported products.  
In reaching this finding, the Panel noted that all domestic production subsidies could in  one way or 
another increase the consumption of domestically produced goods by downstream entities. In this 
context, the Panel considered that the United  States' theory of contingency could result in many 
domestic production subsidies being considered proh ibited import substitution subsidies. The Panel 
considered such a result to be particularly questionable given that Article  III:8(b) of the GATT  1994 
explicitly provides that the practice of a WTO Member granting subsidies exclusively to domestic 
producers  (i.e. domestic production subsidies) should not be disciplined under Article  III:4 of the 
GATT  1994, which, like Article  3.1(b) of the SCM  Agreement , also prohibits import substitution 
subsidies. The Panel further noted that subsidies found by previous WT O panels to be prohibited 
import substitution subsidies required firms to use certain amounts of domestic goods as production 
inputs, that is, to discriminate between upstream sources of domestic and imported goods in favour 
of the former. However, no subs idy had been found to be contingent on the use of domestic over 
imported goods simply because the subsidy was only available to a firm so long as it engaged in 
domestic production activities. Accordingly, the Panel concluded that the United  States failed t o WT/AB/29  
 
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  demonstrate that the A350XWB LA/MSF measures were prohibited import substitution subsidies 
within the meaning of Article  3.1(b) of the SCM  Agreement.  
3.2.2.2   Whether the European  Union complied with the obligation to "take appropriate 
steps to remove the adverse  effects " or "withdraw the subsidy ", pursuant to Article  7.8 
of the SCM  Agreement  
Article  7.8 of the SCM  Agreement  specifies what an implementing Member must do following the 
adoption of a panel and/or Appellate  Body report in which it is determined that a ny specific subsidy 
has caused adverse effects to the interests of another Member, within the meaning of Article  5 of 
the SCM  Agreement. In particular, Article  7.8 calls upon the "Member granting or maintaining such 
subsidy " to "take appropriate steps to r emove the adverse effects or withdraw the subsidy ". The 
Panel considered that the interpretative question that was at the centre of the United  States ' claims 
of non -compliance in this dispute was how to give meaning to this requirement in the context of th e 
substantive disciplines of Article  5 of the SCM  Agreement , which focus not on the existence  of a 
particular type of measure (as other disciplines found in the covered agreements), but rather on the 
trade effects  that may be attributed to a measure, wheth er or not it continues to exist .  
The parties (and certain third parties) expressed profoundly different views about not only whether 
the European  Union and certain member States had complied with the terms of Article  7.8, but also, 
more fundamentally, the  extent to which the European  Union and certain member States had any 
ongoing compliance obligation at all with respect to subsidies found to cause adverse effects in the 
original proceeding that allegedly ceased to exist by the time of the DSB 's adoption of the panel and 
Appellate  Body recommendations and rulings on 1  June 2011.  
The Panel commenced its evaluation of the merits of the United  States ' claims by first of all 
addressing this important threshold question – namely, whether the European  Union and  certain 
member States had any obligation to comply with Article  7.8 of the SCM  Agreement  with respect to 
subsidies that had allegedly ceased to exist before 1  June 2011, that is, before the DSB 's adoption 
of the recommendations and rulings in the original proceeding.  
3.2.2.2.1   Did the European  Union and certain member States have an obligation to 
comply with Article  7.8 of the SCM  Agreement  with respect to subsidies that allegedly 
ceased to exist before 1  June  2011?  
The European  Union argued that the express  language of Article  7.8 of the SCM  Agreement  imposed 
an obligation on the European  Union and certain member States to "take appropriate steps to 
remove the adverse effects" or "withdraw the subsidy" only to the extent that the European  Union 
and certain m ember States continued to be "granting or maintaining" the same subsidies found to 
have caused adverse effects in the original proceeding after the adoption of the relevant 
recommendations and rulings by the DSB. The United  States disagreed with the Europe an Union's 
contention, submitting that the European  Union was under an obligation to "take appropriate steps 
to remove the adverse effects" or "withdraw the subsidy" in respect of all of the challenged subsidy 
measures irrespective of whether they had ceas ed to exist at any particular point in time.  
Although the Panel considered that the European  Union's legal interpretation could arguably find 
some support when the text of Article  7.8 was read in isolation, the Panel found that the 
European  Union's positio n could not be sustained once the language of Article  7.8 was interpreted 
in light of its proper context as well as the object and purpose of WTO compliance obligations. After 
reviewing various provisions of the DSU governing when and how WTO compliance ob ligations are 
incurred, including Articles 19.1 and 21.1, the Panel found that any violation of the covered 
agreements will attract an obligation to bring a WTO -inconsistent measure into conformity with the 
covered agreement that was the source of the infr ingement for as long as that infringement persists. 
The Panel considered Article  7.8 to manifest this principle in the specific context of the 
SCM Agreement . Thus, the Panel found that the objective of Article  7.8 is to clarify how a Member 
found to have c aused adverse effects through the use of subsidies is to come into conformity with 
its obligations under the SCM  Agreement , in particular, Article  5.  
The Panel recalled that Article  5 of the SCM  Agreement  imposes an effects -based  discipline on the 
use of subsidies that can be infringed even when a Member is no longer granting or maintaining a 
particular subsidy. Thus, for example, in the original proceeding, France, Germany, Spain, and the WT/AB/29  
 
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  United Kingdom were found to have caused adverse effects to the Uni ted States' interests between 
2001-2006 through the use of LA/MSF subsidies that were no longer being granted or maintained 
during that period. It followed, therefore, that the fact that an implementing Member may be no 
longer granting or maintaining a par ticular subsidy found to have caused adverse effects in an 
original proceeding, could not, ipso facto , bring that Member into conformity with its obligation under 
Article  5 of the SCM  Agreement  to avoid causing adverse effects through the use of subsidies.  
Thus, the Panel found the European  Union's interpretation of Article  7.8 to be problematic because 
it was based on a conception of compliance that ignored the effects -based  disciplines of Article  5 of 
the SCM  Agreement . In the Panel's view, accepting the European  Union's position would mean that 
any Member able to demonstrate in an original proceeding that a subsidy, which has ceased to exist, 
causes adverse effects to its interests, and would have no possibility of obtaining relief for that WTO -
inconsiste nt conduct were it to continue into the implementation period and beyond. Accordingly, 
the Panel found that the European  Union had failed to demonstrate that the mere fact that one or 
more of the challenged subsidies may have ceased to exist prior to 1  June 2011 meant that the 
European  Union and certain member States did not have a compliance obligation under the terms 
of Article  7.8 of the SCM  Agreement  in respect of those subsidies.  
3.2.2.2.2   Whether the United  States demonstrated that the European  Union and certai n 
member States had failed to "withdraw the subsidy"  
Having rejected the European  Union's contention that Article  7.8 of the SCM  Agreement  imposed no 
compliance obligation on the European  Union and certain member States in relation to subsidies that 
ceased  to exist prior to the DSB's adoption of the recommendations and rulings in the original 
proceeding, the Panel turned to examine the merits of the United  States' claim that the 
European  Union and certain member States had failed to "withdraw the subsidy" f or the purpose of 
Article  7.8. 
The United  States argued that the European  Union and certain member States had failed to 
"withdraw the subsidy" because they had failed to take any affirmative action to "remove" or "take 
away" any of the relevant subsidies. The European  Union rejected the United  States' submission, 
arguing that the relevant subsidies had already been "withdrawn" by virtue of their "lives" having 
come to an end before the end of the implementation period as a result of their "expiry", "extinct ion", 
and/or "extraction".  
The Panel commenced its analysis of the parties' positions by determining the extent to which the 
European  Union had demonstrated that, as a matter of fact, the relevant subsidies had "expired" or 
had been "extinguished" or "ext racted" prior to the end of the implementation period. The Panel's 
analysis was guided by its understanding of the findings and statements made by the Appellate  Body 
in the original proceeding in relation to the notion of the "life" of a subsidy and the re levance of this 
concept to the matters raised in the compliance proceeding. The Panel considered that the 
Appellate  Body had clarified that: (a) a subsidy which no longer exists may be found to cause 
adverse effects; (b) understanding how the "life" of a s ubsidy has "materialized over time" will help 
to inform an assessment of its effects; and (c) the "life" of a subsidy may be determined by 
examining the extent to which its "projected value"  at the time of grant has been altered by any one 
or more subseque nt "intervening events".  
After closely reviewing the European  Union's submissions, the Panel concluded that the 
European  Union had established that the anticipated ( ex ante ) "lives" of the French, German, and 
Spanish LA/MSF subsidies for the A300B/B2/B4, A300-600, A310, A320, A330/A340, and the UK 
LA/MSF subsidies for the A320 and A330/A340, all came to an end before the end of the 
implementation period. Furthermore, the Panel also found that the European  Union had 
demonstrated that the ex ante  "lives" of the French and German Government capital contribution 
subsidies came to an end before the end of the implementation period. The Panel was satisfied that 
the European  Union had shown that the ex ante  "lives" of these subsidies had "expired" not because 
they were somehow brought to a premature  end by, for example, having been repaid or because of 
the alignment of their terms with a market benchmark, but rather because the total period of time 
over which their "projected value" was expected to "materialize" ha d passively  transpired in the 
absence of any "intervening event". In other words, the Panel found that the ex ante  "lives" of the 
relevant subsidies had "expired" simply because they had been fully provided to Airbus as originally 
planned and expected. Wit h respect to all other subsidies at issue in this dispute, the Panel found WT/AB/29  
 
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  that the European  Union had failed to demonstrate that they "expired", or were "extinguished" or 
"extracted", before the end of the implementation period.  
The Panel recalled that, i n dismissing the European  Union's contention that Article  7.8 of the 
SCM Agreement  imposed no compliance obligation on the European  Union and certain member 
States in relation to subsidies that ceased to exist prior to 1  June 2011, it had found that one of  the 
fundamental objectives of Article  7.8 is to bring an implementing Member into conformity with its 
obligations under Article  5 of the SCM  Agreement. According to the Panel, the logical implication of 
this finding was that it cannot be concluded on the sole basis of the "expiry" of the relevant LA/MSF 
and capital contribution subsidies that the European  Union and certain member States had ipso facto  
complied with the obligation to "withdraw the subsidy" with respect to those measures. Rather, in 
light of  the effects -based nature of the subsidy disciplines of Article  5, the Panel was of the view that 
the extent to which the passive  "expiry" events may be found to amount to the "withdrawal" of 
subsidies for the purpose of Article  7.8 will depend upon the ex tent to which they bring the 
European  Union and certain member States into conformity with Article  5 of the SCM  Agreement.  
The European  Union argued, however, that an interpretation of Article  7.8 of the SCM  Agreement 
that failed to acknowledge that the "e xpiry", "extinction" , and/or "extraction" events it relied upon 
will always  amount to the "withdrawal" of subsidies for the purpose of Article  7.8 would not only be 
inconsistent with how similar language has been interpreted and applied in the context of A rticle 4.7 
of the SCM  Agreement and Article  3.7 of the DSU, but it would also be at odds with the 
Appellate  Body's recognition that the "expiry" of a subsidy may, in circumstances that are not "usual" 
or "normal", be sufficient to bring an implementing Mem ber into compliance with Article  7.8. Indeed, 
the European  Union maintained that such an interpretation of Article  7.8 would be tantamount to 
reading an implementing Member's right to "withdraw the subsidy" out of Article  7.8 because it 
would make the avai lability of this compliance option subject to the "removal of adverse effects", 
thereby rendering the specific treaty language inutile . The Panel was unconvinced by the 
European  Union's submissions.  
According to the Panel, finding that the two compliance o ptions referred to in Article  7.8 must be 
interpreted in a way that brings an implementing Member into conformity with the effects -based 
disciplines of Article  5 of the SCM  Agreement would not deprive them of independent meaning. The 
Panel could not see ho w saying that either of the two options must be understood in a way that 
achieves the  same result  necessarily implies that they must have an identical meaning . Indeed, in 
the Panel's view, the express terms of the two options envisage that an implementing Member has 
potentially two different  pathways to achieve the same compliance objective . Thus, after examining 
the text of the two options and considering inter alia how the obligation to "withdraw the subsidy 
without delay" has been interpreted for the purpose of Article  4.7 of the SCM  Agreement , the Panel 
found that the option to "withdraw the subsidy" that is provided for in Article  7.8 should be 
understood t o refer to any conduct on the part of an implementing Member in relation to the subsidy  
found to cause adverse effects, which brings that Member into conformity with its obligations under 
Article  5 of the SCM  Agreement .  
In contrast, the Panel found that t he option to "take appropriate steps to remove the adverse effects" 
referred to an approach to compliance that envisaged an implementing Member coming into 
conformity with its obligations under Article  5 of the SCM  Agreement without  taking any specific 
action in relation to the subsidy  found to cause adverse effects. For the Panel, the focus of this option 
was on other more effects -based or market -focused solutions. Thus, the Panel concluded that while 
the efforts of an implementing Member taking up the opt ion to "withdraw" the subsidy will be focused 
on the subsidy itself , an implementing Member wanting to "take appropriate steps to remove the 
adverse effects" may pursue a different course action that is unrelated to the subsidy  measure itself.  
In concludi ng this part of its analysis, the Panel emphasized that an implementing Member would 
be free to choose between any possible alternative means of pursuing the two compliance options 
envisaged under Article  7.8. However, for the Panel, it was clear that what ever approach an 
implementing Member finally decided upon, it must be, in the words of the Appellate  Body, "sufficient 
to bring that Member into compliance with its WTO obligations". Accordingly, the Panel found that 
the European  Union had failed to demons trate that the mere fact that the "lives" of certain subsidies 
had expired before the end of the implementation period implied that the European  Union and certain 
member States had complied with the obligation to "withdraw the subsidy" for the purpose of 
Article 7.8. Thus, the Panel found that the United  States had established that the European  Union 
and certain member States had failed to "withdraw" the subsidies, for the purpose of Article  7.8. WT/AB/29  
 
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  3.2.2.2.3   Whether the United  States demonstrated that the European  Union and certain 
member States had failed to "take appropriate steps to remove the adverse effects"  
The Panel proceeded to examine whether the United  States had established that the European  Union 
and certain member States had also failed to "take appropriate steps to remove the adverse effects". 
The Panel did so by examining the United  States' claims that the challenged LA/MSF  and capital 
contribution and infrastructure -related subsidies all continued to contribute to the causation of 
"serious prej udice" to United  States' interests in the form of: (i) displacement and/or impedance of 
imports of United  States' LCA into the European  Union market; (ii) displacement and/or impedance 
of exports of United  States' LCA from certain third -country markets; an d (iii) significant lost sales of 
United  States' LCA, within the meaning of Articles 6.3(a), (b), and (c) of the SCM  Agreement.  
3.2.2.2.3.1   The relevant product markets  
In the original proceeding, the Appellate  Body had indicated that a "subsidized product" may only 
be found to displace or impede the importation or exportation of a "like product", or cause significant 
lost sales to a "like product", if it is determined that the two products compete in the same product 
market. Thus, as a threshold step in assessing the United  States' claims that the challenged subsidies 
continued to cause serious prejudice to United  States' interests within the meaning of Article  6.3(a), 
(b) and (c) of the SCM  Agreement , the Panel first sought to determine whether the United  States' 
claims had been made in relation to the relevant product markets.  
The United  States argued that LCA compete in essentially three relevant product markets: (i) the 
single -aisle LCA market; (ii) the twin -aisle LCA market; and (iii) the very large aircraft marke t. The 
same three markets were used by the Appellate  Body in the original proceeding to complete the 
legal analysis of the United  States' claims of serious prejudice. The European  Union argued that the 
conditions of competition had changed significantly si nce the original proceeding and that today 
there were more than three, and up to six or seven, different LCA product markets.  
One of the first issues that arose in the Panel's evaluation of the parties' submissions concerned the 
kind of evidence that shou ld be used to identify relevant product markets. According to the 
European  Union, the Appellate  Body had declared in the original proceeding that the identification 
of relevant product markets should be "rooted in" evidence of a quantitative nature. Thus, according 
to the European  Union, the fact that the United  States had sought to establish the existence of the 
relevant product markets on the basis of evidence that was of a qualitative nature implied that the 
United  States had failed to meet its burden of  proof.  
The Panel found that, contrary to the European  Union's assertions, the Appellate  Body did not, in 
the original proceeding, establish a rule that the United  States, and all complainants in serious 
prejudice cases, must use quantitative analysis when  identifying relevant product markets. While 
the Panel recognized that the Appellate  Body signalled that the three quantitative methods of 
analysis explicitly referred to in its report (the SSNIP test, cross -price elasticity of demand, and price 
correlatio n analysis) may serve to inform  a determination of the extent to which different products 
are substitutable, the Panel detected nothing in the Appellate  Body's report to suggest that those 
methods or any other quantitative methods of analysis must, as a le gal matter , always be used to 
inform a determination of relevant product markets in a serious prejudice dispute.  
Moreover, in light of the particularly complex characteristics of the LCA industry, the absence of 
reliable pricing information and the recogn ized difficulties associated with identifying relevant 
product markets made up of differentiated products, the Panel found that the task of performing a 
reliable econometric analysis of the demand for LCA products would face a number of significant 
methodo logical and data challenges, making it a formidable task. The Panel went on to note that in 
such circumstances, competition authorities, including the European Commission, would tend to 
focus on evidence of a qualitative nature. Thus, the Panel found no re ason to fault the United  States' 
decision not to use the SSNIP test or any other price -based quantitative analysis to substantiate its 
view that there are three relevant product markets in the LCA industry. Accordingly, the Panel 
concluded that the United  States was entitled to advance its case using any and all evidence it 
considered could demonstrate the existence of the three relevant product markets.  
The European  Union then argued that the United  States had failed to establish the existence of the 
three  LCA product markets because it had not shown that all of the aircraft that allegedly compete WT/AB/29  
 
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  in each of the three distinct product markets exercise " significant competitive constraints" on each 
other. The Panel explained that it did not understand the App ellate  Body, in the original proceeding, 
to have declared that two products could only ever be found to compete with each other in the same 
product market if they imposed "significant" competitive constraints on each other. Moreover, 
according to the Panel , there was no textual basis for interpreting the word "market" that appears 
in Article  6.3(a), (b) and (c) of the SCM  Agreement in a way that would mean that "serious prejudice" 
could only ever be found to exist in the context of product markets where the re is vigorous 
("significant" or "close") competition, as opposed to markets where competition between products 
is relatively weak or, in certain circumstances, even markets where strong competitive constraints 
are imposed by one product on one or more oth er products, which themselves impose little, if any, 
competitive constraint on the stronger competitor.  
In this respect, the Panel found it important to recall that the fundamental purpose of identifying 
relevant product markets in a serious prejudice dis pute is to determine whether certain specific trade 
effects have been caused by the use of subsidies . In the Panel's view, the fact that the competitive 
relationships examined for this purpose may have been shaped by the very subsidies that are 
claimed to cause adverse trade effects implies that it may be necessary, depending upon the 
circumstances, to account for the distorting impact of those subsidies in the assessment of relevant 
product markets. Otherwise, the adverse trade effects of a subsidy that tr ansforms an otherwise 
vigorous competitive relationship into one of no competition at all or competition that is insignificant 
could never  be addressed under the disciplines of Articles 5 and 6 of the SCM  Agreement , and WTO 
Members would be left without a remedy under the SCM  Agreement against the use of subsidies to 
marginalize or completely eradicate the ability of a like product to compete in international trade. 
Thus, the Panel dismissed the European  Union's contentions concerning the requisite degree o f 
competition necessary to show that two or more products compete in the same product market for 
the purpose of bringing a claim of serious prejudice under the SCM  Agreement . 
The Panel went on to evaluate the merits of the parties' submissions concerning t he existence of the 
three separate product markets – the markets for single -aisle, twin -aisle, and very large LCA. For 
each alleged product market, the Panel examined the parties' arguments and evidence, including 
multiple expert statements, addressing: (i ) the physical and performance characteristics, end -uses, 
and customers of the various LCA; (ii) the extent to which the different LCA exercised pricing 
constraints on each other; and (iii) Airbus and Boeing marketing strategies and sales campaigns.  
The P anel found that the United  States had demonstrated that it would be appropriate to evaluate 
the merits of its claims on the basis of the following three separate product markets: (a) the product 
market for single -aisle aircraft in which Airbus and Boeing s ell the A320neo, A320ceo, 737MAX , and 
737ng families of LCA; (b) the product market for twin -aisle aircraft in which Airbus and Boeing sell 
the A330, A350XWB, 767, 777 , and 787 families of LCA; and (c) the product m arket for very large 
aircraft (VLA ) in wh ich Airbus and Boeing sell the A380 and the 747.  
In coming to this conclusion, the Panel explained how the LCA industry today continues to be an 
effective Airbus -Boeing duopoly, with each producer having a comparable range of aircraft to offer 
potential cu stomers, and where competition takes place between these two players at different 
levels, including with respect to price, technology , and the timing and availability of new and 
improved aircraft in line with their responses to the complex, constantly evol ving and often 
idiosyncratic nature of aircraft demand. The Panel found that, from the perspective of aircraft 
customers, there are no perfect substitutes within this competitive landscape, only different degrees 
of imperfect substitution. Moreover, accord ing to the Panel, finding exactly where to draw a line 
between these relationships in order to define the precise  boundaries within which relevant "product 
markets" may exist posed a number of significant evidentiary and conceptual challenges.  
Finally, the  Panel emphasized that in finding that the United  States had established the existence of 
three separate LCA product markets, it did not intend to suggest that it was of the view that the 
degree of competition existing within each of the three relevant mar kets will be identical between 
all pairings or combinations of aircraft. The Panel explained that there would be weaker and stronger 
competitive relationships within each market depending upon the particular circumstances of a sale. 
Moreover, the Panel not ed that important competitive relationships may also exist between pairings 
or combinations of aircraft across two, or even all three, of the product markets. Thus, while the 
Panel found that it was apparent that the three product markets the United  States  had chosen to 
rely upon to bring its complaint of non -compliance could not exhaustively capture how competition 
takes place between aircraft in the LCA sector at all times, the Panel was satisfied that for the WT/AB/29  
 
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  purpose of the compliance dispute (as was the  case in the original proceeding) those three markets 
represented the three segments within which most competitive interactions between the relevant 
aircraft will commonly take place.  
3.2.2.2.3.2   The effects of the challenged subsidies in the relevant product markets  
In examining the United  States' claims concerning the effects of the challenged subsidies, the Panel 
undertook a "unitary" causation analysis pursuant to which the effects of the subsidies were 
determined by conducting a counterfactual analysis that entail ed comparing the actual  market 
situation in the post -implementation period with the market situation that would have existed in the 
absence of the challenged subsidies . Consistent with the approach followed in the original 
proceeding, the Panel first exami ned whether the United  States had demonstrated that the 
aggregated effects of the challenged LA/MSF subsidies were a "genuine and substantial" cause of 
various forms of serious prejudice to the United  States' interests, within the meaning of Article  6.3 
of the SCM  Agreement, before turning to assess whether the United  States had demonstrated that 
the effects of the non -LA/MSF subsidies could be cumulated with those of the LA/MSF subsidies, to 
the extent that they were, themselves, a "genuine" cause of the s ame forms of serious prejudice.  
3.2.2.2.3.2.1   The effects of the LA/MSF subsidies  
The Panel explained that in order to determine the merits of the United  States' claims, it would 
perform a counterfactual analysis directed at identifying the situation in t he relevant product markets 
in the absence of the challenged LA/MSF subsidies after the end of the implementation period, that 
is, after 1  December  2011. The Panel stated that the point of departure for its analysis would be the 
adopted panel and Appellate  Body findings from the original proceeding concerning the effects of 
the pre -A350XWB LA/MSF subsidies in the 2001 to 2006 period.  
The Panel recall ed the findings made by the original panel in relation to the "product" effects of the 
pre-A350XWB LA/MSF subsidies in the 2001 -2006 period and considered the Appellate  Body's review 
of those findings on appeal. The Panel observed that the panel in the ori ginal proceeding arrived at 
its ultimate causation findings after having considered two "plausible" and two "unlikely" 
counterfactual scenarios describing the market situation in the 2001 -2006 period in the absence of 
the challenged subsidies. In essence, the two "plausible" counterfactual scenarios envisaged that in 
the absence of the subsidies, Airbus would not exist in the 2001 -2006 period, and there would be 
instead either: (i) a Boeing monopoly; or (ii) a duopoly consisting of Boeing and another 
United  States' LCA manufacturer (possibly McDonnell Douglas). In the two "unlikely" counterfactual 
scenarios, a non -subsidized Airbus would have existed as a "much weaker" company with "at best 
a more limited offering of LCA models" competing in either: (i) a du opoly with Boeing; or (ii) with 
Boeing and another United  States' LCA manufacturer (possibly McDonnell Douglas).  
The Panel chose to proceed to evaluate the alleged "product" effects of the challenged LA/MSF 
subsidies in the post -implementation period by u sing, as the principal  starting point of the analysis,  
the adopted "plausible" counterfactual scenarios from the original proceeding. Given the 
Appellate  Body's conclusion in the original proceeding that the original panel's findings, based on 
the "plausib le" counterfactual scenarios, were "without more" sufficient to establish a "genuine and 
substantial" causal connection between the effects of the pre -A350XWB LA/MSF subsidies and the 
claimed instances of serious prejudice to the United  States' interests i n the 2001 -2006 period, the 
Panel was of the view that its "objective assessment of the matter" in the compliance dispute could 
proceed solely on this basis.  
Nevertheless, in keeping with the approach adopted in the original proceeding, the Panel explaine d 
that it would also explore the parties' arguments concerning the effects of the challenged LA/MSF 
subsidies in the post -implementation period using the "unlikely" counterfactual scenario as the 
starting point of its analysis.  
The key question for the Pa nel to resolve in this part of its report was whether, as argued by the 
European  Union, the mere "passage of time" between the granting of the pre -A350XWB LA/MSF 
subsidies and the post -implementation period meant that those subsidies could no longer be fou nd 
to be a "genuine and substantial" cause of the market presence of the A320, A330 , and A380.  WT/AB/29  
 
- 36 - 
 
  The Panel recalled that the Appellate  Body in the original proceeding had, on a number of occasions, 
emphasized the importance of the passage of time to the ass essment of the effects of a subsidy. 
Like the parties, the Panel understood the Appellate  Body's position to be that the effects of any 
subsidy will eventually come to an end with the passage of time. The Panel also found that it was 
apparent from the Appe llate Body's statements that the precise duration  of the effects of a subsidy 
will depend upon the specific facts of the case at hand , including any pertinent facts shedding light 
on how the "life" of a subsidy has materialized over time. The Panel noted, however, that in 
emphasizing the importance to an adverse effects analysis of considering "the trajectory of the life 
of a subsidy", "how a subsidy is expected to materialize" , and "whether the life of a subsidy has 
ended", the Appellate  Body at no stage e quated the end of the "life" of a subsidy with the complete 
dissipation of its effects. Thus, the Panel stated that the extent to which the effects of a subsidy will 
dissipate with the passage of time and eventually come to an end will be a fact-specific  matter that 
may be informed, but not necessarily defined , by how the "life" of that subsidy has evolved over 
time. 
The Panel next turned to examine the findings adopted in the original proceedings in relation to the 
effects of the pre -A350XWB LA/MSF subsidi es in more detail. The Panel found that two types of 
effects were identified in the original proceeding: (a) direct effects  – namely, the effects of any given 
LA/MSF loan on Airbus' ability to launch and bring to market the particular model of Airbus LCA 
specifically funded by that LA/MSF loan; and (b) indirect effects  – namely, the "learning", scope , 
and financial effects that any given LA/MSF loan provided for the specific purpose of one model of 
LCA may have on the ability of Airbus to launch and bring t o market another model of LCA. The 
Panel found that the adopted findings established that the direct and indirect effects of the 
pre-A350XWB LA/MSF subsidies on the market presence of the A320, A330 , and A380 families of 
Airbus LCA were profound and long -lasting, explaining (under both the "plausible" and "unlikely" 
counterfactual scenarios) the very existence of the entire range of Airbus LCA that was actually sold 
in the 2001 -2006 period.  
After examining the nature of these effects in more detail, the Pa nel concluded that the fundamental 
"product -creating" nature of the pre -A350XWB LA/MSF subsidies meant that their effects were likely 
to endure for as long as the market presence of any model of Airbus LCA continued to be tied to 
those effects by means of a genuine and substantial relationship of cause and effect. Thus, the Panel 
found that, in the absence of any event or development capable of breaking the genuine and 
substantial causal link that was found to exist in the original proceeding, the same caus al connection 
between the direct and indirect effects of the pre -A350XWB LA/MSF subsidies and the A320, A330 , 
and A380 must continue to exist today. The Panel saw no factual basis to accept that the mere 
passage of time  had reduced the "product -creating" e ffects of the pre -A350XWB LA/MSF subsidies 
to only a remote or insignificant cause of the ongoing market presence of these models of Airbus 
LCA.  
The Panel was also not convinced that certain post -launch investments undertaken by Airbus in the 
A320 and the  A330 were sufficient to dilute the causal connection between the "product -creating" 
effects of the pre -A350XWB LA/MSF subsidies and the present -day market presence of the A320 
and A330 families such that it was no longer possible or appropriate to charact erize that link as "a 
genuine and substantial relationship of cause and effect". While the Panel found the post -launch 
investments to be significant in value and instrumental to Airbus' ability to upgrade the technologies 
and production processes associate d with the original A320 and A330, the Panel also found that they 
could not have been undertaken in the absence of the effects of the pre -A350XWB LA/MSF subsidies 
on Airbus' ability to launch and bring to market the original A320 and A330 as and when it di d. Thus, 
although important to the development of the current versions of the A320 and A330, the Panel 
ultimately found that the post -launch investments were, at best, only part of the reason why Airbus 
was able to sell the two families of LCA today.  
Accordingly, the Panel found that the direct and indirect effects of the pre -A350XWB LA/MSF 
subsidies continue to be a "genuine and substantial" cause of the present -day market presence of 
the A320, A330, and A380 families. In other words, the Panel found that  in the absence of the 
pre-A350XWB LA/MSF subsidies, Airbus would not be selling those aircraft today.  
The Panel began its evaluation of the parties' extensive arguments and evidence, including multiple 
expert reports, on the effects of the LA/MSF subsidie s on the launch and market presence of Airbus' 
newest model of LCA, the A350XWB, by noting that using the "plausible" counterfactual scenarios 
adopted in the original proceeding as the starting point  of the effects analysis, a non -subsidized WT/AB/29  
 
- 37 - 
 
  Airbus could n ot have launched the A350XWB at the end of 2006, simply because a non -subsidized 
Airbus would not have existed in 2006 , and there was, furthermore, no evidence to suggest (and 
indeed the European  Union did not argue) that a non -subsidized Airbus would have  come into being 
any time thereafter. Thus, the Panel found that under the "plausible" counterfactual scenarios 
concerning the effects of the pre -A350XWB LA/MSF subsidies, there was no doubt that the A350XWB 
could not have been launched and brought to mark et in the relevant period in the absence of LA/MSF.  
Although the Panel explained that it considered its findings on the basis of the "plausible" 
counterfactual scenarios to be a sufficient basis to satisfy its obligation to make an "objective 
assessment of the matter", the Panel nevertheless went on to examine the merits of the parties' 
positions using the "unlikely" counterfactual scenarios as the starting point of the analysis. In 
performing this analysis, the Panel first set out a detailed d escription of the A350XWB project, from 
the time of its origins when it was conceived as a replacement for the Original A350 to its post -launch 
development and the provision of LA/MSF. The Panel then examined the impact of the direct effects  
of A350XWB LA/ MSF on the subsidized  (i.e. the actual) Airbus' ability to bring the A350XWB to 
market in light of these facts. The Panel considered that by understanding the extent to which the 
A350XWB LA/MSF subsidies facilitated the ability of the subsidized Airbus com pany to launch and 
bring to market the A350XWB, it would be possible to understand whether the "much weaker" 
non-subsidized  Airbus company that would have existed in the "unlikely" counterfactual scenarios 
could have done the same.  
The Panel found that the re were strong strategic reasons for the subsidized  Airbus to launch and 
develop the A350XWB and that alternative financing options were available, making the A350XWB 
sufficiently attractive and, therefore, viable  to the subsidized Airbus company even with out 
A350XWB LA/MSF. However, the Panel also found that the evidence demonstrated that pursuing the 
A350XWB in the absence of A350XWB LA/MSF would have been a more complicated, more costly, 
and riskier endeavour. On this basis, the Panel concluded that, in the absence of A350XWB LA/MSF, 
the subsidized  Airbus company that actually existed  in the 2006 to 2010 period would have been 
able to launch and bring to market the A350XWB or an A350XWB -type aircraft. The Panel 
emphasized, however, that without  A350XWB LA /MSF, the subsidized  Airbus company that actually 
existed  could have pursued such a programme only by a narrow margin, with a high likelihood that 
it would, to some degree, have had to make certain compromises with respect to the pace of the 
programme and/ or the features of the aircraft.  
The Panel next assessed the implications of its findings on the ability of the non-subsidized  Airbus 
company that would have existed in the "unlikely" counterfactual scenario. Drawing from the findings 
made in the original proceeding, the Panel first briefly described the type of competitor that the 
non-subsidized Airbus company that would have existed at the end of the 2006 in the "unlikely" 
counterfactual scenarios could have been. The Panel found that it was apparent from  the evidence 
and the adopted findings in the original proceeding that a non -subsidized Airbus operating in the 
"unlikely" counterfactual scenarios at the end of the 2006 would not have had the same range and 
quality of aircraft on the market that the subs idized Airbus did at the time of the launch of the 
A350XWB. The Panel determined that a non -subsidized Airbus operating in the "unlikely" 
counterfactual scenarios would have had neither the technical or managerial expertise nor the 
financial resources that  were available to the Airbus company that actually existed at the end of 
2006. Accordingly, the Panel concluded that a non-subsidized  Airbus existing in the "unlikely" 
counterfactual scenarios could not have launched the A350XWB or an A350XWB -type aircraf t by the 
end of 2006.  
Finally, the Panel confirmed its findings in the context of the "unlikely" counterfactual scenarios by 
examining the extent to which the indirect effects  of pre-A350XWB LA/MSF  contributed to the ability 
of the subsidized  Airbus company that actually existed over the relevant period to undertake the 
A350XWB programme as and when it did.  
After carefully reviewing the "learning", scope, and financial effects associated with the 
pre-A350XWB LA/MSF subsidies on the A350XWB pr ogramme, the Panel concluded that the indirect 
effects  of pre -A350XWB LA/MSF were fundamental to Airbus' ability to launch and develop the 
A350XWB. In particular, the Panel found that the "learning" effects arising from the pre -A350XWB 
programmes that woul d not have existed in the absence of pre -A350XWB LA/MSF were wide -
ranging, significant, and critical to the A350XWB. Likewise, the Panel found that the financial effects 
of pre -A350XWB LA/MSF, in the form of significant revenue generation through the sale of Airbus 
LCA and reduced financing costs (resulting in a reduced debt burden), were also instrumental to the WT/AB/29  
 
- 38 - 
 
  A350XWB programme. There was no doubt in the Panel's mind that had Airbus not benefitted from 
these indirect effects  of the pre -A350XWB LA/MSF mea sures, it would not have been possible to 
launch and bring to market the A350XWB.  
Thus, using all four of the adopted counterfactual scenarios from the original proceeding concerning 
the effects of the pre -A350XWB LA/MSF subsidies until the end of 2006 as the starting point of its 
analysis, the Panel found that the A350XWB could not have been launched and brought to market 
in the absence of LA/MSF as and when it was.  
Having found that the effects of the challenged LA/MSF subsidies continue to be a "genuine and 
substantial" cause of the current market presence of the A320, A330, A380, and A350XWB families 
of LCA, the Panel next turned to determine the extent to which the LA/MSF subsidies, through their 
continued "product" effects, are a "genuine and substanti al" cause of significant lost sales, market 
impedance , and displacement of United  States LCA in the post -implementation period.  
In light of the continued "product" effects of the challenged LA/MSF subsidies and the conditions of 
competition in the LCA ind ustry, the United  States claimed that: (i) the United  States LCA industry 
suffered serious prejudice in the form of displacement and/or impedance of its LCA products in all 
three relevant product markets in the European  Union, and in six third -country prod uct markets, 
within the meaning of Articles 6.3(a) and 6.3(b) of the SCM  Agreement; and that (ii) eight  orders, 
accounting for 380 individual Airbus LCA, made after 1  December  2011 constituted "significant lost 
sales" of United  States LCA, within the meani ng of Article  6.3(c) of the SCM  Agreement.  
In order for the Panel to evaluate the merits of the United  States' claims, one of the key questions 
that had to be resolved was whether the United  States had established not only that Airbus  would 
not have won t he relevant sales or market share in the absence of the LA/MSF subsidies, but also 
that Boeing or another United  States LCA manufacturer  (as opposed to a non -United  States LCA 
producer) would have won those sales or market share. According to the United  States, nothing had 
happened since the end of 2006 to suggest that the conditions of competition used as the basis for 
the two "plausible" counterfactual scenarios in the original proceeding should change in any material 
way for the purpose of the post -imple mentation period. Thus, in the view of the United  States, the 
sales and market share won by Airbus in the post -implementation period constituted serious 
prejudice to the United  States' interests because in the "plausible" counterfactual scenarios, Boeing 
or a duopoly involving Boeing and another United  States manufacturer of LCA (possibly McDonnell 
Douglas) would continue to be the only player(s) in the LCA industry after 1  December  2011. 
However, the European  Union argued that there was evidence to suggest  that other non -
United  States LCA manufacturers would be operating in the LCA industry in the absence of Airbus, 
implying that the relevant sales and market shares the United  States claimed were lost as a result 
of Airbus' market presence, could have been captured by the non -US companies.  
Thus, the Panel had to determine whether , in the absence of Airbus, another non-United  States 
producer  of LCA would have entered the LCA industry in the years following 2006, such that it could 
have been a source of compe tition to Boeing in the "plausible" monopoly counterfactual scenario or 
Boeing and another United  States manufacturer of LCA in the "plausible" duopoly counterfactual 
scenario.  
The Panel found that the nature of the existing competitive relationship betwee n potential new 
entrants in the current  duopoly environment, consisting of Airbus and Boeing, strongly suggested 
that it would have been highly unlikely for a non -United  States producer to have entered the LCA 
market in the "plausible" counterfactual scena rio that envisages a duopoly involving Boeing and 
another United  States manufacturer of LCA. According to the Panel, there was no evidence or 
argument before it to suggest that any one or more of the non -United  States companies that have 
been trying to ent er the existing LCA market would have been in a better competitive position 
vis-à-vis a duopoly involving Boeing and another United  States manufacturer of LCA than they 
actually are in the present -day Airbus -Boeing duopoly. In this light, the Panel found t hat it was 
reasonable to conclude that competition from potential new entrants in this "plausible" 
counterfactual scenario that envisaged a United  States' LCA company duopoly, would have been the 
same or similar to what it is today – very weak and limited to the smaller -seating -capacity -end of 
the single -aisle product market or in the words of Airbus' Vice President for Contracts, Christophe 
Mourey: "not yet … significant or widespread".  WT/AB/29  
 
- 39 - 
 
  The Panel came to a similar conclusion with respect to how the other " plausible" counterfactual 
scenario (the Boeing monopoly) would have evolved between 2006 and the present day. According 
to the Panel, it was reasonable to assume that Boeing, as a monopolist, would have been in a 
stronger competitive position relative to a ny potential new entrant than in a duopoly situation. 
Boeing's incumbency advantages would have therefore been more difficult to overcome. 
Nevertheless, the Panel considered that the very existence of a monopoly would have created strong 
incentives for new  entrants to materialize as well as for potential customers to purchase newly 
introduced products. Moreover, in the face of increasing demand, Boeing may not have been able 
to satisfy all potential customers. However, at the same time, the Panel considered  that given the 
expensive, technologically complex , and uncertain nature of LCA production, it was likely that any 
new LCA company entering a market dominated by a Boeing monopoly could only have done so in 
the single -aisle segment and only with respect to  products that, technology -wise, would have been 
inferior to Boeing's more advanced offerings. In this respect, the Panel found it very difficult to 
conceive that any new entrant (even one with years of experience in the smaller regional aircraft 
sector) c ould have developed and brought to market by the beginning of the post -implementation 
period the same range and quality of LCA that are in competition with Boeing's LCA today. 
Accordingly, the Panel found that it may well have been possible for one of the more experienced 
non-United  States aircraft producers that exist today to enter the LCA market by the time of the 
post-implementation period in a "plausible" counterfactual scenario where Boeing is a monopolist. 
However, the Panel considered that it was li kely that in the limited period of time from the end of 
2006 to the beginning of the post -implementation period, such an entity would have only been able 
to enter the single -aisle segment with aircraft that, as a general matter, could only impose weak 
comp etitive constraints on Boeing.  
The Panel then applied the two "plausible" counterfactuals it had developed to the facts pertaining 
to the significant lost sales and market displacement and impedance claimed by the United  States.  
Because any new entrant co uld have only been present as a potential competitor to Boeing and/or 
Boeing and another United  States LCA manufacturer in the single -aisle LCA segment, it was clear 
that any relevant sales won by Airbus in the twin -aisle and VLA LCA markets must have cons tituted 
lost sales and market displacement and impedance to the United  States LCA industry. In terms of 
the competition from a non -United  States producer in the single -aisle LCA market, the Panel 
considered that it was unlikely that any such competitor cou ld impose greater competitive 
constraints on the incumbent United  States producers than those actually imposed by any of the 
non-US companies trying to enter the LCA market today. For the Panel, this implied that a new 
entrant could not have prevented any of the incumbent United  States LCA producers from winning 
the relevant sales and market share in the relevant markets in the absence of Airbus.  
Accordingly, the Panel found that all eight orders for the 380 LCA identified by the United  States to 
have taken  place after 1  December  2011 were significant lost sales to the United  States LCA industry 
and, therefore, that the challenged LA/MSF subsidies continued to be a "genuine and substantial" 
cause of serious prejudice to the United  States within the meaning o f Article  6.3(c) of the 
SCM Agreement. Likewise, the Panel concluded that in the absence of the "product" effects of the 
challenged LA/MSF subsidies, the volume of deliveries and market shares that would have been 
achieved by the United  States' LCA industr y between 1 December 2011 and the end of 2013 would 
have been higher than its actual level in all relevant product markets. The United  States had, 
therefore, established that the "product" effects of the challenged LA/MSF subsidies were a "genuine 
and subs tantial" cause of displacement and/or impedance of United  States LCA in the markets for 
single -aisle LCA in the European  Union, Australia, China , and India; twin -aisle LCA in the 
European  Union, China, Korea , and Singapore; and VLA in the European  Union, A ustralia, China, 
Korea, Singapore , and the United Arab Emirates.  
3.2.2.2.3.2.2   The effects of the non -LA/MSF subsidies  
Having reached the above conclusions in relation to the effects of the challenged LA/MSF subsidies, 
the compliance Panel next examined the extent to which the effects of the non -LA/MSF subsidies 
(i.e. the capital contributions and infrastructure -related grants) were a "genuine" cause of serious 
prejudice to the United  States' interests and could, therefore, be "cumulated" with those effec ts for 
the purpose of making serious prejudice findings.  
The following capital contribution subsidies were at issue in this compliance proceeding: (i)  the 
French Government's equity infusions into Aérospatiale in 1987, 1988, 1992 and 1994; and  (ii) the WT/AB/29  
 
- 40 - 
 
  German Government's acquisition of a 20% interest in Deutsche Airbus in 1989 and its subsequent 
transfer to Messerschmitt -Bölkow -Blohm GmbH in 1992.  
The Panel considered that the aggregated effects of the capital contribution subsidies played a 
fundamental ro le in the market presence of Airbus' full range of LCA in the post -implementation 
period  in much the same (although not identical) way as the direct  and indirect  effects of the LA/MSF 
subsidies. The Panel recalled that the findings of the original panel, a s upheld by the Appellate  Body, 
established that the aggregated effects of the capital contribution subsidies not only ensured that 
Airbus would be able to continue the A320 programme and launch and develop the A330/A340 
programme, but they also secured th e very existence  of a financially stable Airbus Consortium going 
forward and, thereby, Airbus' ability to continue to launch, develop , and produce other models of 
LCA. The Panel was of the view that by securing the very existence of a financially stable Ai rbus 
Consortium and providing significant support at a crucial time for Airbus to pursue its development 
and production work on the A320 and A330/A340 programmes, the capital contribution subsidies 
meaningfully contributed to the development of new Airbus LCA products in much the same way as 
the direct effects  of the LA/MSF subsidies. Likewise, to the extent that the launch, development, and 
production of LCA supported in part by the capital contribution subsidies gave rise to "learning", 
scope and scale, a nd financial effects, the Panel found that it was apparent that the capital 
contribution subsidies must have also generated effects that were not unlike the indirect effects  of 
the LA/MSF subsidies.  
These considerations led the Panel to conclude that, jus t as in the original proceeding, the 
aggregated effects of the capital contribution subsidies continued to "complement and supplement" 
the "product" effects of the LA/MSF subsidies in the post -implementation period by operating along 
a similar causal pathw ay. Accordingly, the Panel found that the aggregated effects of the capital 
contribution subsidies were a "genuine" cause of the "product" effects of the challenged LA/MSF 
subsidies and, consequently, also the relevant instances of serious prejudice to the  United  States 
interests caused by those subsidies in the relevant product markets.  
Eleven infrastructure -related grants by German and Spanish authorities were at issue in this 
compliance proceeding. The United  States argued that all 11 subsidies "compleme nted and 
supplemented" the effects of the LA/MSF subsidies in the post -implementation period and, thereby, 
were a "genuine" cause of serious prejudice to the United  States' interests.  
The Panel disagreed with the United  States with respect to 4 of the 11 s ubsidies, finding that the 
United  States had not demonstrated that they benefitted Airbus' LCA -related activities. The Panel, 
however, agreed with the United  States regarding the remaining seven infrastructure -related grants.  
The Panel recalled its previo us finding concerning the ex ante  "lives" of the infrastructure -related 
regional grant subsidies that, even accepting the European  Union's submissions, Airbus would be 
continuing to "benefit" from significant portions of the grants provided by the Spanish authorities 
for decades to come, with the "benefit" of the German regional development grant amortizing in 
2014. For the Panel, the fact that Airbus was at present consuming the "benefit" of the Spanish 
regional grant subsidies suggested that the effects o f all but the German regional development grant 
subsidies that were found to exist in the original proceeding were likely to continue to be felt today.  
Moreover, according to the Panel, the facts demonstrated that the regional development grant 
subsidies continued to make a meaningful contribution to Airbus' ability to develop and produce 
parts and components of, especially, the A380, but also other non -specified Airbus LCA in the post -
implementation period. The Panel found that, as in the original proceed ing, the aggregated effects 
of the regional development grants continued to "complement and supplement" the "product" effects 
of the LA/MSF subsidies in two ways. First, the grants "complement and supplement" the direct  
effects of LA/MSF by meaningfully contributing to Airbus' ability to produce the LCA connected to 
the LCA programmes that would not have existed as and when they did in the absence of LA/MSF. 
Second, the Panel considered the grants to "complement and supp lement" the indirect  effects arising 
from LA/MSF because they meaningfully contributed to Airbus' ability to produce its relevant LCA, 
the development and production  of which both gave rise to the accumulation of the beneficial 
"learning", scale and scope,  and financial effects.  
The Panel found that by meaningfully contributing to Airbus' ongoing LCA development and 
production efforts in the ways described above, the regional development grant subsidies continued WT/AB/29  
 
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  to be a "genuine" cause of the "product" ef fects of the challenged LA/MSF subsidies and, 
consequently, also the relevant instances of serious prejudice to the United  States' interests caused 
by those subsidies in the relevant product markets.  
3.2.2.2.3.3   Conclusions with respect to the United  States' claim tha t the European  Union 
and certain member States failed to "take appropriate steps to remove the adverse 
effects"  
In summary, the Panel found the United  States to have demonstrated that the European  Union and 
certain member States failed to "take appropriat e steps to remove the adverse effects" because:  
i. the "product effects" of the challenged LA/MSF subsidies are a "genuine and substantial" 
cause of displacement and/or impedance of United  States LCA from the markets for 
single -aisle, twin -aisle, and very large LCA in the European  Union, within the meaning of 
Article  6.3(a) of the SCM  Agreement, constituting serious prejudice to the interests of the 
United  States within the meaning of Article  5(c) of the SCM  Agreement;  
ii. the "product effects" of the  challenged LA/MSF subsidies are a "genuine and substantial" 
cause of displacement and/or impedance of exports of United  States LCA to the market for 
single -aisle LCA in Australia, China , and India ; the market for twin -aisle LCA in China, Korea , 
and Singap ore; and the market for VLA in Australia, China, Korea, Singapore , and the United 
Arab Emirates, within the meaning of Article  6.3(b) of the SCM  Agreement, constituting 
serious prejudice to the interests of the United  States within the meaning of Article  5(c) of 
the SCM  Agreement;  
iii. the "product effects" of the challenged LA/MSF subsidies are a "genuine and substantial" 
cause of significant lost sales of United  States LCA in the global markets for single -aisle, 
twin-aisle, and very large LCA, within the meani ng of Article  6.3(c) of the SCM  Agreement, 
constituting serious prejudice to the interests of the United  States within the meaning of 
Article  5(c) of the SCM  Agreement; and  the effects of the aggregated capital  contribution 
subsidies and certain infrastruc ture-related grants "complement and supplement" the 
relevant effects of the aggregated LA/MSF subsidies and, therefore, are a "genuine" cause 
of serious prejudice to the interests of the United  States within the meaning of Article  5(c) 
of the SCM  Agreement . 
3.2.3   Overall conclusions and recommendations  
The Panel's overall conclusions and recommendations in relation to the United  States' 
non-compliance claims may be summarized as follows:  
i. The United  States failed to demonstrate  that the French, German, Spanish , and UK A380 
and A350XWB LA/MSF measures constituted prohibited export subsidies within the meaning 
of Article  3.1(a) and footnote 4 of the SCM  Agreement ; 
ii. The United  States failed to demonstrate  that the French, German, Spanish and UK A350XWB 
LA/MSF measures constituted prohibited import substitution subsidies within the meaning of 
Article  3.1(b) of the SCM  Agreement ; and 
iii. The United  States demonstrated  that the European  Union and certain member States failed 
to comply with the adopted DSB recommendations and r ulings and, in particular, the 
obligation under Article  7.8 of the SCM  Agreement "to take appropriate steps to remove the 
adverse effects or … withdraw the subsidy", to the extent that the effects of the challenged 
LA/MSF subsidies and the non -LA/MSF subsi dies continue to be, respectively, a "genuine 
and substantial" and "genuine", cause of serious prejudice to the United  States' interests in 
the post -implementation period, within the meaning of Articles 5(c) and 6.3(a), (b) and (c) 
of the SCM  Agreement . 
The Panel therefore concluded that the European  Union and certain member States failed to 
implement the recommendations and rulings of the DSB to bring its measures into conformity with 
its obligations under the SCM  Agreement , and to the extent, that the ado pted recommendations and 
rulings remained operative.  WT/AB/29  
 
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  3.2.4   Appellate proceedings  
3.2.4.1   Protection of sensitive information  
By letter dated 13  October  2016, the European  Union and the United  States submitted a joint 
request for the Appellate  Body to adopt additional pr ocedures to protect the BCI and HSBI. The 
participants suggested that the additional procedures adopted by the Appellate  Body in the appeal 
in United  States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint)  (WT/DS353) 
should form the ba sis for any procedural ruling on the protection for confidentiality in these 
compliance proceedings, and identified certain modifications that could be made to those additional 
procedures. The Division decided to provide additional protection to all BCI/HS BI contained in the 
panel record transmitted to the Appellate  Body in this dispute. The Division further specified the 
form of such protection. Following a joint request of the participants, the Division authorized public 
observation of the opening and clo sing statements at the Appellate  Body hearings by means of a 
delayed video showing.  
3.2.4.2   Article  21.5 of the DSU  
The European  Union  claimed that the Panel erred in its interpretation and application of Article  21.5 
of the DSU, and under Article  11 of the DSU, i n finding that there was no disagreement for it to 
resolve within the meaning of that provision regarding the Mühlenberger Loch aircraft assembly site 
and Bremen runway extension measures.  
The Appellate  Body recalled that  it is open to either party to ref er a matter to a compliance panel 
under Article  21.5 to resolve a disagreement as to the existence or consistency with a covered 
agreement of a measure taken to comply. A "disagreement" arises from the existence of conflicting 
views: the  original complaina nt's view that such a measure is inconsistent with the WTO agreements 
or brings about only partial compliance, and the original respondent's view that a measure is 
consistent with the WTO agreements and brings about full compliance with the DSB's 
recommend ations and rulings". In carrying out its adjudicatory function, the task of a panel under 
Article  21.5 is to decide "disputes" arising out of any "disagreement as to the existence or 
consistency with a covered agreement of measures taken to comply with the recommendations and 
rulings". By virtue of Article  11 of the DSU, which also governs proceedings under Article  21.5, the 
task of a compliance panel is to "examine fully", and in an objective manner, the issues raised by 
the parties. Much like it is for  the Article  21.5 panel – and not for the complainant or the respondent  – 
to determine whether a particular measure is one "taken to comply", it is also for the Article  21.5 
panel, and not for either party, to determine whether an objectively identifiable "disagreement" 
exists between the parties.  
Turning to the specifics of the issues appealed, the Appellate  Body noted that by including the 
Bremen Airport and Mühlenberger Loch measures in its Compliance Communication, the 
European  Union took the view that  those measures were consistent with the WTO agreements and 
brought the European  Union into full compliance with the relevant recommendations and rulings by 
the DSB. In the Appellate  Body's understanding, based on a collective reading of its representation s 
before the Panel, the United  States did not take issue with or challenge this view held by the 
European  Union. Thus, in light of the United  States' and European  Union's statements before it, the 
Panel had rightly found that there was no "disagreement" fo r it to resolve within the meaning of 
Article  21.5 of the DSU. Noting that the United  States  had not contested the European  Union 's view 
that these measures complied with the relevant recommendations and rulings of the DSB, the 
Appellate  Body found no erro r in the approach adopted by the Panel, and saw no need to make 
further findings in respect of those measures. Finally, the Appellate  Body agreed with the Panel that 
"the United  States would not be entitled to request the suspension of concessions or other  
obligations under the covered agreements in relation {to} the Mühlenberger Loch and the 
Bremen  Airport runway measures."  
3.2.4.3   United  States ' cross -appeal under Article  3.1(b) of the SCM  Agreement  
With respect  to the admissibility of the United  States' appeal u nder Article  3.1(b) of the 
SCM Agreement, the Appellate  Body found that the United  States' appeal fell within the scope of 
appellate  review contrary to what the European  Union  had argued. In particular, the Appellate  Body 
found that the United  States ' appe al adequately identified "issues of law covered in the panel report WT/AB/29  
 
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  and legal interpretations developed by the panel" pursuant to Article  17.6 of the DSU, as well as 
"specific allegations of errors" within the meaning of the Working Procedures, with regard  to the 
Panel's interpretation and application of Article  3.1(b) of the  SCM Agreement.  
Regarding the merits of the United  States' appeal, the Appellate  Body noted that it had dealt with 
the interpretation of Article  3.1(b) in United  States – Conditional T ax Incentives for Large Civil 
Aircraft . It recalled that the legal standard for establishing the existence of "contingency" under 
Article  3.1(b) is the same as under Article  3.1(a) of the SCM  Agreement. A subsidy would be 
"contingent" upon the use of domes tic over imported goods where the use of those goods is a 
condition, in the sense of a requirement, for receiving the subsidy. The term "contingency" under 
Article  3.1(b) covers contingency both in law and in fact, but the legal standard expressed by the 
term "contingent" is the same for de jure and de facto contingency. A subsidy will be de jure 
contingent upon the use of domestic over imported goods "when the existence of that condition can 
be demonstrated on the basis of the very words of the relevant le gislation, regulation or other legal 
instrument constituting the measure", or can "be derived by necessary implication from the words 
actually used in the measure". The Appellate  Body observed that proving de facto contingency "is a 
much more difficult tas k". The existence of de facto contingency "must be inferred  from the total 
configuration of the facts constituting and surrounding the granting of the subsidy, none of which 
on its own is likely to be decisive in any given case". Factors that may be releva nt in this regard 
include the design and structure of the measure granting the subsidy, the modalities of operation 
set out in such a measure, and the relevant factual circumstances surrounding the granting of the 
subsidy that provide the context for under standing the measure's design, structure, and modalities 
of operation. The  Appellate  Body noted that the analysis of de jure and de facto  contingency under 
Article  3.1(b), in light of the above -mentioned factors and circumstances, should be understood as 
a continuum, and a panel should conduct a holistic assessment of all relevant elements and evidence 
on record. The Appellate  Body further noted that insofar as Article  3.1(b) does not prohibit the 
subsidization of domestic "production" per se, but rather th e granting of subsidies contingent upon 
the use of domestic over imported goods, subsidies that relate to domestic production are not, for 
that reason alone, prohibited. In particular, such subsidies can ordinarily be expected to increase 
the supply of the  subsidized domestic goods in the relevant market, thereby increasing the use of 
these goods downstream and adversely affecting imports, without necessarily requiring the use of 
domestic over imported goods as a condition for granting the subsidy. The Appe llate Body therefore 
agreed with the Panel that  the fact that  a subsidy results in the use of domestic over imported goods  
cannot by itself demonstrate that that subsidy is contingent on the use of domestic over imported 
goods, whether in law or in fact . It found that the Panel's interpretation of Article  3.1(b) in this case  
was consistent with the Appellate  Body's interpretation of that provision.  
Given that the United  States '' appeal of the Panel's findings on the application of Article  3.1(b) was 
dependent upon its challenge of the Panel's interpretation of that provision, the Appellate  Body 
declined to make findings regarding the application of this provision to the facts of the present case, 
or to address the United  States' arguments concerning completion of the legal analysis. 
The Appellate  Body observed that the Panel's finding under Articles  3.1(b)  and 3.2 
of the SCM Agreement therefore stands that the United  States  had fa iled to establish that the 
subsidies at issue are prohibited import substitution subsidies. The Panel finding rejecting the 
United  States '' claim that the subsidies at issue are contingent on export performance and prohibited 
under Article  3.1(a) of the SC M Agreement was not appealed.  
3.2.4.4   Benefit analysis for the A350XWB  
Regarding the Panel's analysis of LA/MSF for the A350XWB, the European  Union put forth a series 
of arguments. The European  Union asserted that the Panel erred in identifying the appropriate poi nt 
in time from which to draw the corporate borrowing rate component of the market benchmark to 
determine whether each A350XWB LA/MSF contract confers a "benefit", and therefore constitutes a 
subsidy, under Article  1.1(b) of the SCM  Agreement . Moreover, th e European  Union contended that 
by rejecting the yield on the day of the conclusion of each contract, the Panel failed to make an 
objective assessment of the matter, under Article  11 of the DSU. In the alternative, the 
European  Union appealed the Panel's i nclusion, in its construction of the corporate borrowing rate, 
of the six -month average yield on the relevant  European Aeronautic Defence and Space Company 
N.V. (EADS ) bond within the Panel's range of average yields. Specifically, the European  Union 
submit ted that the Panel erred in the application of Articles 1.1(b) and 7.8 of the SCM  Agreement . 
Separately, the European  Union contended that by including the six -month average yield within its 
range, the Panel failed to make an objective assessment of the ma tter, under Article  11 of the DSU.  WT/AB/29  
 
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  The European  Union also took issue with the Panel's identification of the project risk premium 
component of the market benchmark to determine whether each A350XWB LA/MSF contract confers 
a "benefit", and therefore constit utes a subsidy, under Article  1.1(b) of the SCM  Agreement. The 
European  Union submitted that in selecting a single undifferentiated project risk premium for each 
A350XWB LA/MSF contract, which was developed for a different programme (i.e.  the A380) in the 
original proceedings, the Panel erred because: (a) the Panel failed to establish a project -specific risk 
premium for A350XWB LA/MSF based on the risks associated with the A350XWB programme and 
further that by failing to consider more appropriate benchmarks  and by deviating from the approach 
to project -specific benchmarks taken in the original proceedings, the Panel failed to make an 
objective assessment of the matter, under Article  11 of the DSU; (b) by failing to establish similarity 
between the risks invo lved in the A350XWB project and the A380 LA/MSF project, as well as between 
the risks involved in the A350XWB LA/MSF contracts and the A380 LA/MSF contracts, the Panel failed 
to make an objective assessment of the matter as required under Article  11 of the  DSU; and (c) the 
Panel erroneously adopted a single project risk premium to benchmark all four A350XWB LA/MSF 
contracts.  
3.2.4.4.1   The calculation of Airbus' general corporate borrowing rate  
The Appellate  Body agreed with the European  Union  that, in conducting the benefit analysis, the 
comparison focuses on the moment in time when the lender and borrower commit to the transaction. 
The Appellate  Body disagreed, however, with the European  Union  to the extent that it suggested 
that the Panel wa s required to limit its analysis to data from "the day of conclusion" of each A350XWB 
LA/MSF contract regardless of the time period over which the parties may have committed to the 
terms and conditions of that financing instrument. Rather, the Panel was re quired to take into 
account the specific financing instrument at issue, including the relevant circumstances surrounding 
the conclusion of that instrument, to determine the period over which the terms and conditions of 
the relevant contract were agreed. Th e Panel provided two reasons in support of its decision to 
determine the corporate borrowing rate using the average yields one month prior and six months 
prior to the conclusion of the A350XWB LA/MSF contracts, in the form of a range. First, the Panel 
considered that "the yield on the day of the signature of contract may reflect atypical fluctuations." 
The Panel's second reason was that "{p}arties agreeing to a complex loan contract may rather set 
the rates in the lead -up to the conclusion of the contract, and prior to the actual day on which the 
contract is signed." The Appellate  Body found this understanding to be in line with its observation 
that, in some cases, parties may have committed to a transaction – or to key aspects thereof – 
during a finalizatio n period of the negotiations preceding the moment of formal conclusion of all 
aspects of that transaction. In the present case, the financial contribution at issue consists of 
complex financing, the terms and conditions of which have been negotiated and ag reed over a 
certain contracting period. In these circumstances, the Appellate  Body found that the Panel did not 
err in its application of Article  1.1(b) of the SCM  Agreement  in finding that the corporate borrowing 
rate component of the market benchmark cou ld be based on the average yields of the EADS bond 
"one-month prior and six -months prior to the conclusion" of the French, German, Spanish, and UK 
A350XWB LA/MSF contracts, "in the form of a range", attributing more weight to the former average 
yields than  it did to the latter.  
Moreover, the Appellate  Body rejected the European  Union 's claim that the Panel acted 
inconsistently with Article  11 of the DSU because it lacked a sufficient evidentiary basis for rejecting 
the EADS bond yield on the day of conclus ion of each A350XWB LA/MSF contract. In addition, the 
European  Union  did not establish that the Panel's decision to set the corporate borrowing rate in the 
form of a range of average yields, or the fact that such decision was done against the background 
of a downward trend in the yield of the EADS bond, reflects a lack of objectivity and even -handedness 
contrary to the requirements of Article  11 of the DSU. Consequently, the Appellate  Body found that 
the European  Union  has failed to establish that the Panel  acted inconsistently with its obligations 
under Article  11 of the DSU.  
The Appellate  Body also rejected the European  Union 's alternative claims that the Panel erred in its 
application of Article  1.1(b) of the SCM  Agreement  and acted inconsistently with Ar ticle 11 of the 
DSU by accepting the average yield of the EADS bond over the six months prior to the conclusion of 
the French, German, Spanish, and UK A350XWB LA/MSF contracts as part of the range of average 
yields that was used to determine the corporate borrowing rate. Although the corporate borrowing 
rate was determined in the form of a range of average yields, the Panel rightly gave more 
prominence to the one -month average yield of the EADS bond than to the six -month average yield, 
which was considered only to be a "helpful indication of market expectations". In these WT/AB/29  
 
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  circumstances, the Appellate  Body found that the European  Union  failed to establish that the Panel 
erred in its application of Article  1.1(b) of the SCM  Agreement  or acted inconsistently with Article  11 
of the DSU by deciding to observe the EADS bond yield on the basis of the average yields one month 
prior and six months prior to the conclusion of each of the four A350XWB LA/MSF contracts, in the 
form of a range, a ttributing more weight to the former average yields than it did to the latter.  
For these reasons, the Appellate  Body upheld the Panel's finding that the corporate borrowing rate 
component of the market benchmark be based on "the average yields one -month pr ior and six -
months prior to the conclusion of the {French, German, Spanish, and UK A350XWB LA/MSF 
contracts}, in the form of a range".  
3.2.4.4.2   The calculation of project -specific risk premium  
The Appellate  Body disagreed with the European  Union 's claim that "the Panel failed to adopt the 
most appropriate benchmark, tailored to the risks associated with the A350XWB, based on a 
'progressive search' for the benchmark that shared 'as many elements as possible in common with' 
the A350XWB LA/MSF loans." The Appellate  Body also disagreed that the Panel erred under 
Article  1.1(b) of the SCM  Agreement  merely because it applied a single, undifferentiated project risk 
premium derived from the A380 project to the A350XWB project. Moreover, given that the 
Appellate  Body address ed and rejected the European  Union 's claim that the Panel erred under 
Article  1.1(b) by failing to undertake a "progressive search" for a market benchmark, the 
Appellate  Body considered it unnecessary to address further the European  Union 's claim that the 
Panel acted inconsistently with Article  11 of the DSU by failing to consider alternative, and more 
appropriate, benchmarks than those proposed by the United  States . In addition, the Appellate  Body 
disagreed with the European  Union 's claim that the Panel ac ted inconsistently with Article  11 of the 
DSU because it allegedly deviated from the original panel's findings by adopting a "constant, 
undifferentiated project risk premium" for the A350XWB. Consequently, the Appellate  Body found 
that the European  Union  did not establish that the Panel erred in its application of Article  1.1(b) of 
the SCM  Agreement , and that the European  Union  failed to establish that the Panel acted 
inconsistently with Article  11 of the DSU.  
The Appellate  Body also disagreed with the Euro pean Union 's claim that the Panel acted 
inconsistently with Article  11 of the DSU in its examination of the risk profiles of the A380 and 
A350XWB projects, including in its assessment of: (i) programme risk; (ii) contract risk; and (iii) the 
price of risk.  Contrary to the European  Union 's view, the Panel did not simply assume that the risk 
premium proposed by Professor Whitelaw in the original proceedings for the A380 project, also 
referred to as the Whitelaw Risk Premium  (WRP) would serve as an appropriate  project -specific risk 
premium for the A350XWB. Instead, the Panel assessed the relative project -specific risks associated 
with the A380 and A350XWB projects. The purpose of this comparative analysis was, in the Panel's 
view, to determine "whether the Unit ed States  ha{d} demonstrated that the project -specific risks 
of the A350XWB programme {were} sufficiently similar to those of the A380 programme such that 
it would be reasonable to conclude that the WRP could be used as the project -specific risk premium 
for the A350XWB". Regarding the Panel's analysis of programme risk, the Appellate  Body found that 
the European  Union  failed to establish that the Panel acted inconsistently with its obligations under 
Article  11 of the DSU in its analysis of development risk,  market risk, or in its comparison of the 
development and market risks. With regard to contract risk, the Appellate  Body found that the 
European  Union  failed to establish that the Panel's comparison of the A350XWB and A380 LA/MSF 
contracts lacks a sufficie nt evidentiary basis in a manner inconsistent with the requirements of 
Article  11 of the DSU. The Appellate  Body also found that the European  Union  failed to establish that 
the Panel acted inconsistently with Article  11 of the DSU by failing to compare the  terms of the 
A350XWB LA/MSF contracts to the terms of the A380 risk -sharing supplier contracts. Finally, the 
Appellate  Body found that the European  Union  failed to establish that the Panel acted inconsistently 
with Article  11 of the DSU in its analysis of  the price of risk.  
The Appellate  Body also rejected the European  Union 's claims that, in adopting a single, 
undifferentiated project -specific risk premium for each of the four A350XWB LA/MSF contracts, the 
Panel erred in its application of Article  1.1(b) of the SCM  Agreement , and also failed to make an 
objective assessment of the matter as required by Article  11 of the DSU. The Panel recognized that 
there were some differences among the risk profiles of the four A350XWB LA/MSF contracts. 
However, based on its analysis, the Panel was not persuaded that the terms of those contracts 
rendered them significantly different so as to require the application of two or more different 
project -specific risk premia in these proceedings. Given the Panel's analysis and the arguments that WT/AB/29  
 
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  were put before it, the Appellate  Body found that the European  Union  did not establish that the Panel 
erred under Article  1.1(b) of the SCM  Agreement  by applying a  "single, undifferentiated project risk 
premium" without making adjustments for differences among the risk profiles of the A350XWB 
LA/MSF contracts. Moreover, contrary to the European  Union 's claim under Article  11 of the DSU, 
the Appellate  Body found no e rror in the Panel's decision to adopt, on the one hand, an 
undifferentiated project -specific risk premium for the four A350XWB LA/MSF contracts and, on the 
other hand, a contract -specific approach to the corporate borrowing rate. Thus, the Appellate  Body 
found that the European  Union  failed to establish that, by applying a single, undifferentiated project 
risk premium to all four of the A350XWB LA/MSF contracts, the Panel acted inconsistently with 
Article  11 of the DSU.  
For these reasons, the Appellate  Body upheld the Panel's finding that the development risks 
associated with the A350XWB were at least as high as, or sufficiently similar to, those associated 
with the A380; the Panel's findings that the market risks experienced by the A380 and A350XWB 
were ove rall comparable in importance and that the A350XWB market risks would not have been 
much lower than the A380 market risks; the Panel's finding that the A350XWB LA/MSF contracts 
containing such "risk -reducing" terms are no less risky than at least [BCI]  for A380 LA/MSF that 
also contained similar terms in the original proceedings; the Panel's findings that it was not 
persuaded that the differences in certain terms affecting the risk profiles of the individual A350XWB 
LA/MSF contracts would require the applic ation of two or more different project -specific risk premia; 
and, consequently, the Panel's finding that the overall project -specific risks of the A380 and 
A350XWB projects were sufficiently similar to allow the risk premium applied to the A380 LA/MSF in 
the original proceedings to be applied to the A350XWB LA/MSF.  
Accordingly, the Appellate  Body upheld the Panel's findings that Airbus paid a lower interest rate for 
the A350XWB LA/MSF than would have been available to it on the market and, consequently, a 
benefit was thereby conferred within the meaning of Article  1.1(b) of the SCM  Agreement . 
Consequently, the Appellate  Body also upheld the Panel's findings that the French, German, Spanish, 
and UK A350XWB LA/MSF contracts each constitute a subsidy within the  meaning of Article  1.1 of 
the SCM  Agreement  and, thus, that the United  States  demonstrated that the French, German, 
Spanish, and UK A350XWB LA/MSF contracts are specific subsidies within the meaning of Articles 1 
and 2 of the SCM  Agreement .  
3.2.4.4.3   Article  7.8 o f the SCM  Agreement  
On appeal, the European  Union asserted that the Panel erred in interpreting Article  7.8 of the 
SCM Agreement  to require an implementing Member to remove the adverse effects found to arise 
from an actionable subsidy irrespective of whet her that subsidy had been withdrawn and was no 
longer maintained. In addition, the European  Union contended that the Panel erred in its 
interpretation of Article  7.8 (in conjunction with Article  1.1(a) of the SCM  Agreement ) in finding that 
bringing about t he end of a financial contribution does not result in withdrawal of the subsidy.  
The Appellate  Body found that the obligation to "take appropriate steps to remove the adverse 
effects or … withdraw the subsidy" concerns the subsidies that are "grant{ed} or  maintain{ed}" by 
the implementing Member at the end of the implementation period. The Appellate  Body underscored 
that an implementing Member cannot be required to withdraw a subsidy that has ceased to exist. 
Nor did the Appellate  Body see a basis, under A rticle 7.8 of the SCM  Agreement, to require that an 
implementing Member "take appropriate steps to remove the adverse effects" of subsidies that no 
longer exist. In this regard, the Appellate  Body reasoned that, although a subsidy and its effects 
need not be contemporaneous, it does not follow from this that the effects of a subsidy can be 
detached from the subsidy itself such that these effects could be subject to a separate compliance 
obligation under Article  7.8. The Appellate  Body underscored that, whil e a past subsidy that no 
longer exists may be found to cause or have caused adverse effects under Article  5, the source  of 
that inconsistency under Article  5 is nonetheless the subsidy . Thus, when a subsidy has expired such 
that it is no longer in existenc e, the Appellate  Body did not see how a compliance obligation under 
Article  7.8 could still apply to lingering effects of such a past subsidy. The Appellate  Body therefore 
disagreed with the Panel that it follows from the so -called "effects -based nature" o f the discipline of 
Article  5 that an implementing Member would have a compliance obligation under Article  7.8 
regardless of whether the subsidy continues to exist. Accordingly, the Appellate  Body reversed the 
Panel's interpretation of Article  7.8 of the S CM Agreement whereby an implementing Member would 
be required to "withdraw" or "take appropriate steps to remove the adverse effects" of past subsidies 
irrespective  of whether such subsidies have expired prior to the end of the relevant implementation WT/AB/29  
 
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  period. It follows from the Appellate  Body's finding that, in the present dispute, the European  Union 
had no compliance obligation with respect to subsidies that had expired before 1  December  2011.  
3.2.4.4.4   Conditional appeals under Article  7.8 of the SCM  Agreement  
The Appellate  Body found that an ex ante  analysis regarding the benefit of a subsidy serves as the 
starting point  of the analysis to determine whether a subsidy continues to exist at the end of the 
implementation period. For such a determination, it is also necessary to conduct an analysis 
regarding "whether there are 'intervening events' that occurred after the gran t of the subsidy that 
may affect the projected value of the subsidy as determined under the ex ante analysis" . The 
Appellate  Body further found that the Panel's ultimate conclusion regarding the actual  duration of 
relevant pre -A380 LA/MSF subsidies was bas ed on a proper analysis of both the expiry of the ex ante 
"lives" of the subsidies and the alleged intervening events after the granting of the subsidies. The 
Appellate  Body considered this to be consistent with its approach in the original proceedings, 
whereby the assessment of the "life" of a subsidy should encompass both an ex ante  analysis and 
an evaluation of intervening events. For these reasons, the Appellate  Body upheld the Panel's finding 
that the European  Union had demonstrated that the ex ante "lives" of the French, German, and 
Spanish LA/MSF subsidies for the A300B/B2/B4, A300 -600, A310, A320, and A330/A340, and the 
UK LA/MSF subsidies for the A320 and A330/A340, "expired" before 1  June 2011. The 
Appellate  Body saw no reason to make additional fi ndings on whether the French LA/MSF for 
the A310-300, the French and Spanish LA/MSF for the A300B/B2/B4 and A300 -600, and the French, 
Spanish, and UK LA/MSF for the A320 and A330/A340 also came to an end due to the actual 
repayment of the loans with intere sts. The Appellate  Body did not consider such findings to be 
necessary to resolve this dispute.  
3.2.4.4.5   European  Union's consequential appeal under Article  7.8 of the SCM  Agreement  
The Appellate  Body disagreed with the European  Union that it necessarily  follows fr om the manner 
in which the Panel characterized the scope of the compliance obligation under Article  7.8 of the 
SCM Agreement that the Panel's findings of adverse effects must be reversed for each of the specific 
country and product markets with respect to which the United  States brought its claims. The 
Appellate  Body noted that the Panel's adverse effects analysis led to its final conclusion that "the 
European  Union and certain member States have failed to comply with the DSB recommendations 
and rulings and , in particular, the obligation under Article  7.8 of the  SCM Agreement 'to take 
appropriate steps to remove the adverse effects or … withdraw the subsidy'." In the Appellate  Body's 
view, whether the Panel had a sufficient basis for this ultimate conclusion  was a question that could 
only be answered following a careful review of the Panel's reasoning and analysis, in particular its 
analysis relating to the adverse effects of the existing  LA/MSF subsidies that are maintained or 
granted in the post -implementat ion period. The Appellate  Body stated that a consideration of expired 
subsidies is relevant for this purpose insofar as it sheds light on whether LA/MSF subsidies granted 
or maintained by the European  Union in the post -implementation period cause adverse e ffects.  
3.2.4.4.6   Articles 5, 6, and 7.8 of the SCM  Agreement  – adverse effects  
3.2.4.4.6.1   The relevant product markets  
According to the European  Union , the Panel erred in its interpretation of the term "market" in 
Article  6.3 of the SCM  Agreement , as permitting two products to be placed in the same product 
market on the basis of any competition between them, rather than on the basis of the existence of 
significant competitive constraints between them. In the alternative, the European  Union claimed 
that the Panel erred in its application of Articles 5(c), 6.3, and 7.8 of the SCM  Agreement  when it 
identified the relevant product markets for purposes of assessing the United  States' adverse effects 
claims in a manner that is inconsistent with its own legal standard. The European  Union further 
submitted that, by limiting its assessment of the existence of the relevant product markets for 
purposes of assessing the United  States' adverse effects claims to competition between only those 
products that the United  States had placed in the  same product markets, the Panel failed to make 
an objective assessment of the matter as required under Article  11 of the DSU.  
Regarding the term "market" in Article  6.3 of the SCM  Agreement, the Appellate  Body found that 
two products are in the same marke t if they are sufficiently substitutable and they exercise 
"meaningful" competitive constraints on each other. The Appellate  Body noted that a  consideration WT/AB/29  
 
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  of quantitative  tools and evidence may assist a panel in defining the relevant product markets and 
in answering the question of whether products exercise meaningful competitive constraints on each 
other and are sufficiently substitutable to fall in the same product market. However, like the Panel, 
the Appellate  Body did not see a reason to preclude that  a careful scrutiny of qualitative  evidence 
may also be sufficient provided that it permits an informative and meaningful analysis of the relevant 
product markets. Depending on the particularities of a given case, the Appellate  Body found that 
it may be su fficient for a panel to examine qualitative  evidence regarding demand -side and 
supply -side substitutability, product characteristics, end -uses, and customer preferences in order to 
reach a conclusion as to the nature and degree of competition between two p roducts.  
Having reviewed the Panel's analysis of competition in the single -aisle LCA, twin -aisle LCA, and VLA 
product markets, the Appellate  Body was satisfied that the Panel's identification of the product 
markets in the present dispute was based on a pr oper analysis of the competition among the relevant 
products, which the Panel found to demonstrate sufficient substitutability, in accordance with the 
standard articulated by the Appellate  Body in the original proceedings. The Appellate  Body was also 
satisfied that the Panel's analyses identifying the single -aisle LCA, twin -aisle LCA, and VLA product 
markets reflect a proper reading of the term "market" and did not agree with the European  Union to 
the extent that it argued that the Panel erred in its interp retation of the term "market" in Article  6.3 
of the SCM  Agreement. Accordingly, the Appellate  Body upheld the Panel's finding that the 
United  States had brought its adverse effects claims with respect to appropriately defined product 
markets for LCA, namel y, the global markets for single -aisle LCA, twin -aisle LCA, and VLA.  
3.2.4.4.6.2   Non-subsidized like product  
Regarding the Panel's findings concerning the "non -subsidised like product" provisions of Articles 6.4 
and 6.5 of the SCM  Agreement , the European  Union claimed  that the Panel erred in reaching its 
findings on whether there is a "new matter", and acted inconsistently with Article  11 of the DSU. 
The European  Union also asserted that the Panel erred in its interpretation and application of 
"security and predictabil ity" within the meaning of Article  3.2 of the DSU as it relates to the "cogent 
reasons rule".  
The Appellate  Body found that the Panel was required to examine the meaning of Article  6.3(b), 
including the relationship between this provision and Article  6.4, as clarified by the Appellate  Body 
in the original proceedings in this dispute and in US ‒ Large Civil Aircraft (2nd complaint) . According 
to the Appellate  Body, it was also appropriate for the Panel to take into account the findings and 
reasoning by the original panel regarding the meaning of Article  6.4. The Appellate  Body considered 
that the Panel could not simply refuse to address the arguments and evidence before it in dealing 
with the United  States' claims under Article  6.3(b). Rathe r, it was required to adjudicate the 
United  States' claims under Article  6.3(b) in light of the arguments raised and evidence submitted 
by both parties to the dispute, and it erred by declining to do so. Accordingly, the Appellate  Body 
declared moot and of  no legal effect the Panel's finding concerning the European  Union 's reliance on 
Article  6.4 to reject the United  States ' claims under Article  6.3(b) of the SCM  Agreement . However, 
the Appellate  Body disagreed with the European  Union that a complainant is required to 
demonstrate, in  each case, that its like product is non -subsidized in order to show that the effect of 
the subsidy is displacement and/or impedance of its like product in a third  country  market.  
3.2.4.4.6.3   "Product effects" of LA/MSF subsidies on Airbus LCA 
As regards the Panel's findings relating to "adverse effects", the European  Union submitted that the 
Panel erred in the interpretation of Article  5(c) of the SCM  Agreement  in adopting a "but for" 
approach to causation that failed to consider the passage of time, and events that occurred during 
that time, and consequently attributing the current market presence of the A320, A330, and A380 
families of aircraft to pre -A350XWB LA/MSF. Additionally, the European  Union submitted that, to the 
extent the Panel found that LA/MSF for the A380 resulted in "direct effects" on the launch and market 
presence of the A380, the Panel acted inconsistently with Article  11 of the DSU. The Europ ean Union 
also argued that the Panel erred in the application of Articles 5(c) and 7.8 of the SCM  Agreement  by 
attributing the market presence of the A350XWB to the "indirect effects" of LA/MSF for the A380. 
Separately, the European  Union claimed that to t he extent the Panel found that LA/MSF for the 
A350XWB resulted in "direct effects" on the launch and market presence of the A350XWB, the Panel 
failed to make an objective assessment of the matter as required under Article  11 of the DSU.  WT/AB/29  
 
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  The Appellate  Body noted that the errors alleged by the European  Union regarding the Panel's 
findings on the "product  effects" of the pre -A350XWB LA/MSF subsidies on the market presence of 
the A320 and A330 families of Airbus LCA concern primarily the LA/MSF subsidies that w ere found 
by the Panel to have expired before the end of the implementation period – namely, the subsidies 
for the A300, A310, A320, A330, and A340. The Appellate  Body recalled that, under its interpretation 
of Article  7.8 of the  SCM Agreement, the Europea n Union does not bear a compliance obligation with 
respect to the subsidies that were found by the Panel to have expired by the end of the 
implementation period. Thus, t o the extent that some subsidies had expired, a further examination 
of the removal of t he effects of those subsidies would not be necessary. The Appellate  Body 
considered therefore that it was not pertinent to examine whether the Panel's findings on the 
"product effects" of the expired  subsidies could support its ultimate conclusion of non -compliance 
under Article  7.8 of the SCM  Agreement. In line with this view, the Appellate  Body did not consider 
it necessary to make separate findings on the European  Union's claims on appeal insofar as they 
concerned the Panel's alleged failure to assess pr operly the passage of time and the events during 
that time in reaching its findings on the "product effects" of the expired subsidies.  In addition, the 
Appellate  Body disagreed with the Panel insofar as its reference to the aggregated LA/MSF subsidies 
in the above findings includes the expired subsidies.  
The Appellate  Body underscored that the pertinent question for purposes of these compliance 
proceedings was whether the subsidies existing in the post -implementation period (i.e.  after 
1 December  2011) caus e adverse effects. The Panel found, and the European  Union  did not disagree, 
that the French, German, Spanish, and UK A380 LA/MSF subsidies had not expired by the end of the 
implementation period. Furthermore, the Panel found that, subsequent to the origin al reference 
period (2001 -2006), the European  Union had granted new LA/MSF subsidies to Airbus for developing 
its A350XWB family of LCA, and that these subsidies were "closely  connected" with the adopted 
recommendations and rulings of the DSB and the Europ ean Union's alleged compliance "actions". 
Given the scope of these compliance proceedings, the Appellate  Body therefore focused its review 
on the Panel's analysis and findings regarding the effects of subsidies existing in the 
post-implementation period – namely, the A380 LA/MSF and the A350XWB LA/MSF subsidies – and 
the European  Union's appeal thereof to determine whether those findings support the Panel's 
ultimate conclusion regarding serious prejudice.  
As part of its analysis, the Appellate  Body disagre ed with the European  Union's claim under Article  11 
of the DSU that the Panel's understanding of the "direct effects" of A380 LA/MSF on Airbus' ability 
to launch, bring to market, and continue developing the A380 as and when it  did lacks sufficient 
evident iary basis. Furthermore, the Appellate  Body found that the European  Union failed to establish 
that the Panel acted inconsistently with Article  11 of the DSU in reaching its conclusion that, " without  
A350XWB LA/MSF, the Airbus company that actually existed  {in 2006-2010} could have pursued 
such a programme only by a narrow margin, with a high likelihood that it would, to  some degree, 
have had to make certain compromises with respect to the pace of the programme and/or the 
features of the aircraft." The Appel late Body also rejected the European  Union 's claim that the Panel 
erred in finding that the A380 LA/MSF subsidies had "indirect effects" on the  A350XWB.  
The findings by the Panel on the issues surrounding the Original A350 and the launch of the 
A350XWB, together with its findings on the severe implications of the extensive delays with the A380 
programme, establish that Airbus was faced with considerable ov erall uncertainty in the years 
following the original reference period. Moreover, the original panel's findings, together with the 
Panel's analysis, indicate that A380 LA/MSF had "direct effects" on Airbus' ability to launch, bring to 
market, and continue developing the A380 as and when it  did, given that the A380  LA/MSF subsidies 
had not expired, as well as the fact that Airbus continued to receive disbursements under the French, 
German, and Spanish LA/MSF contracts at a time when it was experiencing sever e financial 
difficulties resulting from the extensive production delays in the A380  programme. The Panel's 
findings regarding the "direct effects" of the A350XWB LA/MSF, read together with its findings 
concerning the "indirect effects" of the A380 LA/MSF, also indicate that, without the aggregated 
"product effects" of the existing LA/MSF subsidies for the A380 and A350XWB programmes, Airbus 
would not have been able to launch the A350XWB as and when it did . In other words, the existing 
LA/MSF subsidies that Airbus continued to receive made it possible to proceed with the timely launch 
of the A350XWB – a high -risk and expensive programme of considerable strategic importance to 
Airbus – and to bring to market the A380, which had suffered extensive delays.  
In sum, the Appellate  Body found, based on the Panel's findings, that the LA/MSF subsidies existing 
in the post -implementation period – i.e. the A380 and the A350XWB LA/MSF subsidies – enabled WT/AB/29  
 
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  Airbus to proceed with the timely launch and development of the A350 XWB, and to bring to market 
and to continue developing the A380.  
3.2.4.4.6.4   Lost sales, displacement, and impedance  
The European  Union submitted that the Panel erred in the application of Articles 5(c), 6.3, and 7.8 
of the SCM  Agreement  by failing, in its assessment of lost sales, displacement, and impedance, to 
account for the differences in closeness of competition between various aircrafts and non -attribution 
factors. The European  Union also claimed that the Panel erred in the interpretation of Articles 6.3(a) 
and 6.3(b) of the SCM  Agreement  in finding that non -withdrawn subsidies cause "displacement 
and/or impedance", thereby conflating the two separate forms of serious prejudice. The 
European  Union further contended that the Panel erred in the application of Artic les 6.3(a) and 
6.3(b) of the SCM  Agreement  as permitting findings of "displacement" and "impedance" without any 
assessment of sales volume and market share data, and by finding "displacement" and "impedance" 
without any assessment of sales volume and marke t share data, the Panel erred in the application 
of Articles 5(c), 6.3(a), 6.3(b), and 7.8 of the SCM  Agreement .  
The Appellate  Body recalled that "displacement or impedance" would arise where the counterfactual 
analysis shows that the sales of the complai ning Member would have declined less or would have 
been higher in the absence of the challenged subsidy. The Appellate  Body understood the Panel to 
have sought to apply this framework when it turned to assess whether the volume of deliveries and 
market sha res that "would have been achieved by the United  States' LCA industry between 
1 December  2011 and the end of 2013 would have been higher than  its actual level  in all relevant 
product markets" in the absence of the "product effects" of the LA/MSF subsidies.  The Appellate  Body 
further considered that the Panel's finding that "the United  States has established that the 'product' 
effects of the challenged LA/MSF subsidies are a 'genuine and substantial' cause of displacement 
and/or impedance  of United  States LC A" in the relevant geographic markets for single -aisle LCA, 
twin-aisle LCA, and VLA is informed by the manner in which the United  States framed its claims. The 
Appellate  Body did not read the Panel's use of the term "displacement and/or impedance" when 
summing up its serious prejudice findings regarding the relevant markets at issue as suggesting that 
the Panel found the existence of these serious prejudice phenomena in an undifferentiated manner 
with respect to one and the same product and country market. Therefore, contrary to what the 
European  Union appeared to suggest, the Appellate  Body considered that it does not necessarily 
follow from the Panel's use of the term "displacement and/or impedance" that the Panel treated 
"displacement" and "impedance" as interchangeable and indistinguishable concepts for purposes of 
its adverse effects analysis.  
The Appellate  Body recalled its finding that the Panel's assessment of the relevant product markets 
in these compliance proceedings was based on a proper analysis  of the nature and degree of 
competition between products that the Panel found to demonstrate sufficient substitutability. 
However, the Appellate  Body observed that an  assessment of the nature and degree of competition 
in the relevant product market(s) did  not, in and of itself, answer the question of whether the 
subsidies existing in the post -implementation period were a genuine and substantial cause of 
adverse effects in the relevant  market(s).  
The Appellate  Body recalled that, with regard to the single -aisle LCA market, the Panel's findings 
regarding the "product  effects" of LA/MSF subsidies on the market presence of the  A320 concerned 
primarily the effects of those subsidies that had expired prior to the end of the implementation 
period. The Appellate  Body found, however, that the European  Union  had no compliance obligation 
in respect of those expired subsidies. Rather, the pertinent question in these compliance proceedings 
was whether the subsidies existing in the post -implementation period (i.e.  after 1  December  2011) 
cause adverse effects, such that the European  Union  has failed to comply with its obligation under 
Article  7.8 of the SCM  Agreement  to "take appropriate steps to remove the adverse effects". With 
respect to this issue, the Appellate  Body did not find any analysis by the Panel as to whether, and 
to what extent, Airbus' competitiveness in the single -aisle LCA market, gained through the pre -A380 
LA/MSF subsidies, was renewed and sustained beyond the original reference period as a result of 
the subsidies that the European  Union maintained or granted in the post -implementation period. 
Thus, the Appellate  Body was not convinced that, insofar as the single -aisle LCA market was 
concerned, the Panel's analysis provided a sufficient basis to sustain it s conclusion that "the orders 
identified in Table  19 {in the single -aisle LCA market} represent 'significant' 'lost sales' to the 
United  States LCA industry and, therefore, that the challenged LA/MSF subsidies continue to be a 
'genuine and substantial' cau se of serious prejudice to the United  States  within the meaning of WT/AB/29  
 
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  Article  6.3(c) of the SCM  Agreement ". Similarly, the Appellate  Body was not convinced that, with 
regard to the various country markets for single -aisle LCA, the Panel's analysis was suffici ent to 
sustain its conclusion that "the challenged LA/MSF subsidies are a 'genuine and substantial' cause 
of displacement and/or impedance of United  States LCA in the markets for single -aisle LCA in the 
European  Union, Australia, China and India". The Appe llate Body therefore reversed these findings 
by the Panel insofar as they related to the single -aisle LCA market. Having so found, the 
Appellate  Body did not consider it necessary to address the European  Union's additional arguments. 
The Appellate  Body further found that it was unable to complete the legal analysis of the 
United  States' claims of "displacement and/or impedance" in the single -aisle LCA markets in 
Australia, China, and  India, and impedance in the single -aisle LCA market in the European  Union , 
or, in the alternative, threat of displacement and impedance in that market.  
With regard to significant lost sales  in the twin -aisle LCA market, the Appellate  Body's review of the 
Panel's finding on the product effects of LA/MSF subsidies on the A350XWB i ndicated that, in the 
absence of the LA/MSF subsidies existing in the post -implementation period (i.e. after 
1 December  2011), Airbus would not have been able to offer the A350XWB at the time it did and 
with the features it had. The Appellate  Body noted th at the  Panel's finding that the sales of the 
A350XWB in the post -implementation period constituted "lost sales" to the US LCA industry within 
the meaning of Article  6.3(c) of the SCM  Agreement was also supported by relevant Panel findings 
regarding the com petitive dynamics between Boeing's and Airbus' respective product offerings in 
the twin -aisle LCA market. Furthermore, the Appellate  Body was not convinced by the 
European  Union's argument that the Panel failed to take into account market -specific and 
sale-specific non -attribution factors. The Appellate  Body considered therefore that the Panel's 
findings supported the conclusion that the sales of the A350XWB identified in Table 19 of the Panel 
Report represented "significant lost sales" to the US LCA industry within the meaning of Article  6.3(c) 
of the SCM  Agreement, and that such lost sales were the effect of the LA/MSF subsidies existing in 
the post -implementation period. The Appellate  Body noted that this conclusion also finds support in 
the analytical framework adopted by the panel and the Appellate  Body i n the original proceedings, 
as well as in a number of the Panel's findings, including its finding concerning the "product effects" 
of the LA/MSF subsidies existing in the post -implementation period on Airbus' timely launch of the 
A350XWB, and the existence  of sufficient substitutability between Boeing's and Airbus' twin -aisle 
product offerings. In light of the Appellate  Body's interpretation of Article  7.8 of the SCM  Agreement, 
however, the Appellate  Body disagreed with the Panel's conclusion on "significan t lost sales" in the 
twin-aisle LCA market to the extent that its conclusion was based on the effects of the challenged 
LA/MSF subsidies that the Panel found to have expired.  
Accordingly, the Appellate  Body modified the Panel's conclusion, and found instea d that the orders 
identified in Table 19 of the Panel  Report in the twin -aisle LCA market represent "significant lost 
sales" to the US LCA industry and, therefore, that the LA/MSF subsidies existing in the 
post-implementation period are a genuine and subst antial cause of serious prejudice to the 
United  States  within the meaning of Article  6.3(c) of the SCM  Agreement . 
With regard to displacement and impedance  in the twin -aisle LCA market, the Appellate  Body noted 
that, according to the Panel, the LA/MSF subs idy for the A330 -200 expired in  the 
post-implementation period. The Appellate  Body noted, however, that the original panel found that 
it was likely that the A330 -200 could have been launched even in the absence of the specific LA/MSF 
granted in respect of that programme because it was a derivative of the A330 and, therefore, 
required a comparatively small amount of funding to develop. Moreover, unlike for the A380 and 
A350XWB LA/MSF subsidies, there are no specific findings by the Panel relating to the issu e of 
whether and how the "product effects" of the A330 -200 LA/MSF subsidy continued beyond 2006 and 
into the post -implementation period. Based on its review of the Panel's finding on the "product 
effects" of LA/MSF subsidies on the A350XWB, the Appellate  Body found that, in the absence of the 
LA/MSF subsidies for the A380 and A350XWB existing in the post -implementation period, Airbus 
would not have been able to offer the A350XWB at the time it did and with the features it had. The 
Appellate  Body further rec alled the Panel's finding that Airbus' A350XWB product offering was in 
direct competition with Boeing's twin -aisle LCA.  
The Appellate  Body noted, however, that the United  States framed its claim of "displacement and/or 
impedance" in the twin -aisle LCA mar ket on the basis of data concerning market shares and 
deliveries  of Airbus and Boeing LCA during the period 2001 -2013. There were no deliveries of the 
A350XWB during that period. Thus, for purposes of the claim of displacement and/or impedance in 
the twin -aisle LCA market, the Panel relied on market shares and delivery data relating to the A330, WT/AB/29  
 
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  rather than orders of the A350XWB, in making its finding. The Appellate  Body recalled, in this regard, 
that the Panel's findings regarding the "product effects" of LA/MSF subsidies on the A330 concerned 
primarily the effects of those subsidies that had expired. The Appellate  Body found, however, that 
the European  Union  has no compliance obligation in respect of those expired subsidies. Rather, 
the pertinent question was whether the subsidies existing in the post -implementation period cause 
adverse effects, such that the European  Union  failed to comply with its obligations under Article  7.8 
of the SCM  Agreement  to "take appropriate steps to remove the adverse effects".  However, given 
the way the claims of displacement and/or impedance were raised before the Panel and its approach 
to assessing these claims, the Panel did not explore, and made no findings on, the issue of whether 
and, if so, how the A380 and A350XWB subsi dies existing in the post -implementation period may 
have contributed to the deliveries of the A330 occurring during that period. In these circumstances, 
the Appellate  Body was not convinced that the Panel's analysis and findings provided a sufficient 
basis to sustain the conclusion that the effect of the LA/MSF subsidies existing in the 
post-implementation period was to displace or impede US  LCA in the twin -aisle LCA market in the 
European  Union  and relevant third -country markets. Accordingly, the Appellate  Body reversed the 
Panel's conclusion that "the United  States ha{d} established that the 'product' effects of the 
challenged LA/MSF subsidies are a 'genuine and substantial' cause of displacement and/or 
impedance of United  States LCA in the markets for … t win-aisle LCA in the European  Union, China, 
Korea and Singapore". Having done so, the Appellate  Body saw no further reason to address the 
European  Union's additional arguments. The Appellate  Body further found that it was unable to 
complete the legal analy sis of the United  States' claims of displacement in the twin -aisle LCA markets 
in China, Korea, and Singapore, and  impedance in the twin -aisle LCA markets in the European  Union, 
China, Korea, and Singapore.  
With regard to significant lost sales  in the VLA market, the Appellate  Body's review of the Panel's 
findings, as well as the relevant findings from the original proceedings, indicated that, in the absence 
of the LA/MSF subsidies existing in the post -implementation period (i.e. after 1  December  2011), 
Airbus would not have been able to offer the A380 at the time it did. Moreover, the Panel's analysis 
regarding the conditions of competition in the VLA market confirmed that Airbus' and Boeing's 
respective VLA products – the A380 and 747 – are sufficiently su bstitutable with each other. Such 
competitive dynamics, in the Appellate  Body's view, provided further support to the proposition that 
the sales won by Airbus in the VLA market were at the expense of the US LCA producer. Finally, like 
the Panel, the Appell ate Body had doubts as to whether Airbus' pre -existing commonality 
advantages and other product -related advantages over Boeing could be characterized as 
non-attribution factors that could be said to "dilute" the causal link between the LA/MSF subsidies 
existing in the post -implementation period and the relevant market phenomena.  
The Appellate  Body considered therefore that the Panel's findings support the conclusion that the 
sales of the A380 identified in Table 19 of the Panel Report represented "significa nt lost sales" to the 
US LCA industry within the meaning of Article  6.3(c) of the SCM  Agreement, and that such lost sales 
were the effect of the LA/MSF subsidies existing in the post -implementation period. According to the 
Appellate  Body, this conclusion a lso finds support in the analytical framework adopted by the Panel 
and the Appellate  Body in the original proceedings, as well as in a number of the Panel's findings, 
including its finding concerning the "product effects" of the LA/MSF subsidies existing i n the 
post-implementation period on Airbus' continued offering of the A380, and the existence of sufficient 
substitutability between Boeing's and Airbus' VLA product offerings. In light of its interpretation of 
Article  7.8 of the SCM  Agreement, however, th e Appellate  Body disagreed with the Panel's 
conclusion on "significant lost sales" in the VLA market to the extent that its conclusion was based 
on effects of challenged LA/MSF subsidies that the Panel found to have  expired. Accordingly, the 
Appellate  Body modified the Panel's conclusion, and found instead that the orders identified in 
Table  19 of the Panel Report in the VLA market represent "significant lost sales" to the US LCA 
industry and, therefore, that the LA/MSF subsidies existing in the post -implem entation period 
continue to be a genuine and substantial cause of serious prejudice to the United  States within the 
meaning of Article  6.3(c) of the SCM  Agreement.  
With regard to displacement and impedance  in the VLA market, the Appellate  Body found that, in 
the absence of the LA/MSF subsidies existing in the post -implementation period, Airbus would not 
have been able to offer the A380 at the time it did. Referring to the Panel's analysis of the competitive 
dynamics in the VLA market, the Appellate  Body found that Boeing's and Airbus' respective product 
offerings – the 747 and the A380 – were sufficiently substitutable. With respect to the non -attribution 
factor alleged by the European  Union concerning the development and production delays affecting 
the 747 -8, the Appellate  Body noted the Panel's observation that the larger versions of the  777 may WT/AB/29  
 
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  also at times challenge for sales in the VLA market. On this basis, the Appellate  Body saw no reason 
to disturb the Panel's finding that this non -attribution factor  would not be capable of diluting the 
genuine and substantial relationship of cause and effect between the LA/MSF subsidies and the 
alleged market phenomena.  
The Appellate  Body noted that in reaching its finding of displacement  the Panel did not examine 
whether there existed any discernible trends in volumes and market shares in the VLA markets at 
issue, including whether or not there existed declining trends that could have supported the Panel's 
findings. In these circumstances , the Appellate  Body considered that the Panel should have engaged 
with the evidence before it in order to explain sufficiently the basis for its finding that the LA/MSF 
subsidies had the effect of displacing US LCA in these VLA markets in the post -impleme ntation 
period. Accordingly, insofar as displacement in the VLA market was concerned , the Appellate  Body 
disagreed with the Panel to the extent that it found that "the  United  States ha{d} established that 
the 'product' effects of the challenged LA/MSF subs idies are a 'genuine and substantial' cause of 
displacement … of United  States LCA in the markets for … {VLA} in the European  Union, Australia, 
… Korea, {and} Singapore ." The Appellate  Body further found that it was unable to complete the 
legal analysis of  the United  States' claim of displacement in the VLA markets in the European  Union, 
Australia, Korea, and Singapore.  
As for the finding of impedance , the Appellate  Body recalled that the phenomenon of impedance 
refers to situations where the exports or im ports of the like product of the complaining Member 
would have expanded had they not been "obstructed" or "hindered" by the subsidized product. The 
Appellate  Body also recalled that its review of the Panel's findings with respect to the A380 and 
A350XWB pr ogrammes, as well as relevant findings from the original proceedings, indicates that, in 
the absence of the LA/MSF subsidies existing in the post -implementation period, Airbus would not 
have been able to offer the A380 at the time it did. Moreover, as the Panel's analysis of the 
competitive dynamics in the VLA market showed, Boeing's and Airbus' respective product offerings  – 
the 747 -8 and the A380 – are sufficiently substitutable. Thus, contrary to the situation regarding 
alleged impedance in the twin -aisle LCA market, the "product effects" of the LA/MSF subsidies 
existing in the post -implementation period, including the A380 LA/MSF subsidies, and the VLA 
delivery data underlying the United  States ' claim, concerned the same aircraft model, and, as 
explained  above, the Panel made necessary findings on both "product effects" and delivery data. On 
the basis of these considerations, and in light of the deliveries of the A380 in the post -implementation 
period, the Appellate  Body saw no error in the Panel's conclu sion that, absent the LA/MSF subsidies, 
the US LCA industry would have achieved a higher volume of deliveries and market share than its 
actual level in the post -implementation period.  
The Appellate  Body considered therefore that the Panel's findings suppor ted the conclusion that the 
effect of the LA/MSF subsidies existing in the post -implementation period was impedance of US VLA 
in the  VLA markets in the European  Union, Australia, China, Korea, Singapore, and the 
United  Arab Emirates. According to the Appel late Body, this conclusion also found support in the 
analytical framework adopted by the panel and the Appellate  Body in the original proceedings, as 
well as in a number of the Panel's findings, including its finding concerning the "product effects" of 
the LA/MSF subsidies existing in the post -implementation period on Airbus' continued offering of the 
A380, and the existence of sufficient substitutability between Boeing's and Airbus' VLA product 
offerings. In light of its interpretation of Article  7.8 of th e SCM  Agreement, however, the 
Appellate  Body disagreed with the Panel's conclusion on impedance in the VLA market to the extent 
it was based on the effects of the challenged LA/MSF subsidies that the Panel found to have expired.  
Accordingly, the Appellate  Body modified the Panel's conclusion, and found instead that the 
United  States has established that the "product effects" of the LA/MSF subsidies existing in the 
post-implementation period are a genuine and substantial cause of impedance of US LCA in the V LA 
markets in the European  Union, Australia, China, Korea, Singapore, and the United Arab Emirates.  
In light of these considerations, in respect of subsidies existing in the post -implementation period, 
the Appellate  Body therefore upheld, albeit for diffe rent reasons , the Panel's conclusions: that "{b}y 
continuing to be in violation of Articles  5(c) and 6.3(a), (b) and (c) of the SCM  Agreement" insofar 
as the twin -aisle LCA and VLA markets are concerned, "the European  Union and certain member 
States have f ailed to comply with the DSB 's recommendations and rulings and, in particular, the 
obligation under Article  7.8 of the SCM  Agreement 'to take appropriate steps to remove the adverse 
effects or … withdraw the subsidy'"; and that "the European  Union  and cert ain member States have 
failed to implement the recommendations and rulings of the DSB to bring its measures into WT/AB/29  
 
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  conformity with its obligations under the SCM  Agreement " and that, "{t}o  the extent that the 
European  Union  and certain member States have fail ed to comply with the recommendations and 
rulings of the DSB in the original dispute, those recommendations and rulings remain operative."  
The Appellate  Body recommended that the DSB request the European  Union  to bring its measures 
found in its Report, and  in the Panel Report as modified by its Report, to be inconsistent with the 
SCM Agreement  into conformity with its obligations under that Agreement.  
3.3  Appellate  Body  Report, European  Union  – Countervailing Measures on Certain 
Polyethylene Terephthalate from Pakistan , WT/DS486/AB/R  
This dispute concerned countervailing duties imposed by the European  Union  on imports of certain 
polyethylene terephthalate (PET) originating in, inter alia, Pakistan. These countervailing duties were 
imposed on 27  September 2010, when the Council of the European  Union issued a regulation 
imposing definitive countervailing duties and collecting definitively the provisional duty imposed on 
imports of PET origi nating in, inter alia, Pakistan (Definitive Determination).  
In its countervailing duty investigation leading to the Definitive Determination, the 
European  Commission (Commission) had investigated several schemes that allegedly involved the 
granting of subs idies by the Government of Pakistan, including the Manufacturing Bond Scheme 
(MBS) and Long Term Financing of Export -Oriented Projects (LTF -EOP). The MBS permits the import 
of duty -free material on condition that it is used as an input in the manufacture o f goods that are 
subsequently exported. Systems like the MBS are commonly referred to as "duty drawback 
schemes". Duty drawback schemes allow domestic producers to obtain exemptions or remissions of 
import duties otherwise payable on production inputs, if such inputs are consumed in the 
manufacture of finished goods destined for export.  
Before the Panel, Pakistan claimed that the countervailing measure imposed by the European  Union 
was inconsistent with several provisions of the SCM  Agreement and the GATT  1994. In particular, 
Pakistan challenged the findings by the  Commission that Pakistan's MBS and LTF -EOP were 
countervailable subsidies contingent upon export performance. Pakistan also claimed that the 
Commission had acted inconsistently with Article  15.5 o f the SCM  Agreement in conducting its 
causation analysis. Additionally, Pakistan claimed that the Commission had acted inconsistently with 
Article  12.6 of the SCM  Agreement in connection with its obligation to disclose the results of the 
verification visit  to the Pakistani exporting producer, Novatex Limited, Karachi (Novatex).  
The European  Union submitted a request for a preliminary ruling asking the Panel to cease all work 
in this dispute because the relevant countervailing measure on PET from Pakistan, c ontained in the 
Definitive Determination, had expired on 30  September 2015. Alternatively, the European  Union 
requested the Panel to find that certain of Pakistan's claims were outside the Panel's terms of 
reference under the standards set forth in Article  6.2 of the DSU. On 19  May 2016, the Panel sent a 
communication to the parties denying the European  Union's request that the Panel cease all work in 
this dispute.  
The Panel made several findings that were not appealed. With respect to the European  Union's  
request for a preliminary ruling concerning the Panel's terms of reference under Article  6.2 of the 
DSU, the Panel found that Pakistan's claim that the Commission had acted inconsistently with 
Annex  II(II)(1) and Annex  III(II)(2) to the SCM  Agreement fell  outside its terms of reference. 
However, the Panel rejected the European  Union 's objections relating to Pakistan's claims under 
Article  1.1(a)(1)(ii) and Article  12.6 of the SCM  Agreement, finding that these claims were within 
the Panel's terms of referen ce. In addition, the Panel found that the Commission had acted 
inconsistently with Article  14(b), Article  1.1(b), and the chapeau  of Article  14 of the SCM  Agreement 
in connection with its finding that the LTF -EOP loan was a countervailable subsidy continge nt upon 
export performance. With respect to the Commission's causation analysis, the Panel found that the 
Commission had acted inconsistently with Article  15.5 of the SCM  Agreement by failing to conduct a 
proper non -attribution analysis of certain specific  other known factors. The Panel also found that the 
Commission had acted inconsistently with Article  12.6 of the SCM  Agreement in connection with its 
verification visit to Novatex.  
The Panel also made three sets of findings that were appealed. The first se t of findings concerned 
the expiry of the measure at issue. The European  Union submitted a request for a preliminary ruling WT/AB/29  
 
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  asking the Panel to cease all work in this dispute because the relevant countervailing measure on 
PET from Pakistan had expired on 3 0 September 2015. The European  Union referred to Articles  3.4, 
3.7, and 11 of the DSU in support of its assertion that the role of a panel is to make recommendations 
or rulings when these contribute to securing a positive solution to a dispute. Pakistan as ked the 
Panel to reject the European  Union's request. Pakistan asserted that the expiry of a measure does 
not limit a panel's jurisdiction to issue findings regarding that measure, and that a panel cannot 
decline to rule on the entirety of the claims over which it has jurisdiction.  
The Panel acknowledged that the measure at issue had expired on 30  September  2015, at which 
time the countervailing duties on certain PET from Pakistan had been removed. Thus, the Panel 
considered that the measure at issue had ce ased to have legal effect. For the Panel, this meant that 
it was not possible for the European  Union to "withdraw" the measure at issue within the meaning 
of Article  3.7 of the DSU. Taking note of WTO panel and Appellate  Body jurisprudence stating that 
panels have discretion in deciding whether to make findings regarding expired measures, the Panel 
indicated that it had not identified any reason to depart from this jurisprudence.  
In deciding how to exercise its discretion, the  Panel first noted that the measure at issue had expired 
after the Panel had been established. Second, the Panel took into account that Pakistan continued 
to request that the Panel make findings with respect to the expired measure. Third, the Panel 
conside red it a reasonable possibility that the European  Union could impose countervailing measures 
on Pakistani goods in a manner that could give rise to certain potential WTO  inconsistencies that 
would be the same as, or materially similar to, those alleged in this dispute. In particular, the Panel 
took note of Pakistan's assertion that a wide range of Pakistani exports benefit from the MBS, and 
of the fact that the parties disputed, on a fundamental level, how investigating authorities should 
determine the exte nt to which duty drawback schemes like the MBS may constitute countervailable 
subsidies within the meaning of the SCM  Agreement. For these reasons, the Panel decided to proceed 
with its work in this dispute.  
The second set of findings concerned government revenue foregone. Before the Panel, Pakistan 
argued that by finding that all duties remitted under the MBS, rather than only the excess remission, 
constituted a financial contribution and thus a countervailable subsidy, the European  Union had 
acted inconsi stently with, inter alia, Articles  1.1(a)(1)(ii) and 3.1(a) of the SCM  Agreement. Pakistan 
asserted that, when examining duty drawback schemes like the MBS to determine whether a 
financial contribution exists in the form of government revenue foregone othe rwise due, within the 
meaning of Article  1.1(a)(1)(ii) of the SCM  Agreement, footnote  1 of the SCM  Agreement limits the 
financial contribution that may be found to exist to the excess  remission. The European  Union argued 
that footnote  1 and Annexes  I to II I to the SCM  Agreement contain no requirement that investigating 
authorities, with respect to duty drawback schemes, must always equate excess remissions with the 
amount of the subsidy. The European  Union maintained that, if the conditions set out in Annex es II 
and III are not satisfied, footnote  1 cannot be interpreted to mean that a subsidy can exist only by 
reason of excess remissions.  
The Panel noted the explanation in Annex  II(I)(2) to the SCM  Agreement that, pursuant to 
Annex  I(i), drawback schemes ca n constitute an export subsidy to the extent that they result in a 
remission or drawback of import charges in excess of those actually levied on inputs that are 
consumed in the production of the exported product. For the Panel, a subsidy, in the form of 
government revenue foregone that is otherwise due, exists only insofar as the former exceeds the 
latter, i.e. where an "excess" remission occurs. The Panel referred to this as the "excess remissions 
principle". The Panel analysed Article  1.1(a)(1)(ii) and fo otnote  1 of the SCM  Agreement, as well as 
the provisions listed in footnote  1: the Ad Note to Article  XVI of the GATT  1994, and Annexes  I to 
III to the SCM  Agreement.  
Following its analysis, the Panel found that the excess remissions principle provides the  legal 
standard for determining whether remissions of import duties obtained under a duty drawback 
scheme constitute a financial contribution in the form of government revenue foregone that is 
otherwise due within the meaning of Article  1.1(a)(1)(ii) of th e SCM  Agreement. The Panel rejected 
the European  Union's position that Annex  II and/or Annex  III provides a relevant reason to depart 
from the excess remissions principle. The Panel considered that, even if an exporting Member has 
no reliable system of tra cking inputs consumed in the production of a relevant exported product, 
and in the absence of a further examination by the exporting Member of that issue, investigating 
authorities must still determine whether an excess remission occurred.  WT/AB/29  
 
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  Turning to the f acts of this case, the Panel concluded that, by failing to provide a reasoned and 
adequate explanation for why the entire amount of unpaid duties was a financial contribution and 
that those duties were "in excess of those which have accrued", within the me aning of footnote  1 of 
the SCM  Agreement, the Commission had acted inconsistently with Article  1.1(a)(1)(ii) of the 
SCM Agreement. Owing to its finding that the Commission had incorrectly identified the existence of 
a subsidy, the Panel also found that the  Commission had acted inconsistently with Article  3.1(a) of 
the SCM  Agreement  by improperly finding the existence of a "subsidy" that was contingent upon 
export performance.  
The third set of findings concerned the Commission ''s causation analysis. Before t he Panel, Pakistan 
claimed that the Commission's "approach to causation", and specifically its use of the "break the 
causal link" approach, was inconsistent with the requirements of Article  15.5 of the SCM  Agreement.  
Pakistan argued, inter alia, that the C ommission's approach had prejudged its non -attribution 
analysis. Pakistan also stated that the "causal link" that the Commission had found at the start of 
its causation analysis was used to dismiss the significance of the non -attribution factors the 
Commis sion purported to analyse.  
The Panel explained that Article  15.5 of the SCM  Agreement requires an investigating authority to 
demonstrate the existence of a causal link between the subsidized imports and the injury to the 
domestic industry, and this "causal  link" must involve a "genuine and substantial relationship of 
cause and effect" between the subsidized imports and the injury. The Panel also stated that the 
non-attribution language in the third sentence of Article  15.5 calls for an assessment that invol ves 
separating and distinguishing the injurious effects of other known factors from the injurious effects 
of the subsidized imports. The third sentence also requires an investigating authority to provide a 
satisfactory explanation of the nature and extent of the injurious effects of other known factors, as 
distinguished from the injurious effects of the subsidized imports.  
Turning to the facts of this case, the Panel observed that the Commission had "considered" that a 
"causal link" existed between the subs idized imports and the observed injury to the EU industry 
before it examined whether other known factors "broke the causal link". The Panel observed that it 
was only after the assessment of the other known factors that the Commission had "concluded" that 
the subsidized imports had caused material injury to the EU industry. On this basis, the Panel found 
it "evident" that the Commission had "allowed for the possibility that the analysis of other known 
factors could have negated its initial consideration that  a causal link existed between subject imports 
and the observed injury to the domestic industry".  
The Panel also failed to see how the Commission's approach had led to a disregard of the relevant 
legal standard "in this case" or how this approach had precl uded the Commission from separating 
and distinguishing the injurious effects of any other known factors from those of the subsidized 
imports.  
For these reasons, the Panel rejected Pakistan's argument that the Commission's "break the causal 
link" approach h ad precluded the Commission from satisfying the non -attribution requirements of 
Article  15.5 of the SCM  Agreement in this case. Having also rejected Pakistan's other arguments in 
support of its claim, the Panel concluded that Pakistan had failed to demonst rate that the 
Commission's use of the "break the causal link" approach in this case was inconsistent with 
Article  15.5 of the SCM  Agreement.  
3.3.1   European  Union's claim of error regarding the expiry of the measure at issue  
On appeal, the European  Union  claimed that the Panel had failed to comply with its duty under 
Article  11 of the DSU, as informed by Article  3 of the DSU, by deciding to make findings on Pakistan's 
claims in this dispute, notwithstanding the expiry of the measure at issue during the Panel 
proce edings. The European  Union submitted that the measure at issue had expired, and had ceased 
to have any legal effect before the Panel commenced its work, thereby rendering the Panel 
proceeding moot. The European  Union requested the Appellate  Body to reverse  the entirety of the 
Panel Report and to declare moot and of no legal effect the findings and legal interpretations 
contained therein.  
The Appellate  Body explained that panels have a margin of discretion in the exercise of their inherent 
adjudicative power s under Article  11 of the DSU. Within this margin of discretion, it is for a panel to WT/AB/29  
 
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  decide how it takes into account subsequent modifications to, or expiry or repeal of, the measure at 
issue. The fact that a measure has expired is not dispositive of the question of whether a panel can 
address claims in respect of that measure. Rather, a panel, in the exercise of its jurisdiction, has the 
authority to assess objectively whether the "matter" before it, within the meaning of Article  7.1 and 
Article  11 of the  DSU, has been fully resolved or still requires to be examined following the expiry of 
the measure at issue.  
In this vein, the Appellate  Body reviewed each of the three considerations that the Panel took into 
account. First, the Appellate  Body found that t he Panel did not err by giving importance to the fact 
that, in the present dispute, the measure expired after the DSB had established the Panel. Second, 
the Appellate  Body observed that the Panel did not consider Pakistan's continued request for 
findings, on its own, to be dispositive of the Panel's need to make findings in this dispute. Moreover, 
given the largely self -regulating nature of a complaining Member's decision to initiate WTO dispute 
settlement proceedings, the Appellate  Body agreed with the Pan el that a complaining Member's 
continued request for findings following the expiry of the measure at issue is a 
relevant  consideration. Nonetheless, the Appellate  Body recalled that the deference accorded to a 
Member's exercise of its judgement in bringing  a dispute is not entirely boundless. Rather, where a 
measure expires in the course of the panel proceedings, the panel should, in the exercise of its 
jurisdiction, objectively assess whether the "matter" before it, within the meaning of Article  7.1 
and Article 11 of the DSU, has been fully resolved or still requires to be examined. To this end, the 
Appellate  Body observed that the Panel took account of, inter alia, the fact that the parties 
disagreed, on a fundamental level, on how investigating authoritie s should determine the extent to 
which the MBS may constitute a countervailable subsidy within the meaning of the SCM  Agreement.  
From its consideration of the arguments of the parties before the Panel, and the Panel's reasoning, 
the Appellate  Body consider ed it apparent that there still existed a dispute between the parties on 
the "applicability of and conformity with the relevant covered agreements", within the meaning of 
Article  11 of the DSU, as regards the Commission's findings underpinning the measure at issue, 
despite its expiry.  
Thus, for the Appellate  Body, the Panel in this dispute made an objective assessment that "the 
matter" before it still required to be examined because the parties were still in disagreement as to 
the "applicability of and conf ormity with the relevant covered agreements" in respect of the 
Commission's findings underpinning the expired measure at issue.  
Accordingly, the Appellate  Body found that the European  Union had not demonstrated that the Panel 
had failed to comply with its  duty under Article  11 of the DSU, as informed by Article  3 of the DSU, 
by deciding to proceed to make findings on Pakistan's claims in this dispute, notwithstanding the 
expiry of the measure at issue. The Appellate  Body therefore rejected the European  Union's request 
that the Appellate  Body reverse  the entirety of the Panel Report and declare moot and of no legal 
effect the findings and legal interpretations contained therein.  
With respect to this issue, one member of the Appellate  Body Division hearing th is appeal issued a 
separate opinion. The Appellate  Body Member first clarified that he agreed with the legal 
interpretation and reasoning of the majority, regarding a panel's terms of reference, jurisdiction, its 
margin of discretion in deciding how to tak e into account the expiry of a measure, and the 
parameters that should guide a panel's objective assessment of whether a "matter" before it has 
been fully resolved or still requires to be adjudicated. His separate opinion was limited to the question 
of whe ther, in the specific circumstances of this case, the Panel's reasoning reflected an objective 
assessment of whether the "matter" before it, within the meaning of Article  7.1 and Article  11 of the 
DSU, had been fully resolved or still required to be examin ed, following the expiry of the measure 
at issue.  
The Appellate  Body Member noted that among its inherent adjudicative powers is the authority of a 
panel to assess objectively whether the "matter" before it, within the meaning of Article  7.1 and 
Article  11 of the DSU, has been fully resolved or still requires to be examined, following the expiry 
of the measure at issue. According to the Appellate  Body Member, a panel should make this 
assessment before undertaking its duty under Article  11 of the DSU to "mak e an objective 
assessment of the matter before it, including an objective assessment of the facts of the case and 
the applicability of and conformity with the relevant covered agreements". Turning to this specific 
case, the Appellate  Body Member did not se e any reasoning in the Panel Report demonstrating an 
objective assessment by the Panel, of whether the "matter" before it, within the meaning of 
Article  7.1 and Article  11 of the DSU, had been fully resolved or still required to be examined, WT/AB/29  
 
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  following the expiry of the measure at issue. For those reasons, the Appellate  Body Member 
disagreed with the finding of the majority that the European  Union had not demonstrated that in the 
circumstances of this case, the Panel failed to comply with its duty under Arti cle 11 of the DSU, as 
informed by Article  3 of the DSU, by deciding to proceed to make findings on Pakistan's claims in 
this dispute, notwithstanding the expiry of the measure at issue.  
3.3.2   European  Union's claim of error regarding government revenue foregone  
The European  Union appealed the Panel's interpretation of Article  1.1(a)(1)(ii), footnote  1, and 
Annexes  I to III to the SCM  Agreement, in connection with the Commission's finding that the MBS 
is a countervailable subsidy contingent upon export performance . In particular, the European  Union 
challenged the Panel's finding that, in the context of duty drawback schemes, a subsidy exists only 
when an "excess" remission occurs representing government revenue foregone that is otherwise 
due, within the meaning of Article  1.1(a)(1)(ii) and footnote  1 of the SCM  Agreement. The 
European  Union requested the Appellate  Body to reverse this interpretation by the Panel of the 
relevant provisions of the SCM  Agreement. Owing to the expiry of the measure at issue, the 
Europea n Union did not request the Appellate  Body to complete the legal analysis in the present 
case. Instead, the European  Union requested the Appellate  Body to declare moot and of no legal 
effect the entirety of the Panel's findings with respect to the MBS on t he grounds that the Panel 
applied the wrong legal standard.  
The Appellate  Body observed that the European  Union's claim of error and its arguments in support 
thereof raised the question of what, in the context of duty drawback schemes, constitutes the 
financial contribution element of the subsidy within the meaning of Article  1.1(a) (1)(ii) and 
footnote  1 of the SCM  Agreement. The Appellate  Body recalled that the foregoing (or non -collection) 
of revenue otherwise due, within the meaning of Article  1.1(a)(1)(ii) of the SCM  Agreement, implies 
that less (or no) revenue has been raised by  the government than would have been raised in a 
different situation, and the word "foregone" suggests that the government has given up an 
entitlement to raise revenue that it could "otherwise" have raised.  While Article  1.1(a)(1)(ii) provides 
a general de scription of revenue foregone, footnote  1, appended thereto, identifies specific instances 
of revenue foregone that "shall not be deemed to be" subsidies. Footnote  1 deals with the exemption 
or remission of duties or taxes on exported products.  The Appella te Body noted that, w ith respect 
to duty drawback schemes, the government revenue foregone that is described in footnote  1 of the 
SCM Agreement is concerned with the "duties or taxes" in the form of "import charges" on inputs 
that are consumed in the produ ction of goods destined for export.  
Significantly, footnote  1 is prefaced by the words "in accordance with", followed by a list of several 
provisions of the GATT  1994 and the SCM  Agreement: "Article  XVI of GATT  1994 (Note to 
Article  XVI) and the provisions of Annexes  I through III to this Agreement". Like footnote  1 of the 
SCM Agreement, the wording of Annex  I(i), Annex  II(I)(2) of the SCM  Agreement, and the Ad Note 
to Article  XVI of the GATT  1994, confirms that, for duty drawback schemes, the focus on the excess  
amount of the remission or drawback underpin s the definition of the subsidy, and in particular the 
financial contribution element thereof, in the form of government revenue foregone. The 
Appellate  Body also noted that similar language appears in Annex  III(I) with respect to substitution 
drawback sch emes.  
The Appellate  Body considered that a harmonious reading of Article  1.1(a)(1)(ii), footnote  1, and 
Annexes  I(i), II, and  III to the SCM  Agreement and the Ad Note to Article  XVI of the GATT  1994 
confirms that duty drawback schemes can constitute an exp ort subsidy that can be countervailed 
only if they result in a remission or drawback of import charges "in excess" of those actually levied 
on the imported inputs consumed in the production of the exported product. Thus, in the context of 
duty drawback sch emes, the financial contribution element of the subsidy (i.e. the government 
revenue foregone that is otherwise due) is limited to the excess  remission or drawback of import 
charges on inputs and does not encompass the entire amount of the remission or dra wback of import 
charges.  
The Appellate  Body also explained that the perceived "silence" in Annexes  II and III to the 
SCM Agreement, referred to by the European  Union, is not one that pertains to the definition of the 
subsidy, and in particular to what cons titutes the financial contribution element of the subsidy, in 
the form of government revenue foregone. Instead, the perceived "silence" relates to a procedural 
step in the context of an investigating authority's inquiry into whether the excess  remission or  
drawback of import charges occurred. As regards this procedural step, where an investigating WT/AB/29  
 
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  authority determines that there is no verification system in place in the exporting Member, or a 
verification system is in place but it is not reasonable, effecti ve for the purpose intended, and based 
on generally accepted commercial practices in the country of export, or it has not been applied 
effectively by the exporting Member, and where a further examination by the exporting Member has 
not been undertaken or i s considered unsatisfactory by the investigating authority, it is true that 
Annexes  II and III do not explicitly provide for what should happen next. Nonetheless, the 
SCM Agreement, as a whole, is not silent, and the perceived "silence" in Annexes  II and I II does not 
grant an investigating authority the liberty to depart from these other disciplines of the 
SCM Agreement. In particular, Article  12.7 of the SCM  Agreement allows an investigating authority 
to rely on the "facts available" on its investigation r ecord to complete its inquiry into whether a duty 
drawback scheme conveys a subsidy by reason of excess drawback of import charges on inputs.  
Accordingly, the Appellate  Body found that the European  Union had not demonstrated that the Panel 
erred in its int erpretation of Article  1.1(a)(1)(ii), footnote  1, and Annexes  I(i), II, and III to the 
SCM Agreement and the Ad Note to Article  XVI of the GATT  1994.  
The Appellate  Body noted that the European  Union had not challenged the Panel's review of the 
Commission's  findings on the MBS, beyond the European  Union's claim that the Panel had applied 
the wrong legal standard to the facts of this case. Accordingly, the Appellate  Body found that the 
European  Union had not demonstrated that the Panel erred in its applicatio n of Article  1.1(a)(1)(ii) 
and footnote  1 of the SCM  Agreement to the facts of this case.  
Consequently, the Appellate  Body upheld the Panel's finding that the Commission had erred under 
Article  1.1(a)(1)(ii) of the SCM  Agreement by failing to provide a rea soned and adequate explanation 
for why the entire amount of remitted duties was "in excess of those which have accrued" within the 
meaning of footnote  1 of the SCM  Agreement. The Appellate  Body also upheld the Panel's finding 
that the Commission had acted inconsistently with Article  3.1(a) of the SCM  Agreement by 
improperly finding the existence of a "subsidy" that was contingent upon export performance.  
3.3.3   Pakistan's claim of error regarding the Commission's causation analysis  
Pakistan challenged the Panel's rejection of Pakistan's claim that the Commission's use of the "break 
the causal link" approach in this case was inconsistent with Article  15.5 of the SCM  Agreement 
because this approach had precluded the Commission from satisfying the non -attribution 
requirement of this provision. Pakistan argued that the "primary objective" of a causation analysis 
under Article  15.5 is to determine whether there exists a "genuine and substantial relationship of 
cause and effect" between the subsidized imports and the inju ry to the domestic industry. According 
to Pakistan, a proper test for determining the existence of such a "genuine and substantial" causal 
relationship is whether other known factors "attenuate" or "dilute" the link between the subsidized 
imports and the o bserved injury such that this link cannot be characterized as a "genuine and 
substantial relationship of cause and effect". Pakistan considered that the Commission's "break the 
causal link" approach fell short of this proper standard and the Panel erred in  endorsing such an 
approach.  
According to Pakistan, the  Commission's approach: (i)  was "illogical" because, if factors other than 
the subsidized imports are capable of breaking the causal link, this causal link should never have 
existed in the first place;  (ii) precluded the  Commission from assessing the effects of the subsidized 
imports alone because, by examining whether each non -attribution factor individually broke the 
causal link, the Commission assessed the effect of each non -attribution factor agains t the 
compounded effects of the subsidized imports plus the effects of the remaining other factors; 
(iii) was not "even -handed" and skewed the  Commission's causation analysis because it required 
each non -attribution factor to be "the cause" of the injury, while requiring the subsidized imports to 
be only "a contributing cause" of the injury; and (iv)  tainted the Commission's analysis of 
non-attribution factors and precluded the Commission from properly separating and distinguishing 
the effects of those fact ors. 
The Appellate  Body observed that the key objective of a causation analysis under Article  15.5 of the 
SCM Agreement  is for an investigating authority to establish whether there is a "genuine and 
substantial relationship of cause and effect" between the  subsidized imports and the injury to the 
domestic industry. A showing of such a "genuine and substantial" causal relationship entails: (i)  an 
examination of the existence and extent of the link between the subsidized imports and the injury WT/AB/29  
 
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  suffered by the  domestic industry through an assessment of the "effects" of the subsidized imports; 
and (ii)  a non -attribution analysis of the injurious effects of other known factors. The Appellate  Body 
thus held that an investigating authority is required under Article  15.5 to determine whether, in light 
of the injurious effects of other known factors, the subsidized imports can be considered a "genuine 
and substantial" cause of the injury suffered by the domestic industry.  
The Appellate  Body further noted that, while a n investigating authority must conduct a 
non-attribution analysis before it reaches an overall conclusion as to the existence of a "causal 
relationship", Article  15.5 does not prescribe any particular methodology an investigating authority 
must use in carr ying out such analysis. Thus, it is possible for an investigating authority to address 
the two components of causation in a "unitary" analysis or in two separate steps. The Appellate  Body 
observed that, in carrying out such a two -step causation analysis, a n investigating authority can 
consider a "causal link" to exist between the subsidized imports and the injury on the basis of the 
first step of its analysis, provided that the authority compares the significance of such a "causal link" 
with the significanc e of the injurious effects of other known factors and objectively assesses whether 
this link qualifies as a "genuine and substantial" causal relationship in light of those other factors.  
In addition, the Appellate  Body noted that, when the subsidized impor ts and several  other factors 
are simultaneously injuring the domestic industry, an investigating authority must ensure that the 
contribution of the subsidized imports to the injury is "genuine and substantial" in light of the effects 
of all of these other factors. However, an investigating authority may not necessarily be required to 
carry out an assessment of the collective  effects of the other known factors in addition  to examining 
those factors' individual  effects, for example, where an investigating aut hority's assessment of the 
individual effects of the other known factors reveals that only a limited number of those other factors 
contribute to the injury, and each of them to a limited degree.  
Turning to the relevant findings by the Panel, the Appellate  Body observed that the Panel had 
correctly found that, while the Commission had stated that a "causal link" existed between the 
subsidized imports and the injury before it turned to its non -attribution analysis, such consideration 
of a "causal link" was no t a final conclusion, and the Panel had not necessarily prejudged the 
Commission's assessment of the effects of the other known factors.  
The Appellate  Body also addressed, and rejected, Pakistan's arguments regarding the four alleged 
flaws in the Commissio n's approach to causation that were raised in support of its claim that this 
approach had precluded the Commission from satisfying the correct legal standard under 
Article  15.5. In particular, the Appellate  Body explained that it is inappropriate for an in vestigating 
authority to examine whether other known factors "break" the causal link in the sense that the 
injurious effects of each non -attribution factor are so significant that they eliminate the link between 
the subsidized imports and the injury. This is because the correct causation standard requires instead 
an examination of whether, in light of the injurious effects of other known factors, the subsidized 
imports can be considered a "genuine and substantial" cause of the injury. However, with respect to 
the countervailing duty investigation at issue, the Appellate  Body found that the Commission had 
effectively examined whether and why the subsidized imports could be considered a "genuine and 
substantial" cause of the injury taking into account the inju rious effects of all of the other known 
factors that it found to have contributed to the injury.  
Accordingly, the Appellate  Body found that the Panel had not erred in its interpretation or application 
of Article  15.5 of the SCM  Agreement  in rejecting Pakis tan's claim that the Commission's approach 
to examining causation precluded the Commission from satisfying the non -attribution requirements 
of Article  15.5 in this case. Consequently, the Appellate  Body upheld the Panel's finding that Pakistan 
had failed t o establish that the Commission's approach to examining causation in this case was 
inconsistent with Article  15.5. 
3.4  Appellate  Body  Report, Indonesia – Safeguard on Certain Iron or Steel Products , 
WT/DS490/AB/R, WT/DS496/AB/R  
This dispute concerned a specifi c duty applied by Indonesia on imports of galvalume, a type of 
flat-rolled products of iron or non -alloy steel. The duty was adopted in 2014 for a period of three 
years following an investigation initiated and conducted under Indonesia's domestic safeguards 
legislation by Indonesia's competent authority. Imports of galvalu me originating in 120 allegedly 
developing countries are exempt from the scope of application of the specific duty.  WT/AB/29  
 
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  Chinese Taipei and Viet Nam challenged the measure at issue on the assumption that such measure 
was a safeguard subject to the WTO safeguar d disciplines. Specifically, Chinese Taipei and Viet Nam 
claimed that Indonesia's specific duty on imports of galvalume, the investigation leading to its 
adoption, and the related notifications to the WTO Committee on Safeguards were inconsistent with 
Article XIX:1(a) and XIX:2 of the GATT  1994 and Articles 2.1, 3.1, 4.1, 4.2(a), 4.2(b), 4.2(c), 12.2, 
and 12.3 of the Agreement on Safeguards. Indonesia, also proceeded on the assumption that the 
measure at issue is a safeguard, and requested the Panel to reje ct Chinese  Taipei's and Viet Nam's 
claims in their entirety.  
Following the first Panel meeting, Indonesia explained that it does not have a tariff binding on 
galvalume in its WTO Schedule of Concessions. On this basis, the Panel considered that a 
fundamen tal question arose as to whether the measure at issue is, indeed, a safeguard within the 
meaning of Article  1 of the Agreement on Safeguards. The Panel found that the measure at issue 
does not suspend, withdraw, or modify Indonesia's obligations under Arti cle II of the GATT  1994. It 
further dismissed Indonesia's argument that the measure at issue suspends the GATT  exception 
under Article  XXIV of the GATT  1994. Finally, the Panel rejected Indonesia's assertion that the 
exemption of 120 countries from the sco pe of application of the specific duty results in a suspension 
of Indonesia's MFN treatment obligation under Article  I:1 of the GATT  1994. On this basis, the Panel 
concluded that Indonesia's specific duty on imports of galvalume is not a safeguard subject to the 
WTO safeguard disciplines. Having so found, the Panel found that there was no legal basis to address 
the complainants' claims under Article  XIX:1(a) and XIX:2 of the GATT  1994 and Articles 2.1, 3.1, 
4.1, 4.2(a), 4.2(b), 4.2(c), 12.2, and 12.3 of the  Agreement on Safeguards with respect to the 
specific duty as a safeguard measure . 
However, the Panel considered that Chinese Taipei and Viet Nam had put forward an alternative 
claim that the specific duty "as a stand -alone measure" – i.e. not as a safegua rd measure – is 
inconsistent with Article  I:1 of the GATT  1994. The Panel went on to find that the exemption of 
galvalume originating in 120 countries from the scope of application of the specific duty is an 
"advantage" granted to "like products" that is n ot "accorded immediately and unconditionally" to 
imports of galvalume from all WTO Members. Hence, the Panel concluded that the measure at issue 
is inconsistent with Indonesia's obligations under Article  I:1 of the GATT  1994.   
On appeal, Chinese Taipei and  Viet Nam claimed that certain portions of Indonesia's Notice of Appeal 
and appellant's submission did not identify the Panel's alleged errors with sufficient precision to meet 
the requirements of Rules 20(2)(d) and 21(2)(b)(i) of the Working Procedures. I n addition, 
Indonesia, Chinese Taipei, and Viet Nam all appealed the Panel's finding that the measure at issue 
is not a safeguard subject to the WTO safeguard disciplines. Finally, Indonesia claimed that the Panel 
exceeded its terms of reference by finding  a violation of Article  I:1 of the GATT  1994 in respect of 
the measure at issue "as a stand -alone measure" – i.e. not as a safeguard measure.  
3.4.1   The sufficiency of Indonesia's appeal under the Working Procedures for 
Appellate  Review  
Chinese Taipei and Viet N am claimed that certain portions of Indonesia's Notice of Appeal and 
appellant's submission did not identify the Panel's alleged errors with sufficient precision. Based on 
its review of Indonesia's Notice of Appeal, the Appellate  Body understood Indonesia' s appeal to 
encompass allegations of error concerning: (i) the Panel's finding that the measure at issue is not a 
safeguard; (ii) the scope of the Panel's terms of reference concerning the characterization of the 
measure at issue; (iii) the scope of the Pa nel's terms of reference concerning the claim against the 
specific duty as a "stand -alone measure"; and (iv) the Panel's objective assessment under Article  11 
of the DSU of the characterization of the measure at issue. Given that these grounds of appeal we re 
discernible in Indonesia's Notice of Appeal, the  Appellate  Body did not consider that Indonesia had 
failed to set out "a brief statement of the nature of the appeal" or to provide an "identification of the 
alleged errors in the issues of law covered in the panel report and legal interpretations developed 
by the panel", as required under Rule 20(2)(d).  
Moreover, the Appellate  Body found that Indonesia's appellant's submission sets out more specific 
legal argumentation in support of the grounds of appeal identified by Indonesia in its Notice of 
Appeal. In addition, regarding the complainants' reliance on Rule  21(2)(b)(i), the Appellate  Body 
found that the complainants' objection concerning Indonesia's appellant's submission was not 
pertinent to the scope o f appellate review, but rather related to the merits and substance of 
Indonesia's legal arguments. Accordingly, the Appellate  Body declined the complainants' request WT/AB/29  
 
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  that certain portions of Indonesia's appeal be rejected for failure to comply with the Wor king 
Procedures.  
3.4.2   The Panel's finding that the measure at issue is not a safeguard  
Chinese Taipei, Viet Nam, and Indonesia all appealed the Panel's finding that the measure at issue 
is not a safeguard subject to the WTO safeguard disciplines. Specifically,  Indonesia claimed that the 
Panel's finding exceeded the Panel's terms of reference under Articles 6.2 and 7.1 of the DSU and 
constituted a failure to conduct an objective assessment of the matter pursuant to Article  11 of the 
DSU. Moreover, all participan ts claimed that, in reaching that finding, the Panel erred in it its 
interpretation and application of Article  1 of the Agreement on Safeguards and Article  XIX of the 
GATT  1994. 
Beginning with Indonesia's claim under Articles 6.2, 7.1 and 11 of the DSU, the Appellate  Body 
recalled that a panel's terms of reference under Article  7.1 of the DSU are governed by the panel 
request(s) provided under Article  6.2 of the DSU. In this regard, the Appellate  Body observed that 
Article  6.2 does not contain a requ irement that a panel request expressly indicate the provisions 
governing the legal characterization of a measure for purposes of the applicability  of a given covered 
agreement.  
With respect to Indonesia's claim under Article  11 of the DSU, the Appellate  Body recalled that 
Article  11 requires panels to examine, as part of their "objective assessment of the matter", whether 
the provisions of the covered agreements invoked by complainants as the basis for their claims are 
applicable and relevant to the case at  hand. The Agreement on Safeguards applies to the "measures 
provided for in Article  XIX of GATT  1994". A panel's assessment of claims brought under that 
agreement may therefore require a threshold examination of whether the measure at issue qualifies 
as a safeguard measure within the meaning of Article  XIX of the GATT  1994. A panel is not precluded 
from determining the applicability of a particular covered agreement in cases where the issue has 
not been raised by the parties. Indeed, the duty to conduct an "objective assessment of the matter" 
may, at times, require  a panel to depart from the positions taken by the parties and determine for 
itself whether a measure falls within the scope of a particular provision or covered agreement. 
Moreover, the description of a measure proffered by a party and the label given to it under municipal 
law are not dispositive of the proper legal characterization of that measure under the covered 
agreements.  
The Appellate  Body noted that the complainants in this dispute had claimed that Indonesia's specific 
duty on imports of galvalume is incon sistent with Article  XIX of the GATT  1994 and certain 
substantive provisions of the Agreement on Safeguards. Therefore, according to the Appellate  Body, 
it was the Panel's duty, pursuant to Article  11 of the DSU, to assess objectively whether the measure 
at issue constitutes a safeguard measure in order to determine the applicability of the substantive 
provisions relied upon by the complainants as the basis for their claims.  
On this basis, the Appellate  Body found that the Panel did not exceed its terms of  reference or fail 
to conduct an objective assessment of the matter by ascertaining whether the measure at issue 
constitutes a safeguard measure within the meaning of Article  1 of the Agreement on Safeguards.  
Having so found, the Appellate  Body proceeded t o assess whether the Panel's finding stemmed from 
an erroneous  interpretation or application of Article  1 of the Agreement on Safeguards or Article  XIX 
of the GATT  1994. The Appellate  Body held that, in order to constitute one of the "measures provided 
for in Article  XIX", a measure must present certain constituent features, absent which it could not 
be considered a safeguard. First, that measure must suspend, in whole or in part, a GATT  obligation 
or withdraw or modify a GATT concession. Second, the suspen sion, withdrawal, or modification in 
question must be designed to prevent or remedy serious injury to the Member's domestic industry 
caused or threatened by increased imports of the subject product.  
The Appellate  Body further stated that, in order to dete rmine whether a measure presents such 
features, a panel is called upon to assess the design, structure, and expected operation of the 
measure as a whole. In making its independent and objective assessment, a panel must identify all 
the aspects  of the measu re that may have a bearing on its legal characterization, recognize which 
of those aspects are the most central to that measure, and, thereby, properly determine the 
disciplines to which the measure is subject. As part of its determination of whether a mea sure is a WT/AB/29  
 
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  safeguard, a panel should evaluate and give due consideration, where relevant, to the manner in 
which the measure is characterized under the domestic law of the Member concerned, the domestic 
procedures that led to the adoption of the measure, an d any relevant notifications to the WTO 
Committee on Safeguards. However, none of these is, in and of itself, dispositive of the question of 
whether the measure constitutes a safeguard measure within the meaning of Article  1 of the 
Agreement on Safeguards.  
Having reviewed the design, structure, and expected operation of the measure at issue, together 
with all the relevant facts and arguments on record, the Appellate  Body found that this measure 
does not present the constituent features of a safeguard for pu rposes of the applicability of the WTO 
safeguard disciplines. First, it noted, the imposition of the specific duty on galvalume may seek to 
prevent or remedy serious injury to Indonesia's industry, but it does not suspend any GATT 
obligation or withdraw or  modify any GATT concession because Indonesia does not have a tariff 
binding on galvalume in its WTO Schedule of Concessions.  
Second, continued the Appellate  Body, the exemption of 120 countries from the scope of application 
of the specific duty may argua bly be seen as suspending Indonesia's MFN treatment obligation under 
Article  I:1 of the GATT  1994, but it has not been shown to be designed to prevent or remedy serious 
injury to Indonesia's domestic industry. Rather, that exemption appears to constitute a n ancillary 
aspect of the measure, which is aimed at according S&D  treatment to developing countries with 
de minimis  shares in imports of galvalume as contemplated under Article  9.1 of the Agreement on 
Safeguards. The disciplines of Article  9.1 set out con ditions for the WTO -consistent  application of 
safeguard measures, and do not speak to the question of whether a measure constitutes a safeguard 
measure for purposes of the applicability  of the WTO safeguard disciplines. Hence, the 
Appellate  Body found that  the measure at issue, considered in light of those of its aspects most 
central to the issue of legal characterization, does not constitute one of the "measures provided for 
in Article  XIX of GATT  1994".  
Based on the foregoing, the Appellate  Body upheld the Panel's overall conclusion that the measure 
at issue does not constitute a safeguard within the meaning of Article  1 of the Agreement  on 
Safeguards. Having upheld the Panel's conclusion, the Appellate  Body found no  legal basis to rule 
on the co mplainants' request for completion of the legal analysis with respect to their claims under 
Article  XIX of the GATT  1994 and Articles 2.1, 3.1, 4.1(a), 4.1(b), 4.2(a), 4.2(b), 4.2(c), 12.2, and 
12.3 of the Agreement on Safeguards.  
3.4.3   The Panel's finding of in consistency with Article  I:1 of the GATT  1994  in respect of 
the specific duty "as a stand -alone measure"  
Indonesia challenged the Panel's finding of inconsistency with Article  I:1 of the GATT  1994 with 
respect to the specific duty as a stand -alone measure (as opposed to a safeguard measure), claiming 
that the Panel's finding exceeded the Panel's terms of reference. According to Indonesia, the 
complainants' panel requests did not include claims to the effect that the measure at issue, as a 
stand -alone measur e, was inconsistent with Article  I:1. Instead, argued Indonesia, those requests 
limited the claims under Article  I:1 to the measure at issue construed as a safeguard.  
The Appellate  Body considered that the description and presentation of the specific duty  as a 
"measure at issue" in the complainants' panel requests clearly identified the specific duty as a 
measure that is alleged to be causing the violation of an obligation contained in a covered agreement. 
The Appellate  Body further noted that the panel re quests plainly connected the relevant measure, 
that is, the specific duty, with the MFN treatment obligation provided under Article  I:1 of the 
GATT  1994 by explicitly linking the discriminatory application of that duty with the substantive 
requirement that  any advantage that is granted to a product be accorded immediately and 
unconditionally to the like products originating in all WTO Members. For the Appellate  Body, the 
additional language in the panel requests in the nature of factual background or legal argument 
concerning the characterization of the measure did not narrow the claims raised under Article  I:1 of 
the GATT  1994.  
The Appellate  Body further found that  the complainants' submissions to the Panel confirmed that 
their claims  of inconsistency with  Article  I:1 of the GATT  1994 encompassed alleged discrimination 
between countries exempted from the scope of application of the specific duty and countries to which 
such an exemption does not apply  (including Chinese  Taipei and Viet Nam themselves). In li ght of WT/AB/29  
 
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  the foregoing, the Appellate  Body considered that the formulations used in the panel requests were 
sufficient to articulate a claim against the specific duty as a stand -alone measure (i.e. as a 
non-safeguard measure).  
Accordingly, the Appellate  Body found that the Panel did not err in concluding that the complainants 
properly raised a claim under Article  I:1 of the GATT  1994 against the specific duty as a stand -alone 
measure. As the Panel did not err in identifying the matter within its terms of refe rence, and given 
that Indonesia did not otherwise challenge the Panel's substantive analysis or findings under 
Article  I:1 of the GATT  1994, the Appellate  Body upheld the Panel's finding that the application of 
the specific duty on imports of galvalume ori ginating in all but the 120 countries listed in Regulation 
137 is inconsistent with Indonesia's obligation to accord MFN  treatment under Article  I:1 of the 
GATT  1994.  
3.5  Appellate  Body  Reports, Brazil – Certain Measures Concerning Taxation and Charges , 
WT/DS472/AB/R, WT/DS497/AB/R  
These disputes concerned three groups of measures through which Brazil provides exemptions, 
reductions, or suspensions of certain federal taxes and contributions . The taxes and contributions 
relevant for these disputes are: (i)  the Tax on Industrialised Products (IPI tax); (ii) the Social 
Integration Programme/Civil Service Asset Formation Programme (PIS/PASEP) contribution and the 
Contribution to Social Security Financing (COFINS); (iii) the Social Integration and Civil Service  Asset 
Formation Programmes contribution applicable to Imports of Foreign Goods or Services (PIS/PASEP -
Importation) and the Contribution to Social Security Financing applicable to Imports of Goods or 
Services (COFINS -Importation); and (iv) the Contribution  of Intervention in the Economic Domain 
(CIDE).  
The first group of measures at issue concerns the information and communication technology (ICT) 
sector and comprises tax treatment granted under: (i) the Informatics programme; (ii) the 
programme of Incentiv es for the Semiconductors Sector (PADIS programme); (iii) the programme 
of Support for the Technological Development of the Industry of Digital TV Equipment (PATVD 
programme); and (iv) the programme for Digital  Inclusion (the Digital Inclusion programme). The 
second group comprises tax treatment granted under the programme of Incentive to the 
Technological Innovation and Densification of the Automotive Supply Chain (the INOVAR -AUTO 
programme), which targets the automotive sector. The third group of measures  comprises tax 
treatment granted under: (i) the regime for Predominantly Exporting Companies (PEC programme); 
and (ii) the Special Regime for the Purchase of Capital Goods for Exporting Enterprises (RECAP 
programme).  
The Informatics programme provides for exemptions and reductions on the IPI tax on the sale of 
information technology  goods. It also provides for suspensions of the IPI tax on the purchase or 
import of raw materials, intermediate goods, and packaging materials used in the production of 
informat ion technology, and automation goods incentivized under the programme. In order to 
benefit from the tax treatment, companies must obtain an accreditation. The eligible companies 
under the Informatics programme are companies that: (i)  develop or produce inf ormation 
technology and automation goods and services in compliance with the relevant Basic Productive 
Processes (PPBs), which are defined as the minimum set of operations performed at a manufacturing 
facility that characterizes the actual industrializatio n of a given product; and (ii)  invest in information 
technology research and development (R&D) activities in Brazil. Moreover, under this programme, 
products that have obtained the status of "developed in Brazil" are subject to additional tax 
reductions.  
The PADIS programme exempts, through zero rates, accredited companies from paying certain taxes 
with respect to semiconductors and information displays, as well as inputs, tools, equipment, 
machinery, and software for the production of semiconductors and di splays. In order to obtain 
accreditation, legal persons must: (i) invest in R&D in Brazil; and (ii) engage in certain activities in 
Brazil with respect to semiconductor electronic devices, information displays, and inputs and 
equipment intended for the man ufacture of electronic semiconductor devices and information 
displays.  
The PATVD programme exempts accredited companies from paying certain taxes with respect to 
radio frequency signal transmitting equipment for digital television (digital television trans mission WT/AB/29  
 
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  equipment), as well as machinery, apparatus, instruments, equipment, inputs, and software for the 
production of digital television transmission equipment (production goods). In  order to obtain 
accreditation, legal persons must: (i) invest in R&D in  Brazil; (ii) engage in developing and 
manufacturing activities of digital television transmission equipment; and (iii) either comply with the 
relevant PPB or, alternatively, meet the criteria for a product to be considered "developed in Brazil".  
The Digit al Inclusion programme exempts, through zero rates, Brazilian retailers from paying 
PIS/PASEP and COFINS contributions with respect to the sale of certain digital consumer goods 
produced in Brazil in accordance with the relevant PPBs.  
The INOVAR -AUTO progr amme provides for reduction of the IPI tax burden on certain motor vehicles 
either: (i) through presumed IPI tax credits granted to accredited companies; or  (ii) through reduced 
IPI tax rates on the importation of vehicles originating in certain countries,  as well as on certain 
domestic vehicles. All companies using presumed IPI tax credits, and certain companies using 
reduced IPI tax rates, must obtain one of three forms of accreditation: (i)  domestic manufacturer; 
(ii) importer/distributor; or (iii)  investor. In order to obtain accreditation, a company must comply 
with certain requirements of both a general and specific nature. All such companies must comply 
with the same two general requirements and also with certain additional specific requirements that 
vary by the type of accreditation. A  company applying for accreditation as a domestic manufacturer 
shall comply with the two general requirements as well as "three out of four specific requirements, 
one of which must be the performance of a minimum number of defined manufacturing and 
engineering infrastructure activities in Brazil". A company applying for accreditation as 
importer/distributor shall comply with the two general requirements and "the  following three specific 
requirements: (i)  investments in R& D in Brazil; (ii)  expenditure on engineering, basic industrial 
technology and capacity -building of suppliers in Brazil; and, (iii)  participation in the vehicle labelling 
programme by [the] National Institute of Metrology, Quality and Technology (INMETRO)".  A 
company applying for accreditation as an investor shall submit to the Ministry of Development, 
Industry and Trade (MDIC) an investment project containing a description and the technical features 
of the vehicles to be imported and manufactured. Accredita tion shall be granted once the investment 
project is approved by that Ministry. An investor shall be required to apply for a specific accreditation 
for every factory, plant, or industrial project that it plans to establish.  
Under the PEC  programme, the IPI  tax and the PIS/PASEP, COFINS, PIS/PASEP -Importation, and 
COFINS -Importation contributions are suspended with respect to raw materials, intermediate goods, 
and packaging materials purchased by predominantly exporting companies. Similarly, under the 
RECAP  programme, the PIS/PASEP, COFINS, PIS/PASEP -Importation, and COFINS -Importation 
contributions are suspended with respect to purchases of new machinery, tools, apparatus, 
instruments, and equipment by predominantly exporting companies.  
Before  the Panel, th e European  Union and Japan raised claims, inter alia , under Articles  III:2, III:4, 
and III:5 of the GATT  1994; Article  2.1 of the TRIMs  Agreement; and Article  3.1(b) of the 
SCM Agreement with respect to tax treatment established under the Informatics, PADI S, PATVD, 
and Digital Inclusion programmes (the ICT programmes) and the INOVAR -AUTO programme. Brazil 
invoked Article  XX(a) of the GATT  1994 to justify certain inconsistencies with respect to the PATVD 
programme and Articles  XX(b) and XX(g) to justify cert ain inconsistencies with respect to the 
INOVAR -AUTO programme. The European  Union and Japan also raised claims under Article  I:1 of 
the GATT  1994 with respect to the INOVAR -AUTO programme, in response to which Brazil invoked 
the Enabling Clause as a defenc e. With respect to the PEC and RECAP programmes, the 
European  Union and Japan raised claims under Article  3.1(a) of the SCM  Agreement.  
The Panel first addressed two broad defences raised by Brazil concerning the ICT  and INOVAR -AUTO 
programmes . First, the P anel rejected Brazil's argument that Article  III of the GATT  1994, Article  2 
of the TRIMs  Agreement, and Article  3.1(b) of the SCM  Agreement are inapplicable to "pre -market" 
measures. The Panel found that these provisions are not per se inapplicable to "pr e-market" 
measures directed at producers. Second, the Panel rejected Brazil's argument that the ICT and 
INOVAR -AUTO programmes constitute payment of subsidies exclusively to domestic producers 
within the meaning of Article  III:8(b) of the GATT  1994, and th erefore are exempted from the 
disciplines of Article  III of the GATT  1994 and Article  2.1 of the TRIMs  Agreement. To the Panel, 
those aspects of a measure resulting in product discrimination are not exempted per se  from these 
disciplines, even if the measu re takes the form of a subsidy paid exclusively to domestic producers.  WT/AB/29  
 
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  With respect to the ICT programmes , the Panel found that: (i) the production -step requirements and 
the requirement for products to obtain the status of "developed in Brazil" result in i mported products 
being subject to internal taxes in excess of those applied to like domestic products, inconsistently 
with Article  III:2, first sentence, of the GATT  1994; (ii) the production -step requirements and the 
requirement for products to obtain the  status of "developed in Brazil", as well as the lower 
administrative  burden on companies purchasing domestic incentivized intermediate ICT  products 
accord to imported products treatment less favourable than that accorded to like domestic products, 
inconsi stently with Article  III:4 of the GATT  1994; (iii) the ICT programmes constitute trade -related 
investment measures, and the aspects of these programmes found to be inconsistent with 
Articles  III:2 and III:4 of the GATT  1994 are also inconsistent with Artic le 2.1 of the 
TRIMs  Agreement; (iv) the tax exemptions, reductions, and suspensions granted under the 
ICT programmes are subsidies within the meaning of Article  1.1 of the SCM  Agreement, which are 
contingent upon the use of domestic over imported goods wit hin the meaning of Article  3.1(b) of 
the SCM  Agreement, and thus are prohibited subsidies, inconsistent with Articles  3.1(b) and 3.2 of 
the SCM  Agreement; and (v) those aspects of the PATVD programme found to be inconsistent with 
the GATT  1994 and the TRIM s Agreement are not justified under Article  XX(a) of the GATT  1994.  
With respect to the INOVAR -AUTO programme , the Panel found that: (i) certain aspects of the 
accreditation process, the system of rules on accrual and calculation of presumed tax credits, and 
the rules on the use of presumed tax credits resulting from expenditure on strategic inputs and tools 
in Brazil result in imported products being subject to internal taxes in excess of those applied to like 
domestic products, inconsistently wi th Article  III:2 of the GATT  1994; (ii) certain aspects of the 
accreditation process, the system of rules on accrual and calculation of presumed tax credits, and 
the rules on the use of presumed tax credits resulting from expenditure on strategic inputs an d tools 
in Brazil; the accreditation requirement to perform a minimum number of manufacturing steps in 
Brazil; that aspect of the rules on accrual of presumed IPI tax credits pertaining to expenditure in 
strategic inputs and tools; and those aspects of the  accreditation requirements to invest in R&D in 
Brazil and make expenditures on engineering, basic industrial technology, and capacity -building of 
suppliers in Brazil, pertaining to the purchase of Brazilian laboratory equipment, accord less 
favourable tre atment to imported products than that accorded to like domestic products, 
inconsistently with Article  III:4 of the GATT  1994; (iii) the INOVAR -AUTO programme constitutes a 
trade -related investment measure, and those aspects of the programme found to be inc onsistent 
with Articles  III:2 and III:4 of the GATT  1994 are also inconsistent with Article  2.1 of the 
TRIMs  Agreement; (iv) the tax reductions through presumed tax credits granted under the 
INOVAR -AUTO programme are subsidies within the meaning of Article  1.1 of the SCM  Agreement 
and contingent upon the use of domestic over imported goods within the meaning of Article  3.1(b) 
of the SCM  Agreement, and thus are prohibited subsidies, inconsistent with Articles  3.1(b) and 3.2 
of the SCM  Agreement; and (v) thos e aspects of the INOVAR -AUTO programme found to be 
inconsistent with the GATT  1994 and the TRIMs  Agreement are not justified under Article  XX(b) 
or XX(g) of the GATT  1994.  
The Panel also found that: (i) tax reductions accorded to imported products from Mer cado Comùn 
del Sur (Southern Common Market) (MERCOSUR) members and Mexico under the INOVAR -AUTO 
programme are advantages granted by Brazil to products originating in those countries, which are 
not accorded immediately and unconditionally to like products o riginating in other WTO Members, 
inconsistently with Article  I:1 of the GATT  1994; (ii) the complaining parties were not under a burden 
to invoke the Enabling Clause in their panel requests, and their claims under Article  I:1 of the 
GATT  1994 are therefore  within the Panel's terms of reference; and (iii) the tax reductions accorded 
to imported products from Argentina, Mexico, and Uruguay and found to be inconsistent under 
Article  I:1 of the GATT  1994 are not justified under paragraphs 2(b) or 2(c) of the En abling Clause.  
In relation to the PEC and RECAP programmes , the Panel found that the tax suspensions granted 
thereunder are subsidies within the meaning of Article  1.1 of the SCM  Agreement and contingent 
upon export performance under Article  3.1(a) of the  SCM Agreement, and thus are prohibited 
subsidies, inconsistent with Articles  3.1(a) and 3.2 of the SCM  Agreement . 
In accordance with Article  19.1 of the DSU, and having found that Brazil acted inconsistently with 
its obligations under Articles  I:1, III:2,  and III:4 of the GATT  1994; Article  2.1 of the 
TRIMs  Agreement; and Articles  3.1(a), 3.1(b), and 3.2 of the SCM  Agreement with respect to the 
measures at issue, the Panel recommended that the DSB request Brazil to bring its measures into 
conformity with i ts obligations under the covered agreements. Pursuant to Article  4.7 of the WT/AB/29  
 
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  SCM Agreement, the Panel also recommended that Brazil withdraw the subsidies found to be 
WTO-inconsistent within 90 days . 
3.5.1   Articles  III:2 and III:4 of the GATT  1994 and Article  2.1 of the TRIMs Agreement  
The Appellate  Body began by recalling certain terminologies employed by the Panel in these disputes 
regarding  the categories of products involved under the ICT  and INOVAR -AUTO programmes. The 
Appellate  Body recalled that the Panel no ted that the European  Union's and Japan's claims with 
respect to the ICT  and INOVAR -AUTO programmes pertained to two distinct types of products: 
"incentivised products" and inputs for the "incentivised products". The Panel further observed that 
Brazil subc ategorized the "incentivised products" as "intermediate" and "finished" products. The 
Appellate  Body recalled that the Panel noted that a "finished product", as identified  by Brazil, is a 
product that will not undergo any further manufacturing and will be "incentivised" if "the company  
producing them is accredited under a particular programme" and if a finished product is incentivi zed, 
it means that it receives a particular tax benefit on its sale. The Appellate  Body further recalled that 
"intermediate prod ucts", as the Panel explained, will  be subject to further manufacturing  and will 
also be "incentivised" if the company producing them is accredited under a particular programme. 
The Panel noted that, i f an intermediate product is incentivi zed, it will be subject to a particular tax 
benefit on its sale.  
The Appellate  Body further noted that, on appeal, Brazil took issue with the Panel's finding that 
Article  III of the GATT  1994 is not per se inapplicable to certain measures, in particular pr e-market 
measures  directed at producers. Brazil contended that Article  III deals with non -discrimination 
between domestic and imported products, thus being applicable only to measures which affect a 
product once it has been produced and enters the marketpl ace and not to production (pre -market) 
measures. However, in response to questioning at the oral hearing, Brazil confirmed that it did not 
wish to pursue any further this line of argument regarding the inapplicability of Article  III to 
producer -related mea sures.  
With that background in mind, the Appellate  Body turned to address Brazil's discrete claims 
on appeal.  
3.5.1.1   The ICT programmes  
3.5.1.1.1   Whether the Panel erred in finding that imported finished and intermediate 
ICT products were taxed in excess of like domestic finished and intermediate ICT  products 
inconsistently with Article  III:2, first sentence, of the GATT  1994  
In relation  to imported finished ICT products , Brazil contended on appeal that the Panel failed to 
undertake a thorough analysis of the case presente d by the complaining parties and to carefully 
scrutinize the design, structure, and operation of the ICT  programmes in applying Article  III:2 to the 
facts of this dispute. Brazil submitted that there is nothing in the design, structure, and operation of 
the challenged measures that by necessary implication would amount to de jure  tax discrimination 
within the meaning of Article  III:2.  
The Appellate  Body noted that, in order for an ICT  product to be subject to the tax treatment 
provided for in the ICT  progra mmes, companies that manufacture these products must be located 
(and operate) in Brazil and must comply with one or more of the following requirements: (i) invest 
in R&D in Brazil  (in the case of the Informatics, PADIS, and PATVD programmes); (ii) manufact ure 
in Brazil in accordance with the relevant PPBs (in the case of the Informatics, PADIS, PATVD, and 
Digital Inclusion programmes) or carry out certain manufacturing steps in Brazil (in the case of the 
PADIS and PATVD programmes); and/or (iii) develop the  products in Brazil (in order to obtain 
additional tax reductions under the Informatics programme or to obtain tax exemptions (through 
zero rates) under the PATVD programme). The Appellate  Body noted that Brazil accepted that it is 
undisputed that foreign producers cannot be accredited under the ICT  programmes. The 
Appellate  Body found that the Panel rightly considered that that imported finished ICT  products 
cannot qualify for the relevant tax treatment because they: (i) are never manufactured in Brazil by  
companies located or operating in Brazil and are never produced in accordance with the relevant 
PPBs or similar production -step requirements; and (ii) will never be able to obtain the status of being 
"developed in Brazil". Accordingly, the Appellate  Body found that imported finished ICT  products are 
therefore not eligible for either tax reductions or exemptions under the ICT  programmes and WT/AB/29  
 
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  consequently, bear the full tax burden, as opposed to like domestic finished ICT  products. The 
Appellate  Body further noted that a finished product is a product that will not undergo any further 
manufacturing and the  sale of a finished product represents the last stage of a transaction. In the 
case of an imported finished ICT  product, w hen an importer sells the imported f inished ICT  product 
to a wholesaler, retailer, or distributor, the importer will charge the IPI tax to the wholesaler or 
retailer or distributor and remit the tax to the Brazilian Government. In contrast, in the case of a 
like domestic finished ICT  product  that is subject to IPI tax exemption or reduction under the 
ICT programmes, the seller does not charge any tax or charges a reduced tax, as the case may be, 
to the wholesaler, retailer, or distributor. At this last stage, the Appellate  Body found that the  tax 
rate is thus higher for imported finished ICT  products than for like domestic finished ICT  products, 
and the tax burden on the former is necessarily in excess of that on the latter.  
For these reasons , the Appellate  Body upheld the Panel's findings tha t that imported finished 
ICT products are subject to a higher tax burden than like domestic ICT  products and are 
consequently taxed in excess of like domestic finished ICT  products, contrary to Article  III:2, 
first sentence, of the GATT  1994.  
In relation  to imported intermediate ICT products , on appeal, Brazil argued that the Panel opted to 
ignore the fact that the credit -debit system in a value added tax ensures that the amount collected 
at each step of production is equivalent to the value added at that step. Brazil thus submitted that, 
in the end, the tax burden of a product subject to the payment of a tax, which generates a credit, 
and a product that is subject to a suspension, but  receives no credit, will be the  same.  
The Appellate  Body noted that, on appeal, Brazil neither took issue with the Panel's understanding 
of the credit -debit system, nor did Brazil raise a claim under Article  11 of the DSU. That said, t he 
Appellate  Body recalled the Panel's explanation when  comparing the situations concerning t he sale 
of incentivized domestic intermediate ICT  products, on the one hand, and imported intermediate 
ICT products, on the other hand. The Appellate  Body considered that, while on the face of it, the tax 
system may appear to be neutral in terms of tax col lection with respect to intermediate ICT  products 
(whether domestic or imported), the Panel rightly stated that a thorough look into the operation of 
the tax holistically is necessary in order to determine the effective tax burden on the products at 
issue.  The Appellate  Body recalled that the Panel ultimately found that there is a different effective 
tax burden on imported ICT  products vis -à-vis like domestic ICT  products for two reasons: the 
availability of cash flow for those companies that benefit from t he tax exemption or reduction, and 
the "time -value" of money.  
The Appellate  Body noted that, under the credit -debit system, purchases of non -incentivized 
imported intermediate ICT  products involve the payment of a tax upfront that is not faced by 
companies  that purchase incentivized like domestic intermediate ICT  products, which are exempted 
from the relevant taxes. Even in the case of tax reductions, companies purchasing incentivized like 
domestic intermediate ICT  products have to pay a lower tax as compar ed to companies purchasing 
non-incentivized imported intermediate ICT  products. The Appellate  Body explained that the fact 
that purchasers of imported intermediate ICT  products have to pay the relevant taxes under the 
ICT programmes, irrespective of the po int in time, compared to purchasers of incentivized like 
domestic intermediate ICT  products, who do not have to pay the relevant tax or pay a reduced 
amount, limits the availability of cash flow, resulting in a higher effective tax burden on imported 
intermediate ICT  products. The Appellate  Body also found that the value of the tax credit that is 
generated upon the payment of the relevant tax on the sale of a non -incentivized imported 
intermediate ICT  product will depreciate over time until it is used or ad justed. The Appellate  Body 
recalled that, in cases where the IPI tax debits are lower than the IPI tax credits, and the company 
buying a product cannot offset the credits with debits after a three -month period, it can request 
compensation of the credits wi th other taxes, or  reimbursement from the Brazilian Government. The 
Appellate  Body, however, noted that the reimbursement process may take from several months to 
years. Therefore, the Appellate  Body considered that, to that extent there is a time lag betwe en the 
accrual of the tax credit and the adjustment or use thereof, it necessarily results in the value of 
money (in the form of accrued tax credits) depreciating over time.  
For these reasons, the Appellate  Body upheld the Panel's findings that imported intermediate 
ICT products are taxed in excess of like domestic incentivized intermediate ICT  products contrary to 
Article  III:2, first sentence, of the GATT  1994.  WT/AB/29  
 
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  3.5.1.1.2   Whether the P anel erred in finding that the accreditation requirements under 
the ICT  programmes accord treatment less favourable to imported products than that 
accorded to like domestic products inconsistently with Article  III:4 of the GATT  1994  
On appeal , Brazil argue d that the Panel's analysis with respect to the accreditation requirements 
under the ICT  programmes conflates tax discrimination, which is under the purview of Article  III:2 
with regulatory discrimination, to which Article  III:4 applies. Brazil contended t hat, in order to find 
an inconsistency with Article  III:4 of the GATT  1994, the Panel was required to identify a regulatory 
discrimination other than the differences in tax treatment that may result in an inconsistency with 
Article  III:2 of the GATT  1994.  
The Appellate  Body noted that the aspect of the ICT  programmes challenged by the complaining 
parties as being inconsistent with Article  III:4 concerned the accreditation requirements, the 
fulfilment of which enabled the  obtaining of the relevant tax exempt ion, reduction, or suspension on 
the sales or purchases of ICT  products. The Appellate  Body recalled the Panel's recognition  that the 
aspects challenged by the complaining parties under Article  III:4 are different from, albeit related 
to, the differential tax treatment of like domestic and imported products that they challenge under 
Article  III:2. The Appellate  Body considered that the Panel was mindful of the fact that the 
ICT programmes included both fiscal and regulatory aspects that were applicable to t he products at 
issue.  While the accreditation requirements related to regulatory aspects, the tax exemptions or 
reductions under the ICT  programmes related to fiscal aspects. The Appellate  Body found t his 
evident from the Panel's conclusion that the condit ions for accreditation "modify the conditions of 
competition to the detriment of the imported products" by creating "a lower internal tax burden on 
domestic products than on like imported products".  
The Appellate  Body noted that it was undisputed that, in order to be eligible for the tax exemption, 
reduction, or suspension under the ICT  programmes, companies must fulfil the accreditation 
requirements. The Appellate  Body found that t he accreditation requirements under the 
ICT programmes therefore result in l ess favourable treatment for imported ICT  products in the form 
of the differential tax burden that imported ICT  products are subjected to by virtue of the fact that 
foreign producers cannot be accredited under the ICT  programmes. The consequence being, as the 
Panel also noted, imported ICT products can never qualify for the tax exemptions, reductions , or 
suspensions. The Appellate  Body considered that t he aspects of the ICT  programmes found to be 
inconsistent with Article  III:2, first sentence, and Article  III:4 are distinct. In the case of Article  III:2, 
first sentence, the aspect of the ICT  programme found to be inconsistent is the differential tax 
treatment that results in a higher tax burden on imported ICT  products, i.e. imported ICT  products 
are taxed in excess of like domestic ICT  products. For purposes of Article  III:4, the aspect of the 
ICT programmes found to be inconsistent is the accreditation requirements that result in less 
favourable treatment in the form of the differential burden that importe d ICT  products are subjected 
to. The Appellate  Body saw no reason why that cannot be the case since d ifferent aspects of the 
same measure may be found to be inconsistent with one or more paragraphs of Article  III of the 
GATT  1994.  
For these  reasons, the Ap pellate  Body upheld the Panel's findings that the accreditation 
requirements under the ICT  programmes, by restricting access to the tax incentives only to domestic 
products , modify the conditions of competition to the detriment of imported products and res ult in 
less favourable treatment being accorded to imported ICT  products than to like domestic 
ICT products  inconsistently with Article  III:4 of the GATT  1994.  
3.5.1.1.3   Whether the Panel erred in finding that the ICT  programmes are inconsistent 
with Article  III:4 o f the GATT  1994 by virtue of the lower administrative burden on 
companies purchasing incentivized domestic intermediate products  
On appeal, Brazil argued that Panel's findings concerning the alleged lower administrative burden 
on companies purchasing domes tic incentivized intermediate products has  no grounds, either in law 
or in the facts of the present dispute. Brazil contended that the Panel misconstrued the functioning 
of the Brazilian tax system and found an administrative burden in the operation of the  debit and 
credit tax system where there is none.  
The Appellate  Body observed that the Panel took into account the functioning of the credit -debit 
system. The Appellate  Body noted that it was mindful of Brazil's contention that the credit -debit WT/AB/29  
 
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  system oper ates as a ledger in which both purchases of inputs and intermediate goods and sales of 
final goods are recorded, and debits and credits are offset and that there is no change in the event 
of suspensions, reductions , or exemptions of indirect taxes. The App ellate  Body, however, 
considered that Brazil's contention would not change the fact that purchasers of imported 
intermediate ICT  products that are not incentivized under the ICT  programmes will have to 
anticipate and pay the full amount of tax due on such imported intermediate ICT  products. The 
Appellate  Body noted that, although any such tax paid on the purchase of imported intermediate 
ICT products will generate a corresponding tax credit in favour of the purchaser, nonetheless, 
offsetting this tax credit  entails an administrative burden that is not faced and/or faced to a lesser 
extent by a purchaser of domestic intermediate ICT  products that are incentivized. The 
Appellate  Body explained that this is the case because, under the credit -debit system, if th e tax 
credit cannot be offset by debits after three taxation periods, the process of compensating the tax 
credit with other federal taxes, or reimbursement thereof can be burdensome for companies, and 
can take years.  
For these reasons, the Appellate  Body u pheld the Panel's findings that the ICT  programmes are 
inconsistent with Article  III:4 of the GATT  1994, because they accord to imported intermediate ICT 
products treatment less favourable than that accorded to like domestic intermediate ICT products, 
due to the lower administrative burden imposed on firms purchasing incentivized domestic 
intermediate ICT products.  
3.5.1.1.4   Whether the Panel erred in finding that the ICT  programmes are inconsistent 
with Article  2.1 of the TRIMs  Agreement  
The Appellate  Body noted that, on appeal, Brazil did not make any specific arguments in connection 
with the Panel's finding under Article  2.1 of the TRIMs  Agreement. Rather, the Appellate  Body 
observed that Brazil's request for reversal of the Panel's finding under Article  2.1 of the TRIMs 
Agreement was premised on the Appellate  Body reversing the Panel's findings under Article  III:4 of 
the GATT  1994. The Appellate  Body, however, recalled that for the reasons stated above, it had 
upheld the Panel's findings tha t certain aspects of the ICT  programmes are inconsistent with 
Article  III:4 of the GATT  1994. Consequently, the Appellate  Body upheld the Panel's findings that 
those aspects of the ICT  programmes found to be inconsistent with Article  III:4 of the GATT  1994 
are also inconsistent with Article  2.1 of the TRIMs  Agreement.  
3.5.1.2   The INOVAR -AUTO programme  
3.5.1.2.1   Whether the Panel erred in finding that the accreditation requirements under 
the INOVAR -AUTO programme are inconsistent with Article  III:4 of the GATT  1994 
because th ey are more burdensome for companies seeking accreditation as 
importers/distributors as opposed to domestic manufacturers  
On appeal, Brazil took issue with the Panel's finding that the accreditation requirements under the 
INOVAR -AUTO programme are discrimi natory because they would be allegedly more burdensome to 
importers/distributors than to domestic manufacturers and therefore result in less favourable 
treatment being accorded to imported finished motor vehicles. Brazil argued that, in reaching its 
conclu sions on the discriminatory impact of the types of accreditation provided under the 
INOVAR -AUTO programme , the Panel limited itself to conducting a quantitative  analysis of the 
requirements provided under INOVAR -AUTO programme.  
The Appellate  Body recalled that the purpose of complying with the requirements for accreditation 
is to obtain presumed IPI tax credits on the sale of products. The Appellate  Body noted that it was 
undisputed that, in order for companies to obtain any sort of accreditation that entit les them to 
accrue and use presumed IPI tax credits, they must either be located and operate in Brazil, in the 
case of domestic manufacturers and importers/distributors, or be in the process of establishing in 
the country as domestic manufacturers, in the case of investors. The Appellate  Body found that the 
only viable way for foreign manufacturers to be able to enjoy the benefit of the presumed IPI tax 
credits in reducing their IPI tax liability is to become accredited as importers/distributors. However, 
in order to do so, the Appellate  Body noted, foreign manufacturers must, first and foremost, be 
located and operate in Brazil, which, in the Appellate  Body's view, indicated that foreign 
manufacturers seeking accreditation as importers/distributors face a corresponding burden that WT/AB/29  
 
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  necessarily  comes with having to operate in, or establish themselves in Brazil, unlike domestic 
manufacturers, who already operate or are established in Brazil.  
The Appellate  Body further recalled that, in order to become accredited as importers/distributors, a 
compa ny shall comply with the following three specific requirements: (i)  investments in R&D in 
Brazil; (ii)  expenditure on engineering, basic industrial technology, and capacity -building of suppliers 
in Brazil; and (iii)  participation in the vehicle -labelling p rogramme by INM ETRO . The Appellate  Body 
noted that a fourth requirement which calls for the performance in Brazil of certain manufacturing 
steps also exists. The Appellate  Body, however, took the view that these activities are not typical 
for foreign manuf acturers seeking to import motor vehicles into Brazil. According to the 
Appellate  Body, the fact that foreign manufacturers have to undertake these activities to get 
accredited as importers/distributors implied that foreign manufacturers face a burden that  domestic 
manufacturers do not face. The Appellate  Body observed that, in order to be accredited, domestic 
manufacturers need to comply with three out of four specific requirements. The Appellate  Body noted 
that one of these must be the performance of a mi nimum number of defined manufacturing and 
engineering infrastructure activities in Brazil. The other two requirements must be among the 
following three: (i)  investments in R&D in Brazil; (ii)  expenditure on engineering, basic industrial 
technology, and cap acity-building of suppliers in Brazil; or (iii)  participation in the vehicle -labelling 
programme by INMETRO. The Appellate  Body considered that almost all of these requirements could 
be considered to be typical of the nature of activity carried out by a do mestic manufacturer.  
The Appellate  Body found that the INOVAR -AUTO programme is thus designed in such a manner 
that the accreditation requirements thereunder adversely modify the equality of competitive 
conditions for imported products compared to like dom estic products. The Appellate  Body reasoned 
that this is so because, first, foreign manufacturers seeking accreditation as importers/distributors 
in order  to enjoy a  reduction on IPI tax liability have to operate or establish themselves in Brazil 
with the corresponding burden unlike domestic manufacturers, who already operate and are 
established in Brazil. Second, foreign manufacturers seeking accreditation as importers/distributors 
are required to comply with more accreditation requirements and undertake c ertain activities 
prescribed under the INOVAR -AUTO programme, which are, in any event, not typical for foreign 
manufacturers seeking to import motor vehicles into Brazil. The Appellate  Body further found that, 
contrary to Brazil's contention , the Panel suf ficiently engaged in a qualitative analysis.  
For these reasons, the Appellate  Body upheld the Panel's findings that, under the INOVAR -AUTO 
programme, the conditions for accreditation, in order to receive presumed tax credits, accord less 
favourable treatme nt to imported products than that accorded to like domestic products 
inconsistently with Article  III:4 of the GATT  1994.  
3.5.1.2.2   Whether the Panel erred in finding that the INOVAR -AUTO programme is 
inconsistent with Article  2.1 of the TRIMs  Agreement  
The Appellate  Body noted that, on appeal, Brazil did not make any specific arguments regarding the 
Panel's finding under Article  2.1 of the TRIMs  Agreement. Rather, the Appellate  Body observed, that 
Brazil's request for reversal of the Panel's finding under Article  2.1 of the TRIMs  Agreement was 
premised on the Appellate  Body reversing the Panel's findings under Article  III:4 of the GATT  1994. 
The Appellate  Body, however, recalled that for the reasons stated above, it had upheld the Panel's 
findings that certain aspects  of the INOVAR -AUTO programme are inconsistent with Article  III:4 of 
the GATT  1994.  Consequently, the Appellate  Body upheld the Panel's findings that those aspects of 
the INOVAR -AUTO programme found to be inconsistent with Article  III:4 of the GATT  1994 ar e also 
inconsistent with Article  2.1 of the TRIMs  Agreement.  
3.5.2   Article  III:8(b) of the GATT  1994  
On appeal, Brazil claimed that the Panel erred in its interpretation of Article  III:8(b) in finding that 
"subsidies that are provided exclusively to domestic pro ducers pursuant to Article  III:8(b) of the 
GATT  1994 are not per se exempted from the disciplines of Article  III of the GATT  1994." As a result 
of its erroneous interpretation, Brazil claimed that the Panel also erred in its application of 
Article  III:8(b)  in finding that: (i) the ICT programmes are inconsistent with Article  III:2, first 
sentence, and Article  III:4 of the GATT  1994 and Article  2.1 of the TRIMs  Agreement; and (ii) the 
accreditation requirements under the INOVAR -AUTO programme are inconsisten t with Article  III:4 
of the GATT  1994 and Article  2.1 of the TRIMs  Agreement.  WT/AB/29  
 
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  Beginning with the legal standard under Article  III:8(b), the Appellate  Body noted the similarities 
between the opening clause of Article  III:8(b) and the chapeau  of Article  XX, on the one hand, and 
the differently worded opening clauses of Article  III:8(a) and (b), on the other hand. According to 
the Appellate  Body, while Article  III:8(a) precludes  the application of the national treatment 
obligation in Article  III to government procurement activities falling within its scope, Article  III:8(b) 
provides a justification  for measures that would otherwise be inconsistent with the national 
treatment obligation in Article  III. Turning to the term "payment of subsidies" used in 
Article  III:8(b), the Appellate  Body considered that the interpretative issue at hand related not to 
the definition of "subsidies" under the GATT  1994 generally or under the SCM  Agreement, but 
instead on the precise scope of the term "payment of subsidies" as used in Article  III:8(b), in 
particular. Having examined  the text and context of Article  III:8(b), as supported by its negotiating 
history, the Appellate  Body concluded that "payment of subsidies" in Article  III:8(b) does not include 
within its scope the exempt ion or reduction of internal taxes applied, directly or indirectly, on 
domestic products. Instead, the Appellate  Body recalled its finding in Canada – Periodicals that 
Article  III:8(b) "was  intended to exempt from the obligations of Article  III only the pa yment of 
subsidies which involves the expenditure of revenue by a government". In reaching this conclusion, 
the Appellate  Body placed particular emphasis on the examples of "payment of subsidies" set out in 
Article  III:8(b) as well as the context provided by Article  III:2. With respect to the latter,  the 
Appellate  Body observed that, if the scope of "payment of subsidies" is seen as encompassing an 
exemption or reduction of internal product taxes that are "otherwise due", it would allow 
WTO Members to circu mvent Article  III:2 and adopt discriminatory tax measures by disguising them 
in the form of a scheme of exemption or reduction of internal product taxes for domestic producers 
alone.  
Regarding the phrase  "exclusively to domestic producers" in Article  III:8(b), the Appellate  Body 
observed that, to the extent that the payment of subsidies exclusively to domestic producers of a 
given product affects the conditions of competition between such a product and the like imported 
product, resulting in an inconsistenc y with the national treatment obligation in Article  III, such a 
payment would be justified under the exception contained in Article  III:8(b), provided that the 
conditions thereunder are met. Moreover, according to the Appellate  Body,  insofar as Article  III:8(b) 
justifies the payment by WTO Members of subsidies exclusively to domestic producers, conditions 
for eligibility that define the class of eligible "domestic producers" by reference to their activities in 
the subsidized products' markets would be justi fied under Article  III:8(b). By contrast, a requirement 
to use domestic over imported goods in order to have access to the subsidy may, however, not be 
covered by the exception in Article  III:8(b) and would therefore continue to be subject to the national 
treatment obligation in Article  III. Finally, with respect to the term "domestic producers" in 
Article  III:8(b), the Appellate  Body stated that the focus of inquiry ought to be on whether the 
domestic entity at issue is a producer  of the product with respe ct to which a violation of the national 
treatment obligation arising from the "payment of subsidies" is alleged.  
Turning to Brazil's claims of error on appeal, the Appellate  Body agreed with the Panel's preliminary 
observations that discrimination resultin g from the payment of subsidies exclusively to domestic 
producers and the market effects thereof may be justified under Article  III:8(b). It, however, 
expressed several concerns about the Panel's subsequent analysis leading to the conclusion that 
"aspects of a subsidy resulting in product discrimination (including requirements to use domestic 
goods, as prohibited by Article  3.1 of the SCM  Agreement) are not exempted from the disciplines of 
Article  III pursuant to Article  III:8(b)." In particular, the Appell ate Body noted the Panel's 
unqualified reference to "aspects of a subsidy", as well as its use of the term "including", when 
referring to domestic content requirements in the above statement. According to the Appellate  Body, 
the Panel's interpretation, tak en to its logical conclusion, denies effect to the exception contained in 
Article  III:8(b), because, following the Panel's logic, in order to justify discrimination inconsistent 
with the national treatment obligations in Article  III pursuant to Article  III:8(b), the "payment of 
subsidies exclusively to domestic producers" must not be discriminatory in the first place. The 
Appellate  Body thus considered that the Panel's conclusion embodies a circular logic inasmuch as it 
delimits the scope of Article  III:8(b ) – an exception to the national treatment obligation for certain 
specific types of subsidies – on the basis of the discriminatory effects of the subsidies themselves. 
The Appellate  Body clarified that, although the Panel correctly noted that discriminatio n resulting 
from requirements to use domestic over imported goods, as prohibited under Article  3.1(b) of the 
SCM Agreement, is not justified under Article  III:8(b), the Panel's unqualified reference to "aspects 
of a subsidy resulting in product discriminat ion" not being exempted under Article  III:8(b) is overly 
broad and deprives that provision of any effect because, as acknowledged by the Panel, the very act 
of subsidization will, in and of itself, often result in product discrimination. For these reasons,  the WT/AB/29  
 
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  Appellate  Body reversed the Panel's overly broad and unqualified findings that "subsidies that are 
provided exclusively to domestic producers pursuant to Article  III:8(b) of the GATT  1994 are not per 
se exempted from the disciplines of Article  III of the GATT  1994" and that "aspects of a subsidy 
resulting in product discrimination (including requirements to use domestic goods, as prohibited by 
Article  3.1 of the SCM  Agreement) are not exempted from the disciplines of Article  III pursuant to 
Article  III:8(b)".  
Having reversed the Panel's findings under Article  III:8(b), the Appellate  Body addressed Brazil's 
argument that the term "subsidies" in Article  III:8(b) encompasses all types of subsidies listed in 
Article  1.1 of the SCM  Agreement. Recalling its d iscussion of the legal standard under 
Article  III:8(b), the Appellate  Body found that Article  III:8(b) does not include within its scope the 
exemption or reduction of internal taxes affecting the conditions of competition between like 
products. Thus, for t he Appellate  Body, none of the measures at issue in this dispute is capable of 
being justified under that provision because they all involve the exemption or reduction of internal 
taxes affecting the conditions of competition between like products and ther efore cannot constitute 
the "payment of subsidies" within the meaning of Article  III:8(b).  
One member of the Division disagreed with the majority's interpretation of the term "payment of 
subsidies" in Article  III:8(b). In a separate opinion, that Division member noted that there are 
explicit textual linkages between the definition of a subsidy set out in Article  1 of the SCM  Agreement 
and Article  XVI of the GATT  1994 dealing with subsidies. Noting that the relevant  provisions of the 
GATT  1994 and the SCM  Agreement together define and reflect the whole package of rights and 
obligations of WTO  Members with respect to subsidies, the member saw no reason why the term 
"subsidies" under the GATT  1994, including in Article  III:8(b), should have a different meaning than 
the definition of a subsidy set out in Article  1.1 of the SCM  Agreement. As to the use of the term 
"payment" in Article  III:8(b), the member was of the view that "payments" involving the expenditure 
of revenue by a government may take various forms an d are not necessarily limited to direct 
monetary transfers. Recalling the Appellate  Body Report in Canada  ‒ Dairy , the member noted that 
the foregoing of revenue, such as through a reduction, exemption, or suspension of taxes "otherwise 
due", incurs a char ge on the public account and therefore involves the expenditure of revenue by a 
government. The member was of the view that the restrictive interpretation of "payment of 
subsidies" as excluding "revenue foregone" arrived at by the majority denies effect to  the key legal 
terms of the SCM  Agreement. In this regard, the member noted that the focus on the trade effects 
of subsidization, including through revenue foregone, which pervades the SCM  Agreement disciplines 
concerning the use of "actionable" subsidies is absent in the context of Article  III:2 of the 
GATT  1994. For this reason, the member observed that the interpretation of "payment of subsidies" 
as excluding revenue foregone would undermine, inconsistently with Article  3.2 of the DSU as well 
as the fund amental principle of effectiveness in treaty interpretation, the careful balance of rights 
and obligations under the SCM  Agreement with respect to an entire category of measures that are 
expressly included within the definition of a subsidy in Article  1.1, namely, the foregoing of 
government revenue that is otherwise due. Insofar as they constitute the "payment of subsidies 
exclusively to domestic producers", the member thus concluded that the measures at issue in these 
disputes, as well as any conditions f or eligibility for the payment of subsidies that define the class of 
eligible "domestic producers" by reference to their activities in the subsidized products' markets, 
would be justified under Article  III:8(b).  
3.5.3   Article  3.1(a) of the SCM  Agreement  
On appea l, Brazil claimed that the Panel erred in finding that the tax suspensions granted under the 
PEC programme and the RECAP programme are subsidies within the meaning of Article  1.1(a)(1)(ii) 
of the SCM  Agreement  and are contingent upon export performance und er Article  3.1(a) of the 
SCM Agreement . According to Brazil, the Panel erred in the application of Article  1.1(a)(1)(ii) of the 
SCM Agreement by failing to use the tax treatment of companies that are structural tax accumulators 
as the benchmark treatment. Brazil argued, in particular, that "[i]nstead of examining the principles 
and structure of Brazil's taxation regime and identifying what constitutes 'comparably situated 
taxpayers', the Panel erroneously focused on identifying a 'general rule of taxation' and its potential 
exemptions." In the event that the Appellate  Body were to conclude that the Panel did not err in its 
identification of the relevant benchmark treatment, Brazil submitted three alternative claims of error. 
Brazil argued that the Panel: (i)  erred in its comparison of the selected benchmark treatment with 
the challenged treatment under the PEC and RECAP programmes; (ii) erred in finding that the 
possible cash availability and implicit interest income constitute "government revenue that is WT/AB/29  
 
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  otherwise due"; and (iii) failed to make an objective assessment of the matter before it pursuant to 
Article  11 of the DSU by disregarding certain evidence submitted by Brazil.  
The Appellate  Body started by addressing Brazil's claim that the Panel erred in de termining the 
benchmark for comparison. The Appellate  Body recalled that, before the Panel, as well as on appeal , 
Brazil argued that the appropriate benchmark for comparison with the tax suspensions and 
exemptions under the PEC and RECAP programmes is the treatment granted to companies that tend 
to structurally accumulate credits. In its analysis of the benchmark treatment with respect to the IPI 
tax suspensions, "[t]he Panel agree[d] with Brazil that there are other companies, in addition to the 
companies accredited or registered as predominantly exporting companies, which are entitled to the 
IPI tax suspension on the purchase of raw materials, intermediate goods and packaging materials." 
Specifically, the Panel noted that, pursuant to Article  29 of Law 10, 637/2002, the tax suspension 
also applies to: (i) establishments dedicated primarily to the manufacture of products classified in 
chapters 2, 3, 4, 7, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 20, 23, 28, 29, 30, 31, and 64 (21 chapters 
in total) of the Indust rial Goods Tax Classification Table, as well as under codes 2209.00.00 and 
2501.00.00, and at positions 21.01 to 21.05.00 of the Industrial Goods Tax Classification Table; 
(ii) industrial establishments that primarily manufacture components, chassis, bodies, parts, and 
pieces of automotive products; (iii) industrial establishments that primarily manufacture parts and 
pieces intended for the aerospace industry; and (iv) industrial establishments that primarily 
manufacture the goods benefiting f rom the Informatics programme. Moreover, the Panel observed 
that "[t]he suspension also applies to companies qualified under the Special Regime for the Brazilian 
Aerospace Industry [(RETAERO)] and the Special Regime to Incentive Computers for Educational 
Use (REIMCOMP)."  
The Appellate  Body further recalled that the Panel, however, considered that the selection of 
companies entitled to the tax suspensions "d[id] not seem to be directly linked to the problem of 
credit -accumulation, so as to create a general r ule for structurally or predominantly credit 
accumulating companies". In the Panel's view, the evidence on the record did not demonstrate that 
companies to which the suspension applied were structural credit accumulators. The Panel observed 
that, on the on e hand, there are producers of low -taxed products, which are more likely to 
accumulate tax credits, that are not entitled to tax suspensions and, on the other hand, producers 
of higher taxed products, which are less likely to do so, that were entitled to t he suspensions. The 
Panel was not convinced that the availability of suspensions for other companies, in addition to the 
predominantly exporting companies, was sufficient to prove the existence of a general rule for 
structurally or predominantly credit -accumulating companies. The Panel thus found that Brazil has 
not demonstrated that the tax suspensions were the benchmark treatment for structurally 
credit -accumulating companies and, instead, defined the benchmark as "the treatment applicable to 
purchases by  non-accredited companies of raw materials, intermediate goods and packaging 
materials used in the manufacture of their products".  
The Appellate  Body recalled that a panel examining a claim under Article  1.1(a)(1)(ii) of the 
SCM Agreement must: (i) identif y the tax treatment that applies to the income of the alleged subsidy 
recipients; (ii) identify a benchmark for comparison; and (iii) compare the challenged tax treatment 
and the reasons for it with the benchmark tax treatment. The Appellate  Body expressed  reservations 
about a panel seeking to identify a general rule and exception relationship in determining the 
existence of a revenue otherwise due that is foregone or not collected under Article  1.1(a)(1)(ii). 
The Appellate  Body explained that, given the va riety and complexity of domestic tax systems, it will 
usually be very difficult to isolate a general rule of taxation and exceptions to that general rule, and 
that an examination under Article  1.1(a)(1)(ii) "must be sufficiently flexible to adjust to the 
complexities of a Member's domestic rules of taxation ". In seeking to identify a general rule and an 
exception, a panel might artificially create a rule and an exception where no such distinction exists. 
The Appellate  Body observed that the determination of  a benchmark for comparison entails, instead, 
identifying the tax treatment of comparable income of comparably situated taxpayers. This exercise 
involves an examination of the structure of the domestic tax regime and its organizing principles 
and requires the panel to develop an understanding of the tax structure and principles that best 
explains that Member's tax regime.  
The Appellate  Body noted that, in its analysis, the Panel sought to determine the existence of a 
"general rule" for companies that struct urally accumulate credits. The Panel considered that such a 
general rule would exist if the tax suspensions were to apply to all the actual or potential credit 
accumulators and were not to apply to companies that do not or are unlikely to accumulate credit s. 
The Panel rejected the tax suspensions as the benchmark treatment because it considered that some WT/AB/29  
 
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  companies to which the tax suspensions applied were not actual or potential credit accumulators, 
and because some companies to which the suspensions did no t apply were accumulating credits. As 
a result, the Panel could not establish the existence of a "general rule" of taxation.  
The Appellate  Body took the view, however, that, instead of seeking to determine the existence of 
a general rule whereby the tax su spensions would only apply to companies structurally accumulating 
credits, the Panel should have determined the tax treatment of comparably situated taxpayers. The 
Appellate  Body noted that companies that are entitled, or potentially entitled, to the suspe nsion of 
taxes fall into many categories, each covering a broad number of entities. In the Appellate  Body's 
view, the Panel should have considered in detail the treatment of these categories of companies to 
determine whether they are comparably situated to  the predominantly exporting companies rather 
than seeking to identify the existence of a general rule of taxation for structurally 
credit -accumulating companies.  
The Appellate  Body thus reversed the Panel's findings that Brazil has not demonstrated that t he tax 
suspensions are the benchmark for comparison and that the appropriate benchmark is, instead, the 
treatment applicable to purchases by non -accredited companies of the relevant products. As a result, 
the Appellate  Body also reversed the Panel's findin gs that the tax suspensions granted to registered 
or accredited companies under the PEC and RECAP programmes constitute financial contributions in 
the form of government revenue otherwise due that is foregone or not collected and are hence 
subsidies within  the meaning of Article  1.1 of the SCM  Agreement that are contingent upon export 
performance under Article  3.1(a) of the SCM  Agreement. Having done so, the Appellate  Body did 
not need to further address Brazil's alternative claims concerning the applicatio n of 
Article  1.1(a)(1)(ii) of the SCM  Agreement and the Panel's assessment of evidence under Article  11 
of the DSU.  The Appellate  Body could not complete the analysis to find whether the tax suspensions 
granted under the PEC and RECAP programmes constitute  subsidies under Article  1.1 of the 
SCM Agreement.  
3.5.4   Article  3.1(b) of the SCM  Agreement  
3.5.4.1   Article  1.1(a)(1)(ii) of the SCM  Agreement  
On appeal, Brazil claimed that the Panel erred in finding that the tax treatment of intermediate 
products and inputs under the ICT programmes constitutes a subsidy under Article  1.1 of the 
SCM Agreement. Brazil contended that the Panel erred in finding that the "implicit interest income" 
with respect to intermediate products and inputs constitutes government revenue othe rwise due 
that is foregone under Article  1.1(a)(1)(ii) of the SCM  Agreement for two reasons. First, Brazil 
claimed that the Panel failed to compare the treatment accorded to the group of taxpayers in the 
benchmark treatment with the group of taxpayers unde r the challenged treatment. Second, Brazil 
contended that the Panel erroneously found that the implicit interest income that Brazil purportedly 
foregoes in respect of intermediate products and inputs under the ICT programmes constitutes 
government revenue that is otherwise due under Article  1.1(a)(1)(ii) of the SCM  Agreement. At the 
oral hearing, Brazil stated that it also took issue with the Panel's determination of the benchmark 
treatment for the comparison with the challenged treatment of intermediate pr oducts and inputs.  
With respect to Brazil's claim, raised at the oral hearing, that the Panel erred in determining the 
benchmark for comparison, the Appellate  Body first recalled that, in accordance with Rule  20(2)(d) 
of the Working Procedures, the Notice of Appeal "shall include" a brief statement of the nature of 
the appeal, comprising: (i) "identification of the alleged errors in the issues of law covered in the 
panel report and legal interpretations developed by the panel"; (ii) "a list of the legal pro vision(s) of 
the covered agreements that the panel is alleged to have erred in interpreting or applying"; and 
(iii) "an indicative list of the paragraphs of the panel report containing the alleged errors". The 
Appellate  Body also noted that, if a particula r claim of error is not raised by the appellant in the 
Notice of Appeal, then that claim is not properly within the scope of the appeal, and the 
Appellate  Body will not make findings thereon.  
Having examined Brazil's Notice of Appeal, the Appellate  Body no ted that Brazil framed its claim 
under Article  1.1(a)(1)(ii) of the SCM  Agreement in broad terms. However, the Appellate  Body also 
observed that that the indicative list of paragraphs in the Panel Reports containing the alleged errors 
provided by Brazil di d not refer to paragraphs in which the Panel addressed the benchmark 
determination. Moreover, the Appellate  Body observed that, in its appellant's submission, Brazil WT/AB/29  
 
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  stated, in several instances, that it agreed with the Panel's determination of the benchma rk 
treatment.  
The Appellate  Body thus concluded that Brazil's Notice of Appeal, read together with Brazil's 
appellant's submission, demonstrated that, until the oral hearing, Brazil did not raise a claim 
regarding the Panel's benchmark determination as it related to its findings under Article  3.1(b) of 
the SCM  Agreement. The Appellate  Body considered that Brazil's claim that the Panel erred in its 
determination of the benchmark in the context of its analysis under the ICT programmes was not 
properly raised before it and hence was not within the scope of the appeal.  
The Appellate  Body then turned to Brazil's claim that the Panel erred in its comparison of the 
treatment of intermediate goods and inputs under the ICT programmes with the benchmark 
treatment by a rbitrarily distinguishing between taxpayers situated within the benchmark. In this 
respect, Brazil argued that the Panel "dismissed as a mere 'best case scenario' the treatment" 
applicable to the companies offsetting the entire amount of taxes paid during the same taxation 
period and opted to compare the challenged treatment to a small group of taxpayers within the 
benchmark, i.e. those that are unable to offset the full amount of tax credits during the same taxation 
period.  
The Appellate  Body disagreed wit h Brazil's characterization of the Panel's approach to comparing the 
challenged treatment to the selected benchmark treatment. The Appellate  Body considered that the 
Panel did not treat only one subset of taxpayers (i.e. those that are unable to offset the  amount of 
the tax paid during the same taxation period) as the benchmark for the purposes of comparison. 
Rather, having explained in detail how the mechanism of credits and debits under the principle of 
non-accumulation works, the Panel concluded that, un der the normal rule of general application of 
Brazil's tax system, there are two possible factual scenarios: one in which the buyer of non -
incentivized products will be able to offset the amount of the tax paid during the same taxation 
period, and the othe r one when this would not be possible. The Panel then reached a conclusion as 
to whether the Brazilian Government overall foregoes revenue otherwise due based on both 
scenarios. The Appellate  Body concluded that, in comparing the challenged tax treatment t o the 
benchmark treatment, the Panel correctly examined both possible factual scenarios that result from 
the application of the normal rules of Brazil's tax system.  
The Appellate  Body next turned to examine Brazil's claim that the Panel erred in finding th at the 
cash availability and implicit interest on unused credits that the Brazilian Government earns in the 
situations when tax credits were not offset within the same taxation period constitute government 
revenue otherwise due that is for egone or not coll ected under Article  1.1(a)(1)(ii) of the 
SCM Agreement.  
The Appellate  Body observed that, in the present dispute, when the tax exemptions and reductions 
apply, the Brazilian Government does not collect in full the tax revenue when it normally would, or 
collects it in part. The fact that, ultimately, the amount of the tax collected under the benchmark 
treatment and the challenged treatment may nominally be the same does not detract from the fact 
that, under the benchmark treatment, in the scenario when non -accredited companies are unable 
to offset their credits immediately, the Brazilian Government would collect and retain, for a certain 
period, the amount of tax payable to it. During this period of time, the Brazilian Government can 
enjoy the cash available to it and earn interest on it. By contrast, when tax exemptions and 
reductions are applied, the Brazilian Government collects the tax later in time and does not enjoy 
the availability of cash as it otherwise would under the benchmark treatment. Thus, under  the 
challenged treatment, the Brazilian Government would not collect the tax at the time it normally 
would under the benchmark treatment. The Appellate  Body considered that, by doing so, the 
Brazilian Government would not collect the revenue that would be  otherwise due to it within the 
meaning of Article  1.1(a)(1)(ii) of the SCM  Agreement.  
In light of the above, the Appellate  Body did not consider that the Panel erred in finding that the tax 
treatment of intermediate products and inputs under the ICT progr ammes constitutes a subsidy 
under Article  1.1 of the SCM  Agreement. The Appellate  Body thus upheld the Panel's findings that 
each of the challenged tax exemptions, reductions, and suspensions granted to accredited 
companies on (i) the sales of intermediate  goods that they produce, and (ii) the purchases of raw 
materials, intermediate goods, and packaging materials (under the Informatics programme) and 
inputs, capital goods, and computational goods (under the PADIS and PATVD programmes) WT/AB/29  
 
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  constitutes financial  contributions where "government revenue that is otherwise due is foregone or 
not collected" under Article  1.1(a)(1)(ii) of the SCM  Agreement.  
3.5.4.2   Article  3.1(b) the SCM  Agreement – import substitution  
The Appellate  Body then turned to consider Brazil's claim on appeal that the Panel erred in finding 
that the PPBs and other production -step requirements under the four ICT programmes (Informatics, 
PADIS, PATVD, and Digital Inclusion programmes) are contingent upon the use of domestic goods, 
inconsistently with Ar ticle III:4 of the GATT  1994, and that they also constitute a contingency on 
the use of domestic over imported goods within the meaning of Article  3.1(b) of the SCM  Agreement. 
The PPBs were defined by the Panel as the minimum set of operations performed at  a manufacturing 
facility that characterizes the actual industrialization of a given product.  
Before turning to its analysis, the Appellate  Body observed that the Panel addressed the question 
whether the ICT programmes contain a requirement to use domestic  goods in the section of the 
Panel Reports addressing the complainants' claims under Article  III:4 and subsequently referred to 
this analysis in its examination under Article  3.1(b). The Appellate  Body considered that the legal 
standard under Article  3.1(b ) of the SCM  Agreement is not the same as that under Article  III:4 of 
the GATT  1994. While establishing that a measure provides an incentive to producers to use 
domestic goods would be sufficient to find an inconsistency with Article  III:4 of the GATT  1994, it 
would not suffice to also find that the same measure is contingent upon the use of domestic over 
imported goods under Article  3.1(b) of the SCM  Agreement. The Appellate  Body stated that, in its 
assessment, it would focus on whether the Panel was corre ct in finding that the PPBs and other 
production -step requirements of the four ICT programmes establish a requirement to use domestic 
over imported goods in the sense of Article  3.1(b) of the SCM  Agreement. The Appellate  Body 
considered that, to the extent  that they do, this would also be inconsistent with Article  III:4 of the 
GATT  1994. If, however, the Appellate  Body were to establish that the Panel made a finding of 
inconsistency under Article  3.1(b) merely because it considered that the relevant measure s provide 
an incentive to use domestic over imported goods, this would not be consistent with the legal 
standard under Article  3.1(b) of the SCM  Agreement.  
The Appellate  Body also noted that, while the Panel did not expressly indicate whether it conducted 
a de jure  or a de facto  analysis of inconsistency with Article  3.1(b) of the SCM  Agreement, it 
understood the Panel to have made a de jure  finding of inconsistency. The Appellate  Body recalled 
that, in order to find a de jure  inconsistency with Article  3.1(b), a condition requiring the use of 
domestic over imported goods must be discerned from the terms of the measure itself, or by 
necessary implication therefrom.  
3.5.4.2.1   Informatics programme  
The Appellate  Body then examined Brazil's claims of error concerning the  Panel's findings under the 
Informatics programme. The Appellate  Body recalled that, in its analysis in the context of the 
Informatics programme, the Panel separately addressed the case of the "main" PPBs that contain 
nested PPBs and the case of basic prod uction -step requirements for all PPBs. The Panel started its 
analysis by examining the "nested" PPBs, i.e. those PPBs that contain an additional PPB within a 
main PPB. As the Panel observed, "the main PPBs that contain nested PPBs require that at least 
some minimum proportion of the components and subassemblies of the type covered by the nested 
PPBs must have been produced in accordance with those nested PPBs." The Appellate  Body 
understood the Panel to have seen "nested" PPBs as an explicit manifestation o f the requirement to 
use domestic goods over imported products.  
As an example of nested PPB, the Appellate  Body referred to Article  2 of the PPB for Speed Alarms, 
Tracking and Control, which requires that "90% of the total number of Global System for Mobil e 
Communications (GSM) communication modules used in the production of PRODUCTS FOR SPEED 
ALARMS, TRACKING AND CONTROL … shall be produced in accordance with their respective [PPB]." 
The Appellate  Body explained that the PPB for GSM communication modules i s "nested" into the 
main PPB for Speed Alarms, Tracking and Control. The Appellate  Body considered that the main PPB 
mandates that 90% of the GSM communication modules used in the production of products for speed 
alarms, tracking and control be produced in  accordance with their own (nested) PPB. The 
Appellate  Body recalled that, pursuant to the Panel's findings that were not contested on appeal, 
goods produced in accordance with PPBs are Brazilian domestic goods. The GSM communication WT/AB/29  
 
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  modules manufactured i n line with their respective PPBs will thus be Brazilian domestic products. In 
the Appellate  Body's view, it followed that 90% of the GSM communication modules used in the 
production of products for speed alarms, tracking and control "shall be" Brazilian d omestic goods. 
Thus, the Appellate  Body considered that, by requiring that 90% of the GSM communication modules 
used in the production of products for speed alarms, tracking , and control be produced in accordance 
with their respective PPBs, the PPB effecti vely requires that 90% of GSM communication modules 
used in the production of speed alarms, tracking , and control be of domestic origin.  
The Appellate  Body concluded that the nested PPBs within the main PPBs, by their very words, or at 
least by necessary i mplication therefrom, require that a certain percentage of inputs used in the 
production steps performed in accordance with the main PPB be sourced domestically. Thus, the use 
of domestic components and subassemblies, for which there is a nested PPB, in th e production of 
the products covered by the main PPB will not be merely incidental. Rather, it is a condition that 
must be fulfilled in order for the relevant product to benefit from the tax incentives under the 
ICT programmes. On this basis, the Appellate  Body found that the main PPBs, which incorporate a 
nested PPB, contain a condition requiring the use of domestic over imported goods in the sense of 
Article  3.1(b) of the SCM  Agreement that stems from the very text of the nested PPBs, or at least 
by neces sary implication therefrom. The Appellate  Body also found that, as a consequence of that 
condition, the nested PPBs also provide less favourable treatment to imported goods than to like 
domestic products within the meaning of Article  III:4 of the GATT  1994. The Appellate  Body thus 
upheld the Panel's findings that the main PPBs that incorporate nested PPBs under the Informatics 
programme are inconsistent with Article  3.1(b) of the SCM  Agreement and Article  III:4 of the 
GATT  1994.  
The Appellate  Body next cons idered the main PPBs that do not contain nested PPBs. The 
Appellate  Body recalled the Panel's finding that the possibility to outsource the production of 
components and subassemblies in Brazil under the PPBs "g[ave] rise to a requirement to use 
domestic go ods" under Article  3.1(b). The Appellate  Body, however, disagreed with the Panel that 
the mere possibility of outsourcing under PPBs of production steps to be performed by a third party 
in Brazil, in and of itself, gives rise to a requirement to use domest ic over imported goods under 
Article  3.1(b) of the SCM  Agreement. Instead, the Panel should have explored, when establishing 
whether there was de jure inconsistency with Article  3.1(b), how the text of the PPBs gives rise to a 
requirement to use domestic o ver imported goods or how such a requirement can be derived from 
the text of the PPBs by necessary implication.  
The Appellate  Body was of the view that the PPBs set out a number of sequential production steps, 
starting from manufacturing of components and subassemblies and ending with the final assembly 
and testing of the product. The Appellate  Body considered that the structure of the PPBs suggests 
that the subsidy recipients will likely "use" in a subsequent production step the domestic components 
and sub assemblies that were manufactured in a previous production step. However, the 
Appellate  Body observed that, while such use of domestic goods may be a likely consequence of the 
eligibility requirements for the tax incentives under the Informatics programme,  this does not, in 
and of itself, indicate the existence of a condition requiring the use of domestic over imported 
products under Article  3.1(b) of the SCM  Agreement.  
The Appellate  Body further noted that, given that compliance with the PPBs is mandatory in order 
for a company to qualify for the tax incentives and that, in complying with the PPBs, the producers 
of an incentivized product will be likely to use domestic components and subassemblies, the main 
PPBs without nested PPBs provide an incentive to u se domestic over imported goods. By doing so, 
in the Appellate  Body's view, the main PPBs in the Informatics programme accord treatment less 
favourable to imported goods than that accorded to like domestic goods inconsistently with 
Article  III:4 of the GAT T 1994.  
In light of the above, the Appellate  Body reversed the Panel's findings that the main PPBs without 
nested PPBs under the Informatics programme are contingent upon the use of domestic over 
imported goods within the meaning of Article  3.1(b) of the S CM Agreement. However, the 
Appellate  Body upheld the Panel's findings that the main PPBs that do not incorporate nested PPBs 
under the Informatics programme are inconsistent with Article  III:4 of the GATT  1994.  WT/AB/29  
 
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  3.5.4.2.2    PATVD, PADIS, and Digital Inclusion programm es 
With respect to the PATVD programme, the Appellate  Body observed that the PPBs under this 
programme follow the same structure and logic as those under the Informatics programme. The 
Appellate  Body recalled that it had agreed with the Panel's conclusion that the main PPBs that 
incorporate nested PPBs contain "explicit requirements to use domestic goods", i.e. the components 
and subassemblies covered by the nested PPBs, under Article  3.1(b) of the SCM  Agreement and 
Article  III:4 of the GATT  1994. For the s ame reasons, to the extent the PPBs under the PATVD 
programme incorporate nested PPBs, the Appellate  Body considered them to require de jure  the use 
of domestic over imported goods inconsistently with Article  3.1(b) of the SCM  Agreement and 
Article  III:4 o f the GATT  1994. With respect to the main PPBs that do not incorporate nested PPBs, 
however, the Appellate  Body recalled that it had reversed the Panel's finding that they reflect a 
condition requiring the use of domestic over imported goods under Article  3.1(b). The Appellate  Body 
thus upheld the Panel's findings of inconsistency under Article  3.1(b) of the SCM  Agreement 
concerning the PATVD programme to the extent they relate to the main PPBs that contain nested 
PPBs, and reversed the Panel's findings to the extent they relate to the main PPBs that do not contain 
nested PPBs.  
With respect to the PADIS programme, the Appellate  Body observed that in contrast to some PPBs 
that require incorporation of components and subassemblies produced in accordance with t he PPBs 
in the ensuing stage of production, this programme does not reflect such a requirement. The 
Appellate  Body noted that it is possible that, in the scenario when a company seeking accreditation 
complies with all or several requirements under the PADI S programme, it would use the inputs 
produced in accordance with the PADIS programme in the ensuing stage of production. However, in 
the Appellate  Body's view, this would be a result of the eligibility requirements under the PADIS 
programme rather than a c ondition requiring the use of domestic over imported goods. The 
Appellate  Body thus reversed the Panel's findings that the PADIS programme requires the use of 
domestic over imported goods inconsistently with Article  3.1(b) of the SCM  Agreement.  
With respect to the Digital Inclusion programme, the Appellate  Body recalled that this programme 
provides for zero rates with respect to PIS/PASEP and COFINS contributions for companies that sell 
in Brazil at retail level certain digital consumer goods produced  in accordance with the relevant PPBs. 
The Appellate  Body also recalled that the Panel made findings of inconsistency with Article  3.1(b) of 
the SCM  Agreement and Article  III:4 of the GATT because it considered that the Digital Inclusion 
programme presente d "a straightforward situation of incentives that are provided in respect of a 
preference (in this case by retailers) for domestic over imported goods" . The Appellate  Body agreed 
with the Panel that such an incentive results in the less favourable treatmen t under Article  III:4 of 
the GATT  1994 for like imported digital consumer products. However, it did not consider that the 
Panel had a proper basis to conclude that the Digital Inclusion programme contains a requirement 
to use domestic over imported goods u nder Article  3.1(b) of the SCM  Agreement and reversed the 
Panel's findings of inconsistency under that provision.  
The Appellate  Body, however, agreed with the Panel that the PPBs and other production -step 
requirements under the PATVD, PADIS, and Digital In clusion programmes provide an incentive to 
use domestic ICT products and upheld the Panel's findings that these programmes accord less 
favourable treatment to imported ICT products than that accorded to like domestic products, 
inconsistently with Article  III:4 of the GATT  1994.  
3.5.4.2.3   INOVAR -AUTO programme  
On appeal, Brazil requested that, "[t]o the extent that the Panel's findings are based on the 
erroneous assumption that production step requirements are sufficient to establish a contingency 
upon the use of dome stic over imported goods within the meaning of Article  3.1(b) of the 
SCM Agreement", that the Appellate  Body reverses the Panel's findings that certain aspects of the 
INOVAR -AUTO programme constitute a prohibited import substitution subsidy under Articles  3.1(b) 
and 3.2 of the SCM  Agreement.  
The Appellate  Body remarked that, in its reasoning concerning the accreditation requirement to 
perform a minimum number of manufacturing steps in Brazil, the Panel relied on its previous analysis 
with respect to the PPB s and other production -step requirements under the ICT  programmes. The 
Appellate  Body further observed that the requirement to perform a minimum number of WT/AB/29  
 
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  manufacturing steps in Brazil operates in a way similar to the main PPBs that do not incorporate 
nested PPBs under the ICT programmes.  
Therefore, having reversed the Panel's findings with respect to the main PPBs that do not incorporate 
nested PPBs under the ICT programmes, the Appellate  Body also reversed the Panel's findings of 
inconsistency with Articl e 3.1(b) with respect to the requirement to perform a minimum number of 
manufacturing steps under the INOVAR -AUTO programme.  
3.5.4.2.4   European  Union 's and Japan's appeal concerning the in -house scenario  
On appeal, the European  Union  and Japan submitted a series of alternative claims the essence of 
which was that the Panel erred by not making findings on the in -house scenario because the 
complainants had challenged the production -step requirements of the ICT and INOVAR -AUTO 
programmes "as a whole", without distinguis hing between the in -house and outsourcing scenarios. 
The European  Union  and Japan requested that the Appellate  Body reverse the relevant Panel findings 
and complete the legal analysis to find that the production -step requirements in the ICT and 
INOVAR -AUTO  programmes are inconsistent with Article  III:4 of the GATT  1994, Article  2.1 of the 
TRIMs Agreement, and Article  3.1(b) of the SCM  Agreement under both the in -house and 
outsourcing scenarios.  
The Appellate  Body understood that, at the heart of the Europea n Union 's and Japan's appeal was 
the concern that, due to an alleged lack of clarity in the Panel's findings concerning the in -house 
scenario, the implementation of the Panel's recommendations and rulings in this dispute may be 
compromised and certain issu es may be left unresolved. The Appellate  Body started its analysis by 
examining whether the Panel's findings cover the in -house scenario.  
Having examined the relevant Panel's analysis and findings, the Appellate  Body concluded that 
aspects of the Panel's r easoning and conclusions appeared to refer to the outsourcing scenario, while 
excluding the in -house scenario. Other aspects of the Panel's analysis, including the overall 
conclusions and recommendations, could be understood as covering measures as a whole  and thus 
extending to the in -house scenario. The Appellate  Body shared the concern of the European  Union  
and Japan that the lack of clarity with respect to the scope of the Panel's findings may compromise 
the effective implementation of the recommendation s and rulings in this dispute. This would not 
contribute to achieving a positive solution to this dispute, as required under Article  3.7 of the DSU.  
The Appellate  Body recalled that the participants agreed that the Panel's finding of inconsistency 
with res pect to the PPBs and other production -step requirements under the ICT  programmes was of 
a de jure  nature. The Appellate  Body further recalled that the legal standard under Article  3.1(b) of 
the SCM  Agreement and Article  III:4 of the GATT is not the same. W hile an inquiry under 
Article  3.1(b) of the SCM  Agreement focuses on whether there is a condition requiring the use of 
domestic over imported goods, an incentive to use domestic goods is sufficient to find an 
inconsistency with Article  III:4 of the GATT  1994. 
The Appellate  Body considered that it did not matter, for purposes of the Panel's analysis, what 
factual scenarios were available for compliance with the requirements under the ICT and 
INOVAR -AUTO programmes. The Appellate  Body expressed the view that the Panel's bifurcation of 
its analysis into the two possible factual scenarios was thus unnecessary. Moreover, the 
Appellate  Body reiterated that, for purposes of establishing an inconsistency with Article  3.1(b) of 
the SCM  Agreement, Article  III:4 of the  GATT  1994, and Article  2.1 of the TRIMs Agreement, the 
possible factual scenarios existing under the measure are not decisive. What matters, instead, is 
whether the respective legal standard has been met.  
In light of the above, the Appellate  Body reversed  the Panel's findings, made in the context of its 
analysis under ICT programmes, to the extent that they could be understood as suggesting that the 
in-house scenario was not covered by the Panel's findings. It also reversed the Panel's findings, 
made in th e context of INOVAR -AUTO programme and referring to the Panel's findings under the 
ICT programmes, to the extent that they could also be understood as suggesting that the in -house 
scenario was not covered by the Panel's findings. The Appellate  Body conside red that the relevant 
Panel's findings applied also in the in -house scenario.  WT/AB/29  
 
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  3.5.5   Article  I:1 of the GATT  1994 and the Enabling Clause  
On appeal, Brazil contended that the Panel erred in finding that the claims raised by the 
European  Union and Japan under Arti cle I:1 of the GATT  1994 were within its terms of reference and 
that the differential and more favourable treatment in the form of internal tax reductions accorded 
to imports from Argentina, Mexico, and Uruguay under the INOVAR -AUTO programme was not 
justified under paragraphs 2(b) and 2(c) of the Enabling  Clause.  
3.5.5.1   Whether the Panel erred in finding that the claims raised by the European  Union 
and Japan under Article  I:1 of the GATT  1994 were within its terms of reference  
The Panel found that a complaining p arty does not have the burden to invoke the Enabling  Clause 
in its panel request, unless that complaining party is informed that the responding party considers 
the challenged measure to have been adopted pursuant to the Enabling  Clause. In the present case , 
the Panel found that there was no notification made under paragraph  4(a) of the Enabling Clause to 
support a justification under paragraph  2(b) thereof. The Panel further found that Brazil had not 
demonstrated how the relevant tax reductions under the IN OVAR -AUTO programme found to be 
inconsistent under Article  I:1 of the GATT  1994 were related to the 1980  Treaty of Montevideo or 
the economic complementation  agreements ( ECAs) that were notified as having been adopted 
pursuant to paragraph  2(c). The Panel thus concluded that differential and more favourable 
treatment accorded to Argentina, Mexico, and Uruguay under the INOVAR -AUTO programme and its 
related justifications under the Enabling Clause (i.e. under paragraphs 2(b) and 2(c) thereof) were 
not notified to the WTO pursuant to paragraph  4(a) of the Enabling Clause, such that the complaining 
parties could be considered to have been on notice. Consequently, the Panel found th at there was 
no burden on the complaining parties to invoke paragraphs  2(b) and 2(c) of the Enabling  Clause in 
their panel requests, and therefore their claims under Article  I:1 of the GATT  1994 were within the 
Panel's terms of reference.  
3.5.5.1.1   Whether the Panel  erred in its interpretation of paragraph  4(a) of the 
Enabling  Clause  
On appeal, Brazil took issue with the Panel's finding that the obligation to invoke the Enabling  Clause 
would only apply if the complaining party had been appropriately informed that the  responding party 
considers the challenged measure to have been adopted pursuant to and justified under the 
Enabling  Clause.  
The Appellate  Body first addressed the notification requirement in paragraph  4(a) of the Enabling 
Clause. The Appellate  Body noted that paragraph  4(a) of the Enabling Clause deals with the 
requirement to notify  any action by a Member seeking to introduce, modify, or withdraw differential 
and more favourable arrangements adopted pursuant  to paragraphs 1 through 3 of the 
Enabling  Clause . The use of the word "shall", according to the Appellate  Body, indicated that 
paragraph  4(a) imposes an obligation on a Member according differential and more favourable 
treatment to notify the WTO of the arrangement it has adopted. The Appellate  Body fur ther observed 
that paragraph  4(a) provides that a Member adopting an arrangement according differential and 
more favourable treatment "furnish" Members "with all the information they may deem appropriate" 
relating to the introduction, modification, or with drawal of the arrangements adopted. The 
Appellate  Body considered that this requirement to furnish "all" the information suggests that a 
notification pursuant to paragraph  4(a) should be sufficiently detailed so as to put the Members on 
notice regarding an y "action" taken pursuant to paragraphs 1 through 3 of the Enabling  Clause. The 
Appellate  Body thus found that a notification pursuant to paragraph  4(a) speaks to and has a direct 
bearing on a complaining party's knowledge and, consequently, on the questio n whether it is 
required to raise the Enabling Clause and identify the relevant provision(s) thereof in its panel 
request.  
The Appellate  Body next recalled its statement in EC – Tariff Preferences  that it is insufficient in WTO 
dispute settlement for a com plainant to allege inconsistency with Article  I:1 of the GATT  1994 if the 
complainant seeks also to argue that the measure is not justified under the Enabling  Clause. 
However, the Appellate  Body considered that its statement concerning the burden on the 
complaining party to raise the Enabling Clause and identify the relevant provision(s) thereof in its 
panel request should be read in the context of the challenged measure at issue in that dispute, i.e. WT/AB/29  
 
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  the tariff preference scheme, which as the Appellate  Body had itself indicated, was plainly taken  
pursuant to the Enabling  Clause.  
The Appellate  Body found that paragraph  4(a) of the Enabling Clause envisages a degree of 
specificity in the notification adopted thereunder. At a minimum, a notification pursuant t o 
paragraph  4(a) should state under which provision of the Enabling  Clause the differential and more 
favourable treatment has been adopted. Paragraph 4(a) indicates that arrangements or measures 
adopted under different subparagraphs of paragraph  2 would ha ve to be notified to the WTO so as 
to put other Members on notice regarding the relevant differential and more favourable treatment 
sought to be accorded and justified under the Enabling Clause. The Appellate  Body also found that 
paragraph  4(a) does not ex clude the possibility that a single notification can state that the notifying 
Member considers an arrangement or a measure to have been adopted pursuant to one or more 
subparagraphs of paragraph  2 of the Enabling Clause. The Appellate  Body, however, cautio ned that, 
in the absence of any such indication in the notification issued under paragraph  4(a), it cannot be 
taken for granted that a complaining party is on notice of those subparagraphs of paragraph  2 that 
the notifying Member considers applicable. The Appellate  Body concluded that a complaining party 
is therefore required to raise the Enabling Clause and identify the relevant provisions thereof in its 
panel request when a measure according differential and more favourable treatment is: (i) plainly 
taken  pursuant to the Enabling  Clause, or when it is clear from the face of the measure itself that it 
has been adopted pursuant to the Enabling  Clause; and/or (ii)  notified pursuant to paragraph  4(a) 
of the Enabling  Clause. However, the Appellate  Body cautione d that, while it is for the complaining 
party to raise the Enabling Clause and identify the relevant provision(s) thereof in its panel request, 
the burden to prove that the measure satisfies the conditions set out in the Enabling Clause remains 
on the resp onding party relying upon the Enabling  Clause as a defence.  
For these reasons, the Appellate  Body upheld the Panel's finding that a complaining party has to 
raise the Enabling Clause and identify the relevant provision(s) thereof in its panel request in 
situations where the complaining party is on notice that the challenged measure was adopted 
(and, in the view of the adopting Member, justified) under the Enabling  Clause.  
3.5.5.1.2   Whether the Panel erred in finding that the differential tax treatment under the 
INOVA R-AUTO programme was not notified pursuant to paragraph  4(a) as having been 
adopted under paragraph  2(b) of the Enabling  Clause  
The Appellate  Body began by noting that Brazil's case before the Panel rested on its contention that, 
since the 1980  Treaty of M ontevideo and the relevant ECAs were notified to the WTO as having been 
adopted under paragraph  2(c), the notification requirement in paragraph  4(a) with respect to the 
differential tax treatment under the INOVAR -AUTO programme stood satisfied. However, th e 
Appellate  Body observed that, in its defence, Brazil contended that the differential tax treatment 
under the INOVAR -AUTO programme was justified not only under paragraph  2(c), but also under 
paragraph  2(b). The Appellate  Body therefore understood, like t he Panel, that Brazil contended that 
the differential tax treatment under the INOVAR -AUTO programme was adopted pursuant to both 
paragraphs 2(b) and 2(c) of the Enabling  Clause and did not require additional notification, since the 
1980 Treaty of Montevide o and the relevant ECAs were notified as adopted pursuant to 
paragraph  2(c). 
The Appellate  Body noted that it was undisputed that the differential tax treatment under the 
INOVAR -AUTO programme was not specifically notified to the WTO pursuant to paragraph  4(a) as 
having been adopted under paragraph  2(b). The Appellate  Body recalled that the Panel considered 
that its task was to determine whether a notification of an arrangement adopted pursuant to 
paragraph  2(c) could also serve as a notification of an arra ngement adopted pursuant to 
paragraph  2(b). The Appellate  Body therefore considered that the Panel's enquiry focused on 
whether or not the complaining parties could be considered to have been on notice that the 
differential tax treatment under the INOVAR -AUTO programme was notified as having been adopted 
pursuant to paragraph  2(b) by virtue of the notification under paragraph  2(c). The Appellate  Body 
found that the analysis of whether or not an arrangement or a measure alleged to be adopted under 
paragraph  2(b) was notified pursuant to paragraph  4(a) was necessary in determining the 
complaining parties' burden to raise the Enabling Clause and identify paragraph  2(b) in their panel 
requests.  
The Appellate  Body recalled that paragraph  4(a) does not exclude the possibility that a single 
notification can state that the notifying Member considers an arrangement or a measure to have WT/AB/29  
 
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  been adopted pursuant to one or more subparagraphs of paragraph  2. However, the Appellate  Body 
also recalled that in the absence of any such indication, it cannot be taken for granted that a 
complaining party is on notice that the notifying Member considers the notified arrangement or 
measure to have been adopted pursuant to one or more subparagraphs of  paragraph  2. The 
Appellate  Body therefore agreed with the Panel's finding that paragraph  4(a) does not permit 
notification of a measure adopted under one provision of the Enabling  Clause to serve equally as a 
notification of that measure being adopted und er another provision of the Enabling  Clause, unless 
indicated in the notification itself.  
Brazil contended that in the case of developing country Members, paragraphs 2(a) and  2(b) of the 
Enabling  Clause are both contained in paragraph  2(c). Accordingly, Br azil argued that the fact that 
a given agreement has been notified under paragraph  2(c), as was the case in the present dispute , 
sufficed for the complaining parties to have been on notice that the measures at issue fell under the 
Enabling  Clause.  
The Appe llate Body noted that subparagraphs (a) to (c) of paragraph  2 of the Enabling  Clause 
provide for differential and more favourable treatment with respect to which the authorization of 
paragraph  1 of the Enabling  Clause applies. Paragraph 2(a) provides for d ifferential and more 
favourable treatment in the form of preferential tariff treatment accorded by developed  country 
Members to products originating from developing countries. Paragraph  2(b) provides for differential 
and more favourable treatment concernin g non -tariff measures. Unlike paragraph  2(a), which 
specifically speaks of "[p]referential tariff treatment accorded by developed country Members to … 
developing countries", paragraph  2(b) does not define either the grantor or the beneficiary of the 
differential and more favourable treatment. Paragraph 2(c), unlike both paragraphs 2(a) and 2(b), 
provides for differential and more favourable treatment concerning tariff and non -tariff measures 
between developing country Members pursuant to "[r]egional or glob al arrangements". The 
Appellate  Body considered that, even assuming Brazil's argument to be correct, it does not 
necessarily follow that the notification of a measure as having been adopted under paragraph  2(c) 
would suffice for the purposes of paragraph  2(b) insofar as the complaining party's burden to raise 
and identify paragraph  2(b) of the Enabling Clause in its panel request is concerned. The 
Appellate  Body explained that this would be the case in circumstances where, as it had explained 
and as the Pan el also noted, it is indicated in the notification itself.  
For these reasons, the Appellate  Body upheld the Panel's findings that Brazil has not demonstrated 
that the differential tax treatment under the INOVAR -AUTO programme was notified to the WTO as 
adopted pursuant to paragraph  2(b), and therefore, in the circumstances of this case, the 
complaining parties were not required to raise and identify paragraph  2(b) of the Enabling  Clause in 
their panel requests.  
3.5.5.1.3   Whether the Panel erred in finding that the di fferential tax treatment under the 
INOVAR -AUTO programme was not notified pursuant to paragraph  4(a) as having been 
adopted under paragraph  2(c) of the Enabling  Clause  
The Appellate  Body observed that the differential tax treatment under the INOVAR -AUTO 
programme was not specifically notified to the WTO pursuant to paragraph  4(a) of the 
Enabling  Clause as having been adopted under paragraph  2(c) thereof. Rather, the Appellate  Body 
noted that, before the Panel, Brazil contended that the complainants were suf ficiently on notice that 
the challenged measure was adopted and justified under the Enabling  Clause because the 
1980 Treaty of Montevideo was notified to the WTO under paragraph  2(c) of the Enabling  Clause. 
Brazil further submitted that the differential an d more favourable treatment granted to Argentina, 
Mexico, and Uruguay (in the form of internal tax reductions) is based on ECAs that were negotiated 
under the auspices of the 1980  Treaty of Montevideo and that in turn were also notified to the WTO 
and that  the differential tax treatment at issue under the INOVAR -AUTO programme was a corollary 
of these ECAs, and thus did not require additional notification. The Appellate  Body considered that 
in order to determine that the complaining parties could be conside red to have been on notice that 
the differential tax treatment under the INOVAR -AUTO programme was taken pursuant to 
arrangements adopted under paragraph  2(c), the Panel needed to determine whether the 
notification of the 1980  Treaty of Montevideo and the ECAs could substantively serve as a notification 
of the adoption under paragraph  2(c) of the differential tax treatment under the INOVAR -AUTO 
programme found to be inconsistent with Article  I:1 of the GATT  1994. The Appellate  Body therefore 
found that the Panel rightly considered the question to be whether Brazil had demonstrated that the WT/AB/29  
 
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  RTA notified to the WTO put the WTO Membership on notice as to the adoption of the particular 
differential and more favourable treatment sought to be justified under parag raph 2(c). 
The Appellate  Body recalled that Decree  No. 7,819/2012 is the instrument that provides for the 
differential tax treatment under the INOVAR -AUTO programme and Articles  21 and 22(I) thereof 
provide for a 30 -percentage -point reduction of the IPI ta x rates on certain categories of motor 
vehicles if: (i) under Article  21, those motor vehicles are imported into Brazil by companies 
accredited as "domestic manufacturers" or "investors" under the INOVAR -AUTO programme, and 
the motor vehicles are imported from countries that are signatories to the agreements established 
by Legislative Decree  350 of 21  November  1991, Decree  4,458 of 5  November  2002, and 
Decree  6,500 of 2  July 2008; or (ii) under Article  22(I), those motor vehicles are imported into Brazil 
by any company (whether accredited or unaccredited) under the INOVAR -AUTO programme, and 
the motor vehicles are imported under the agreement established by Decree  6,518 of 30  July 2008 
and Decree  7,658 of 23  December  2011.  
Brazil argued that the 1980  Treaty of Montevideo and the ECAs have an ample scope comprising 
internal tax reduction measures. Brazil asserted that Article  21 of Decree  7,819/2012 makes an 
explicit reference to these legal instruments, and therefore the tax treatment at issue under the 
INOVA R-AUTO programme was a corollary of these ECAs, and thus did not require additional 
notification.  
The Appellate  Body noted that Articles  21 and 22(I) of Decree  7,819/2012 do not refer to 
the 1980 Treaty of Montevideo. The Appellate  Body also noted that the  1980 Treaty of Montevideo 
does not itself specify any rules regarding internal tax reductions. The Appellate  Body thus saw no 
reason to disagree with the Panel's finding that none of the provisions cited in the 1980  Treaty of 
Montevideo have any relation,  in and of themselves, to the differential tax treatment under the 
INOVAR -AUTO programme. The Appellate  Body also observed that Articles  21 and 22(I) of 
Decree  7,819/2012 fall under Chapter VII thereof, entitled "Tax Rates and Suspension of IPI". The 
Appel late Body recalled that Articles  21 and 22(I) of Decree  7,819/2012 provide for a reduction of 
the IPI tax rates on motor vehicles when they are imported from the countries that are signatories 
to the ECAs mentioned therein. However, the Appellate  Body cons idered that the reference to the 
ECAs is limited to identifying the countries, imports from which benefit from the IPI tax reduction. 
According to the Appellate  Body, the ECAs did not, in and of themselves, refer to internal taxation. 
The Appellate  Body no ted that Brazil has not identified any provisions of the ECAs that would support 
its contention that the differential tax treatment under the INOVAR -AUTO programme is a corollary 
of the ECAs. Neither did the Appellate  Body find Brazil to have demonstrated that there is a rational 
connection between the IPI tax reduction provided under the INOVAR -AUTO programme and the 
referenced ECAs. To the contrary, the Appellate  Body found that the referenced ECAs provide for 
the adoption of tariff preferences in the aut omotive sector and do not refer to internal taxation. 
Thus, the Appellate  Body found that the ECAs have no genuine link to the differential tax treatment 
under the INOVAR -AUTO programme. Accordingly, the Appellate  Body failed to see how the 
INOVAR -AUTO pro gramme that accorded the differential and more favourable treatment at issue 
could be considered to have been notified as having been adopted under paragraph  2(c) of the 
Enabling  Clause. The Appellate  Body therefore agreed with the Panel that Brazil has no t 
demonstrated how the tax reductions found to be inconsistent under Article  I:1 of the GATT  1994 
are related to the RTA that Brazil has notified to the WTO (the 1980  Treaty of Montevideo) or the 
ECAs allegedly implementing that RTA.  
For these reasons, the  Appellate  Body upheld the Panel's findings that the differential and favourable 
treatment (i.e. the differential tax treatment in the form of internal tax reductions) under the 
INOVAR -AUTO programme was not notified as adopted under paragraph  2(c) of the Enabling Clause, 
as required pursuant to paragraph  4(a). Consequently, the Appellate  Body also upheld the Panel's 
finding that, in the circumstances of this case, there was no burden on the complaining parties to 
raise and identify paragraph  2(c) of the En abling  Clause in their panel requests.  
3.5.5.2   Whether the Panel erred in its interpretation of paragraph  2(b) of the 
Enabling  Clause and in finding that the differential tax treatment under the INOVAR -AUTO 
programme was not justified under that provision  
On appea l, Brazil disagreed with the Panel's finding that instruments multilaterally negotiated under 
the auspices of the GATT must be distinct from the provisions of the GATT  1994 incorporating the 
GATT  1947 because the GATT  1994 itself is an instrument that was multilaterally negotiated under WT/AB/29  
 
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  the auspices of the GATT, as an institution. Brazil argued that the GATT  1994 is the covered 
agreement that governs internal taxation, in Article  III and the Enabling Clause itself, as it was 
incorporated to the WTO as part of the GATT  1994, is, therefore, an instrument multilaterally 
negotiated under the auspices of the GATT. Brazil therefore asserted that the Panel's interpretation 
renders the text of paragraph  2(b) of the Enabling  Clause  inutile . 
The Appellate  Body recalle d that paragraph  2(b) of the Enabling Clause provides that paragraph  1 
of the Enabling Clause applies to "[d]ifferential and more favourable treatment with respect to the 
provisions of the General  Agreement concerning non -tariff measures governed by the pr ovisions of 
instruments multilaterally negotiated under the auspices of the GATT". The Appellate  Body first 
analysed the scope of the phrase "non -tariff measures governed by the provisions of instruments 
multilaterally negotiated under the auspices of the GATT" as it appears in paragraph  2(b). The 
Appellate  Body found that paragraph  2(b) provides for the adoption of a limited category of 
differential and more favourable treatment, namely treatment that concerns "non -tariff measures 
governed by the provision s of instruments multilaterally negotiated under the auspices of the GATT ", 
as an institution. The Appellate  Body considered that the text of paragraph  2(b) does not, however, 
support a reading of that provision as extending to the adoption of differential  and more favourable 
treatment concerning non -tariff measures governed by "provisions of the General  Agreement" itself. 
The Appellate  Body reasoned that, had it been so, the latter part of paragraph  2(b) in referring to 
"provisions of instruments multilate rally negotiated under the auspices of the GATT" would be 
deprived of any meaning.  
The Appellate  Body found support from the contextual history surrounding the adoption of the 
Enabling Clause. The Appellate  Body recalled that the Enabling  Clause was adopte d in 1979 during 
the Tokyo Round of multilateral trade negotiations, which also witnessed the conclusion of a number 
of plurilateral agreements governing various non -tariff measures, i.e. the Tokyo Round Codes. The 
Appellate  Body noted that the Tokyo Round  Codes were negotiated under the auspices of the GATT, 
as an institution. The Appellate  Body observed that a number of these plurilateral agreements sought 
to further the objectives of and/or build upon existing provisions of the GATT  1947, and contained 
provisions on S&D treatment for developing countries. The reference in paragraph  2(b) to differential 
and more favourable treatment "with respect to the provisions of the General  Agreement concerning 
non-tariff measures governed by the provisions of instrum ents multilaterally negotiated under the 
auspices of the GATT" was in relation to these plurilateral agreements that were negotiated under 
the auspices of the GATT, as an institution, and furthered the objectives of and/or built upon existing 
provisions of  the GATT  1947. Moreover, the Appellate  Body found that in using the phrase 
"provisions  of instruments multilaterally negotiated under the auspices of the GATT", as opposed to 
"instruments multilaterally negotiated under the auspices of the GATT", paragrap h 2(b) referred to 
specific provisions of these plurilateral agreements, in particular, the S&D treatment provisions, and 
not the entire agreements themselves. The Appellate  Body found additional support from 
contemporaneous decisions adopted during the To kyo Round of multilateral trade negotiations. In 
particular, the Appellate  Body recalled the decision entitled "Action by the CONTRACTING PARTIES 
on the Multilateral Trade Negotiations". The Appellate  Body noted that paragraph  3 of that decision 
stated tha t "[t]he CONTRACTING PARTIES also note that existing rights and benefits under the GATT 
of contracting parties not being parties to these  Agreements, including those derived from Article  I, 
are not affected by these  Agreements." The Appellate  Body observed  that the GATT CONTRACTING 
PARTIES expressly confirmed that the benefits of the Tokyo Round plurilateral agreements were to 
accrue to all the contracting parties to the GATT, even those that were not parties to the plurilateral 
agreements, insofar as the s ubject matter of those agreements were covered by Article  I of the 
GATT  1947. Therefore, absent the Enabling Clause, a Contracting Party who was not a party to a 
Tokyo Round plurilateral agreement could have challenged a measure taken by a party to that 
plurilateral agreement pursuant to a S&D treatment provision thereof as being inconsistent with 
Article  I of the GATT  1947. The Appellate  Body found that the adoption of the Enabling  Clause, 
particularly paragraph  2(b), addressed this situation. Paragraph 2( b) provided an umbrella by 
excepting differential and more favourable treatment concerning non -tariff measures governed by 
the provisions of instruments multilaterally negotiated under the auspices of the GATT, i.e. 
differential and more favourable treatme nt accorded pursuant to the S&D treatment provisions of 
the Tokyo Round Codes, from challenge under Article  I of the GATT  1947.  
The Appellate  Body therefore found that the phrase "non -tariff measures governed by the provisions 
of instruments multilaterally  negotiated under the auspices of the GATT" in paragraph  2(b), at the 
time of the adoption of the Enabling  Clause, concerned non -tariff measures taken pursuant to the 
S&D treatment provisions of the Tokyo Round Codes and not the provisions of the  GATT  1947 itself.  WT/AB/29  
 
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  The Appellate  Body noted that with the entry into effect of the WTO  Agreement, the Tokyo Round 
Codes are no longer in force. The Enabling  Clause, however, stood incorporated as an integral part 
of the GATT  1994. The Appellate  Body recalled that th e Uruguay Round of multilateral trade 
negotiations culminated in the establishment of the WTO, and that the GATT as an institution was 
replaced by the WTO. Recalling that Article  II:1 of the WTO  Agreement expressly recognizes that 
"[t]he WTO shall provide the common institutional framework for the conduct of trade relations 
among its Members in matters related to the agreements and associated legal instruments included 
in the Annexes to [the WTO]  Agreement", the Appellate  Body considered that the Enabling C lause 
as an integral part of the GATT  1994 falls within the scope of Article  II:1 of the WTO  Agreement. 
The Appellate  Body found that, while at the time of its adoption, paragraph  2(b) of the Enabling 
Clause spoke of "instruments multilaterally negotiated under the auspices of the GATT" as an 
institution, following the entry into force of the WTO  Agreement, paragraph  2(b) refers to 
"instruments multilaterally negotiated under the auspices of the [WTO]" as an institution. The 
Appellate  Body held that paragra ph 2(b), following the entry into force of the WTO  Agreement, thus 
covers a limited category of differential and more favourable treatment, namely treatment that 
concerns non -tariff measures governed by provisions of instruments multilaterally negotiated u nder 
the auspices of the WTO. The Appellate  Body noted that the GATT  1994, while an integral part of 
the WTO  Agreement, was not negotiated under the auspices of the WTO as an institution. According 
to the Appellate  Body, these considerations, read in light  of the text, context, and circumstances 
surrounding the adoption of the Enabling  Clause, and thereafter the establishment of the WTO, 
indicated that paragraph  2(b) does not concern non -tariff measures governed by the provisions of 
the GATT  1994 itself. In stead, paragraph  2(b) speaks to non -tariff measures taken pursuant to S&D 
treatment provisions of "instruments multilaterally negotiated under the auspices of the [WTO]".  
For these reasons, the Appellate  Body upheld the Panel's finding that a non -tariff me asure falling 
within the scope of paragraph  2(b) must be governed by specific provisions on special and 
differential treatment, that are distinct from the provisions of the GATT  1994 incorporating the 
GATT  1947.  
Turning to the Panel's application of paragr aph 2(b) of the Enabling  Clause, the Appellate  Body 
recalled its finding that paragraph  2(b) did not apply, at the time of its adoption, with respect to 
Articles  III:2 and III:4 of the GATT  1947, and following the entry into force of the WTO  Agreement, 
does not apply with respect to Articles  III:2 and III:4 of the GATT  1994. Therefore, the 
Appellate  Body considered that subjecting like products of different WTO Members to different 
internal taxes inconsistently with Article  I:1 of the GATT  1994 cannot be ju stified under 
paragraph  2(b). 
For these reasons, the Appellate  Body upheld the Panel's finding that the internal tax reductions 
under the INOVAR -AUTO programme accorded to imported products from Argentina, Mexico, and 
Uruguay and found to be inconsistent u nder Article  I:1 of the GATT  1994 are not justified under 
paragraph  2(b) of the Enabling  Clause.  
3.5.5.3   Whether the Panel erred in its interpretation of paragraph  2(c) of the 
Enabling  Clause and in finding that the differential tax treatment under the INOVAR -AUTO  
programme was not justified under that provision  
On appeal, Brazil contended that the Panel's substantive evaluation of paragraph  2(c) is  essentially 
indistinguishable from its evaluation of whether the notification was sufficient under paragraph  4(a). 
Brazil argued that the Panel rested its finding on its flawed conclusion that because the 1980  Treaty 
of Montevideo and the provisions of the relevant ECAs do not expressly make reference to internal 
taxation, they did not have a genuine link with paragraph  2(c) and therefore WTO Members could 
not have been expected to be informed that Brazil intended to accord internal tax reductions to 
motor vehicles from Argentina, Mexico, and Uruguay.  
The Appellate  Body recalled that paragraph  2(c) provides that the provi sions of paragraph  1 of the 
Enabling Clause apply to "[r]egional or global arrangements entered into amongst developing 
country Members for the mutual reduction or elimination of tariffs and, in accordance with criteria 
or conditions which may be prescribe d by the [WTO Members], for the mutual reduction or 
elimination of non -tariff measures, on products imported from one another". The Appellate  Body 
considered that paragraph  2(c) does not exclude the possibility that developing country Members 
that are part ies to regional or global arrangements may adopt such instruments that they deem 
appropriate for the mutual reduction or elimination of tariffs and non -tariff measures. However, the WT/AB/29  
 
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  Appellate  Body found that it suffices that the instrument adopted that way , to be justified under 
paragraph  2(c) for the differential and more favourable treatment it accords, has a "genuine" link or 
a rational connection with the regional or global arrangement adopted and notified to the WTO. 
Therefore, the Appellate  Body disag reed with the Panel to the extent it considered that, in order for 
any differential and more favourable treatment to be justified under paragraph  2(c), there must 
exist both a "close" and "genuine" link to a "regional arrangement entered into amongst" deve loping 
country Members.  
The Appellate  Body considered that the  Panel did not find, as Brazil contended, that the 1980  Treaty 
of Montevideo and the relevant ECAs do not bear a genuine link with the requirements of 
paragraph  2(c). Instead, the Panel found th at Brazil had not demonstrated how  the relevant tax 
reductions under the INOVAR -AUTO programme found to be inconsistent under Article  I:1 of the 
GATT  1994 are related to the RTA that Brazil has notified to the WTO (the Treaty of Montevideo) or 
the ECAs all egedly implementing that RTA. The Appellate  Body recalled that it has considered the 
question of whether or not the differential tax treatment under the INOVAR -AUTO programme was 
notified pursuant to paragraph  4(a) of the Enabling  Clause as having been ado pted under 
paragraph  2(c) by virtue of the notification of the 1980  Treaty of Montevideo and the relevant ECAs 
under paragraph  2(c). The Appellate  Body also recalled its finding that neither the 1980  Treaty of 
Montevideo nor the relevant ECAs refer to inte rnal taxation. Accordingly, the Appellate  Body noted 
that, in the absence of a genuine link between the differential tax treatment under the INOVAR -AUTO 
programme, on the one hand, and the 1980  Treaty of Montevideo and the relevant ECAs, on the 
other hand,  it had agreed with the Panel's finding that Brazil had not demonstrated how the tax 
reductions found to be inconsistent under Article  I:1 of the GATT  1994 are related to the 
arrangements that Brazil has notified to the WTO under paragraph 2(c) of the Enab ling Clause. 
Therefore, to the extent that the Panel relied upon its earlier analysis concerning whether or not the 
INOVAR -AUTO programme had a genuine link to the  arrangements notified to the WTO in 
determining if the differential and more favourable tax treatment thereunder was substantively 
justified under paragraph  2(c), the Appellate  Body saw no error in the Panel's approach. The 
Appellate  Body explained that if there is no genuine link between the measure at issue according 
the differential and more f avourable treatment and the arrangements notified to the WTO, it is 
difficult to see how the measure at issue could be substantively justified under paragraph  2(c). 
For these reasons, the Appellate  Body upheld the Panel's finding to the extent it found tha t Brazil 
has not identified any arrangement with a genuine link to the differential tax treatment envisaged 
under the INOVAR -AUTO programme. Consequently, the Appellate  Body upheld the Panel's finding 
that the internal tax reductions accorded under the INO VAR-AUTO programme to imported products 
from Argentina, Mexico, and Uruguay and found to be inconsistent under Article  I:1 of the 
GATT  1994 are not justified under paragraph  2(c) of the Enabling  Clause  
3.5.6   Articles  11 and 12.7 of the DSU and 4.7 of the SCM  Agreement  
On appeal, Brazil claimed that the Panel acted inconsistently with Articles  11 and 12.7 of the DSU in 
recommending, pursuant to Article  4.7 of the SCM  Agreement, that Brazil withdraw the prohibited 
subsidies identified by the Panel within 90 days.  According to Brazil, the Panel failed to engage with 
the arguments put forward by the parties and to provide a "reasoned and adequate explanation" or 
a "basic rationale" for its conclusion that the prohibited subsidies at issue be withdrawn within 90 
days.   
Beginning with the legal standard under Article  4.7 of the SCM  Agreement , the Appellate  Body noted 
that the remedy under Article  4.7 to withdraw prohibited subsidies "without delay" is distinct from 
the remedy contemplated under Article  21 of the DSU. Having examined the text and the context of 
Article  4.7, the Appellate  Body stated that term "without delay" in that provision is not used in the 
sense of requiring  immediate  compliance , nor does the use of that term, combined with the 
requirement tha t the panel specify a time period, impose a single standard or time period applicable 
in all cases. Instead, for the Appellate  Body, Article  4.7 requires a panel to specify a time period that 
constitutes "without delay" within the realm of possibilities in  a given case and considering the 
domestic legal system of the implementing Member. The Appellate  Body explained that, in 
determining the time period that constitutes "without delay", a panel should typically take into 
account the nature of the measure(s) to be revoked or modified and the domestic procedures 
available for such revocation or modification, including any extraordinary procedures that may be 
available within the legal system of a WTO Member.   WT/AB/29  
 
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  The Appellate  Body next turned to ascertain whether the Panel provided a "reasoned and adequate 
explanation" or "basic rationale", in accordance with Articles  11 and 12.7 of the DSU, for its 
recommendation that Brazil withdraw the prohibited subsidies found to exist within 90 days. The 
Appellate  Body noted that, in specifying the time period, the Panel referred to prior panel reports 
specifying 90 days as the time period under Article  4.7 as well as the Appellate  Body Reports in 
Canada  ‒ Renewable Energy / Canada – Feed-in Tariff Program . The Appellate  Body found no 
support for the Panel's conclusion in this case in the Appellate  Body Reports addressing the 
Canada  ‒ Renewable Energy / Canada – Feed-in Tariff Program  dispute. The Appellate  Body further 
noted that, while many panels have tended to specify 90 days as the time period for withdrawal of 
prohibited subsidies "without delay", other panels have specified longer periods under Article  4.7. 
The Appellate  Body co nsidered this to be in line with its view that the use of the term "without delay" 
in Article  4.7 does not establish a bright -line standard of 90 days to be specified in all cases. Finally, 
the Appellate  Body noted that the Panel's indication in a single s tatement that it had taken into 
account "the procedures that may be required to implement [its] recommendation on the one hand, 
and the requirement that Brazil withdraw its subsidies 'without delay' on the other", did not allow 
the Appellate  Body to ascert ain whether the Panel's findings and recommendations were based on 
a sufficient evidentiary basis on the record and an adequate engagement with the arguments 
presented by the parties, and whether its recommendation was based on a reasoned and adequate 
explanation, in accordance with Article  11 of the DSU. For the Appellate  Body, as a result of the 
Panel's failure to engage with the participants' arguments on the relevant procedures necessary to 
implement its recommendation, the Panel's analysis did not "rev eal how and why the law applies" 
to the facts, in accordance with Article  12.7 of the DSU. Noting therefore that the Panel did not 
provide reasoning establishing a sufficient link between the time period of 90 days specified by it for 
the withdrawal of the  subsidies at issue and the domestic procedure within Brazil for such withdrawal, 
the Appellate  Body reversed the Panel's conclusions that Brazil withdraw the prohibited subsidies at 
issue within 90  days.  
Having reversed the Panel, the Appellate  Body was unable to complete the legal analysis and specify 
a time  period under Article  4.7 of the SCM  Agreement , as requested by Brazil, because there were 
no factual findings by the Panel nor any undisputed facts on the record concerning the time periods 
under, an d the nature of, the legislative process in Brazil. The Appellate  Body clarified, however, 
that the Panel's recommendations that Brazil withdraw the prohibited subsidies at issue "without 
delay" stand undisturbed.  
3.6  Appellate  Body  Report, United  States  – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article  21.5 of the DSU by 
the United  States  / United  States  – Measures Concerning the Importation, Marketing and 
Sale of Tuna and Tuna Products – Second Recourse to Article  21.5 of the DSU by Mexico , 
WT/DS381/AB/RW/USA, WT/DS381/AB/RW2  
These compliance proceedings concerned the United  States ' labelling regime for dolphin -safe tuna 
products and the implementation by the United  States  of the DSB's  recommendations and  rulings in 
US – Tuna II (Mexico)  and US – Tuna II (Mexico) (Article  21.5 – Mexico) .  
Commercial tuna fishing can have harmful effects on marine mammals, including dolphins, and these 
effects may vary depending on factors such as the method of fishing used , the size of the fishing 
vessel, and the area of the ocean in which the vessel engages in tuna fishing. The United  States has 
undertaken certain domestic measures, and participated in certain multilateral initiatives, aimed at 
reducing the adverse effects  on dolphins associated with commercial fishing operations. In 1990, 
the United  States  put in place a domestic regime for labelling tuna products as "dolphin -safe" 
through the enactment of the Dolphin Protection Consumer Information Act (DPCIA) in order to : 
(i) ensure that consumers are not misled or deceived about whether tuna products contain tuna 
caught in a manner that adversely affects dolphins; and (ii) contribute to the protection of dolphins 
by ensuring that the US market is not used to encourage fi shing fleets to catch tuna in a  manner 
that adversely affects dolphins.  
At the international level, the United  States  and Mexico are parties to the 1999 Agreement on the 
International Dolphin Conservation Program (AIDCP). The AIDCP, together with the inst ruments 
adopted thereunder, addresses a particular tuna -fishing method (purse seine fishing) in a specific 
area of the ocean, namely, the Eastern Tropical Pacific Ocean (ETP). Within the ETP, there is a 
regular association between tuna and dolphins, in tha t schools of tuna tend to swim beneath 
dolphins. Certain vessels operating in this area thus employ the fishing technique known as WT/AB/29  
 
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  "setting  on" dolphins, which involves chasing and encircling the dolphins with a purse seine net in 
order to catch the tuna s wimming beneath them. The AIDCP rules do not prohibit setting on dolphins, 
but permit only large purse seine vessels to set on dolphins, only within certain dolphin mortality 
limits, and only subject to a number of requirements in respect of the fishing ge ar that they must 
carry and the procedures that they must perform, so as to reduce the risk of harm to dolphins. 
Mexico's tuna -fishing fleet consists primarily of large purse seine vessels operating in the ETP using 
the method of setting on dolphins.  
In the original proceedings, the measure at issue consisted of the following legal instruments: DPCIA, 
codified in United  States  Code, Title 16, Section 1385; the regulations implementing the DPCIA, in 
particular, United  States  Code of Federal Regulations (CFR), Title 50, Sections 216.91 and  216.92 
(original implementing regulations); and a ruling by a US Federal Appeals Court in Earth  Island  
Institute v. Hogarth relating to the application of the DPCIA ( Hogarth  ruling). These instruments, 
taken together, set out the conditions under which tuna products sold in the United  States may be 
labelled "dolphin -safe" or make similar claims on th eir labels. The original tuna measure did not 
make the use of a dolphin -safe label obligatory for the importation or sale of tuna products in the 
United  States . However, the preferences of retailers and consumers are such that the dolphin -safe 
label has si gnificant commercial value, and access to that label constitutes an advantage on the US 
market for tuna products.  
The Appellate  Body found that, by excluding most Mexican tuna products from access to the dolphin -
safe label while granting access to most US  tuna products and tuna products from other countries, 
the original tuna measure modified the conditions of competition in the US market to the detriment 
of Mexican tuna products. Next, the Appellate  Body scrutinized whether the detrimental impact from 
the measure stemmed exclusively from a legitimate regulatory distinction. In particular, the 
Appellate  Body examined whether the different conditions for access to the dolphin -safe label were 
"calibrated" to the risks to dolphins arising from different fishin g methods in different areas of the 
oceans, as the United  States  had claimed. The Appellate  Body noted the original panel's finding that 
the fishing technique of setting on dolphins is particularly harmful to  dolphins and that this fishing 
method has the c apacity of resulting in observed and unobserved adverse effects on dolphins. The 
Appellate  Body also noted that, at the same time, the original panel was not persuaded that the 
risks to dolphins from other fishing methods are insignificant and do not under  some circumstances 
rise to the same level as the risks from setting on dolphins. The Appellate  Body further noted the 
original panel's finding that, while the US measure fully addressed the adverse effects on dolphins 
resulting from setting on dolphins in  the ETP, it did not address dolphin mortality and serious injury 
arising from fishing methods other than setting on dolphins in other areas of the oceans. Thus, the 
Appellate  Body found that the original tuna measure was not even -handed in the manner in w hich 
it addressed the risks to dolphins arising from different fishing methods in different areas of the 
oceans. The Appellate  Body therefore reversed the original panel's finding that the US dolphin -safe 
labelling provisions were not inconsistent with Art icle 2.1 of the TBT  Agreement , and found, instead, 
that the US measure was inconsistent with that provision.  
In the first compliance proceedings, the measure at issue, i.e. the 2013 Tuna Measure, consisted of 
the DPCIA, Subpart H of Part 216 of CFR  Title 50 as amended by the 2013 Rule (2013  implementing 
regulations), and the Hogarth  ruling. The DPCIA and the Hogarth  ruling remained unchanged, and 
the amendments introduced by the 2013 Tuna Measure concerned only the 2013 implementing 
regulations. The Appella te Body found that the first compliance panel made a number of errors in 
its application of the relevant legal provisions, including by undertaking isolated  analyses and making 
separate findings regarding the three discrete elements of the measure, and by failing to consider 
whether differences in the relative risks of harm to dolphins in different fisheries explain or justify 
the differences in the certification requirements and the tracking and verification requirements  
applied inside and outside the ETP large purse seine fishery.  The Appellate  Body therefore reversed 
the first compliance panel's finding that the eligibility criteria were consistent with Article  2.1 of the 
TBT Agreement , as well as the Panel's separate findings that the different certification requirements 
and the different tracking and verification requirements were each inconsistent  with that provision. 
For similar reasons, the Appellate  Body reversed the panel's findings under the GATT  1994. 
Specifically, the Appellate  Body reversed the finding that the eligibility criteria, the certification 
requirements, and the tracking and verification requirements were each  inconsistent with Articles 
I:1 and III:4 of the GATT  1994. The Appellate  Body also reversed the finding that  the eligib ility 
criteria were consistent with the chapeau  of Article  XX, while the certification requirements and  
tracking and verification requirements were each inconsistent with the chapeau . WT/AB/29  
 
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  In completing the analysis, the Appellate  Body found that, by excluding most Mexican tuna products 
from access to the dolphin -safe label, while granting conditional access to such label to like products 
from the United  States  and other countries, the 2013 Tuna Measure modified the conditions of 
competition to the detriment of Mexican tuna products in the US market. In the absence of a proper 
assessment by the first compliance panel of the risks posed to dolphins inside and outside the ETP 
large purse seine fishery, the Appellate  Body was unable to assess fully whether all of th e regulatory  
distinctions drawn under the 2013 Tuna Measure can be explained and justified in light of differences 
in the relative risks associated with different methods of fishing for tuna in different areas of the 
oceans. Nevertheless, the Appellate  Body was able to find that, by virtue of the determination 
provisions, the 2013 Tuna Measure did not provide for the same certification requirements in all 
circumstances of comparably high risks. Thus, it was not demonstrated that the differences in the 
dolph in-safe labelling conditions under the 2013 Tuna Measure were calibrated to, or commensurate 
with, the risks to dolphins arising from different fishing methods in different areas of the oceans. 
Therefore, the detrimental impact of the amended tuna measure could not be said to stem 
exclusively from a legitimate regulatory distinction, and the Appellate  Body found the 2013  Tuna 
Measure to be  inconsistent with Article  2.1 of the TBT  Agreement . Relying on a similar analysis, the 
Appellate  Body found that the 20 13 Tuna Measure was inconsistent with Articles I:1 and III:4 of the 
GATT  1994 and that, although the measure was provisionally justified under Article  XX(g), it had 
not been demonstrated that the measure was applied in a manner that does not constitute arb itrary 
or unjustifiable discrimination within the meaning of the chapeau  of Article  XX of the GATT  1994. 
Against the backdrop of the first compliance proceedings, on 22  March 2016, the United  States 
published, in its Federal Register , a legal instrument entitled "Enhanced Document Requirements 
and Captain Training Requirements to Support Use of the Dolphin Safe Label on Tuna Products" 
(2016 Rule). The 2016 Rule made certain changes to Sections  216.91 and 216.93 of CFR Title 50 . 
The Pa nels described the measure at issue in these compliance proceedings, i.e. the 2016 Tuna 
Measure, as consisting of the following three elements: (i) the DPCIA; (ii) Subpart H of Part 216 of 
CFR Title 50 (Dolphin Safe Tuna Labelling), as amended by the 2013 Rule and the 2016 Rule 
(collectively, the 2016 implementing regulations); and (iii) the Hogarth  ruling. Like  its predecessors, 
the 2016  Tuna Measure prohibits the use of the dolphin -safe label on a tuna product sold in the US 
market unless the conditions s pecified in the measure are met.  The 2016 Tuna Measure broadly 
places three types of conditions on the use of the dolphin -safe label for tuna products exported from 
or offered for sale in the United  States: (i)  conditions relating to the automatic disquali fication of 
certain tuna products (eligibility criteria); (ii)  conditions relating to certifications (certification 
requirements); and (iii)  conditions relating to record keeping and the segregation of dolphin -safe 
and non -dolphin -safe tuna (tracking and v erification requirements).  
The 2016 Tuna Measure makes no changes to the eligibility criteria set out in the DPCIA and the 
Hogarth  ruling. Thus, under the 2016 Tuna Measure, the following tuna products are automatically 
ineligible for the dolphin -safe labe l: (i) tuna harvested using large -scale driftnets on the high seas; 
and (ii)  tuna products containing tuna harvested by setting on dolphins anywhere in the world. All 
other tuna products may be labelled "dolphin -safe" only if  no dolphins were killed or ser iously injured 
in the gear deployments in which the tuna was caught. To this end, these tuna products must satisfy 
the certification requirements and tracking and verification requirements of the 2016 Tuna Measure.  
Apart from large -scale driftnet fishing o n the high seas, the certification requirements under the 
2016 Tuna Measure make a distinction between the ETP large purse seine fishery, on the one hand, 
and all other fisheries, on the other hand. For tuna caught in the ETP large purse seine fishery, the  
2016 Tuna Measure, like the 2013 Tuna Measure, mandates that certification must be provided by 
the captain of the vessel and an International Dolphin Conservation Program (IDCP) -approved 
observer, indicating that: (i)  none of the tuna was caught on a trip  using a purse seine net 
intentionally deployed on or used to encircle (i.e. set on) dolphins; and (ii)  no dolphins were killed 
or seriously injured during the sets in which the tuna was caught.  
As for all fisheries other than the ETP large purse seine fis hery, for fishing trips that began on or 
after 21  May 2016, captains  of all vessels must certify that: (i)  no purse seine net or other fishing 
gear was intentionally deployed on or used to encircle (i.e. set on) dolphins during the fishing trip in 
which th e tuna was caught; and (ii)  no dolphins were killed or seriously injured in the sets or other 
gear deployments in which the tuna was caught. In certain circumstances, the same certifications 
from an observer participating in a national or international pro gramme acceptable to the 
US Assistant Administrator for Fisheries will be required pursuant to the following two elements of 
the 2016 Tuna Measure.  WT/AB/29  
 
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  The first element concerns seven US  domestic fisheries for which the Assistant Administrator has 
determined  that observers are qualified and authorized to make the relevant certifications. In these 
fisheries, certification by such an observer is required when the observer is already on board the 
fishing vessel for other reasons (i.e. reasons unrelated to the do lphin-safe labelling regime). The 
second element concerns what the first compliance panel described as the "determination 
provisions". The determination provisions have been modified under the 2016 Tuna Measure, such 
that tuna caught in all fisheries other  than the ETP large purse seine fishery  may require observer 
certifications, in addition to the captain certifications, where the Assistant Administrator has 
determined that in such a fishery: (i)  there is a regular and significant association between dolp hins 
and tuna (similar to the association between dolphins and tuna in the ETP); or (ii)  a regular and 
significant mortality or serious injury of dolphins is occurring.  
Additionally, the 2016 Tuna Measure contains a new requirement whereby the captains of  the vessels 
in all fisheries other than the ETP large purse seine fishery must certify that they have completed 
the National Marine Fisheries Service (NMFS) Tuna Tracking and Verification Program dolphin -safe 
training course (Captain Training Course).  
The tracking and verification requirements under the 2016 Tuna Measure concern the physical 
segregation of dolphin -safe tuna from non -dolphin -safe tuna, from the moment of harvest and 
throughout the processing chain. Like its predecessor, the 2016 Tuna Measur e prescribes the 
documentation requirements for recording and verifying segregation and the corresponding 
regulatory oversight. These requirements distinguish between: (i)  the ETP large purse seine fishery, 
which must comply with the AIDCP Tracking and Ver ification System; and (ii)  all other fisheries, 
which must comply with the requirements prescribed in the 2016 implementing regulations that the 
United  States refers to as the "NOAA  regime", i.e. the regime administered by the United  States  
National Oceani c and Atmospheric Administration.  
Under the AIDCP regime, tuna caught by large purse seine vessels in the ETP must be accompanied 
by Tuna Tracking Forms (TTFs), used to separately record dolphin -safe and non -dolphin -safe sets 
on a particular fishing trip.  The relevant TTF number must accompany the tuna from the moment of 
unloading and through every subsequent processing step of the relevant catch. The AIDCP Tracking 
and Verification System also provides that the national programs established by the parties  to the 
AIDCP should include periodic audits and spot checks for tuna products, as well as mechanisms for 
cooperation among national authorities. In addition, all tuna products imported into the 
United  States, regardless of where the tuna was caught and wh ether the dolphin -safe label is used, 
must be accompanied by NOAA  Form 370, which designates, inter alia, whether the tuna is 
dolphin -safe. This means that, for imported tuna caught in the ETP large purse seine fishery, both 
TTFs and Form 370 are required.  By contrast, for imported tuna caught in all other fisheries, only 
Form 370 is required.  
As regards all other fisheries, the NOAA regime requires US tuna processors to submit monthly 
reports to the US Tuna Tracking and Verification Program for all tuna re ceived at their processing 
facilities. Furthermore, under the NOAA  regime, the US NMFS is empowered to undertake verification 
activities, including dockside inspections of vessels, monitoring of Form 370s, monitoring of cannery 
reports, audits of US canner ies, and retail market spot checks. In addition, the 2016 Tuna Measure 
introduced new chain -of-custody record -keeping requirements for tuna products harvested from all 
other fisheries, whereby the US processors and importers of such tuna products must coll ect and 
retain, for two years, information on each point in the chain of custody of the tuna or tuna products. 
This information must be provided to the NMFS upon request, and must be sufficient for the NMFS 
to conduct a trace -back of any tuna product marke ted as dolphin -safe to verify that the tuna product 
in fact meets the dolphin -safe labelling requirements. Breach of these new chain -of-custody record -
keeping requirements may lead to the imposition of sanctions under US law. Finally, tuna caught in 
fisheries designated under the determination provisions must be accompanied by valid 
documentation signed by a representative of the vessel flag nation or the processing nation certifying 
that the relevant tracking and verification requirements described a bove are met.  
The United  States requested the Panels to find that the 2016 Tuna Measure brings the United  States 
into compliance with its WTO obligations, including Article  2.1 of the TBT  Agreement . Mexico, 
however, asked the Panels to find that the 2016 T una Measure is WTO -inconsistent, including under 
Article  2.1 of the TBT  Agreement . WT/AB/29  
 
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  The Panels recalled that a finding of inconsistency with Article  2.1 of the TBT  Agreement  must be 
based on the following three elements: (i)  the measure at issue is a techni cal regulation within the 
meaning of Annex 1.1 to the TBT  Agreement; (ii)  the relevant products are "like" products; and 
(iii) the measure at issue accords less favourable treatment to imported products than to the 
relevant group of like products. Noting t he similarity in the factual circumstances underlying the first 
two elements in the first compliance proceedings, the Panels in these compliance proceedings agreed 
with the parties that the 2016 Tuna Measure is a technical regulation and that the relevant products 
are like.  
Regarding the third element, the Panels recalled the Appellate  Body's finding that assessing whether 
the measure accords less favourable treatment under Article  2.1 requires two distinct steps: 
(i) determining whether the challenged meas ure modifies the conditions of competition to the 
detriment of the relevant imported products vis -à-vis like products of domestic origin and/or like 
products originating in any other country; and, if the panel makes such a finding, (ii) determining 
whether  the detrimental impact on imports stems exclusively from a legitimate regulatory distinction 
rather than reflecting discrimination against the group of imported products. Noting that the 
2016 Tuna Measure maintains the overall architecture and structure o f the original and 2013 Tuna 
Measures, as well as the parties' agreement in this regard, the Panels thus found that the 2016 Tuna 
Measure modifies the conditions of competition to the detriment of Mexican tuna products in the 
US market.  
The Panels therefo re noted that the parties' disagreement on the consistency of the 2016 Tuna 
Measure with Article  2.1 of the TBT  Agreement  centred on the question whether the detrimental 
impact caused by the 2016 Tuna Measure stems exclusively from a legitimate regulatory distinction. 
The Panels considered that, while there may in theory be a number of ways to assess whether the 
measure satisfies the second step of the analysis under Article  2.1, in this dispute it was appropriate 
to assess whether the detrimental impact ca used by the 2016 Tuna Measure stems exclusively from 
a legitimate regulatory distinction through the lens of calibration. Specifically, the Panels considered 
their task in examining the parties' respective claims under Article  2.1 was to ascertain whether the 
relevant regulatory distinctions are appropriately calibrated to, or commensurate with, the different 
risks to dolphins arising from the use of different fishing methods in different areas of the ocean. 
The Panels rejected Mexico's argument that the ca libration analysis must be constrained by a distinct 
analysis of the relationship between the detrimental impact and the objectives of the Measure. 
Rather, the Panels considered that the objectives of the Measure would be taken into account in the 
calibrat ion analysis under Article  2.1. 
The Panels also rejected Mexico's argument that the 2016 Tuna Measure is incompatible with the 
principle of sustainable development, and therefore with Article  2.1, because it encourages the use 
of fishing methods as alterna tives to setting on dolphins, which cause grievous harm to fisheries and 
to the overall marine ecosystem. The Panels considered this argument to have elevated the 
preambular language to the level of substantive obligation, and emphasized that the 2016 Tuna  
Measure is not concerned with sustainable development, but rather with the protection and 
well-being of dolphins. In any event, to the Panels, the WTO  Agreement does not obligate a Member 
to regulate only for the objective of sustainable development.  
The Panels proceeded to examine whether the detrimental impact caused by the 2016 Tuna Measure 
stems exclusively from a legitimate regulatory distinction. The Panels began by assessing the 
evidence before them concerning the use of all relevant fishing methods  in different areas of the 
ocean (i.e. fisheries) before arriving at an overall conclusion regarding the risk profile of each fishing 
method. In making this assessment, the Panels considered it appropriate to rely to the greatest 
extent possible on a quant itative analysis, and recur to a qualitative assessment in cases where this 
seemed to be the most reasonable avenue to properly gauge and describe the risks at issue. The 
Panels also highlighted the importance of a standardized benchmark or metric when det ermining 
and comparing the different risk profiles. The Panels considered several different possible 
standardized metrics and ultimately adopted a "per set" methodology that entailed averaging the 
total number of a particular indicator of adverse effects b y the number of operations of a particular 
fishing gear used in a particular fishery in a given time period. The Panels found that relevant 
indicators included observed mortalities, serious injuries, and tuna -dolphin interactions. The Panels 
also distingui shed between observable harm and unobservable harm, observed harm and 
unobserved harm, as well as direct harm and indirect harm.  WT/AB/29  
 
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  The Panels conducted their analysis of risk profiles by distinguishing between seven different fishing 
methods, namely: purse seine fishing by setting on dolphins; purse seine fishing without setting on 
dolphins; gillnet fishing; longline fishing; trawl fishing; tuna handlining; and pole and line fishing. 
The Panels found that purse seine fishing by setting on dolphins causes ser ious injuries to dolphins. 
In particular, the Panels found that, in the ETP, while the evidence suggested that setting on dolphins 
does not pose a very high risk of observable serious injury, such serious injury is less frequent than 
mortality. Moreover, t he likelihood of unobserved mortality or serious injury is present in every set, 
as a consequence of the tuna -dolphin association in that ocean area. The Panels also found that 
setting on dolphins causes unobservable harms as a result of the chase and enci rclement process 
itself, including cow -calf separation; potential muscle injury resulting from the chase; immune and 
reproductive systems failures; and other adverse health consequences for dolphins, such as 
continuous acute stress.  
Regarding purse seine fishing without setting on dolphins, the Panels considered that this fishing 
method has a relatively low risk profile in terms of both observed and unobserved mortality and 
serious injury. As regards longline and handline fishing, the Panels found that the  risk profiles of 
these methods were low in terms of observable harms. With regard to trawl fishing, the Panels found 
that this method is a low -to-moderate -risk fishing method in terms of observed mortalities and 
observable harm, as it entails very little,  if any, interaction with dolphins. The Panels also found that 
none of the above fishing methods causes the kinds of unobservable harms caused by purse seine 
fishing by setting on dolphins in the ETP. With respect to gillnet fishing, the Panels found that this 
fishing method poses high levels of observable harm to dolphins in certain areas of the ocean, but 
does not pose the same level of harm in other areas. The Panels further noted that the evidence 
presented in relation to ghost fishing – i.e. when fishi ng gear (such as gillnets) continue to cause 
harm to marine life after being lost or discarded – indicated that ghost fishing does give rise to 
unobserved harms, but that such harms were not like the kinds of unobservable harm that are 
caused by setting on  dolphins. Finally, regarding pole and line fishing, the Panels noted the lack of 
evidence regarding adverse effects caused by this method and concluded that the risk profile of this 
fishing method is very low.  
Having set forth their analysis of the seven fishing methods, the Panels conducted an overall relative 
assessment, in which they provided a comparative assessment of method -specific findings, and 
concluded that, given the differences between setting on dol phins and each of the other six  methods 
with respect to observable harm to dolphins, and taking into account that none of the other methods 
causes the kinds of unobservable harm caused by setting on dolphins, overall, the risk profile of 
setting on dolphin s is much higher than that of each of the other six fishing methods used to catch 
tuna.  
Having examined the relevant risk profiles, the Panels assessed whether the 2016 Tuna Measure is 
calibrated to the risks to dolphins arising from the use of different fishing methods in different areas 
of the ocean, such that the detrimental impact caused by the measure can be said to stem exclusively 
from a legitimate regulatory distinction and therefore not inconsistent with Article  2.1 of the 
TBT Agreement . In making  this assessment, the Panels examined whether (i)  the eligibility criteria; 
(ii) the certification requirements; (iii)  the tracking and verification requirements; (iv)  the 
determination provisions; as well as (v) the 2016  Tuna Measure as a whole, are calib rated to the 
difference in the overall risks to dolphins arising from the use of different fishing methods in different 
areas of the ocean.  
With respect to the eligibility criteria, the United  States claimed that the eligibility criteria are 
even-handed be cause they address the risks of both setting on dolphins and other fishing methods, 
commensurately with the risks that the different methods pose to dolphins. Mexico disagreed, 
arguing that the difference in treatment between ineligible and eligible fishin g methods is not 
even-handed.  
The Panels recalled that they had examined the evidence on the record concerning the existence 
and extent of observable harms, unobservable harms, and interaction with dolphins, with respect to 
the use of different fishing met hods. The Panels recalled that their examination had revealed that 
setting on dolphins is significantly more dangerous to dolphins than are other fishing methods. Based 
on this consideration, the Panels considered that the eligibility criteria in the 2016 Tuna Measure, 
which distinguish between setting on dolphins and other fishing methods, are calibrated to the risks 
to dolphins arising from the use of different fishing methods in different areas of the ocean.  WT/AB/29  
 
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  As regards the certification requirements, the  United  States  argued that, given the special risk profile 
of the ETP large purse seine fishery, the differences in the certification requirements are 
commensurate with the different risk profiles of the ETP large purse seine fishery, on the one hand, 
and other fisheries, on the other hand. For Mexico, the certification requirements are being applied 
in a manner that is not even -handed.  
The Panels noted that, unlike the eligibility requirements, the certification requirements (and the 
tracking and verificat ion requirements) draw distinctions on the basis of different fisheries, rather 
than different fishing methods. Thus, the Panels considered the question before them to be whether 
the distinction that the certification requirements draw between the ETP larg e purse seine fishery, 
on the one hand, and all other fisheries, on the other hand, is calibrated. The Panels recalled their 
conclusion that setting on dolphins is a particularly dangerous fishing method that is liable to cause 
observable and unobservable harms to dolphins at rates significantly in excess of those caused by 
other fishing methods. The Panels recogni zed that not all large purse seine vessels in the ETP actually 
set on dolphins, at least in every set or on every voyage. However, the Panels not ed that in the ETP, 
unlike in other areas of the ocean, large purse seine vessels are permitted to and actually can set 
on dolphins in a consistent and systematic manner. Thus, for the Panels, it is both the technical and 
legal possibilities of setting on dolphins and the fact that dolphin sets occur in a consistent and 
systematic manner in the ETP large purse seine fishery that give this fishery its special risk profile. 
Given the special risk profile of the ETP, the Panels found that the certification req uirements in the 
2016 Tuna Measure address the relative risks posed to dolphins in the ETP large purse seine fishery 
and other fisheries in a way that is calibrated to the risk profiles of those fisheries. Accordingly, the 
Panels considered that the differ ent certification requirements are calibrated to the risks to dolphins 
arising from the use of different fishing methods in different areas of the ocean.  
The United  States claimed that, similar to the certification requirements, the difference in the 
tracking and verification requirements for tuna products produced from the ETP large purse seine 
fishery and from other fisheries able to produce dolphin -safe tuna products is commensurate with 
the different risk profiles of these fisheries. Mexico contended th at, under the 2016 Tuna Measure, 
dramatic differences remain between the tracking and verification requirements for tuna caught by 
large purse seine vessels in the ETP and tuna caught elsewhere. Mexico added that any difference 
in the relevant regulatory d istinctions that result in the provision of inaccurate information to 
consumers would be contrary to the objectives of the 2016 Tuna Measure.  
The Panels observed that, under the 2016 Tuna Measure, the tracking and verification of tuna from 
the ETP large pu rse seine fishery must be conducted consistently with the AIDCP regime. The 
tracking and verification of tuna from other fisheries must be conducted according to the NOAA 
regime. The Panels found that although there remain differences between the NOAA and AIDCP 
regimes with respect to tracking and verification, such differences have been considerably narrowed 
in the 2016 Tuna Measure. The Panels also found that the remaining differences are calibrated to 
the differences in the risk profile of the ETP large purse seine fishery compared to other fisheries.  
In respect of the determination provisions, the United  States claimed that the 2016 Tuna Measure 
eliminates the gaps in the coverage of the determination provisions, identified in the first compliance 
procee dings. Mexico accepted that the revised determination provisions eliminate the differences 
created by the statute with respect to purse seine fishing and other fishing methods. However, 
Mexico questioned the practicability of the additional tracking and ve rification requirements that 
apply to a fishery that has been designated under the determination provisions. In Mexico's view, 
the failure to evaluate whether or not there is regular and significant harm to dolphins occurring in 
fisheries outside the ETP, or the decision not to do so under the provisions of the 2016 Tuna Measure 
is an indication of arbitrariness.  
The Panels rejected Mexico's argument that the determination provisions are applied in an arbitrary 
or uneven -handed manner. Instead, the Panels f ound that the 2016 Tuna Measure fills the gaps in 
the coverage of the determination provisions identified in the first compliance proceedings. The 
Panels also found that the determination provisions have been applied in a reasonable way that 
helps to ensur e that the 2016 Tuna Measure is calibrated to the different risks to dolphins arising 
from the use of different fishing methods in different areas of the ocean.  
After concluding their intermediate analyses of these component elements of the 2016 Tuna 
Measu re, the Panels synthesized their analysis in order to reach their conclusion as to the consistency 
of the 2016 Tuna Measure with the TBT  Agreement . The Panels concluded that the WT/AB/29  
 
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  2016 Tuna Measure, as a whole, is calibrated to the risks to dolphins arising from the use of different 
fishing methods in different areas of the ocean. Consequently, the Panels concluded that the 
2016 Tuna Measure accords to Mexican tuna products treatment no less favourable than that 
accorded to like products from the United  State s and other countries, and therefore is consistent 
with Article  2.1 of the TBT  Agreement . 
In light of the parties' agreement in this regard, the Panels found that the 2016 Tuna Measure is 
inconsistent with Articles  I:1 and  III:4 of the GATT  1994, but is pr ovisionally justified under 
subparagraph (g) of Article  XX of the GATT  1994. The only disagreement remaining between the 
parties was whether the 2016 Tuna Measure meets the requirement of the chapeau  of Article  XX.  
The Panels recalled that three analytica l elements must be demonstrated with respect to arbitrary 
or unjustifiable discrimination under the chapeau  of Article  XX, namely: (i)  the application of the 
measure results in discrimination; (ii)  the conditions prevailing between countries are the same; and 
(iii) the discrimination is arbitrary or unjustifiable. With respect to the existence of discrimination, 
since the 2016  Tuna Measure maintains the overall architecture and structure of the original and 
2013 Tuna Measures, the Panels found that the 2016  Tuna Measure continues to cause the same 
detrimental impact resulting from the discriminatory treatment between tuna products containing 
tuna caught in the ETP large purse seine fishery and those containing tuna caught in other fisheries. 
With respect to the second  element, the Panels found that the conditions prevailing between 
countries are the same, namely, the risks of adverse effects on dolphins arising from tuna -fishing 
practices, and that neither party had argued otherwise.  
With respect to the thir d element, the Panels recalled that, so long as the similarities and differences 
between Article  2.1 of the TBT  Agreement and Article  XX of the GATT  1994 are taken into account, 
it may be permissible to rely on reasoning developed in the context of one agr eement for purposes 
of conducting an analysis under the other. The Panels then recalled their finding under Article  2.1 of 
the TBT  Agreement  that the 2016 Tuna Measure is calibrated to different risks to dolphins arising 
from the use of different fishing m ethods in different areas of the ocean and that, consequently, the 
detrimental impact caused by the 2016  Tuna Measure stems exclusively from legitimate regulatory 
distinctions.  
The Panels found that, in the circumstances of this dispute, it was appropriate  to use their factual 
and legal findings under Article  2.1 in their assessment of whether the 2016 Tuna Measure is applied 
in a manner that constitutes arbitrary or unjustifiable discrimination within the meaning of the 
chapeau  of Article  XX. In this regar d, the Panels did not consider that the 2016 Tuna Measure, which 
is tailored to and commensurate with the relevant risks, can be said to be applied in a manner that 
constitutes a means of arbitrary or unjustifiable discrimination within the meaning of Arti cle XX of 
the GATT  1994. Therefore, in light of their finding under Article  2.1, the Panels concluded that the 
2016 Tuna Measure is not applied in a manner that constitutes a means of arbitrary or unjustifiable  
discrimination within the meaning of the chapeau and is therefore justified under Article  XX of the 
GATT  1994.  
At the organizational meetings of the Panels in these proceedings, held in early July 2016, the 
United  States proposed a change to the Panels' working procedures to allow the Panels' substan tive 
meeting to be publicly observed. Alternatively, if Mexico did not agree to this, the United  States 
requested the Panels to allow a party to request a partially open meeting, whereby that party's 
statements during the Panel's meeting with the parties c ould be viewed by the public, either 
simultaneously or through a delayed broadcast. The statements of a party that wished to maintain 
the confidentiality of its statements could not be so viewed. Mexico opposed the United  States' 
request that the Panels co nduct an open meeting either fully or partially. Mexico argued that the 
Panels could only open their substantive meetings with the parties to public viewing with the consent 
of both parties.  
On 29  July 2016, the Panels informed the parties that they consid ered themselves to have the 
authority to authorize the United  States to lift the confidentiality of its statements at the substantive 
meeting with the parties. Subsequently, in response to a formal request by the United  States, and 
following their consulta tion with the parties, the Panels adopted their Additional Working Procedures 
on Partially Open Meetings (Additional Working Procedures). Pursuant to these procedures, the 
Panels permitted the United  States' request to disclose, through public viewing, the  statements of 
its own positions made during the Panels' substantive meeting with the parties. The Panels also 
permitted any third parties that so requested to disclose, through public viewing, the statements of WT/AB/29  
 
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  their own positions made during the Panels' session with the third parties. The Panels granted these 
permissions on condition that the public viewing take the form of delayed viewing. The Panels also 
required that any parts of the meeting, including the third -party session, opened for partial public  
observation should not disclose statements of Mexico's positions or the positions of non -disclosing 
third parties. To this end, these parts of the meeting that were eventually opened for partial public 
observation were subjected to redaction prior to the public viewing.  
3.6.1   Article  2.1 of the TBT  Agreement  
Mexico requested the Appellate  Body to reverse the Panels' findings and conclusions with respect to 
the interpretation and application of Article  2.1 of the TBT  Agreement . Specifically, Mexico claimed 
that t he Panels erred in their legal analysis relating to the assessment of whether the 2016 Tuna 
Measure accords "treatment no less favourable" to Mexican tuna products within the meaning of 
Article  2.1 of the TBT  Agreement.  
3.6.1.1   "Treatment no less favourable" under  Article  2.1 of the TBT  Agreement  
Mexico argued on appeal that the Panels erred in their interpretation and application of Article  2.1 
of the TBT  Agreement in finding that the 2016 Tuna Measure is not inconsistent with that provision. 
In particular, Mexico  contended that the Panels relied on a legal standard that fails to take into 
account whether the regulatory distinctions of the 2016 Tuna Measure are rationally related to its 
objectives.  
The Appellate  Body recalled that it had identified a two -step anal ysis for examining whether a 
technical regulation accords less favourable treatment to imported products under Article  2.1 of the 
TBT Agreement , which consists in determining whether: (i) the technical regulation modifies the 
conditions of competition to the detriment of such imported products vis -à-vis like products of 
domestic origin and/or like products originating in any other country; and (ii) the detrimental impact 
on imports stems exclusively from a legitimate regulatory distinction. The Appellate  Body explained 
in this regard that, where the detrimental impact caused by a technical regulation is found to stem 
exclusively from a legitimate regulatory distinction, such a technical regulation does not accord less 
favourable treatment to imported products and is therefore consistent with Article  2.1 of the 
TBT Agreement.  
The Appellate  Body then indicated that, to determine whether the detrimental impact stems 
exclusively from a legitimate regulatory distinction, a panel must carefully scru tinize whether the 
technical regulation at issue is even -handed in light of the particular circumstances of the case.  The 
Appellate  Body explained that there may be different ways to demonstrate that a measure does not 
stem exclusively from a legitimate re gulatory distinction. One of the ways to do so includes, 
for example, showing that the measure is applied in a manner that constitutes arbitrary or 
unjustifiable discrimination. The Appellate  Body further indicated that , in examining whether a 
technical re gulation constitutes a means of arbitrary or unjustifiable discrimination, it is likely that 
this assessment will involve consideration of the nexus between the regulatory distinctions found in 
the measure and the measure's policy objectives.  
However, the Appellate  Body recalled that, in the original proceedings, the United  States contended 
that the regulatory distinctions drawn under the original Tuna Measure between different tuna -
fishing methods and different areas of the oceans could be explained or jus tified by differences in 
the risks associated with such fishing methods and areas of the oceans. This led the Appellate  Body 
to examine the legitimacy of the original Tuna Measure 's regulatory distinctions through the lens of 
calibration. According to the Appellate  Body, calibration is thus the means to assess whether the 
detrimental impact of the measure at issue in this dispute stems exclusively from a legitimate 
regulatory distinction in the particular circumstances of this dispute. If done  properly, the  calibration 
analysis should encompass consideration of the rational relationship between the regulatory 
distinctions and the objectives of the 2016  Tuna Measure, such that the regulatory distinctions of 
the technical regulation will not amount to arbitrar y or unjustifiable discrimination. The 
Appellate  Body considered that the Panels' articulation of the applicable legal standard comported 
with the findings from the original and first compliance proceedings, and that Mexico's challenge of 
the Panels' findi ngs related primarily to how the Panels applied the legal standard in the 
circumstances of this dispute.  WT/AB/29  
 
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  Furthermore, the Appellate  Body disagreed with Mexico that the Panels erred in rejecting Mexico's 
argument concerning the relevance of the sustainabili ty of tuna stocks and the marine ecosystem. 
Mexico argued that, where the obligations at issue in a dispute relate to sustainable development, 
they must be interpreted consistently with the objective of sustainable development. For Mexico, 
this requirement  arises under Article  2.1 in determining whether the 2016 Tuna Measure stems 
exclusively from a legitimate regulatory distinction. In Mexico's view, applying a technical regulation 
that is inconsistent with or undermines the objective of sustainable develo pment results in 
unjustifiable discrimination, and the regulatory distinctions of the measure can therefore not be 
"legitimate" for the purpose of the second step of the "less favourable treatment" analysis under 
Article  2.1. 
The Appellate  Body considered that, while the preamble of the WTO  Agreement does not itself create 
substantive obligations, it can provide important context for the interpretation of the covered 
agreements, for example, by shedding light on the kinds of policy objectives a Member may p ursue. 
However, the Appellate  Body indicated that Mexico's argument appeared to be premised on the view 
that Article  2.1 is an obligation that relates  to sustainable development. The Appellate  Body stated 
that, contrary to Mexico's contention, Article  2.1 is concerned with ensuring that technical 
regulations are designed and applied in a manner that affords "treatment no less favourable" to like 
imported products. Thus, to the Appellate  Body, Mexico seemed to conflate the nature of the  
obligation in Article  2.1 with the nature of the  technical regulations that Members may choose to 
adopt. The Appellate  Body noted that, while a Member's technical regulation may, depending on the 
circumstances, relate to sustainable development, the nature and scope of the obl igation in 
Article  2.1 remain unchanged. The Appellate  Body further considered that, in any event, the 
objectives of the 2016 Tuna Measure are: (i)  to ensure that consumers are not misled or deceived 
about whether tuna products contain tuna caught in a man ner that adversely affects dolphins; and 
(ii) to contribute to the protection of dolphins by ensuring that the US  market is not used to 
encourage fishing fleets to catch tuna in a manner that adversely affects dolphins. Given that the 
legitimacy of the obj ectives of the 2016  Tuna Measure was not at issue in these compliance 
proceedings, the Appellate  Body reiterated that the question before it was whether the detrimental 
impact caused by the 2016 Tuna Measure stems exclusively from a legitimate regulatory d istinction 
in light of the objectives the United  States had chosen to pursue through the measure.  
3.6.1.2   What the legal standard under Article  2.1 entails in this dispute  
Mexico claimed on appeal that, in assessing the consistency of the 2016  Tuna Measure with 
Article  2.1 of the TBT  Agreement , the Panels erred in determining that the measure is calibrated to 
the risks to dolphins arising from different fishing methods in different areas of the oceans, without 
at the same time considering whether the regulat ory distinctions that the measure draws are 
rationally related to its objectives. In particular, Mexico contended that the Panels failed to consider 
risks relating to inaccurate labelling in examining the risk profiles of relevant fishing methods and 
ocean  areas for the purpose of the calibration analysis. In Mexico's view, because the 2016 Tuna 
Measure cannot achieve its objectives without label accuracy, a proper calibration analysis should 
have included considerations of such risks of inaccurate labellin g. 
The Appellate  Body recalled that, under the calibration analysis set in the original and first 
compliance proceedings, the risks to which the regulatory distinctions should be calibrated were 
risks to dolphins from the use of different fishing methods i n different areas of the ocean. 
In particular, the Appellate  Body highlighted its finding in the first compliance proceedings that the 
panel's inquiry should have encompassed (i)  an assessment of the overall relative risks  or levels of 
harm to dolphins arising from different fishing methods in different ocean areas; and (ii)  an 
assessment as to whether the differences in the dolphin -safe labelling conditions under the measure 
are appropriately tailored to, or commensurate with, those respective risks. In light of these findings, 
therefore, the Panels correctly considered that the relevant inquiry is one that focuses on the risks 
that dolphins face as a result of the use, in different areas of the ocean, of different fishing methods.  
The Appellate  Body emphasized that the examination of whether the regulatory distinctions are 
commensurate with different risks to dolphins must be conducted taking account of the objectives 
of the measure. The Appellate  Body considered that its findings in the first c ompliance proceedings 
indicated that considerations regarding label accuracy should have informed the calibration analysis, 
precisely because the accuracy of the dolphin -safe label was directly related to the objectives of the 
2013 Tuna Measure. To the App ellate  Body, therefore, considerations of the nexus between the WT/AB/29  
 
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  regulatory distinctions and the measure's objectives, rather than being a separate inquiry, are 
encompassed in a proper calibration analysis.  
Furthermore, while accuracy of the information co nveyed to consumers through the dolphin -safe 
label is a consideration that should inform the calibration analysis, the Appellate  Body emphasized 
that this was different from saying that the Panels were required to determine whether the 2016 
Tuna Measure is  calibrated, inter alia , to the risk of inaccurate dolphin -safe information being passed 
to consumers. In any event, the Appellate  Body indicated that Mexico had not substantiated its 
assertion that tuna fishing in ocean areas with less reliable regulatory  systems (that is, ocean areas 
that are unregulated or that have insufficient regulatory oversight, resulting in unreliable reporting, 
significant IUU fishing, and/or significant trans -shipment at sea) is more likely to lead to actual, 
physical harm to dol phins.  
Finally, the Appellate  Body rejected Mexico's argument that, by referring to the term "margin of 
error", the Panels erroneously took the position that allowing inaccurate labels is consistent with the 
objectives of the measure. Instead, the Appellat e Body considered that the Panels utilized this term 
to refer to the different degrees of strictness of the relevant certification and tracking and verification 
requirements, such that the less strict they are, the more likely that adverse effects on dolph ins 
might go undetected and unreported. This, however, does not automatically translate into inaccuracy 
of the ultimate dolphin -safe label. Rather, the ultimate accuracy of the label depends not only on 
the different degrees of the strictness of the releva nt requirements, but also on the level of risks to 
dolphins in a given fishery to which these requirements apply. Where such risks are higher, the 
corresponding labelling conditions may need to be more sensitive, or strict, to ensure the accuracy 
of the la bel in conveying the information regarding the dolphin -safe nature of the tuna products. 
Conversely, where such risks are lower, less sensitive labelling conditions may be sufficient to ensure 
accuracy. The Appellate  Body therefore understood the Panels to  have focused correctly on the 
question whether the sensitivity of the labelling conditions corresponds, or is calibrated, to the risks 
to dolphins arising from the use of different fishing methods in different areas of the ocean, so as to 
ensure accurate labelling.  
Mexico also argued that the Panels erred in assessing and comparing the risk profiles of different 
fishing methods without distinguishing between different ocean areas. Mexico considered that, in 
order to assess whether the measure is properly calibrated to the risks to dolphins, the Panels were 
required to examine whether the 2016 Tuna Measure makes all relevant regulatory distinctions on 
the basis of both fishing methods and ocean areas. Mexico considered this view to be supported by 
the Appel late Body's articulation of the calibration analysis in previous proceedings in this dispute, 
as well as the design of the measure.  
In the Appellate  Body's view, its statement in the first compliance proceedings that the dolphin -safe 
labelling regime woul d not violate Article  2.1 if it was properly calibrated to the risks to dolphins 
arising from different fishing methods in different areas of the oceans  does not prescribe that the 
regulatory distinctions under the 2016 Tuna Measure must be drawn on the ba sis of different ocean 
areas in order for the measure to be consistent with Article  2.1. Rather, such statement indicates 
that, in conducting an assessment of risks to dolphins for the purpose of assessing whether the 
regulatory distinctions under the meas ure are indeed calibrated to different risks to dolphins, it is 
necessary to assess the risks across all relevant ocean areas in which a particular fishing method is 
practised (i.e.  individual fisheries).  
The Appellate  Body considered the essential questi on before the Panels to be whether the regulatory 
distinctions under the measure are calibrated to different risks to dolphins. The Appellate  Body 
explained that the nature of this assessment (i.e. how the Panels were required to apply the 
calibration anal ysis) is informed by the nature of the regulatory distinctions drawn by the measure 
itself, and that the 2016 Tuna Measure makes several sets of  distinctions. The Appellate  Body 
highlighted that, at the level of the eligibility  criteria, the 2016 Tuna Meas ure draws a distinction on 
the basis of fishing methods , while at the level of the certification and tracking and verification 
requirements, the 2016 Tuna Measure makes a distinction on the basis of different fisheries (i.e. the 
use of a particular fishing  method in a particular ocean area).  
The Appellate  Body observed that since, in Mexico's view, the calibration analysis should be on the 
basis of individual fisheries, and not fishing methods, the Panels' examination of the certification  and 
tracking  and verification  requirements appeared consistent with Mexico's preferred approach. As to 
the eligibility criteria, the Appellate  Body noted that the distinction under the eligibility criteria WT/AB/29  
 
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  between driftnet fishing on the high seas and other fisheries is in deed on the basis of both fishing 
method and ocean area. However, the Appellate  Body recalled that the second step of the "less 
favourable treatment" analysis under Article  2.1 should focus on the regulatory distinction(s) causing 
the detrimental impact on  imported products, and the relevant regulatory distinctions giving rise to 
the detrimental impact in this dispute do not concern driftnet fishing on the high seas. Since one of 
the regulatory distinctions c ausing the detrimental impact on  Mexican tuna pro ducts is that tuna  
products containing tuna  caught by setting on dolphins are ineligible  for the dolphin -safe label while 
tuna products containing tuna caught by other fishing methods  are provisionally eligible for the label, 
the Appellate  Body considered that the treatment of tuna caught by driftnet fishing on the high seas 
did not undermine the Panels' approach in assessing whether the distinction between setting on 
dolphins and other fishing methods is calibrated to different risks to dolphins.  
The Appel late Body also considered that, to the extent that Mexico's argument suggested that the 
distinction between the methods of setting on dolphins and other fishing methods is not even -handed 
simply because it is drawn on the basis of fishing methods alone, Me xico's approach was not 
consistent with the Appellate  Body's findings from the original and first compliance proceedings. 
Rather, whether the distinction is legitimate for the purpose of Article  2.1 must be assessed through 
a comparison of the risk profile s of these different fishing methods. The Appellate  Body also 
considered that Mexico did not demonstrate why a distinction on the basis of fishing methods alone 
would undermine the objective of protecting dolphins, and that, contrary to Mexico's arguments,  the 
2016 Tuna Measure does not draw a regulatory distinction between the ETP setting -on-dolphins -
fishery and other fisheries. To the extent that Mexico was asserting that the Panels' analysis of risk 
profiles should have addressed all ocean areas because risks differ across different ocean areas, the 
Appellate  Body agreed that information pertaining to the risks to dolphins in individual fisheries 
should be taken into account. The Appellate  Body went on to address, inter alia , the question of 
whether the Panels failed to assess adequately relevant evidence regarding the risk profiles of 
different fisheries.  
3.6.1.3   The Panel's assessment of relevant risk profiles  
Mexico argued that the Panels erred in their assessment of the different risks to dolphins  from the 
use of different fishing methods in different ocean areas, by: (i) failing to adequately evaluate the 
risk profiles of different fisheries; (ii) using the risk profile of setting on dolphins in the ETP as the 
benchmark for assessing the risk prof iles of other fisheries; and (iii) relying predominantly on per  set 
evidence for measuring the level of risks to dolphins, and ignoring other relevant evidence in their 
evaluation of different risk profiles.  
3.6.1.3.1   The Panels' evaluation of different fisheries  
Mexico argued that the Panels erroneously limited their assessment of risk profiles to the seven 
tuna-fishing methods, without assessing the risk profiles for individual ocean areas. Mexico 
acknowledged that the Panels did address evidence with respect to o cean areas for certain fishing 
methods but erred by forming conclusions on the fishing methods as a whole. Mexico also contended 
that the Panels disregarded that, in certain ocean areas, there are very high risks to dolphins from 
gillnet fishing, longline fishing, and trawl fishing, and erred by failing to address the risk profile of 
purse seine fishing by setting on dolphins in ocean areas other than  the ETP.  
The Appellate  Body recalled that, in assessing the eligibility criteria, the Panels were  required  to 
compare the risk profile of setting on dolphins with the risk profiles of other individual fishing 
methods, and consequently it was appropriate for the Panels to have formed a conclusion for each 
individual fishing method, for the purposes of conductin g the calibration analysis. The Appellate  Body 
highlighted that, in conducting this assessment, the Panels were required to take into account all 
evidence provided to them with respect to each ocean area in which each fishing method is used, 
and were also required to examine the risks to dolphins in each individual fishery. The Appellate  Body 
noted, however, that Mexico had not raised any claims under Article  11 of the DSU alleging that the 
Panels failed to assess any individual fishery for which evidence w as placed before them, or that the 
Panels incorrectly weighed and balanced the risk profiles of each individual fishery in drawing 
generalized conclusions on each fishing method as a whole. The Appellate  Body concluded that 
Mexico had not demonstrated that  the Panels failed to assess the risk profiles of individual fisheries 
or that the Panels erred in drawing conclusions on the risk profile of each fishing method on the 
basis of their examination of the evidence before them (including evidence pertaining t o each 
individual fishery).  WT/AB/29  
 
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  3.6.1.3.2   The Panels' use of "setting on dolphins in the ETP" as a benchmark  
Mexico argued that the Panels erred by using the risk profile of setting on dolphins in the ETP as a 
benchmark for assessing the risk profiles of other fisheries . According to Mexico, the Panels should 
have relied on an independent and objective standard or point of reference against which the overall 
relative risks in each fishery could be assessed. Mexico also argued that the mere fact that the risk 
profiles of other fisheries may be different from or comparatively lower than the risk profile of setting 
on dolphins in the ETP does not mean that the regulatory distinctions are calibrated to the different 
overall relative risks in different fisheries. Mexico furthe r argued that the Panels' reliance on the risk 
profile of setting on dolphins in the ETP as a benchmark resulted in the Panels focusing their analysis 
on qualitative attributes that are unique to the ETP setting -on-dolphins fishery. Consequently , the 
Panel s disregarded the Appellate  Body's instruction to take into account the overall effects of each 
fishing method.  
The Appellate  Body observed that the Panels did not use setting on dolphins in the ETP as a 
benchmark, but used the expression "ETP benchmark" s olely in the context of describing the 
United  States' explanation of the determination provisions under the 2016 Tuna Measure. 
Furthermore, the fact that certain aspects of the Panels' assessment of the risk profile of setting on 
dolphins were limited to t he use of this fishing method in the ETP is because the only fishery -specific 
evidence provided to the Panels concerning the use of setting on dolphins pertained to the use of 
this method in the ETP. Other aspects of the Panels' examination of the risks as sociated with setting 
on dolphins were not limited to the ETP, but pertained more broadly to setting on dolphins anywhere 
in the world.  
The Appellate  Body considered moot Mexico's argument that, by distinguishing setting on dolphins 
in the ETP from all oth er fishing methods, the Panels did not assess whether tuna caught by other 
fishing methods in other ocean areas should also be excluded from access to the label. The 
Appellate  Body explained that the Panels did not compare the risk profile of setting on do lphins in 
the ETP with the risk profiles of all other individual fisheries. Instead, the Panels compared the risk 
profile of setting on dolphins as a fishing method (used anywhere in the world) with the risk profiles 
of other fishing methods (also used any where in the world), in the context of examining the eligibility 
criteria, and compared the risk profile of the ETP large purse seine fishery with other individual 
fisheries in the context of examining the certification and tracking and verification requir ements.  
The Appellate  Body also disagreed with Mexico that the Panels erred by focusing their analysis on 
qualitative attributes that are unique to setting on dolphins, finding, instead, that the Panels'  analysis 
was consistent with the requirement that t hey assess the "overall relative risks" to dolphins from 
different fishing methods as used in different ocean areas. The Appellate  Body considered that the 
Panels relied on all relevant information when comparing the risk profiles of setting on dolphins wi th 
other fishing methods, and consequently took into account all relevant types of harm in conducting 
an assessment of the overall relative risks from different fishing methods, as used in different 
fisheries, before reaching an overall conclusion regardin g the risk profile of each fishing method.  
3.6.1.3.3   The Panels' reliance on per set data and exclusion of other factors  
Mexico argued that all factors that have a bearing on the measure achieving its objectives must be 
included in order to properly assess the risk s to dolphins. Mexico asserted that the Panels incorrectly 
omitted the following factors from their assessment: (i) the impact of tuna -fishing methods on the 
sustainability of dolphin stocks through Potential Biological Removal (PBR) data; (ii)  data with 
respect to absolute dolphin mortalities and serious injuries in ocean areas; and (iii)  data concerning 
the risks created in certain ocean areas through insufficient regulatory oversight, unreliable 
reporting, IUU  fishing, and/or trans -shipment at sea.  
Mexic o first argued that the Panels erred by failing to take into account PBR evidence that shows 
high risks to dolphin populations in certain ocean areas, because, in Mexico's view, such risks to 
dolphin populations are relevant to an assessment of the overall  relative risk profiles of certain 
fisheries. Mexico considered its view to be supported by the findings of the original panel concerning 
adverse effects to dolphins and findings by the first compliance panel concerning the objective of 
the measure, as wel l as by the design and structure of the 2016 Tuna Measure itself.  WT/AB/29  
 
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  Based on the design and structure of the measure, the Appellate  Body agreed with the Panels that 
the dolphin -safe label is mainly concerned with the well -being of individual dolphins, and t hat the 
relevant risks to dolphins, for the purpose of the calibration analysis, are the risks of individual 
dolphins being killed or seriously injured in the fishing process. The Appellate  Body considered that 
the Panels' understanding of the measure as b eing mainly concerned with the risks facing dolphins 
at an individual level did not suggest that risks to dolphin populations are irrelevant, or that the 
2016 Tuna Measure is not at least indirectly concerned with protecting dolphin populations. The 
Appell ate Body further considered that Mexico had not explained how reliance on PBR evidence 
relates to, or reveals, the actual risks that dolphins were killed or seriously injured in the fishing 
process. The Appellate  Body therefore agreed with the Panels that the PBR methodology prioritizes 
the sustainability of the population in a way that would have prevented the Panels from adequately 
assessing whether the measure is calibrated to different risks that a dolphin was harmed or killed in 
the fishing process.  
Second, Mexico argued that the Panels erred by failing to compare the absolute levels of mortalities 
and serious injuries to dolphins in different fisheries, because in fisheries with many sets, the 
absolute levels of adverse effects will be masked by the p er set data. To  Mexico, these absolute 
levels of adverse effects constitute overall adverse effects on dolphins for the fishing method/area. 
Mexico argued that fishing practices in ocean areas where tuna fishing is causing tens of thousands 
of deaths per y ear should be discouraged, and that the omission of these overall adverse effects 
contradicts the two objectives of the measure.  
The Appellate  Body emphasized that the assessment of whether the 2016 Tuna Measure is consistent 
with Article  2.1 of the TBT  Agreement called for an analysis of the overall relative risks to dolphins. 
The Panels were therefore required to use a methodology that allowed for a proper comparison of 
risks to dolphins across fisheries. The Appellate  Body further considered that, based  on the Panels' 
findings, a per set methodology is well  suited to the kind of comparative analysis that Article  2.1 
required the Panels to perform and a comparison of absolute levels of mortalities or serious injuries 
would be less likely to reveal the rel ative likelihood of a dolphin being killed or injured in the fishing 
process than a comparison of per set data. The Appellate  Body therefore concluded that Mexico had 
not demonstrated that the Panels erred by relying primarily on a per set methodology.  
Third, Mexico argued that the Panels erred by omitting evidence of insufficient regulatory oversight 
in certain ocean areas,  including unreliable reporting, significant IUU fishing , and/or significant 
transhipment at sea, because dolphins will be at a greater  relative risk of harms from fishing methods 
used in ocean areas that have insufficient regulatory oversight.  
The Appellate  Body recalled that, while accuracy of the information conveyed to consumers through 
the dolphin -safe label is a consideration that should inform the calibration analysis, this is different 
from saying that the applicable legal standard requires the Panels to d etermine whether the 2016 
Tuna Measure is calibrated, inter alia , to the risk of inaccurate dolphin -safe information being passed 
to consumers. The Appellate  Body also recalled that Mexico had not substantiated its assertion that 
tuna fishing in ocean area s with less reliable regulatory systems is more likely to lead to harm to 
dolphins, and consequently the Appellate  Body saw no reason to disagree with the Panels'  statement 
that the risks of inaccurate certification, reporting, and/or record  keeping are no t risks that affect 
dolphins themselves. The Appellate  Body noted that the Panels did not exclude the possibility that 
factors such as a lack of regulatory oversight may affect the accuracy of the label. The 
Appellate  Body explained that it would address t he question of whether Mexico had substantiated 
its assertion that a lack of regulatory oversight in a fishery will increase the risk of inaccurate labelling 
in the next section of its analysis.  
In conclusion, the Appellate  Body found no error in the Pane ls' assessment of the risks to dolphins 
arising from the use of different fishing methods in different ocean areas or in their conclusions 
regarding the risk profiles of relevant fishing methods on the basis of that assessment.  
3.6.1.4   The Panels' assessment of wh ether the 2016 Tuna Measure is calibrated to the 
risks to dolphins  
Mexico challenged several of the Panels' intermediate findings that led to their ultimate conclusion 
that the 2016  Tuna Measure accords to Mexican tuna products treatment no less favourable  than 
that accorded to like products from the United  States and other countries, and therefore is consistent WT/AB/29  
 
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  with Article  2.1 of the TBT  Agreement. Specifically, Mexico claimed that the Panels erred in their 
assessment of: (i)  the eligibility criteria; (ii ) the certification requirements; (iii)  the tracking and 
verification requirements; and (iv)  the 2016 Tuna Measure as a whole. In its Notice of Appeal, Mexico 
did not separately challenge the Panels' findings regarding the determination provisions.  
With re spect to the eligibility criteria, the Appellate  Body considered that the Panels did not err in 
finding that setting on dolphins is significantly more dangerous to dolphins than other fishing 
methods. This finding implies that the distinction in the eligib ility criteria between setting on 
dolphins, on the one hand, and other fishing methods, on the other hand, is, as the Panels found, 
appropriately calibrated to the risks to dolphins arising from the use of different fishing methods in 
different areas of th e ocean. Accordingly, the Appellate  Body found that Mexico had not 
demonstrated that the Panels erred in reaching the intermediate finding that the eligibility criteria 
embodied in the 2016  Tuna Measure are calibrated to the risks to dolphins arising from the use of 
different fishing methods in different areas of the ocean.  
With respect to the certification requirements, the Appellate  Body found that the Panels adopted the 
correct approach in comparing the risk profiles of individual fisheries, because the certification 
requirements make a distinction on the basis of both fishing method and ocean area. Having found 
no legal error in the Panels' assessment of risk profiles, the Appellate  Body considered that the 
Panels did not err in finding that the ETP larg e purse seine fishery has a special risk profile that 
distinguishes it from other fisheries. The Appellate  Body also addressed and rejected all of Mexico's 
arguments challenging the Panels' assessment of the certification requirements. In  particular, the 
Appellate  Body highlighted the Panels' statements that accuracy is a function of potentially many 
variables, inc luding not only the labelling requirements in place but also the different levels of risk 
to dolphins in different fisheries, and that less strict certification requirements do not necessarily 
mean less label accuracy. The Appellate  Body agreed with the Pa nels that the pertinent question is 
whether the strictness of the relevant requirements is commensurate with the different risks to 
dolphins arising from the use of different fishing methods in different areas of the ocean. In the 
Appellate  Body's view, th e Panels took account of risks of inaccuracy when finding that the Captain 
Training Course incorporated in the 2016  Tuna Measure: (i)  contains meaningful information that 
would assist captains to carry out their certification responsibility properly; and ( ii) is embedded 
within a sufficiently enforceable regulatory framework. Furthermore, the Appellate  Body agreed with 
the Panels that the determination provisions create flexibility that helps to ensure that the 
2016 Tuna Measure is calibrated to the differe nt risks to dolphins arising from the use of different 
fishing methods in different areas of the ocean. In sum, the Appellate  Body found that Mexico had 
not demonstrated that the Panels erred in arriving at the intermediate finding that the different 
certification requirements are calibrated to the risks to dolphins arising from the use of different 
fishing methods in different areas of the ocean.  
In respect of the tracking and verification requirements, the Appellate  Body found that the Panels 
adopted the correct approach in comparing the risk profiles of individual fisheries for the purposes 
of assessing the tracking and verification requirements, because these requirements make a 
distinction on the basis of both fishing method and ocean area. Having found  no legal error in the 
Panels' assessment of risk profiles, the Appellate  Body considered that the Panels did not err in 
finding that it is both the technical and legal possibilities of setting on dolphins and the fact that 
dolphin sets occur in a consiste nt and systematic manner in the ETP large purse seine fishery that 
give this fishery its special risk profile. Moreover, the Appellate  Body addressed and rejected all of 
Mexico's arguments challenging the Panels' assessment of the tracking and verification  
requirements.  
In particular, the Appellate  Body disagreed with Mexico's contention that the Panels completely 
omitted from their analysis certain factors that allegedly affect the risk of inaccurate labelling. With 
regard to regulatory oversight, the App ellate  Body noted the Panels' finding that the new chain -of-
custody requirement for tuna products harvested outside ETP large purse seine fisheries addresses 
the previous inability of the US  government under the NOAA regime to go behind the documents. 
Concerning the existence of IUU fishing, the Appellate  Body noted the Panels' finding that the 
2016 Tuna Measure contains the necessary tools to induce compliance of US  processors and 
importers. Furthermore, the Appellate  Body noted that Mexico had pointed to no evidence on the 
Panel record regarding the risk of inaccurate labelling owing to insufficient regulatory oversight, 
unreliable reporting, and the existence of IUU fishing and trans -shipment at sea. The Appellate  Body 
also shared the Panels' view that th e amendments introduced in the 2016 Tuna Measure narrowed 
the differences between the AIDCP and NOAA regimes. Consequently, the Appellate  Body found that WT/AB/29  
 
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  Mexico had not demonstrated that the Panels erred in arriving at the intermediate finding that 
differe nces between the NOAA and AIDCP regimes with respect to tracking and verification have 
been considerably narrowed in the 2016  Tuna Measure, and the remaining differences are calibrated 
to the differences in the risk profile of the ETP large purse seine fis hery compared to other fisheries.  
Finally, the Appellate  Body considered that the Panels' analyses of each of the elements of the 
2016 Tuna Measure, as well as their examination of the measure as a whole, were properly informed 
by the interlinkages between  these elements and the fact that they operate together to regulate 
access to the dolphin -safe label. Furthermore, the Appellate  Body recalled that Mexico's claim that 
the Panels erred in their assessment of the 2016 Tuna Measure as a whole was consequenti al upon 
its challenge of the Panels' assessment of the eligibility criteria, certification requirements, and 
tracking and verification requirements. Having reviewed and rejected Mexico's arguments against 
the Panels' assessment of each of these elements of  the 2016 Tuna Measure, the Appellate  Body 
found that Mexico had not demonstrated that the Panels erred in their assessment of the 
2016 Tuna Measure, as a whole, or in finding that the 2016  Tuna Measure, as a whole, is calibrated 
to the risks to dolphins a rising from the use of different fishing methods in different areas of the 
ocean.  
3.6.1.5   Conclusion under Article  2.1 of the TBT  Agreement  
Based on the findings summarized above, the Appellate  Body upheld the Panels' conclusion that the 
2016 Tuna Measure accords to Mexican tuna products treatment no less favourable than that 
accorded to like products from the United  States and other countries and therefore is consistent with 
Article  2.1 of the TBT  Agreement.  
3.6.2   Article  XX of the GATT  1994  
Mexico argued that the Panel s erred in relying on their analysis under Article  2.1 of the 
TBT Agreement to conclude that the 2016 Tuna Measure is not inconsistent with the requirements 
of the chapeau of Article  XX of the GATT  1994. Mexico submitted that, to examine whether a 
measure is applied in a manner that constitutes arbitrary or unjustifiable discrimination under the 
chapeau , a panel must consider whether the detrimental impact caused by the measure can be 
reconciled with, or rationally connected to, the policy objective that wa s provisionally found to justify 
the measure under one of the subparagraphs of Article  XX. To Mexico, since the Panels made no 
substantive findings under Article  2.1 with respect to arbitrary or unjustifiable discrimination, by 
relying on their analysis un der Article  2.1 for the purpose of the chapeau  of Article  XX, the Panels 
did not properly take into account the differences between the legal analyses required under these 
provisions.  
The Appellate  Body recalled that there are important parallels between t he analyses under the 
chapeau  of Article  XX and Article  2.1, in particular because the concept of arbitrary or unjustifiable 
discrimination between countries where the same conditions prevail is found both in the chapeau  of 
Article  XX and in the sixth reci tal of the preamble of the TBT  Agreement. The Appellate  Body further 
recalled that in the circumstances of this dispute, it was appropriate in principle for the first 
compliance panel to rely on a similar analytical process under both Article  2.1 and the chapeau  of 
Article  XX. However, the Appellate  Body noted that, because the first compliance panel had failed to 
conduct a proper calibration analysis under Article  2.1, and had analysed each of the relevant 
components of the measure in isolation, the panel had also failed to examine properly the rational 
relationship between the measure's objectives and the regulatory distinctions giving rise to the 
discrimination. Thus, it was inappropriate for the first compliance panel to have relied on the same 
reasoning  and analysis developed under Article  2.1 in making findings regarding arbitrary or 
unjustifiable discrimination under the chapeau  of Article  XX. 
In contrast, the Appellate  Body found that t he Panels in the present proceedings conducted a proper 
calibratio n analysis of the 2016 Tuna Measure by assessing whether the regulatory distinctions of 
the 2016 Tuna Measure are calibrated to different risks to dolphins arising from the use of different 
fishing methods in different areas of the ocean. Therefore, unlike  the first  compliance panel's 
assessment of the 2013 Tuna Measure, the Panels' calibration analysis under Article  2.1 
encompassed consideration of the rational relationship between the regulatory distinctions of the 
2016 Tuna Measure and its objectives. Th is means that the Panels' analysis under Article  2.1 also 
demonstrated that the 2016 Tuna Measure is not designed or applied in a manner that constitutes WT/AB/29  
 
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  arbitrary or unjustifiable discrimination within the meaning of the chapeau  of Article  XX, such that i t 
was appropriate for the Panels to rely on their reasoning developed under Article  2.1 for assessing 
whether the 2016 Tuna Measure complies with the requirements of the chapeau of Article  XX.  
Finally, the Appellate  Body rejected Mexico's argument that th ere is an apparent conflict in the 
Panels' reasoning. According to Mexico, this conflict arose because, on the one hand, the 2016  Tuna 
Measure is provisionally justified as relating to "conservation of exhaustible natural resources" under 
Article  XX(g) whi le, on the other hand, the Panels refused to consider, in their calibration analysis 
under Article  2.1, PBR data and evidence demonstrating that certain fishing methods in certain areas 
of the oceans are causing adverse effects that threaten the collapse o f dolphin populations. The 
Appellate  Body highlighted the findings by the original and first compliance panels, as well as the 
Panels, that by seeking to ensure that individual dolphins are not being harmed in the fishing 
process, the 2016 Tuna Measure is also related to the conservation of these populations. To the 
Appellate  Body, the fact that the Panels sought to examine whether the measure is calibrated to 
risks to individual dolphins by relying on per set, rather than PBR, evidence does not mean that t heir 
calibration analysis failed to take into account the rational connection between the regulatory 
distinctions and the goal of conserving exhaustible natural resources.  
3.6.3   The Panels' decision to conduct a partially open meeting with the parties  
Mexico ap pealed the findings and conclusion of the Panels that they had the authority to conduct a 
partially open meeting of the parties without the consent of both parties. It is noted that, while 
previous panels and the Appellate  Body have held meetings and heari ngs that were open to public 
observation, this is the first time that a WTO adjudicator had authorized such a meeting without the 
express consent of both parties to the dispute. In response to Mexico's appeal, the United  States 
contended that Mexico's appe al was not properly raised due to deficiencies in Mexico's Notice of 
Appeal in light of Article  17.6 of the DSU and Rule  20(2)(d) of the Working  Procedures.  
As regards the United  States ' contention, the Appellate  Body found that Mexico's Notice of Appeal 
sufficiently identified an alleged error in the issues of law covered in the Panel Reports, as required 
by Rule  20(2)(d)(i) of the Working Procedures and Article  17.6 of the DSU. In  particular, the 
Appellate  Body considered that Mexico's Notice of Appeal identified, as an issue of law, the question 
whether the Panels had the authority to conduct a meeting with the parties that was partially open 
to public observation without the consent of both parties. The Appell ate Body also found that the 
formal defects in Mexico's Notice of Appeal, owing to Mexico's failure to comply with the requirements 
in Rule  20(2)(d)(ii) and (iii) of the Working Procedures, did not, by themselves, warrant the dismissal 
of Mexico's appeal. Therefore, the Appellate  Body found that Mexico's claim that the Panels erred in 
finding that they had the authority to conduct a partially open meeting without the consent of both 
parties was properly within the scope of this appeal.  
The Appellate  Body th en addressed the question whether it should rule on this issue. It noted that, 
while the Appellate  Body is required to address each issue on appeal, it has the discretion not to rule 
on an issue when doing so is not necessary to resolve the dispute , but th e Appellate  Body may rule 
on such an issue in light of the specific circumstances of a given dispute. Competing considerations 
were relevant to its decision on whether ruling on Mexico's claim of error is necessary. First, the 
issue raised by Mexico's appe al does not directly relate to the "matter [at] issue in the dispute", that 
is, whether the 2016 Tuna Measure is consistent with the TBT  Agreement and the GATT  1994. At 
the same time, the manner in which a panel adopts procedures and conducts its proceedin gs when 
it addresses the matter referred to it by the DSB may give rise to issues of law and legal 
interpretation, which would be subject to the scope of appellate review within the meaning of 
Article  17.6 of the DSU. Second, Mexico considered that the Pan els were not authorized to partially 
open their meeting with the parties to public observation without the consent of Mexico. However, 
Mexico's arguments on appeal did not elaborate on the manner in which the Panels' decision is 
inconsistent with the DSU. Third, in addition to Mexico's request for a finding of error, Mexico 
requested that the Appellate  Body clarify that, in the future , panels should not open a hearing even 
partially without the agreement of all disputing parties. Mexico suggested that, by r uling on this 
issue, the Appellate  Body would be providing clarification on a concern that impacts not only panels 
but also arbitrators. The fact that Mexico's request concerned the proceedings of other panels and 
arbitrators under Article  22.6 of the DSU,  in the Appellate  Body's view, cast doubt on whether ruling 
on this issue was necessary to resolve the present dispute.  WT/AB/29  
 
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  In light of the specific circumstances of these proceedings, the Appellate  Body found it unnecessary 
to rule on whether the Panels erred  in finding that they had the authority to conduct a partially open 
meeting of the parties without the consent of both parties. The Appellate  Body emphasized that their 
finding should not be construed as an endorsement of the Panels' decision to conduct a partially 
open meeting of the parties without the consent of both parties.  
  WT/AB/29  
 
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  4  PARTICIPANTS AND THI RD PARTICIPANTS IN A PPEALS  
A total of 25 WTO Members participated at least once as appellant, other appellant, appellee, or 
third participant in appeals for wh ich an Appellate  Body report was circulated in 2018. Ten Members 
participated at least once as the main participant, and 2 2 Members participated, at least once, 
as third participant.  
As of the end of 2018, 77 of the 164 WTO  Members had participated in appeals in which 
Appellate  Body reports were circulated between 1996 and 201 8. Further information on the 
participation of WTO  Members in appeals is provided in Annex  10. 
  WT/AB/29  
 
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  5  PROCEDURAL ISSUES AR ISING IN APPEALS  
This section summarizes the pr ocedural issues that were addressed in the Appellate  Body reports 
circulated in 2018. The Appellate  Body addressed procedural issues concerning : (i) treatment of and 
access to confidential information ; (ii) modification of the time limits for the filing of  written 
submissions ; (iii) conduct of oral hearings ; (iv) modification of the working  schedule  of an appeal; 
(v) harmonization of appeal schedules ; and (vi) the expiry of the terms of office of Appellate Body 
members assigned to appeals . 
5.1   Treatment of confidential information  
In Russia – Commercial Vehicles38, Russia and the European  Union  jointly requested the Division 
hearing the appeal to adopt additional procedures for the protection of BCI in the appellate 
proceedings. The Division invi ted the third participants to comment on the joint request. Only the 
United  States provided comments. The Division issued a Procedural Ruling according additional 
protection, on specified terms, to the information that the Panel treated as BCI in its Repor t and in 
the Panel record.  
In EC and certain member States – Large Civil Aircraft (Article  21.5 – US)39, the European  Union  
and the United  States  jointly requested the Division hearing the appeal to adopt additional 
procedures to protect BCI and HSBI in the  appellate proceedings. The European  Union  and the 
United  States  argued, inter alia , that disclosure of certain sensitive information on the Panel record 
would be severely prejudicial to the large civil aircraft manufacturers concerned and possibly to thei r 
customers and suppliers. The participants suggested that the additional procedures adopted by the 
Appellate  Body in the appeal in US – Large Civil Aircraft (2nd complaint) , with certain modifications, 
form the basis for any procedural ruling on confident iality in these appellate proceedings.  
On the same day, the Chair of the Appellate  Body sent a letter to the participants and third parties 
indicating that the Division had decided, pursuant to Rule 16(1) of the Working Procedures, to 
suspend the deadlines  for the filing of written submissions and other documents in this appeal. The 
third parties were invited to comment in writing on the participants' joint request. Comments were 
received from Australia, Brazil, and Canada. While none of the third parties o bjected to the adoption 
of additional procedures for the protection of BCI and HSBI, Canada suggested that the additional 
procedures provide for a designated reading room at the embassy and/or other diplomatic mission 
of the European  Union  and the United  States in each of the third participants' capitals. Australia, the 
European  Union , and the United  States  each commented on Canada's proposal. Australia supported 
Canada's request. The European  Union  and the United  States  opposed it, noting that it would req uire 
a total of 12 designated reading rooms in the third participants' respective capitals, in addition to 
the designated reading room on the WTO premises, and emphasized that this would impose a 
significant burden on the participants. The United  States  also considered that there would be little 
benefit to third participants, because the only difference under the proposed adjustment would be 
to shift the burden of reviewing BCI from Geneva -based officials to capital -based officials.  
The Division issued a Pr ocedural Ruling adopting additional procedures to protect the confidentiality 
of BCI and HSBI in these appellate proceedings. The Division did not adopt the adjustment proposed 
by Canada, noting the burden it would involve and that the interests of third p articipants mainly 
concerned the correct legal interpretation of relevant provisions of the covered agreements, rather 
than factual questions. The Division also noted that third participants' rights would be taken into 
account in these appellate proceeding s, including in setting the Working Schedule for this appeal.  
The European  Union further requested that certain text in the United  States' other appellant's 
submission be designated as BCI. The United  States  responded indicating that it did not object to 
some of the BCI designations proposed by the European  Union . The United  States , however, did 
object to other proposed BCI designations because the information at issue could already be derived 
from information on the Panel record that was not designated as BCI or HSBI. The Division reviewed 
                                                
38 The procedural rulings in Russia – Commercial Vehicles  were issued to the participants in 2017. 
However, as the Appellate  Body report was circulated on 22  March  2018, these procedural rulings were subject 
to confidentiality until then.  
39 The procedur al rulings in EC and certain member States – Large Civil Aircraft (Article  21.5 – US) were 
issued to the participants in 2016 and 2017. However, as the Appellate  Body report was circulated on 
15 May 2018, these procedural rulings were subject to confidenti ality until then.  WT/AB/29  
 
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  the changes proposed, taking into account the risks associated with the disclosure of the relevant 
information and the rights and duties established in the DSU and the other covered agreements. 
Based on these consideratio ns, the Division decided to proceed on the basis of the BCI designations 
proposed by the European  Union  and requested the United  States  to submit revised copies of the 
BCI and non -BCI versions of its other appellant's submission.  
In EU – PET (Pakistan)40, Pakistan and the European  Union  jointly requested the Appellate  Body 
Division hearing the appeal to adopt additional procedures for the protection of BCI in the appellate 
proceedings. In their joint request, the participants sought protection for any inform ation that was 
submitted by the participants as BCI in the context of the Panel proceedings, including any 
information that was treated as such by the Panel. The Division invited the third participants to 
comment in writing on the joint request. Only the U nited States  provided comments . The Division 
issued a Procedural Ruling informing the participants of its decision to accord additional protection 
to the information that the Panel had treated as BCI in its Report and on the Panel record.  
5.2   Persons approved to access confidential information  
In EC and certain member States – Large Civil Aircraft (Article  21.5 – US), the United  States  objected 
to the inclusion of one of the European  Union 's BCI - and HSBI -Approved Persons, and requested 
further informa tion on this individual. The European  Union  provided additional information on the 
individual concerned, and confirmed that he had been retained by an outside advisor who was 
subject to an enforceable code of professional ethics and assume d responsibility for compliance with 
the additional BCI/HSBI procedures adopted by the Appellate  Body in these proceedings. The 
Division issued a Procedural Ruling recalling that it would reject a request for designation of an 
outside advisor as a BCI - or HSBI -Approved Per son only upon a showing of compelling reasons. In 
the circumstances of this case, the Division considered it appropriate for the European  Union  to keep 
the individual concerned on its BCI - and HSBI -Approved Persons list.  
5.3  Time limits for the filing of writt en submissions  
In Russia – Commercial Vehicles , the Appellate  Body received a communication from the 
United  States requesting an extension of the deadline for filing third participants' submissions. 
Subsequently, the Appellate  Body received a communication  from Russia and the European  Union, 
each requesting an extension of the deadline for filing appellees' submissions. After providing an 
opportunity for the participants and third participants to comment on these requests, the Division 
issued a Procedural R uling extending the deadline for filing appellees' submissions and the deadline 
for filing third participants ' submissions and notifications under Rule 24(1) and (2) of the Working 
Procedures.  
In EC and certain member States – Large Civil Aircraft (Article  21.5 – US), the European  Union  
requested the Division hearing the appeal to modify the deadline for the filing of the appellees' 
submissions. The Division invited the United  States  and the third parties to comment on the 
European  Union 's request. Written comments were received from the United  States , Australia, and 
Canada. The United  States  opposed the request for an extension. While Australia and Canada did 
not object to the extension, they requested that the Division also extend the deadline for the fili ng 
of the third participants' submissions if it were to decide to grant the European  Union 's request. 
Taking into account the length of the United  States ' other appellant's submission and the extended 
Working Schedule adopted for these appellate proceeding s, the Division took the view that declining 
the extension would not result in manifest unfairness and thus rejected the European  Union 's 
request.  
In Brazil – Taxation41, the Division hearing the appeals received a joint letter from Argentina, 
Australia, Ca nada, and the United  States  requesting an extension of the deadline for the filing of 
their third participants' submissions in these proceedings. The Division invited the participants and 
the other third participants to comment on the joint request. No obj ections were received. The 
                                                
40 The procedural rulings in EU – PET (Pakistan) were issued to the participants in 2017. However, as 
the Appellate  Body report was circulated on 16  May 2018, these procedural rulings were subject to 
confidentiality until then.  
41 The proce dural rulings in Brazil – Taxation were issued to the participants in 2017. However, as the 
Appellate  Body report was circulated on 13  December  2018, these procedural rulings were subject to 
confidentiality until then.  WT/AB/29  
 
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  Division issued a Procedural Ruling, in accordance with Rule 16(2) of the Working Procedures, 
extending the deadline for the filing of third participants' submissions.  
In US – Tuna II (Mexico) (Article  21.5 – US) /US – Tuna II (Mexico) (Article  21.5 – Mexico II)42, the 
Division hearing the appeal received a communication from Japan requesting an extension to the 
deadline for filing the third participants' submissions and executive summaries. The Division received 
no objections to  the request. The Division issued a Procedural Ruling, in accordance with Rule 16  of 
the Working Procedures, extending the deadline for the filing of third participants' submissions.  
5.4   Requests regarding the conduct of the oral hearing  
In EC and certain mem ber States – Large Civil Aircraft (Article  21.5 – US), the European  Union  and 
the United  States  jointly requested that the oral hearing in the appeal be open to public observation, 
subject to proposed additional procedures for the protection of BCI and HSB I similar to those in 
US – Large Civil Aircraft (2nd complaint) . Regarding the segments of the oral hearing that would be 
open to public observation, the participants suggested that the opening and closing statements of 
the participants and third participa nts (that agreed to public observation) be videotaped, reviewed 
by the participants for any inadvertent inclusion of BCI/HSBI, and transmitted to the public at a later 
date. Canada and China submitted comments on the participants' joint request. Canada sup ported 
the joint proposal. While recognizing the need for the protection of BCI/HSBI in these proceedings, 
China queried whether a complete exclusion of third participants' non -BCI-Approved Persons from 
segments of the oral hearing dedicated to questions a nd answers was required. Instead, China 
suggested that sessions dedicated to legal interpretative issues be open to all third participants and 
that they be kept separate from sessions requiring reference to BCI/HSBI . 
The Division issued a Procedural Ruling  authorizing the participants' request to open the sessions 
dedicated to the delivery of opening and closing statements to public observation, subject to 
additional procedures for the conduct of all sessions of the oral hearing. The Division considered tha t 
China's request would be difficult to accommodate given the amount of BCI/HSBI involved in this 
dispute. The Division also recalled in this regard that third participants were allowed to designate up 
to eight individuals as BCI -Approved Persons, and cons idered this sufficient to allow the third 
participants to be meaningfully represented at the oral hearing.  
5.5   Request to modify the date of the oral hearing  
In Russia – Commercial Vehicles , Russia requested the Division hearing the appeal to delay the oral 
hearing. The European  Union  objected to Russia's request to delay the hearing. The Division 
informed the participants and third participants that it was not in a position to accommodate Russia's 
request.  
In EC and certain member States – Large Civil A ircraft (Article  21.5 – US), the Division hearing the 
appeal informed the participants and third participants that the second session of the hearing would 
have to take place one week earlier than initially planned, because no meeting room would be 
availabl e at the WTO due to the WTO Public Forum. The United  States  objected to this scheduling 
change due to, inter alia , conflict with religious holidays and emphasized that, from its perspective, 
the WTO's organization of a public forum could not supersede the WTO's timely administration of its 
dispute settlement system, a core function of the organization. The United  States  suggested that 
the second session of the oral hearing take place on the initially scheduled week in an alternative 
venue if no meeting room  could be made available at the WTO. The European  Union  also stated its 
preference for the second session of the oral hearing to take place on the initially planned dates in 
premises outside the WTO if necessary, due to, inter alia , the professional and pe rsonal 
commitments of members of the European  Union 's delegation. Both the United  States  and the 
European  Union  proposed their respective alternative scheduling preference in the event that it is 
impossible to maintain the dates initially planned. No comme nts were received from the third 
participants.  
Following confirmation by the WTO Administration that there would be no room available to the 
Appellate  Body during the week of the WTO Public Forum, and taking into account the participants' 
                                                
42 The procedural rulings in US – Tuna II (Mexico) (Article  21.5 – US) / US – Tuna II (Mexico) 
(Article  21.5 – Mexico II) were issued to the participants in 2017. However, as the Appellate  Body report was 
circulated on 14  December 2018, these procedural rulings were subject to confidentiality until then.  WT/AB/29  
 
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  preference for t he initially planned dates, the Division explored alternative venues and made 
arrangements for the second session of the oral hearing to take place on the initially planned dates 
at the premises of the World Meteorological Organization.  
In EU – PET (Pakist an), Pakistan and the European  Union  jointly requested the Division to reschedule 
the date of the hearing. The Division invited the third participants to comment on the request by the 
participants. None of the third participants commented on the request. T he Division issued a 
Procedural Ruling under Rule 16 of the Working Procedures , informing the participants and third 
participants of its decision to reschedule the date of the hearing.  
5.6   Request for harmonization of appeals schedules  
In EC and certain member States – Large Civil Aircraft (Article  21.5 – US), the Appellate  Body 
receive d a letter from the European  Union  referring to this appeal, and to the then anticipated 
appeals in US – Large Civil Aircraft (2nd complaint) (Article  21.5 – EU) (DS353) and US – Tax 
Incentives  (DS487). Referring to Rules 16(1) and 16(2) of the Working Pro cedures and Article  9 of 
the DSU, the European  Union  requested that the schedules for these three appeals be harmonized 
to the greatest extent possible and that the hearings be sufficiently proximate in time, so that a 
particular matter would not be effect ively disposed of in one appeal before the related matter is 
heard in one of the other appeals. The Chair of the Appellate  Body invited the United  States  and the 
third parties to comment on the European  Union 's request. The United  States  argued that the 
European  Union 's request was not supported by the DSU or the Working Procedures and would result 
in delays in the proceedings. The United  States  stated that it remained open to proposals to set 
deadlines for written submissions and dates for oral hearings in  a way that would allow the 
participants and third participants in each dispute to advocate effectively their positions on appeal 
and for the Appellate  Body to consider fully the issues raised. The participants and third parties were 
invited to submit addi tional comments. The European  Union  reiterated its request that any oral 
hearings in these appeals be sufficiently proximate in time, but noted that it was content to leave it 
to the Appellate  Body to determine what that would mean in practice. The Appella te Body indicated 
that it would bear in mind the European  Union's request, as well as the comments received, during 
the appellate proceedings in these three disputes.  
5.7   Transition  
In Russia – Commercial Vehicles , the Chair of the Appellate  Body notified the  participants and third 
participants that Mr Hyun Chong Kim, a member of the Division selected to hear this appeal, had, 
pursuant to Rule 14 of the Working Procedures, resigned on 1  August  2017 with immediate effect. 
The Chair indicated that, pursuant to R ules 6(2) and 13 of the Working Procedures, Mr Shree Baboo 
Chekitan Servansing had replaced Mr Kim on the Division hearing this appeal.  
In EC and certain member States – Large Civil Aircraft (Article  21.5 – US), the participants and third 
participants were  informed that, in accordance with Rule 15 of the Working Procedures, the Chair of 
the Appellate  Body had notified the Chair of the DSB of the Appellate  Body's decision to authorize 
Messrs Ricardo Ramírez -Hernández and Peter Van den Bossche to complete the  disposition of this 
appeal, even though their respective second terms of office were due to expire before the completion 
of these appellate proceedings.  
In EU – PET (Pakistan) , Indonesia – Iron or Steel Products43, and Brazil – Taxation , the participants 
and third participants were informed that, in accordance with Rule 15 of the Working Procedures, 
the Appellate  Body had notified the Chair of the DSB of its decision to authorize Mr Peter Van den 
Bossche to complete the disposition of thi s appeal, even though his second term of office was due 
to expire before the completion of the appellate proceedings.  
5.8   Reasons for the extension of the time  period for the circulation of Appellate  Body 
reports  
The 90 -day time  period stipulated in Article  17.5 of the DSU for the circulation of reports was 
exceeded in all the appellate proceedings in respect of which Appellate  Body reports were circulated 
                                                
43 This notification in Indonesia – Iron or Steel Products was made in 2017. However, since the 
Appellate  Body report was circulated on 15  August  2018, this notification was subject to confidentiality until 
then. WT/AB/29  
 
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  in 2018. For each appellate proceeding, the Appellate  Body communicated to the DSB  Chair the 
reasons why it was not possible to circulate the Appellate  Body report within the 90 -day period.  
These reasons included the substantial workload of the Appellate  Body, issues arising from overlap 
in the composition of the Divisions hearing different appeals owing to t he vacancies on the 
Appellate  Body, appellate proceedings running in parallel, the number and complexity of the issues 
raised in appellate proceedings, together with the demands that these appellate proceedings place 
on the WTO Secretariat's translation se rvices, and the shortage of staff in the Appellate  Body 
Secretariat.  
 
   WT/AB/29  
 
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  6  ARBITRATIONS UNDER A RTICLE  21.3( c) OF THE DSU  
The DSU does not specify who shall serve as an arbitrator under Article  21.3(c) of the DSU to 
determine the reasonable period of time for  the implementation by a WTO  Member of the 
recommendations and rulings adopted by the DSB in dispute settlement cases. The parties to the 
arbitration select the arbitrator by agreement or, if they cannot agree on an arbitrator, 
the Director -General of the WTO appoints the arbitrator. In all but three arbitration proceedings, all 
those who have served as arbitrators pursuant to Article  21.3(c) have been current or former 
Appellate  Body Members.44 In carrying out arbitrations under Article  21.3(c), Appellate  Body 
Members act in an individual capacity.  
6.1  United  States  – Certain Methodologies and Their Application to Anti -Dumping 
Proceedings Involving China , WT/DS471/RPT  
On 22  May 2017, the DSB adopted the Appellate  Body Report and the Panel Report in 
United  States  – Certain Methodologies and Their Application to Anti -Dumping Proceedings Involving 
China . This dispute concerned China's challenge of certain methodologies and their use by the 
United  States in a number of anti -dumping proceedings. The Panel found: (i) t he "Single Rate 
Presumption" (SRP) to be inconsistent "as such" with Article  6.10 and Article  9.2 of the Anti -Dumping 
Agreement; (ii)  the United  States  to have acted inconsistently with Article  6.10 and Article  9.2 of 
the Anti -Dumping Agreement because the United  States  Department of Commerce (USDOC) applied 
the SRP in the 38  anti-dumping determinations challenged by China; (iii)  the United  States  to have 
acted inconsistently with Article  2.4.2 of the Anti -Dumping Agreement because of certain ste ps taken 
by the USDOC in relation to the weighted -average to transaction (W -T) methodology and its use of 
zeroing under the W -T methodology in three  original anti -dumping investigations; and (iv)  the 
United  States  to have acted inconsistently with Article  2.4.2 of the Anti -Dumping Agreement and 
Article  VI:2 of the GATT  1994 because of the USDOC's use of zeroing under the W -T methodology 
in one  administrative review. These Panel findings were not appealed by the United  States  and, in 
ruling on China's appeal , the Appellate  Body did not make any additional findings of inconsistency 
with the covered agreements.  
At the meeting of the DSB held on 19  June 2017, the United  States  indicated its intention to 
implement the DSB's recommendations and rulings in this di spute, and stated that it would need a 
reasonable period of time in which to do so. By letter dated 17  October  2017, China informed the 
DSB that it had engaged in consultations with the United  States  on the reasonable period of time for 
implementation purs uant to Article  21.3(b) of the DSU, but that those consultations had not resulted 
in an agreement. China therefore requested that the reasonable period of time be determined 
through binding arbitration pursuant to Article  21.3(c) of the DSU.  
By letter date d 30 October  2017, China informed the Director -General of the WTO that it had 
engaged in consultations with the United  States  regarding the appointment of an arbitrator but that 
those consultations had not led to an agreement. China therefore requested the  Director -General to 
appoint an arbitrator pursuant to footnote 12 to Article  21.3(c) of the DSU. After consulting with the 
parties, the Director -General appointed Mr Simon Farbenbloom as the Arbitrator on 
7 November  2017.  
In the arbitration, the United  States requested the Arbitrator to determine that 24 months is a 
reasonable period of time to implement the DSB's  recommendations and rulings in this dispute due 
to the number and magnitude of modifications to the challenged measures, the procedural 
require ments under US law, the complexity of the issues involved, the workload of the USDOC, and 
other resource constraints due to the recent change in the US administration. According to the 
United  States , the implementation process would comprise two distinct s ets of actions: (i) one 
proceeding pursuant to Section 123(g) of the Uruguay Round Agreements Act (URAA) to address 
the "as such" recommendations and rulings of the DSB pertaining to the SRP; and (ii) 38 separate 
                                                
44 Mr Simon Farbenbloom  served as the Arbitrator  in United  States  – Anti-Dumping Measures on Certain 
Shrimp from Viet Nam . Mr Farbenbloom had previously served as chair of the Panel in the underlying dispute . 
Ms Claudia Orozco served as the Arbitrator in United  States – Anti-Dumping and C ountervailing Measures on 
Large Residential Washers from Korea . Ms Orozco had previously served as chair of the Panel in the underlying 
dispute . Mr Farbenbloom was also appointed as the Arbitrator in United  States – Certain Methodologies and 
Their Applicat ion to Anti -Dumping Proceedings Involving China , initiated 17  October  2017, and circulated 
19 January  2018.  WT/AB/29  
 
- 113 - 
 
  proceedings pursuant to Section 129(b) of t he URAA to address the DSB's "as applied" 
recommendations and rulings relating to the USDOC's use of the SRP in 38  anti-dumping 
determinations, as well as its use of the W -T methodology, and zeroing under that methodology, in 
certain of those determination s. The United  States  explained that, while these two sets of 
proceedings must be undertaken sequentially, there can be "a small degree of overlap" between 
them. In particular, the United  States  proposed to commence the Section  129 proceedings once the 
preliminary determination in the Section 123 proceeding has been issued. The United  States  
proposed to stagger the Section 129 proceedings in several tranches in lieu of the administrative 
burden on the USDOC.  
China did not question the USDOC's recourse to two  sets of proceedings under Section 123 and 
Section 129 of the URAA for purposes of implementation in this dispute. Nor did China object to the 
degree of overlap between these proceedings that the United  States  indicated would occur. China 
nevertheless argu ed that the amount of time sought by the United  States, both for its Section 123 
proceeding and for the multiple Section 129 proceedings, is "unreasonably long", and that not all 
steps under these sets of proceedings are required, considering the circumsta nces of this case. China 
also contested the staggered approach proposed by the United  States  for the Section 129 
proceedings, and contended that these proceedings can be conducted concurrently. In China's view, 
the United  States  could implement all of the DSB's recommendations and rulings in six months.  
As an initial matter, the Arbitrator recalled that both China and the United  States  agreed that 
Sections  123 and 129 of the URAA are appropriate means to address the DSB's "as such" and "as 
applied" recommendations and rulings respectively. Then, the Arbitrator addressed the parties' 
disagreements regarding the time necessary to complete  the processes under Sections 123 and 129 
of the URAA.  
With respect to the United  States ' proposed means of implementing the DSB's "as such" 
recommendations and rulings under Section 123 of the URAA, the United  States  argued that 
15 months are required du e to the complexity of the issue at hand, allocated as follows: 
(i) approximately seven  months from the adoption of the Panel and Appellate  Body Reports to 
conduct inter -agency consultations and related activity prior to commencing a Section 123 
proceeding; (ii)  approximately four months to issue the preliminary determination once the 
proceeding under Section 123 has commenced; and (iii)  approxima tely four months to issue the 
final determination.  
China argued that no time after the DSB's adoption of the Panel and Appellate  Body Reports should 
be awarded for inter -agency consultations and related activity because, according to China, the 
United  States had ample time to conduct inter -agency consultations and analysis preparation prior 
to the adoption of these reports. According to China, the United  States  was aware of the 
WTO-inconsistency of the SRP prior to the adoption of the Panel and Appellate  Body Reports. China 
further submitted that 15 days would be  sufficient to issue the preliminary determination and that 
the additional time allocated for the United  States  to issue the final determination should be brief.  
The Arbitrator first noted that cons ultations within government agencies are a typical aspect of 
"law-making", and that, regardless of whether they are mandated by law, the time needed to 
undertake such consultations should be taken into account in determining a reasonable period of 
time for  implementation. With respect to the relevance of the United  States ' awareness of the 
WTO-inconsistency of the SRP prior to the adoption of the Panel and Appellate  Body Reports, the 
Arbitrator considered that formal implementation steps need only be taken after the adoption of the 
relevant panel and Appellate  Body reports. However, the Arbitrator also considered that 
circumstances pre -dating the adoption of the relevant panel and Appellate  Body reports may in some 
instances bear on the determination of the reasonable period of time. In this case, the Arbitrator 
noted that the United  States  had not appealed the Panel's finding of "as such" inconsistency 
pertaining to the SRP. Therefore, the Arbitrator considered that the United  States  was, at least to a 
certain extent, in a position to begin considering its options for implementation prior to the adoption 
of the Panel and Appellate  Body Reports. The Arbitrator was also not persuaded that the 
implementation options available to the United  States  are especially numerous or complex. For these 
considerations, the Arbitrator did not consider that as many months are needed for these initial 
steps as the United  States  contended.  
Regarding the United  States ' argument that implementing the DSB's "as such" recommendation s 
and rulings in this dispute is particularly complex, the Arbitrator considered that implementation will WT/AB/29  
 
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  not necessarily be as complicated as the United  States  suggested, but more complex than what 
China suggested. The Arbitrator considered that the Unite d States  could reasonably conduct the 
necessary preparatory work and issue the preliminary determination under Section 123  in respect 
of the DSB's "as such" recommendations and rulings in significantly less time than the United  States ' 
proposal, but in mor e time than China's proposal. Given the overlap between the Section 123 and 
Section 129 proceedings, the Arbitrator did not consider it necessary to address how much time 
should reasonably be allocated for the USDOC to issue the final determination in the Section 123 
proceeding.  
With respect to the United  States ' proposed means of implementing the DSB's "as applied" 
recommendations and rulings under Section 129 of the URAA, the parties agreed that 
redeterminations under Section 129 should commence once the preliminary determination in the 
Section 123 proceeding is issued. The parties, however, disagreed on the extent to which the 
multiple redeterminations that are needed can be conducted concurrently, and on the time required 
for the various steps of a Secti on 129 proceeding. The United  States  claimed that it needed 
13 months  to complete the Section 129 proceedings whereas China claimed that 5 and a half months 
would be  sufficient.  
Specifically, the United  States  argued that the various Section 129 proceedin gs need to be staggered 
in tranches due the large number of redeterminations needed, as well as the associated 
administrative workload and due process considerations. The Arbitrator recalled that, in principle, 
the workload of the implementing authority is  not relevant to the determination of the reasonable 
period of time for implementation of the DSB's recommendations and rulings. The Arbitrator further 
considered that the United  States ' proposed approach of addressing the redeterminations in tranches 
is a matter for the US authorities. The Arbitrator, however, noted that the commonality in the issues 
to be considered and the relationship between a number of redeterminations under Section 129 are 
such that it may be possible for the USDOC to expedite its wo rk for many of the redeterminations.  
The Arbitrator then considered China's argument that Section 129(b)(2) of the URAA imposes a 
180-day limit within which the redeterminations must be made, thereby rendering the United  States ' 
proposal for a longer perio d of time for the Section 129 process inconsistent with its own statute. 
The Arbitrator accepted the United  States ' explanations regarding the scope of this provision that 
the 180 -day limit is not a limit on the length of time that may be used to complete all the steps 
involved in a redetermination. In reaching this conclusion, the Arbitrator observed that the 180 -day 
period is triggered not when the USDOC begins its work pursuant to Section 129, but only when the 
USTR makes a written request to the USDOC r elating to the redetermination, which request could, 
in principle, be received before or after the USDOC begins its work on the redetermination.  
Next, the Arbitrator turned to the question of the relevance, for the reasonable period of time for 
implementat ion, of the relative scope of original investigations and administrative reviews, on the 
one hand, and redeterminations, on the other hand. In this regard, the Arbitrator accepted the logic 
of the proposition put forward by China that redeterminations may require less time than the original 
proceedings since the scope of redeterminations is more limited. However, the Arbitrator also 
considered that the fact that implementation might entail a move from a presumption to a 
fact-based, case -by-case analysis mak es it less likely that the USDOC will be able to make all of the 
required redeterminations without re -opening its factual record in at least some of the relevant 
proceedings.  
Lastly, the Arbitrator noted that there is no provision of US law that mandates that all steps taken 
in original investigations must also be taken in Section 129 redeterminations. However, the 
Arbitrator was reluctant to determine any period of time for implementation that would foreclose the 
possibility that certain procedural steps could be taken if and when warranted, such as hearings and 
verifications.  
For these reasons, the Arbitrator considered that the United  States  could reasonably complete the 
Section 129 redeterminations in respect of the DSB's "as applied" recommendations an d rulings in 
significantly less time than the United  States ' proposal, but in more time than China's proposal.  
Finally, the Arbitrator turned to the "particular circumstances" of this dispute identified as relevant 
in the determination of the reasonable pe riod of time for implementation by the United  States  and 
China. To the extent that such "particular circumstances" were not already taken into account in the WT/AB/29  
 
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  context of the Arbitrator's findings so far, the Arbitrator found them not to be relevant. In part icular, 
the Arbitrator did not consider the USDOC's workload or the continuing formation of the US 
administration and the fact that certain key positions at the USDOC remain vacant to be relevant to 
its determination of the reasonable period of time for im plementation in this dispute. In the same 
vein, the Arbitrator did not consider the United  States ' alleged record of failing to comply within 
applicable reasonable periods of time in previous disputes, as argued by China, to be relevant to its 
determination of the reasonable period of time.  
Based on all of the foregoing considerations, the Arbitrator  determined that the reasonable period 
of time for the United  States  to implement the recommendations and rulings of the DSB in this 
dispute is 15  months  from the adoption of the Panel and Appellate  Body Reports, expiring on 
22 August 2018.  
 
  WT/AB/29  
 
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  7  OTHER ACTIVI TIES  
7.1  Digital Dispute Settlement Registry  
The WTO  Digital Dispute Settlement Registry (DDSR) is being developed as a comprehensive 
application to manage the workflow of the dispute settlement process, as well as to maintain digital 
information about dispute s. This application features: (i) a secure electronic registry for filing and 
serving dispute settlement documents online; (ii) a central electronic storage facility for all dispute 
settlement records; and (iii) a research facility on dispute settlement in formation and statistics.  
The DDSR  will provide for the electronic filing of submissions in disputes, and for the  creation of an 
e-docket of all documents submitted in a particular case. The system will feature: (i)  a facility to 
securely file submissions and other dispute -related documents electronically; (ii)  a means of 
paperless and secure service on other parties of submissions and exhibits; and (iii)  a comprehensive 
calendar of deadlines to assist Members and the Secretariat with workflow management.  
As a storage facility, the DDSR  will provide access to information about WTO  disputes ; in particular, 
it will serve as an online repository of all panel and Appellate  Body records. As a research facility, 
the DDSR  will allow Members and the public to search  the digital records of publicly available data 
of past disputes. Users will have access to a broader range of information and statistics than in the 
past. With the extent of the information available, WTO  Members and the Secretariat, as well as the 
intere sted public, will be able to generate more in -depth and informative statistics on WTO  dispute 
settlement activity.  
In 2018, the Appellate  Body continued to develop and test the DDSR application, help train 
WTO delegates on its various functions, and compil e dispute information for uploading into 
the database.  
The DDSR's electronic filing function has been tested as part of a pilot phase since July 2015. During 
this pilot phase, parties, third parties, and panelists volunteer to use the DDSR in parallel with  the 
existing paper filing procedures for written submissions and other dispute correspondence. In 2018, 
the e -filing function of the DDSR was tested at the panel stage in several disputes, with some 
disputes using the DDSR  for the official filing of all c ommunications between the panel and the 
parties. Participants in certain appellate proceedings tested the DDSR  as part of an appeal pilot 
phase. The testing of the DDSR in the pilot phase shall continue until the DDSR is fully launched and 
e-filing is cons idered as the official filing for all disputes.  
7.2  The John H. Jackson Moot Court Competition  on WTO Law  
2018 marked the 16th year of the John H. Jackson Moot Court Competition on WTO Law, previously 
known as the European Law Students' Association (ELSA) Moot Court Competition on WTO Law. The 
WTO has supported this competition, since its inception, as a technical sponsor. The competition has 
proven to be a useful tool in promoting development of international trade law and WTO -related 
studies. In the course of  the competition, each participating student team represents both the 
complainant and the respondent in the fictional case and prepares both written and oral submissions.  
The competition continues to grow, with more than 90 universities from all over the globe 
participating in 2018. In the 16th edition, students grappled with a hypothetical WTO dispute 
regarding measures taken to incentivize the use of handicraft technologies in textiles manufacturing. 
Students addressed legal questions regarding the T BT Agreement , the GATT  1994, and the 
SCM Agreement . The case was written by James Nedumpara of Jindal Global Law School in India. 
Five regional rounds took place in Naples (Italy), Wroclaw (Poland), Washington D.C.  
(United  States) , Bangkok (Thailand), and Nairobi  (Kenya). In each of these rounds, WTO staff 
members, including staff of the Appellate  Body Secretariat, served as panelists. In addition, staff 
from the WTO and Appellate  Body Secretariats provided support to the competition through  technical 
advice on the subject matter  and assistance with organizational issues, including hosting the Final 
Round in Geneva, Switzerland.  
The Final Round was hosted jointly by the WTO and the Graduate Institute on 19 -23 June 2018. 
Students had the oppo rtunity to plead their case before the WTO Secretariat, current and former 
Appellate  Body Members, leading academics, private practitioners, and delegates who served as WT/AB/29  
 
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  panelists in the mock dispute. Students also had the opportunity to explore opportuniti es for careers 
in international trade law with the sponsors of the competition during the sponsor fair. Prizes included 
scholarships to study at the World Trade Institute in Bern as well as membership to the Society of 
International Economic Law. The winni ng team was from the Graduate Institute of International and 
Development Studies in Geneva, Switzerland, while the National Law School of India University 
placed as runner -up. 
7.3  Technical assistance activities  
The Appellate  Body Secretariat staff participate s in trade -related technical assistance activities, 
organi zed by the WTO, aimed at helping developing countries build their trade capacity, so that they 
can participate more effectively in global trade. A summary of these activities by Appellate  Body 
Secre tariat staff during the course of 2018 can be found in the table below.  
APPELLATE BODY SECRE TARIAT PARTICIPATION  IN  
TECHNICAL ASSISTANCE  ACTIVITIES IN 2018  
Course / Seminar  Location  Dates  
French -speaking Africa Regional 
Trade Policy Course – Dispute 
Settlement Module  Abidjan, Côte d'Ivoire  26-28 March  2018 
CEECAC Regional Trade Policy 
Course – Dispute Settlement 
Module  Almaty, Kazakhstan  12-15 June 2018 
English -speaking Africa Regional 
Trade Policy Course – Dispute 
Settlement Module  Port Louis, Mauritius  27-29 June 2018 
National activity on WTO dispute 
settlement  Astana, Kazakhstan  1-4 October  2018 
Regional Trade Policy Course for 
Latin American Countries – 
Dispute Settlement Module  Montevideo, Uruguay  13-17 November  2018 
Regional Trade Policy Course for 
Asia Pacific Countries – Dispute 
Settlement Module  Bangkok, Thailand  5-7 December  2018 
 
 
  WT/AB/29  
 
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  ANNEX 1  
FAREWELL SPEECH  
28 MAY  2018 
APPELLATE  BODY MEMBER RICARDO  RAMÍREZ -HERNÁNDEZ  
The day I was sworn in was the 40th anniversary of a man landing on the moon. On that day, my 
older sister drew an analogy from that historic event and told me that she was  very proud and happy 
that I had reached my "moon". So here I am, back on Planet Earth after a wonderful journey of 
almost nine years. I am an international trade lawyer whose ultimate professional wish was to be 
part of this institution.  
I was part of a j ewel in the crown created by you, the Membership. A sophisticated international 
adjudicatory system for solving disputes. A mechanism that has always privileged substance over 
form. One that follows a method of interpretation and where parties'  due process  rights are fully 
respected. An institution that strives to find, as Professor Howse puts it, the "equilibrium between 
domestic regulatory autonomy and trade liberalization ", as agreed by WTO Members in the treaty 
text.  
I want  to start this address by tha nking all of the participants involved in the dispute settlement 
process.  
First, the delegates and litigants, who, with great advocacy skills and sophisticated arguments made 
every deliberation challenging. My respect and recognition go out to all of them . I know that AB 
deadlines are often challenging to meet and that answering our questions in hearings can be 
exhausting. I have always appreciated your tireless cooperation in our efforts to explore fully all 
issues raised on appeal.  
Second, I shall recogn ize a group of young, and not that young, lawyers and professionals in the 
Appellate Body Secretariat. They challenged me to the limit and, with every interaction, made me a 
better professional. It was an amazing experience witnessing how each of them grew  professionally 
and personally during these years. I've never seen any institution work with this level of quality, 
commitment, and expertise. The ABS and the other Dispute Settlement Divisions not only administer 
disputes but are also an essential element  in the process of solving them. They perform a unique 
task with the highest degree of expertise, and this organization should, especially in these times of 
uncertainty, recognize and act upon this fact. Finally, it is a good opportunity to set the record 
straight. Our Secretariat is not the 8th ABM. It is the engine that helps us reach our destiny. But 
we, the ABMs, are in the driver's seat.  
Finally, my colleagues, I have always said that the greatest strength of the AB is the diversity – both 
cultural an d professional – of its Members. During my time as an ABM, I had the pleasure of working 
with 13 extraordinary individuals, all of whom with every chat and discussion gave me infinite lessons 
not only about international trade, law, economy, and politics b ut also, and most importantly , about 
life. And if all their teaching and shared wisdom were not enough, the most important gift I got from 
them was their friendship. A bond enhanced because I shared with each and every one of them a 
keen sense of commitmen t to this institution and a belief that the Appellate Body is an important 
part of the WTO's  rules-based multilateral trading system. The Membership could question many 
things about ABMs, but never their full commitment to this institution, sometimes at a great personal 
cost.  
Now I'm going to share with you some thoughts about the serious crisis that the dispute settlement 
mechanism and, in particular, the AB are currently facing. I will try to lay out some considerations 
to help  the Membership address som e of the problems raised, trying always to keep in mind that, in 
the end, as an adjudicator , you speak through your decisions and work with the body of law you are 
provided with.  
Let me start with a personal reflection. It seems to me that the crisis we n ow face could have been 
avoided if it had been addressed head-on, as it began to escalate. The WTO is a consensus -based 
collective. This means that this crisis should not be attributed to one Member. The Membership must  
recognize the need for leadership wi thin and outside this house. A need to recognize that there must WT/AB/29  
 
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  be genuine engagement when one Member is raising problems. The signals have been there for 
some time. No matter how difficult or insurmountable the issues may seem, all those who are part 
of the WTO community must be willing to engage and must refrain from putting personal or national 
trade interests ahead of  attempting to come up with a solution. The first question is whether the 
Membership still wants to have an instance to review panel  reports.  
If the answer is affirmative , then we have to face the conceptual differences among the Membership 
as to the natu re of the WTO . That is, is  the WTO a contract or a constitution? And, following 
immediately from that question, what is the nature of the AB? Is it or should it be an International 
Court? Many of the issues identified in the lead -up to the current state of  affairs go to the core and 
the nature of what the AB is or should not be. If Members want to make progress and solve the 
current deadlock , maybe this is a good place to start. Or, alternatively, maybe there needs to be a 
pragmatic discussion that leaves these conceptual notions aside and goes to the very basic or 
minimal elements all Members can live with to have a fully functioning AB. But it is undeniable that 
there needs to be a discussion. With this in mind, I will now address each of the issues that h ave 
been identified:  
Rule 15  
Rule 15 is an operational rule. It was designed to expedite the dispute settlement process by avoiding 
a "reset" of a dispute if an ABM's term ended before a dispute was finalized. Nothing more. Perhaps 
objective criteria as to  the circumstances in which such a "reset" would be appropriate would help. 
But in my view, a rule that leaves discretion to the Membership whether or not to extend an ABM's 
term after it has expired would not only create uncertainty but also jeopardize  an expedited solution 
to a dispute.  
90 days  
The 90 -day rule is a great rule. It was for a long time a unique feature of the AB process. 
Nevertheless, the growing complexity of WTO disputes, the high rate of appeal of panel reports and 
the number of issues a ppealed, the amount of jurisprudence, and the size of the submissions, among 
other things, turned out to make the 90-day deadline unrealistic.  
On top of that, as my colleague and friend Peter used to say, brevity requires time. So, if the 
Membership wants  to keep the 90 -day rule, it may require some sacrifices. Attempts to address 
some elements that will help expedite the process have been made. For example, not long ago the 
AB put forward the idea of reducing the length of the submissions. The idea was re jected by most 
of the Membership. If you want to preserve the 90 -day rule, the praxis needs to change. For 
instance, by introducing summary judgments .  
Reappointment  
This is an issue in which I believe the text is crystal clear. Reappointment is an option , not a right. 
Upon reflection, this is an issue that is within the realm of only the Membership. Again, however, 
engagement is needed. The Membership has adopted a process for the initial appointment of ABMs. 
WTO Members together need to agree on whether a  process is needed for reappointment and, if so, 
what form it should take.   
Advisory opinion   
There is much scope for differences of opinion, in good faith, as to which  rulings are necessary to 
resolve a dispute, and the extent to which rulings should be supported by reasoning. Moreover, all 
active users have at some point or in some instance requested a finding of the AB that is not 
necessary to solve a dispute.  I've seen Members seek an AB interpretation of a covered agreement 
despite the fact that such clarification was not necessary to solve the dispute. I've seen Members 
ask the Appellate Body to disapprove unappealed panel statements and to set aside portions of pan el 
reports, not to mention the frequent invitations to revisit the factual findings of panels.  In this 
regard, the Membership  needs to solve the tension between the principle that the aim of the dispute 
settlement mechanism " is to secure a positive solutio n" to a dispute and the obligation of the AB to 
"address each of the issues raised " on appeal.  WT/AB/29  
 
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  Gap filling  
No adjudicative entity is infallible , and I believe this is also true of the AB.  No system can exclude 
that some interpretations may diverge from ex pectations or be unacceptable to large parts of a 
constituency.  Such risk needs to be mitigated through an operational negotiating branch that can 
adjust or realign the rules when this occurs . In addition, I haven't  seen a WTO dispute in which all 
parties involved agree that there were mistakes made in the interpretation or that gap filling 
occurred. Maybe a serious discussion needs to take place about the method used for interpreting 
the covered agreements, for example, the Vienna Convention. Members might  decide that the 
significance to be attributed to negotiating history should be elevated beyond the role attributed to 
it in Article 32 of the Vienna Convention. Finally, let me express my concern that whilst trade evolves 
and becomes more and more sophist icated, WTO disciplines are at risk of remaining static. It adds 
an extra hurdle when the Membership wants to fix current problems with old rules. The Membership 
needs to engage in a serious update of its current disciplines and clarify or correct those th at it 
considers have not worked.  
Reliance upon previous cases  
I've never seen a Member who has not argued its case based on previous case law. This type of 
reliance upon de facto  precedent seems to be one that Members themselves value and attach 
importance to  – it is, after all, closely linked to the idea of security and predictability of trading 
relations.  The Membership could very well stop doing this and ban the cogent reasons approach. I 
would just caution that this is precisely why many countries are complaining in the context of 
investor -state dispute settlement (ISDS),  that is, fragmentation and lack of cohesiveness in the 
ISDS jurisprudence.  
Independence and impartiality  
In my view , this is the only non -negotiable aspect of our process if the Members decide to preserve 
the AB. As my former colleague David Unterhalter used to say, "the virtue of independence may 
seem self -evident, but it is not to be taken for granted ". 
The AB now has only four Members. The AB is on the verge of becoming non -operational. Before 
some Members decide to take other routes such as Article 25 or plurilateral agreements, it is 
essential, as the AB Chair said recently, that the Membership truly engag es in a constructive dialogue 
and tries to come up with a compromise. You, the Members, need to ask yourselves, what is the 
contribution of the AB to the international rule of law? What does this paralysis do to the WTO dispute 
settlement system as  a whole ? This institution does not deserve to die through asphyxiation. You 
have an obligation to decide whether you want to kill it or keep it alive. The Membership may want 
to reflect on certain topics under the current system.  
Transparency  
The Membership has b een pretending to be transparent, and the AB has been an accomplice to it. 
WTO hearings are not public. The fact that a few of them are broadcast, sometimes even days after 
the actual hearing takes place, in a room at the WTO headquarters is just simulatin g transparency. 
To truly achieve transparency, all WTO dispute settlement hearings should be broadcast live, of 
course , always addressing any confidentiality consideration.  
Damages  
The great limitations or defects of the current prospective remedies syste m are well known. Back in 
2002, Mexico, among other Members, made a first attempt to address one of the major defects of 
the DSU, the prospective nature of the remedies. The best deterrent for unilateral actions is that 
they are not free of consequences.  
Remand  
Remand is a tool that would greatly facilitate the work and streamline the dispute settlement 
process. It would be worthwhile to explore proposals that have already been tabled by some 
Members.  WT/AB/29  
 
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  WTO and RTAs  
Maybe the Membership could revive the dis cussion about the interactions between the WTO and 
regional agreements dispute settlement. Given the amount of expertise and knowledge developed 
over the past decades, the WTO could become the dispute settlement centre for all RTAs. We need 
to brand the na me.   
Spanish  
Aunque algunos países de habla hispana presentan sus casos en español, no todos lo hacen o en 
algunos casos lo hacen de manera parcial. De alguna forma hemos sucumbido a que los 
procedimientos de solución de controversias se ventilen en inglés. Si este es el caso, dejemos de 
pretender y ahorremos dinero y recursos a la Organización. Si, por el contrario, queremos preservar 
el idioma  español , debemos de hacerlo relevante. Cela s'applique  aussi en français . Aprovecho esta 
oportunidad para agrade cer la valiosa labor de los intérpretes  y traductores , quienes realizan un 
trabajo espléndido que a veces no se valora lo suficiente. Confieso que soy su admirador .  
Although I've seen countries argue their cases in Spanish, not all Spanish -speaking countries plead 
in Spanish. In many ways, we have surrendered dispute settlement to English. If that is what you 
decide , then let's stop the pretending game and accept that all disputes  be adjudicated in English. 
We will save a lot of money and resources if we do so. If , on the other hand, you want to preserve 
the Spanish language, you have to make it relevant. The same applies to French. I take this 
opportunity to give special thanks to  our interpreters and translators who do a splendid job that 
sometimes is not valued enough. I am your fan.  
Very often you hear from developing countries,  and now more often from developed countries, that 
international trade, globalization, and liberalism  are to blame for poverty, loss of jobs , and lack of 
development. They are easy targets. They are faceless causes that can't defend themselves. Faulty 
internal industrial and agricultural policies, lack of rule of law, and corruption are hardly mentioned. 
The rules -based international trading system that I was mandated to protect contributes to global 
prosperity. The Membership should address how to spread across the populations of all its 
Membership the benefits of trade instead of finding ways to concentr ate it. This organization needs 
to stop talking about barriers and start building bridges for a better distribution of the benefits of 
international trade . It's time  to address the new challenges  that world international trade faces. I 
truly believe that t he rules I contributed to uphold are helping the more than 50 million Mexicans 
who today live in extreme poverty, but much more needs to be done.  
Globalization is a reality. Global value chains and global warming are just two examples to illustrate 
the fa ct that we are facing global challenges that can be addressed only with global solutions. Have 
no doubt, with or without the WTO, trade will continue, and globalization, and the technology that 
bolsters it, can't be stopped. But without a framework of bind ing and updated rules, anarchy and 
powerful actors, private and public, will take over. This will not be good, especially for those 
developing and least developed countries that require a system in which, to the eyes of the law, 
every country is equal.  
My father and mother are two schoolteachers  who, with honest and hard work, managed to raise a 
family. My brother has dedicated his life to helping  the communities in one of the poorest districts 
in Mexico City. My older sister is a human rights advocate, an d my other sister is a hardworking and 
honest public servant. They are the ones who should be honoured today; I would not be here if it 
weren't  for their love, example, and guidance. For the past years, one of my main goals was to show 
you that, despite wh at you hear in the news, Mexicans, like my family and many millions, are 
hardworking, honest, and decent people.  
I have been to the moon. I have walked on it and can confirm that it was everything I expected and 
much more. I also realized how fragile it i s. I hope you, the Membership, soon understand the 
importance of what you created and the value of its existence. As for me, few people can say they 
lived a dream. You made a dream come true and , for that , I will be eternally grateful.  
Ricardo OUT! 
 WT/AB/29  
 
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 ANNEX 2  
11TH ANNUAL UPDATE ON W TO DISPUTE SETTLEMENT  
GRADUATE INSTITUTE, GENEVA  
3 MAY 2018 
ADDRESS  OF MR UJAL SINGH  BHATIA , CHAIR  OF THE  APPELLATE  BODY  
2017 will be remembered as an extraordinarily strenuous year for the Appellate  Body and the WTO 
dispute settlement s ystem as a whole. The unprecedented challenges that confront us today stem 
from two interrelated factors. On the one hand, the high number and complexity of appeals currently 
before us is stretching our ability to staff cases and complete our work in a tim ely fashion; on the 
other hand, the composition  of the Appellate  Body is currently  down  to only four members due  to the 
DSB's  inability  to fill three  outstanding  vacancies.  
The Appellate  Body was engaged  in appellate  proceedings  throughout  the year. It circulated five 
reports1 touching, among other things, on Members' terms of accession to the WTO, the 
SPS Agreement , the Anti -Dumping Agreement, the SCM  Agreement , the Import Licensing 
Agreement,  the GATT  1994, and the DSU. The exceptionally  large appeals in the Article  21.5 Airbus 
and Boeing proceedings2, filed in 2016 and  July 2017, respectively, occupied a significant portion of 
Appellate  Body staff resources  throughout  the year. The Secretariat  also assisted  an Arbitrator in 
issuing her award co ncerning the reasonable period of time for implementation of Panel and 
Appellate  Body reports in an anti -dumping and subsidy case.3 Eight new appeals were filed in 20174, 
followed by another two in the first months of 2018.5 Such a heavy workload, coupled with our 
chronic resource constraints, caused some of these appeals to be staffed and hearings to be 
scheduled with delays of several  months.  
We expect  more disputes,  including  the complex  Plain Packaging  case6, to be appealed  soon.  Overall,  
the Secretariat  divisions  that assist  panels have  estimated  that over ten panel  reports  could  be 
issued  to the parties during the course of this year. By all indicators, the Appellate  Body will remain  
busy in the foreseeable  future.  
While  these  figures  and prospects  confirm  WTO Members'  commitment  to a robust and effective 
appellate system, they also stand in stark  contrast to  the political  crisis we are currently  facing.  The 
second  terms  of office  of my distinguished colleagues Ricardo Ramírez -Hernández and Peter Van den 
Bossche expired in June and December 2017, respectively. Furthermore,  Hyun Chong  Kim resigned  
from the Appellate  Body effective on 1  August  2017. As a result, three Appellate  Body seats were left 
vacant and should have b een filled "as [vacancies] arise", as required by Article  17.2 of the DSU. 
Unfortunately, despite the numerous DSB  meetings  held since February  2017 until now, WTO 
Members  remain unable to reach a consensus to initiate the appointment process for three new  
Appellate  Body members, despite a joint proposal for the purpose  by more than 60 Members.  
The reasons for this impasse are well  known and need not be restated here. More interesting – and 
alarming – are the consequences of the ongoing stalemate. First, the fact that the Appellate  Body is 
now operating  at half-capacity,  i.e. with only four active  Members,  is seriously undermining  the 
collegiality  of our deliberations,  reflected  in Rule 4 of the Working Procedures for Appellate Review. 
Second, the l ack of a proper geographical representation threatens to dilute the legitimacy of the 
Appellate  Body. Finally,  the decrease  in serving  Members  is likely to cause further delays in appellate 
proceedings. Unless WTO Members take swift and robust action to remedy this situation, there may 
                                                
1 Appellate  Body Reports, Russia – Pigs (EU) ; US – Anti-Dumping Methodologies (China) ; US – Tax 
Incentives ; EU – Fatty Alcohols (Indonesia) ; Indonesia – Import Licensing Regimes . 
2 EC and certain member States – Large Civil Aircraft (Article  21.5 – US) and US – Large Civil Aircraft 
(2nd complaint) (Article  21.5 – EU). 
3 Article  21.3(c) Arbitration Report, US – Washing Machines . 
4 US – Large Civil Aircraft (2nd complaint) (Article  21.5 – EU); EU – Fatty Alcohols (Indonesia) ; 
Indonesia – Import Licensing Regimes ; Russia – Commercial Vehicles ; EU – PET (Pakistan) ; Indonesia – Iron 
or Steel Products ; Brazil – Taxation ; US – Tuna II (Mexico) (Article  21.5 – US) / US – Tuna II (Mexico) 
(Article  21.5 – Mexico II).  
5 Korea – Radionuclides; US – Countervailing Measures (China) (Article  21.5 – China) . 
6 Australia – Tobacco Plain Packaging . WT/AB/29  
 
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  soon come a time when Divisions of three Appellate  Body members can no longer be formed,  thereby  
effectively  paralyzing  appellate  proceedings.  
Such a paralysis would not concern only the Appellate  Body, but would have profo und implications 
on panel proceedings as well. Indeed, the Appellate  Body and panels  are part of one dispute  settlement  
mechanism, and one cannot properly function without the other. Imagine, for instance, a scenario 
where a panel report is appealed, but n o Appellate Division can be formed to hear that appeal. Under 
current DSU  rules,  the adoption  of the panel  report  has to be suspended  pending the appeal, but the 
Appellate  Body itself would not be in a position to complete  its proceedings.  Such a scenario  
would  entail  the de facto demise of the negative consensus rule that has characterized the WTO  
dispute  settlement  system  since 1995.  While  the negative  consensus rule would remain on the DSU 
books, any losing party could prevent the adoption of the panel report by appealing it to a paralyzed 
Appellate  Body. The consequences of such a scenario working out are obvious.  Circumventing  the 
disciplines  of the DSU would  not automatically time -warp us back to the GATT  era: the more likely 
result  is the spread  of the  paralysis  to the panel  process.  
Likewise, I disagree with suggestions that weakening the WTO's dispute settlement  arm would  help 
revitalize  its negotiating  function.  The prospect of  agreeing  on new multilateral  trade  rules would  lose 
much  of its traction if the negotiating Members were not confident as to the principled and effective 
enforcement of those rules. Hence, the paralysis of the Appellat e Body would cast a long and deep 
shadow on the continued operation  of the multilateral  trading  system  as a whole.  
What is to be done?  The answer  lies firmly  in the hands  of WTO Members. For  over 20 years,  trading  
nations  have shown  an unfaltering  commitment to independent and impartial dispute settlement. 
Aside from the sheer number of disputes that have been submitted to panels and the Appellate  Body, 
it is worth mentioning the almost total absence of instances  where  Members  have,  upon losing  a 
ruling,  explicitly  chosen  not to  implement  it. While  losing  parties  and sometimes  other  Members  have 
criticized individual rulings, these critiques have rarely challenged the overall  authority  or legitimacy  
of the WTO dispute  settlement  mechanism. It is, therefore, incumbent on Members to evaluate 
whether that commitment continues to exist today, in a world that is witnessing the resurgence  of 
sovereigntist  tendencies  in trade  relations.  
Engagement and dialogue are also of the essence. As  Chair of the Appellate  Body, I have been 
holding consultations with a number of delegations that make frequent use of WTO dispute 
settlement. The vast majority of my interlocutors, while expressing deep concern about the current 
situation, reaffirmed thei r desire to preserve the system in its current configuration. The principles 
enshrined in the DSU continue to  be acceptable to all Members. The present debate is about whether 
the Dispute Settlement System has been faithful to them. That is a debate certai nly worth  having.  
As far as the Appellate  Body is concerned, I am well aware that there remains room for improvement 
in our proceedings. A number of decisions,  for instance,  have been criticized  for being  excessively  
technical and therefore indecipherable for lay readers. Other rulings were accused of being too broad 
in scope and addressing issues that were not strictly necessary to provide a positive solution of the 
dispute at hand.  Whatever one thinks of those critiques, they provide useful  food for thought and 
offer guidance as to how to further enhance the functioning of the Appellate  Body. In recent years, 
a number of initiatives have helped simplify and streamline the content of reports. In particular, the 
section devoted to conclusions now summarizes the key points of the reasoning for the benefit of 
readers who do not wish to go through the entire text. Moreover, except in some mammoth disputes 
such as the Large Civil Aircraft cases, the length of reports has been significantly reduced.  None of  
the decisions  issued  in 2017,  for example,  exceeds  70 pages  in length.  
To conclude, it is our shared responsibility to maintain and preserve the trust and credibility that the 
WTO dispute settlement system in general, and  the Appellate  Body in particular,  have built up over 
more than 20 years.  Only by embracing  this responsibility  and engaging  in constructive dialogue will 
the WTO Membership succeed in nurturing and sustaining a system  that is uniquely  effective,  but 
which  cannot  be taken  for granted.WT/AB/29  
 
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 ANNEX 3 
THE LEGITIMACY OF TH E WTO APPELLATE  BODY  
BRANDEIS INSTITUTE F OR INTERNATIONAL JUD GES 2018  
30 MAY TO 2  JUNE 2018 
ADDRESS OF MR UJAL S INGH BHATIA, CHAIR O F THE APPELLATE  BODY  
As you all know, the authority of the WTO Appellate  Body is currently under attack from certain 
quarters. In particular, over the last year or so, the Dispute Settlement Body has been unable to 
launch the selection processes for the appointm ent of new Appellate  Body Members. In light of this 
situation, one would be tempted to speak of a backlash against the Appellate  Body and the WTO 
dispute settlement system as a whole, similar to what we are witnessing with other international 
courts and tr ibunals.1 However, good stories cannot be told from the end. If we wish to fully 
understand the current crisis, we need first to focus on the pathways through which, over the last 
20 years, the Appellate  Body has progressively built up its legitimacy and r eputation as one of the 
most effective inter -State courts in existence.  
Before I begin, I should caution that the notions of "legitimacy" and "authority" of an international 
court or tribunal are rather nebulous and have been defined in different ways by different authors. 
One could say that their use began when international law entered its "post -ontological era"2, i.e. 
when the reality and existence of the international legal system ceased to be questioned. I dare say 
that the multiplication of internati onal courts and tribunals during the 1990s – including  the creation 
of the WTO dispute settlement system – has done much to usher in this new era. Finally free from 
the burden of defending the "lawness" of their discipline, international lawyers turned to questions 
of fairness, effectiveness, and persuasiveness of legal acts and judicial decisions.  
At the risk of oversimplification, the terms "legitimacy" and "authority" refer to an international 
court's ability to command respect for its rulings and ensur e compliance therewith.3 In particular, a 
court's "right to rule"4 depends very much on whether the addressees of that court's decisions are 
willing to accept the legal authority of those decisions even when they disagree with, or are adversely 
affected by , them.5 Several metrics have been proposed to measure the legitimacy and authority of 
international courts. Some such metrics relate to intrinsic legal factors, such as the delegation of 
powers to a court by its constituent States6 or the degree of adhere nce to the principles of 
impartiality and fair treatment of the parties.7 Other indicators, by contrast, reside in the perception 
of judgments by a court's audience. That audience may, for instance, appreciate the extent to which 
a ruling offers a reasoned  interpretation and application of international law, the economy and clarity 
of the reasoning, the ability to solve the issue at hand and set a viable precedent for future cases, 
                                                
1 See e.g. M. Waibel  et al. (eds.), The Backlash Against Investment Arbitration: Perceptions and Reality  
(Kluwer Law International, 2010); K.J.  Alter, J.T.  Gathii, and L.R.  Helfer, "Backlash against International Courts 
in West, East and S outhern Africa: Causes and Consequences", 27 European Journal of International Law  293 
(2016).  
2 T.M. Franck , Fairness in International Law and Institutions  (1995), p. 6. See also T.M. Franck, The 
Power of Legitimacy among Nations  (1990).  
3 See e.g. N. Gro ssman, H.G. Cohen, A. Follesdal, and G. Ulfstein, "Legitimacy and International Courts: 
A Framework", in N. Grossman, H. Cohen, A. Follesdal and G. Ulfstein  (eds.), The Legitimacy of International 
Courts  (Cambridge: Cambridge University Press , 2018 ), pp. 1-40.  
Some commentators  have sought to differentiate the notion of "legitimacy" from that of "authority". See 
e.g. K.J. Alter, L.R. Helfer, and M.R. Madsen, "How Context Shapes the Authority of International Courts", 79 
Law and Contemporary Problems  1 (201 6). 
4 D. Bodansky , "Legitimacy in International Law and International Relations", in J.L. Dunoff and M.A. 
Pollack (eds.), Interdisciplinary Perspectives on International Law and International Relations: The State of the 
Art 321 (2013), p. 324.  
5 On this notion of legitimacy as "diffuse support", see e.g. J.L. Gibson and G.A. Caldeira, "The 
Legitimacy of Transnational Legal Institutions: Compliance, Support, and the European Court of Justice", 39 
American Journal of Political  Science  459 (1995); D. Bodansky, supra  note 54, pp. 326 -327. 
6 See e.g. K.J. Alter, L.R. Helfer, and M.R. Madsen, supra  note 53, p. 3; C.P.R. Romano, K.J. Alter and 
Y. Shany, "Mapping International Adjudicative Bodies, the Issues and Players", in C.P.R. R omano, K.J. Alter 
and Y. Shany (eds.), The Oxford Handbook of International Adjudication  1 (2014), pp. 5 -6; A. Buchanan and 
R.O. Keohane, "The Legitimacy of Global Governance Institutions", 20 Ethics and International Affairs  405 
(2006), pp. 412 -413. 
7 See e.g. T.M. Franck , Fairness in International Law and Institutions , supra  note 52, p. 7.  WT/AB/29  
 
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  etc.8 Finally, for purposes of my presentation, I should note that the legit imacy and authority of an 
international court are not static, but vary over time and across different audiences. Echoing Joseph 
Weiler, "internal legitimacy" is concerned with the perceptions of insiders to the specific legal regime 
concerned, while "exter nal legitimacy" reflects the beliefs of outsiders.9 Albeit fluid, the concepts of 
legitimacy and authority lend themselves well to describing the trajectory of the Appellate  Body from 
its inception until the present day.  
The creation of the Appellate  Body was, by all accounts, an afterthought. In the old GATT system, 
the dispute resolution mechanism saw panel reports being adopted by consensus, i.e. in the absence 
of opposition from any GATT Member. In that setting, it was sufficient for the losing party t o a 
dispute to object to adoption for the report to lose its binding force. This, in my view, does not 
necessarily mean that the GATT system was unregulated or purely power -based. Indeed, the 
international trade community had developed a set of shared prac tices, customs, and traditions that 
shaped the behaviour of its participants. These rules may have been non -judicial in nature, but they 
were rules nonetheless. During the Uruguay Round of negotiations that culminated in the 
establishment of the WTO, negot iators expressed the will to move towards a more formalized system 
for the resolution of trade disputes. A significant innovation was the introduction of a reverse -
consensus rule for the adoption of panel reports, which would acquire binding force unless all WTO 
Members decided otherwise. Clearly, the winning party to a dispute would always have an interest 
in seeing a report become binding, thereby making adoption of reports de facto  automatic. As this 
paradigm shift caused some anxiety among Members, an A ppellate  Body was put in place to give 
them an additional guarantee of review of panel reports.10 In the negotiators' expectations, few 
disputes would make it to the appellate stage, and even then, the appeal was supposed to provide 
a swift remedy to the si tuation where a panel had made an egregious error on a discrete legal issue. 
Little did they know that, from the very early years, most panel reports would be appealed on most 
of their findings.  
Given the unusual circumstances surrounding its establishment , the early Appellate  Body was in a 
delicate position vis -à-vis both its internal audience (i.e. the GATT/WTO community) and its external 
interlocutors (such as non -trade constituencies, civil society, and other international courts and 
tribunals). From an  internal  standpoint, the main challenge was to initiate the WTO Membership and 
trade professionals to the virtues of a fully rules -based dispute settlement system. The risk was that 
the new judicial ethos would be at variance with the well -trodden practic es and the deeply ingrained 
pragmatism that characterized the GATT years. From an external  perspective, the task was to win 
over the world's scepticism vis -à-vis the solidity and fairness of the new international trade rules. 
The early years of the WTO saw  fierce contestation from a number of social groups.11 Some criticisms 
commonly levied against the nascent Organization included claims that international trade rules 
were skewed in favour of developed countries12; that the trade regime did not sufficiently take into 
account extra -trade norms such as human rights and environmental treaties; and that the 
expansionist interpretation of trade rules would impinge on the political and economic sovereignty 
of WTO Member States. Faced with these competing challenges , the Appellate  Body resorted to a 
number of strategies aimed at "creating itself as an independent … judicial branch of the WTO 
system, operating at a considerable remove from the political and diplomatic institutions of the 
WTO".13  
The original Appellate  Body, ably assisted by its Secretariat, developed its Working Procedures within 
the limits set out in the DSU. These procedures, which remain in force today with a few slight 
retouches14, are based on two paramount principles. The first such principle is t he fair treatment of 
                                                
8 See e.g. N. Grossman, H.G. Cohen, A. Follesdal, and G. Ulfstein , supra  note 53; A. v. Bogdandy and I. 
Venzke, In Whose Name? On the Functions, Authority, and Legitima cy of International Courts (2014);  K.J. 
Alter, L.R. Helfer, and M.R. Madsen, supra  note 53, p. 4.  
9 J.H.H. Weiler , "The Rule of Lawyers and the Ethos of Diplomats: Reflections on the Internal and 
External Legitimacy of WTO Dispute Settlement", 35 Journal o f World Trade  191 (2001), p. 193. See also N. 
Grossman, H.G. Cohen, A. Follesdal, and G. Ulfstein , supra  note 53. 
10 J.H.H. Weiler , supra  note 59, p. 199.  
11 See e.g. S.A. Aaronson , Taking to the Streets: The Lost History of Public Efforts to Shape 
Globalization  (2001).  
12 See e.g. R. Howse , "The World Trade Organization 20 Years On: Global Governance by Judiciary ", 27 
European Journal of International Law  9 (2016), pp. 17 -18. 
13 R. Howse, supra  note 62, p. 25.  
14 The most recent  version of the Working Procedures for Appellate Review is contained in WT/AB/WP/6 
(16 August  2010).  WT/AB/29  
 
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  the parties to an appeal. In terms of internal legitimacy, it became immediately apparent that WTO 
Members would come to recognize the authority of the Appellate  Body only if they felt that their 
views were properly heard and that they  were being treated in accordance with the requirements of 
due process. According to the Working Procedures, the participants to an appeal are accorded ample 
opportunity to articulate their claims and arguments through the notice of appeal/other appeal, th e 
appellant''s/other appellant''s submission, the appellee''s submission, and the oral intervention at 
the hearing. The second principle is collegiality in our decision -making processes. While cases are 
heard by three -Member Divisions, the so -called exchan ge of views allows for the Appellate  Body 
Members who are not part of a Division to offer their views and inform their colleagues'' 
understanding of every given dispute.  
Another tool to enhance the legitimacy of the Appellate  Body resided in its approach to legal 
interpretation. While GATT panels'' reading of the applicable rules was often entrenched in 
longstanding institutional practices, the Appellate  Body immediately showed a more formal, 
detached, and rigorous approach, in line with the DSU r equirement "to clarify the existing provisions 
… in accordance with customary rules of interpretation of public international law".15 In its very first 
decision, the Appellate  Body held that those "customary rules of interpretation" were to be found in 
Articles 31 and 32 of the 1969 Vienna  Convention on the Law of Treaties (VCLT).16 The 
Appellate  Body would typically begin its interpretive exercise from the dictionary definition(s) of the 
term(s) to be interpreted, continuing with the relevant context in whic h such terms are embedded, 
and then considering possible subsequent agreements, subsequent practice, and other applicable 
rules of international law. Except for a handful of cases17, the Appellate  Body was able to establish 
the meaning of the relevant rules  through recourse to these elements alone, without having to resort 
to the "supplementary means of interpretation" set forth under Article  32 of the VCLT – in particular, 
the so -called travaux préparatoires . This staunch adherence to codified interpretive techniques led 
some commentators to accuse the Appellate  Body of "textualist fetishism", with the Oxford English 
Dictionary becoming a de facto  covered agreement.18 However, there is little denying that this 
formalist posture strengthened the authority of t he Appellate  Body as an impartial and rigorous 
interpreter of international law. This was particularly important for those developing countries that 
had qualms about the outcomes of the Uruguay Round. If the rules were stacked against those 
countries, it w as essential that, at least, the interpretation and application of the rules be perceived 
as balanced, detached, and open to debate.  
Unlike GATT panels, the Appellate  Body has also placed an emphasis on continuity and consistency 
in its jurisprudence. For instance, it stated that "the legal interpretation embodied in adopted panel 
and Appellate  Body reports becomes part and parcel of the acquis of the WTO dispute settlement 
system", and that "absent cogent reasons, an adjudicatory body will resolve the same  legal question 
in the same way in a subsequent case".19 By so stating, the Appellate  Body declared its commitment 
to predictability in the interpretation and application of the multilateral trade rules – a commitment 
that, in turn, stabilizes the cognitive  expectations of WTO Members and other stakeholders as to the 
legality or illegality of their regulatory action.20 Indeed, throughout more than two decades of case 
law, the Appellate  Body has never overtly overruled its prior decisions. This, of course, doe s not 
mean that one cannot discern certain shifts in the Appellate  Body''s orientation and sensibility. A 
case in point may be the Appellate  Body''s approach to Article  11 of the DSU, which can be invoked 
by an appellant to challenge a panel''s assessment of the facts under certain conditions. I will not 
dwell on this point, and would leave it to the more diligent among you to peruse the evolution of our 
jurisprudence on this issue. An examination of our jurisprudence should convince you that 
                                                
15 Article  3.2 of the DSU.  
16 Appellate  Body Report, US – Gasoline , pp. 16 -17. 
17 See e.g. Appellate  Body Reports, EC – Computer Equipment , paras. 86 -92; US – Gambling , 
paras.  160 and 197; China – Publications and Audiovisual Products , para. 411 ; US – Anti-Dumping and 
Countervailing Duties (China) , para. 579.  
18 See e.g. C.-D. Ehlermann, "Six Years on the Bench of the 'World Trade Court ': Some Personal 
Experienc es as Member of the Appellate  Body of the World Trade Organization ", 36 Journal of World Trade  605 
(2002), p. 616; D.A. Irwin and J.H.H. Weiler, "Measures Affecting the Cross -Border Supply of Gambling and 
Betting Services (DS 285) " (2008) 7 World Trade Review  71-113, 89 -95; G. Abi -Saab, "The Appellate  Body 
and Treaty Interpretation ", in G. Sacerdoti, A. Yanovich and J. Bohanes, (eds), The WTO at Ten: The 
Contribution of the Dispute Settlement System (2006), pp. 453 -64; I. van Damme, Treaty Interpre tation by 
the WTO Appellate  Body (Oxford: Oxford University Press 2009), pp. 222 -35. 
19 Appellate  Body Report, US – Stainless Steel (Mexico) , para. 160.  
20 On the stabilizing function of judicial decisions, see e.g. N. Luhmann, A Sociological Theory of Law  
(2nd edn, Routledge 2014), p. 78; O. Kessler, "The Same as It Never Was? Uncertainty and the Changing 
Contours of International Law ", 37 Review of International Studies  2163 (2011), pp. 2167, 2173.  WT/AB/29  
 
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  Appellate  Body jurisprudence is not always monolithic and, indeed, leaves ample room for the 
accommodation of future changes of direction. Yet, in my view, change best occurs at a piecemeal 
pace, rather than through abrupt ruptures of well -established jurisprudential tr ends. The 
physiological evolution of case law should, in my view, look more like a slow tectonic shift than a 
sudden earthquake.  
Through these and other jurisprudential moves, the Appellate  Body succeeded in commanding 
respect for its rulings and ensuring a high rate of compliance therewith. Aside from the sheer number 
of disputes that Members have submitted to judicialized dispute settlement – which is itself a sign 
of empirical legitimacy – it is worth mentioning the almost total absence of instances wher e Members 
have, upon losing a ruling, explicitly chosen not to implement it. While losing parties and sometimes 
other WTO Members have criticized individual rulings, "these critiques have rarely challenged the 
overall authority or legitimacy of the WTO jud icial mechanism".21 In other words, through its 
principled and prudent interpretation and application of the covered agreements, the Appellate  Body 
managed to progressively establish its authority and legitimacy in the eyes of its internal audience, 
i.e. th e WTO community of States and trade professionals.  
But what about external  audiences? In particular, quid of the non -trade constituencies that might 
have looked with concern at the progressive reinforcement of WTO dispute settlement? Here too, 
the Appellat e Body showed a certain sensibility vis -à-vis non -trade concerns, and sought to balance 
the WTO''s trade -liberalizing mission with the need to accord meaningful regulatory space to WTO 
Members. In US – Gasoline , the Appellate  Body took the view that a sensible interpretation of the 
covered agreements should "reflect[]a measure of recognition that [WTO law] is not to be read in 
clinical isolation from public international law".22 In line with this statement, the Appellate  Body 
rendered a number of decisio ns that usefully expanded the scope of its inquiry into extra -trade areas 
of public international law. However, the Appellate  Body has always stressed that non -WTO law is 
not applicable law, and is referred to only for the purpose of interpreting WTO law. Probably the 
most famous such decision is the report in US – Shrimp , where Appellate  Body interpreted the notion 
of "exhaustible natural resources", which is not further defined in Article  XX(g) of the GATT, through 
recourse to non -WTO legal sources includ ing the Rio de Janeiro Convention on Biological Diversity, 
the Convention on International Trade in Endangered Species of Wild Fauna and Flora, and the 
United Nations Convention on the Law of the Sea.23 While this approach met with initial resistance 
of som e insiders in the community, it was also celebrated by many as a sign of the Appellate  Body''s 
epistemic opening to other areas of public international law.24  
In other rulings, however, the Appellate  Body opted for a more conservative interpretive pathway,  
and declined to rule on international legal instruments falling outside the scope of its jurisdiction. In 
Mexico – Taxes on Soft Drinks , for instance, the Appellate  Body found "no basis in the DSU … to 
adjudicate non -WTO disputes" and to "determine rights  and obligations outside the covered 
agreements".25 More recently, in Peru – Agricultural Products , the Appellate  Body did not attribute 
interpretive salience to a bilateral free trade agreement between the participants which, according 
to Peru, expressly c ontemplated the possibility to maintain the measure at issue in place although 
it breached a WTO provision.26 Some may have considered these rulings as close to a turnaround 
from prior jurisprudence, which was perceived as more "porous" vis -à-vis non -WTO la w. However, 
others saw these rulings as reflecting the jurisdictional limits of the WTO legal system and as a 
refusal to give non -WTO law priority over WTO law. I believe that the Appellate  Body''s preoccupation 
in coming to these decisions was to reassure  its internal audience that the focus of WTO dispute 
settlement would remain centred on the covered agreements.  
This delicate balance between internal and external legitimacy witnessed its most difficult phase in 
the developments concerning the status of amicus curiae  briefs in appellate proceedings. In a 
number of early reports, the Appellate  Body considered that it had "the legal authority … to accept 
and consider amicus curiae briefs" submitted by academics, NGOs, and other civil society 
organizations t o the extent that it found it "pertinent and useful to do so".27 In EC – Asbestos , the 
                                                
21 R. Howse , supra  note 62, p. 11.  
22 Appellate  Body Report, US – Gasoline , p. 17.  
23 Appellate  Body Report, US – Shrimp , paras. 125 -134. 
24 See generally  R. Howse, supra  note 62, pp. 37 -39. 
25 Appellate  Body Report, Mexico – Taxes on Soft Drinks , para. 56.  
26 Appellate  Body Report, Peru – Agricultural Products , paras. 5.91 -5.119.  
27 Appellate  Body Report, US – Lead and Bismuth II , para. 42. See also e.g. Appellate  Body Reports, 
EC – Sardines , para. 160; US – Shrimp , para. 104; US – Carbon Steel , para. 39.  WT/AB/29  
 
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  Appellate  Body established additional appellate procedures for natural or legal persons to submit 
such briefs for consideration.28 By so doing, the Appellate  Body strove t o enhance the external 
transparency of WTO proceedings touching on delicate social matters, without impinging on the 
fundamental principle whereby "access to the dispute settlement process of the WTO is limited to 
Members of the WTO".29 This move, however, incurred the wrath of numerous Members, who 
vehemently criticized the Appellate  Body for what they perceived as an encroachment on the 
diplomatic and political prerogatives of sovereign States.30 Despite these forms of contestation, the 
Appellate  Body held its ground and restated that it had the authority to accept and consider 
unsolicited amicus curiae  briefs. Yet, in a measured display of sensibility vis -à-vis the anxieties of 
WTO Members, it exercised restraint in considering the merits of such briefs, un less strictly 
necessary to dispose of an appeal.31 
In light of all the above, it is safe to say that the Appellate  Body has been able to navigate troubled 
waters in its endless quest for authority and persuasiveness. Despite these successes, there remains 
much room for improvement in appellate proceedings. A number of decisions, for instance, have 
been criticized for being excessively technical and therefore indecipherable for lay readers.32 Other 
rulings were accused of being too broad in scope and addressin g issues that were not strictly 
necessary to provide a positive solution of the dispute at hand. Whatever one thinks of those 
critiques, they provide useful food for thought and offer guidance as to how to further enhance the 
functioning of the Appellate  Body. In recent years, a number of initiatives helped simplify and 
streamline the content of reports. In particular, the section devoted to conclusions now summarizes 
the key points of the reasoning for the benefit of readers who do not wish to go through t he entire 
text. Moreover, except in some mammoth disputes such as the Large Civil Aircraft  cases, the length 
of reports has been significantly reduced. None of the decisions issued in 2017, for example, exceeds 
70 pages in length.  
Despite these efforts – and here I move to the present – the Appellate  Body is currently facing 
formidable challenges, which may threaten its continued functioning as the crown jewel of the WTO 
dispute settlement system. Since February 2017, the United  States has continuously blo cked the 
launch of appointment processes to fill the vacancies left by Appellate  Body Members whose terms 
of office have expired.  
At present, the Appellate  Body is working at half -capacity, with only four Members being able to sit 
on Divisions and dispose  of appeals. This situation, coupled with the heavy workload we are currently 
facing, is stretching our ability to solve disputes to its limits. In particular, the ongoing stalemate 
threatens to undermine the collegiality of the Appellate  Body''s deliberat ive processes, as reflected 
in Rule 4 of the Working Procedures for Appellate Review. Unless the seven -member composition of 
the Appellate  Body is promptly restored, the number of active Divisions will decrease and the time 
necessary to dispose of appeals will extend far beyond the 60 - and 90 -day periods set forth in 
Article  17.5 of the DSU. Indeed, unless WTO Members take swift and robust action to remedy this 
situation, there may soon come a time when the Appellate  Body will find itself unable to fulfil i ts 
mandate. Such a scenario would deal a serious blow to the multilateral trading system.  
The institution of a standing judicial body tasked with reviewing panel decisions is widely considered 
as the crowning achievement of the Uruguay Round of negotiation s. Impairing that achievement 
would deprive the WTO dispute settlement system of its ability to ensure the principled and 
consistent application of multilateral trade rules. It is our shared responsibility to maintain and 
preserve the trust, credibility, a nd legitimacy that the WTO dispute settlement system in general, 
and the Appellate  Body in particular, have built up over more than 20 years. Only by embracing this 
                                                
28 Appellate  Body Report, EC – Asbestos , para. 52.  
29 Appellate  Body Report, US – Shrimp , para. 101.  
30 See S. Charnovitz, "Judicial Independence in the World Trade Organization ", in L. Boisson de 
Chazournes, C.P.R. Romano and R. Mackenzie (eds.), International Organizations and Internati onal Dispute 
Settlement  219 (2002).  
31 As examples  of restraint, see e.g. Appellate  Body Reports, US – Softwood Lumber IV , para. 9; 
Mexico  – Taxes on Soft Drinks , para. 8; Brazil – Retreaded Tyres , para. 7;  China – Auto Parts , para. 11; US – 
Anti-Dumping and Countervailing Duties (China) , para. 18; US – Clove Cigarettes , para. 10; US – Tuna II 
(Mexico) , para. 8; Canada – Renewable Energy / Canada – Feed-in Tariff Program , para. 1.30.  
32 See e.g. G. Shaffer and D. Pabian, "Case Note: European Co mmunities – Measures Prohibiting the 
Importation and Marketing of Seal Products, WT/DS400/AB/R, WT/DS401/AB/R", 109 American Journal of 
International Law  154 (2015).  WT/AB/29  
 
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  responsibility and engaging in constructive dialogue will we succeed in nurturing a system that is 
uniquely effective, but which cannot be taken for granted.  
 WT/AB/29  
 
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 ANNEX 4 
LAUNCH OF THE A PPELLATE  BODY 'S ANNUAL REPORT FOR  2017  
22 JUNE 2018  
ADDRESS  OF MR UJAL SINGH  BHATIA , CHAIR  OF THE  APPELLATE  BODY  
I would like to begin by expressing my gratitude to the DSB  Chair, Ambassador Sunanta, for her 
presence and for her gracious consent to launch the Appellate  Body's Annual Report for 2017 . 
These ar e extraordinary times. The WTO dispute settlement system confronts two contrasting and 
yet related challenges that threaten its legitimacy as well as its existence:  
• On the one hand, the dispute settlement system, which has for over two decades established 
its credentials as an efficient and impartial mechanism, faces the burgeoning pressure of 
increasingly complex disputes at various stages.  
• On the other, some recent critiques have raised fundamental questions about the way the 
DSU should be used to resolve  disputes.  
These two challenges are clearly beyond the capacity of the dispute settlement system itself to 
resolve, and they call for determined political dialogue among WTO Members. Left unaddressed, 
these challenges can cripple, paraly ze, or even extingu ish the system. If they are properly 
addressed, the system can continue to discharge its mandate in the coming years with renewed 
vigour.  
In what follows, I will look at the nature, dimensions, and content of these challenges, as well as 
the policy choices  they represent.  
AN OVERLOADED SYSTEM  
Over the past two decades, the WTO dispute settlement system, including the Appellate  Body, has 
been remarkably active. Since its inception, 551 disputes have been initiated by WTO Members, 
resulting in 230 circulated panel reports with an average rate of appeal of approximately 70% . More 
than 65% of WTO Members have engaged in dispute settlem ent as complainant, respondent, or 
third party.  
The high rate of compliance with DSB decisions testifies to the system's success. Aside from the 
sheer number of disputes that Members have submitted to dispute settlement – which is a sign of 
empirical legit imacy – it is worth mentioning the almost total absence of instances where Members 
have chosen not to implement a ruling upon losing it. While losing parties have criticized individual 
rulings, "these critiques have rarely challenged the overall authority or legitimacy of the WTO judicial 
mechanism".1 
But legitimacy is a fragile virtue, and its longevity cannot be taken for granted. This is a theme I will 
revert to later.  
The expectation of DSU negotiators that only selected issues in key panel reports woul d be appealed 
was belied from the very early years. Since the beginning, a majority of panel reports were appealed 
on most of their findings. This has been a continuing feature of appeal activity in the WTO.  
Last year was not an exception to this trend. Th e Appellate  Body circulated five reports2 touching 
on, among other things, Members' terms of accession to the WTO, the SPS  Agreement, the 
Anti-Dumping Agreement, the SCM  Agreement , the Import Licensing Agreement, the GATT  1994, 
and the DSU. These disputes concerned myriad issues such as animal disease control, domestic tax 
                                                
1 R. Howse, "The World Trade Organization 20 Years On: Global Governance by Judiciary" (20 16) 
European Journal of International Law 27(1), p. 11.  
2 Appellate  Body Reports, Russia – Pigs (EU) ; US – Anti-Dumping Methodologies (China) ; US – Tax 
Incentives ; EU – Fatty Alcohols (Indonesia) ; Indonesia – Import Licensing Regimes . WT/AB/29  
 
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  regimes, and fair trade. The exceptionally large appeals in the Article  21.5 Airbu s and Boeing  
proceedings3, filed in October 2016 and June 2017, respectively, occupied a significant portion of 
our resources throughout the year.  
Eight new appeals were filed in 20174, followed by another three in the first months of 2018.5 Such 
a heavy w orkload, coupled with our chronic resource constraints, caused some of these appeals to 
be staffed, and hearings to be scheduled, with delays of several months.  
More disputes, including the complex  Plain Packaging  case6, will likely be appealed soon. By al l 
indicators, the Appellate  Body will remain very busy in the foreseeable future.  
The workload of the AB over the years calls into question the basic premise of its establishment. 
Being an Appellate  Body Member is no longer a part -time job. It requires ful l-time commitment to 
the WTO. Given the number, size, and complexity of appeals, coupled with the resources provided 
to it, the AB cannot be realistically expected to deliver high -quality reports within the timeframes 
prescribed in the DSU. Long delays in filling vacancies in the AB obviously do not help either.  
Given the daunting mismatch between its workload and resources, the AB has undertaken several 
initiatives to simplify and streamline the content of its reports and its legal analysis. For instance, 
we are continuing the practice of annexing to our reports the executive summaries of the arguments 
submitted by the participants and third  participants, instead of summarizing them. We are also 
providing more complete descriptions of our findings and concl usions, making our central reasoning 
more quickly accessible. Finally, we are striving for greater clarity and concision in our reasoning, 
making our reports more "user friendly" and the use of our limited resources more efficient. Except 
in some mammoth d isputes such as the  Aircraft cases, report length has been significantly reduced. 
None of the decisions issued in 2017, for example, exceeds 70 pages.  
What the Appellate  Body and panels can do to further improve the system, however, is not unlimited. 
WTO M embers are entitled to initiate as many disputes as they wish. They are also entitled to make 
as many claims and to submit as many pages, arguments, and exhibits as they deem necessary. 
WTO Members expect – as they should – a modern, efficient, and effecti ve dispute settlement 
system. But such expectations can be realised only if the resources allocated to it, and the 
procedures governing WTO dispute settlement, are aligned to the workload that WTO Members bring 
to the system. Discussions regarding the DSU deadlines, for instance, can be meaningful only if they 
are adequately contextualised. Discussions on consequences need to take on board the causes as 
well. 
Overall, the growing incongruence between the disputes being referred to the WTO dispute 
settlement  system, the resources allocated to it, and the rules and procedures governing it are 
together leading to very significant delays. The increase in compliance disputes over the past years 
is further adding to the problem. For example, the number of complian ce panels circulated over the 
last five years has doubled compared to the previous five -year period.7 
It is also no longer uncommon to see several years pass before a dispute is settled. This situation 
should ring alarm bells in a system that prides itself  on its efficiency and business -like conduct, 
particularly in light of the prospective nature of WTO remedies. To the extent that delays in dispute 
resolution involve delays in the assertion of the rule of law, they provide an incentive to those who 
benefi t from those delays. Lasting solutions, however, cannot target the symptoms. Rather, they 
                                                
3 EC and certain memb er States – Large Civil Aircraft (Article  21.5 – US); US – Large Civil Aircraft (2nd 
complaint) (Article  21.5 – EU). 
4 EU – Fatty Alcohols (Indonesia);  Indonesia – Import Licensing Regimes ; Russia – Commercial 
Vehicles ; US – Large Civil Aircraft (2nd complaint) (Article  21.5 – EU); EU – PET (Pakistan) ; Indonesia – Iron or 
Steel Products ; Brazil – Taxation; US – Tuna II (Mexico) (Article  21.5 – US) / US – Tuna II (Mexico) 
(Article  21.5 – Mexico II) . 
5 Korea – Radionuclides ; US – Countervailing Measures  (China) (Article  21.5 – China) ; Korea – 
Pneumatic Valves (Japan) . 
6 Australia – Tobacco Plain Packaging . 
7 Number of Appellate  Body and panel reports circulated under Article  21.5 of the DSU: 
(a) period  2013-2018: ten panel reports; four AB reports; and ( b) period 2008 -2012: four panel reports; four 
AB reports.  WT/AB/29  
 
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  must take into account the pertinent causes. WTO Members therefore need to engage in a dialogue 
to address all dimensions of this problem.  
THE MANDATE OF THE D SS 
That brings me to the second challenge confronting the WTO dispute settlement system, namely the 
critiques about the system's adherence to its mandate under the DSU.  
Article  3.2 of the DSU envisages the WTO dispute settlement system to be "a central element in  
providing security and predictability to the multilateral trading system". Article  3.2 further provides 
that the system "serves to preserve the rights and obligations of Members under the covered 
agreements, and to clarify the existing provisions of those  agreements in accordance with customary 
rules of interpretation of public international law." It adds for good measure that 
"[r]ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations 
provided in the covered agreements".  
It is against this backdrop that we need to reflect on the mandate that the WTO dispute settlement 
system enjoys. In this connection, I would like to offer a few comments and raise a few questions 
on two issues arising from recent debates:  
• how the system should deal with ambiguity while clarifying the provisions of the 
WTO Agreement s; and  
• how it should address the issue of consistency of rulings in the context of the mandated need 
to provide security and predictability to the multilateral trading system.  
DEALING WITH AMBIGUIT Y 
First, a general comment on the issue of ambiguity in international agreements. While many 
provisions of international treaties are agreed upon in clear and detailed language, certain provisions 
may be couched in what international la wyers call "constructive ambiguity," where consensus on 
precise language could not be reached during negotiations. In the WTO context, when a dispute 
arises in relation to such an unclear or ambiguous provision, adjudicators are to examine that 
provision i n accordance with customary rules of interpretation and to apply them to the particular 
case. Some argue that where adjudicators encounter such ambiguity or lack of clarity, they should 
refrain from examining it and instead leave it for WTO Members to deal  with. Others support the 
need for resolving the interpretative issue so as to make sure that disputes are not left unresolved.  
Second, existing treaty language that is vague or ambiguous is distinct from  lacunae  in international 
law, that is, where no int ernational law obligation exists. For us, the "customary rules of 
interpretation of public international law" mean those codified in the Vienna  Convention  on the Law 
of Treaties. They say we must begin with the plain text of the treaty provision, but it do es not end 
there. Adjudicators have to discern the "ordinary meaning" to be given to treaty terms in their 
context and in light of the object and purpose of the instrument in which they appear, and they may 
have recourse to supplementary means. This interp retative exercise is meant to "clarify", within the 
meaning of Article  3.2, the content, scope, and limits of treaty obligations even if they are somewhat 
unclear on the face of the text.  
When adjudicators, having applied these interpretative tools, conclu de that certain conduct is outside 
the scope of application of the treaty obligation invoked, they should have no hesitation in ending 
their analysis there. If an issue is not regulated in WTO law, WTO Members are entitled to act as 
they please. For instan ce, the Appellate  Body in US – Section 211 Appropriations Act  noted the 
absence of  explicit  provisions and of an  implicit  definition of trademark "ownership" in the 
TRIPS  Agreement. The Appellate  Body agreed with the panel that this definition "has been left to 
the legislative discretion of individual countries".8 
Third, the question arises whether there is a legal basis in the DSU for not deciding on claims, when 
the matter before the DSB would remain  unresolved. Article  3.2 provides that the dispute settlement 
system serves to clarify WTO provisions in accordance with customary rules of interpretation. So 
                                                
8 Appellate  Body Report, US – Section 211 Appropriations Act , para. 189.  WT/AB/29  
 
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  how far should the dispute settlement system go in "clarifying" ambiguous provisions, and where 
are the limits? There appears to be a tension between the minimalistic approaches favoured by some 
and the requirements under Article  11 of the DSU for panels to make "an objective assessment of 
… the applicability of and conformity with the relevant covere d agreements" and under Article  17.12 
for the Appellate  Body to "address" each issue of law and legal interpretation covered in the panel 
report that is raised during an appellate proceeding.  
When we sit in judgement of specific cases, these issues are not  always easy to resolve. It is true 
that the requirement to "address each claim" does not necessarily mean that we need to do so at 
length. But do these DSU provisions provide WTO adjudicators with the discretion to deny clarifying 
WTO provisions where suc h clarification is necessary to resolve the dispute? Do they permit 
adjudicators to deny exercising jurisdiction to resolve the dispute when it has been properly 
established?  
In this connection it is important to note that a decision not to fully address a n issue could, in effect, 
be a decision in favour of one of the participants, possibly altering the rights and obligations of WTO 
Members.  
There are also cases in which Members raise an issue on appeal concerning "legal interpretations 
developed by the pan el", as contemplated by Article  17.6, without challenging the ultimate 
conclusion that the panel reached. In raising such issues, Members typically state that they are 
motivated by systemic concerns. Members may also be concerned about the effect that an 
interpretation by a panel may have on how they implement a different finding against them. And 
thus, if left unclarified, an ambiguous or incorrect interpretation may affect the rights and obligations 
of a WTO Member. In each scenario, the Appellate  Body carefully decides, on a case -by-case basis, 
how to "address" the issue raised on appeal, including whether findings concerning the interpretation 
of WTO provisions are necessary in order to facilitate the prompt settlement and effective resolution 
of the spe cific dispute.  
CONSISTENCY  
The issue of consistency of rulings in WTO dispute settlement is closely connected to the mandated 
requirement for "security and predictability". As is well known, one reason for creating the 
Appellate  Body was to provide greater guarantees to WTO Members that panel reports would be 
subject to review, in the context of the adoption of the reverse -consensus principle. The 
Appellate  Body has taken the view that ensuring "security and predictability" implies th at, absent 
cogent reasons, an adjudicator will resolve the same legal question in the same way in a subsequent 
case.9 At the same time, it needs to be emphasized that the Appellate  Body's approach does not call 
for a mechanistic or rigid application of thi s principle. Appellate  Body interpretations of certain 
provisions have evolved over time, as evidenced by the number of AB reports interpreting Article  XX 
of the GATT. Each case has to be considered on its own merits, and cases or issues that appear to 
be similar may be decided differently when they can be distinguished from earlier cases or when 
factual scenarios are different.  
It is possible that there could be other judicial approaches to "security and predictability" that could 
emerge from reasoned deba te among WTO Members. The AB would consider them when raised by 
participants in a dispute. But surely it is no one's case that a  tabula rasa  approach, which consciously 
sweeps aside the past, could meet the requirements of "security and predictability" as outlined in 
the DSU. Those who are not enamoured of the need for "security and predictability" in the WTO 
need only to look at international investment arbitration, and the difficulties caused by the lack of 
consistency in first -instance arbitration ruling s, as an immediate counterfactual of a system without 
a review mechanism for ensuring coherence and predictability.  
PRESERVING THE LEGIT IMACY OF THE WTO'S D ISPUTE SETTLEMENT SY STEM  
My point is that a dispute resolution mechanism acquires its legitimacy, or  indeed its wisdom, not 
from the statute that established it, but from the way it continues to meet the changing needs of its 
users. The global trading system has changed enormously since the WTO's dispute settlement 
mechanism was designed and operationali sed. The dynamics of global trading relationships have 
                                                
9 Appellate  Body Report, US – Stainless Steel (Mexico) , para. 160.  WT/AB/29  
 
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  also evolved significantly. The rules and procedures of the system have clearly not kept pace with 
these developments. It is not for adjudicators to make law by their rulings. That is the job of WTO 
Members. But sustained inactivity on the legislative front puts more pressure on adjudicators, with 
attendant risks for the legitimacy of their rulings and their institutions.  
WTO Members need to think clearly and deeply about the challenges that confront th e WTO dispute 
settlement system. These challenges require reasoned and systemic dialogue that keeps at the 
forefront the enormous value of an effective system on the one hand, and the consequences of its 
paralysis on the other. The issues I have mentioned are meant only to provide some substance to 
such a debate.  
Given the urgency for decisions regarding the AB, inaction is no longer an option. The year -long 
impasse on the process for appointing AB Members is debilitating the Body. Its reduced strength is 
undermining the collegiality of our deliberations, and the lack of proper geographical representation 
threatens its legitimacy.  
I need not point out that the reduction in our numbers will cause further delays in appellate 
proceedings. Unless WTO Members tak e swift and robust action to remedy this situation, there may 
soon come a time when appellate proceedings are paraly zed if fewer than three AB Members are 
available.  
Such a paralysis would have profound implications on  panel  proceedings as well. Indeed, th e 
Appellate  Body and panels are part of one dispute settlement mechanism, and one cannot properly 
function without the other. Where a panel report is appealed, but an Appellate  Division cannot be 
formed to hear that appeal, the adoption of the panel report  is suspended until the Appellate  Body 
can complete its proceedings. This would lead to the  de facto demise of the negative consensus rule 
that has characterized the WTO  dispute settlement system since 1995. Any losing party would be 
able to prevent the ad option of the panel report by appealing it to a paraly zed Appellate  Body.  
The implications of the paralysis of dispute settlement for the WTO itself are also obvious. If rules 
cannot be enforced, is there a point to negotiating them?  
NEW CHALLENGES TO MU LTILATERALISM  
These challenges must also be discussed in the larger context of the recent challenges to 
multilateralism. We have witnessed significant unilateral trade measures by key WTO Members that 
have evoked countermeasures from affected Members. A numb er of disputes involving such 
measures have already been filed in the WTO. These disputes will test the WTO dispute settlement 
system to its limits. It is unfortunate that these developments are taking place at a time when the 
system is already experiencin g huge stress. The current events are a sobering reminder of what is 
at stake and how the erosion of the WTO dispute settlement system could lead to the re -emergence 
of power orientation in international trade policy.  
As noted, while the WTO dispute settle ment system has to enforce existing international obligations, 
it also has to respect the limits of those rules and identify areas where national sovereignty is not 
constrained. But WTO Members also need to bear in mind the consequences of their actions on  the 
effectiveness of the international system. In an interdependent world, global problems demand 
global solutions, and even national problems often require international cooperation.  
I would like to conclude by stating the obvious  – the institution of a standing body tasked with 
reviewing panel decisions is widely considered as the crowning achievement of the Uruguay Round 
of negotiations. Impairing that achievement would deprive the WTO of ensuring the principled and 
consistent application of multilatera l trade rules.  
It is our shared responsibility to maintain and preserve the trust, credibility, and legitimacy that the 
WTO dispute settlement system in general and the Appellate  Body in particular have built over more 
than 20 years. WTO Members must embrace this responsibility and engage in constructive dialogue 
to ensure the continued good health of a system that is uniquely effective, but which cannot be 
taken for granted.  WT/AB/29  
 
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 ANNEX 5 
MEMBERS OF THE APPEL LATE BODY  
(1 JANUARY TO 31  DECEMBER  2018)  
BIOGRAPHICAL NOTES  
Ujal Singh Bhatia  (India) (2011 -2019)  
Ujal Singh  Bhatia was born in India on 15  April 1950. He was India's Ambassador and Permanent 
Representative  to the WTO  from 2004 to 2010 and represented India in a number of dispute 
settlement cases. He also served as a WTO  dispute settlement panelist in 2007 -2008.  
Mr Bhatia has served in senior positions in the Government of India as well as in Orissa State in  
various administrative assignments that involved development administration and policy -making. 
His legal and adjudicatory experience spans over three decades, and has involved domestic 
and international legal/jurisprudence issues, as well as negotiation o f bilateral, regional, and 
multilateral trade agreements.  
Mr Bhatia has often lectured on international trade issues and has published numerous papers and 
articles on a range of trade and economic topics. He holds an MA in Economics from the University  of 
Manchester and from Delhi University, as well as a BA (Hons) in Economics, 
also from Delhi University.  
Thomas R. Graham  (United  States) (2011 -2019)  
Tom is the former head of the international trade practice at King & Spalding, and he was the founder 
of the international trade practice at Skadden, Arps, Slate, Meagher & Flom. He was one of the first 
US lawyers to represent respondents in trade remedy c ases in various countries around the world, 
and he was among the first to bring economists, accountants, and other non -lawyer professionals 
into the international trade practices of private law firms.  
Prior to entering private practice, Tom served as Depu ty General Counsel in the Office of the 
US Trade Representative. Earlier in his career, he was a Legal Officer of the United Nations, 
in Geneva, a visiting professor of law , and the executive assistant to the president of Ford Motor 
Company, in  Caracas,  Venezuela.  
Tom was the founding chairman of the American Society of International Law's Committee on 
International Economic Law. He served as chair of the American Bar Association's Subcommittee on 
Exports.  He has been an adjunct professor at the Georgetown Law Center and a visiting professor 
at the University of North Carolina Law School.  He has edited books on international trade policy  and 
on international trade and environment, and he has written many articles and monographs on 
international trade law  and policy as a Guest Scholar at the Brookings Institution.  He also is the 
co-author, with his daughter,  of Getting Open: The Unknown Story of Bill Garrett and the Integration 
of College Basketball  (Simon  & Schuster, Atria Books, 2006; Indiana University, pa perback, 2008).  
Tom received his undergraduate degree from Indiana University, and his JD from Harvard 
Law School.  
 
Shree Baboo Chekitan Servansing  (Mauritius) (2014 -2018)  
Born in Mauritius on 22  April 1955, Shree Baboo Chekitan Servansing enjoyed a long and 
distinguished career with the Mauritian civil service. From 2004 to 2012, Mr Servansing was 
Mauritius' Ambassador and Permanent Representative to the United Nations Office and other 
International Organizations in Geneva, including the WTO. During his tenure as Permanent 
Representative, he served on various committees at the WTO, and chaired the Committees on Trade 
and Environment, and Trade and Development. He also chaired the Work Programme on Small 
Economies, the dedicated session on Aid -for-Trade, and the African Group, and was coordinator of 
the African Caribbean Pacific (ACP) Group.  WT/AB/29  
 
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  Mr Servansing previously worked, in various capacities, for the Mauritius Ministry of Foreign Affairs 
in Mauritius, India, and Belgium. During his tenure at the Mau ritius Embassy in Belgium, he was 
intensively involved in the ACP -EU negotiations leading to the Cotonou  Agreement and subsequently 
in the Economic Partnership  Agreement (EPA) negotiations. Mr Servansing also served as the 
personal representative of the Pr ime Minister of Mauritius on the Steering Committee of the New 
Partnership for Africa's Development (NEPAD). In this capacity he was engaged in the strategic 
formulation of Africa's flagship development framework.  
Upon retiring from civil service, Mr Serva nsing served as the head of the ACP -EU Programme on 
Technical Barriers to Trade in Brussels from 2012 to 2014. In this position, he was responsible for 
facilitating the building of capacity among ACP countries in order to enhance their export 
competitivene ss, and improve their Quality Infrastructure to comply with technical regulations.  
Mr Servansing's experience in trade policy, trade negotiations, and the multilateral trading system 
spans three decades. He has frequently spoken on international trade issu es, and has published 
numerous papers and articles in Mauritian and foreign journals on a variety of trade -related issues.  
Mr Servansing holds an MA from the University of Sussex, a Postgraduate Diploma in Foreign  Affairs 
and International Trade from Austr alian National University, and a BA (Hons) from  the University of 
Mauritius.  
Peter Van den Bossche  (Belgium) (2009 -2017)  
Born in Belgium on 31  March  1959, Peter Van den Bossche is Professor of International Economic 
Law at Maastricht University, the Nether lands. Mr Van den Bossche is also visiting professor at the 
College of Europe, Bruges (since 2010); the University of Barcelona (IELPO Programme) 
(since  2008); and the World Trade Institute, Berne (MILE Programme) (since 2002). He is member 
of the Advisory  Board of the  Journal of International Economic Law , the Journal of World Investment 
and Trade , and the  Revista Latinoamericana de Derecho Comercial International . He is also member 
of the Advisory Board of the WTO  Chairs Programme (WCP).  
Mr Van den Bossch e holds a Doctorate in Law from the European University Institute in Florence, an 
LLM from the University of Michigan Law School, and a Licence en Droit  magna  cum laude  from the 
University of Antwerp. From 1990 to 1992, he served as a référendaire of Advoc ate General  W. van 
Gerven at the European Court of Justice in Luxembourg. From 1997 to 2001, Mr  Van den Bossche 
was Counsellor and subsequently Acting Director of the WTO  Appellate  Body Secretariat. In 2001, 
he returned to academia and from 2002 to 2009 fr equently acted as a consultant to international 
organi zations and developing countries on issues of international economic law. He also served on 
the faculty of the Université libre de Bruxelles, Brussels, Belgium  (2002 -2009); the China -EU School 
of Law, C hina University of Political Science and  Law, Beijing, China (2008 -2014); the Trade Policy 
Training Centre in Africa (trapca), Arusha, Tanzania (2008 and 2013); the Foreign Trade University, 
Hanoi & Ho Chi Minh City, Viet  Nam (2009  and 2011); the Universid ad San Francisco de Quito, 
Ecuador (2013); and the Law  School of Koç University, Istanbul, Turkey  (2013).  
Mr Van den Bossche has published extensively in the field of international economic law. He is author 
of the book  The Law and Policy of the World Trad e Organization , of which the third edition (with 
Werner Zdouc) was published by Cambridge University Press in 2013.  
Hong Zhao  (China) (2016 -2020)  
Madame Zhao received her bachelor's and master's degrees and a Ph.D. in Law from the Law School 
of Peking Univ ersity in China. Currently she is a professor at several universities including the 
Universities of Peking, Fudan, and International Business and Economics. She is also a Council 
Member of Shenzhen International Arbitration Court. Previously she served as Minister Counsellor 
in charge of legal affairs at China's mission to the WTO, during which time she served as Chair of 
the WTO's Committee on Trade -Related Investment Measures (TRIMs). Madame Zhao then served 
as Commissioner for Trade Negotiations at the C hinese Ministry of Commerce's Department for WTO 
Affairs, where she participated in a number of important negotiations on international trade, 
including the Trade Facilitation Agreement negotiations, negotiations on the expansion of the 
Information Technol ogy Agreement, and the China -Australia Free Trade Agreement.  WT/AB/29  
 
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  Madame Zhao helped formulate many important Chinese legislative acts on economic and trade 
areas adopted since the 1990s and has experience in China's judiciary system, serving as Juror at 
the Ec onomic Tribunal of the Second Intermediate Court of Beijing between 1999 and 2004. She 
has also taught and supervised law students on international economic law, WTO law, and intellectual 
property rights (IPR) at various universities in China.  
 
* * * 
DIRECTOR OF THE APPE LLATE  BODY SECRETARI AT 
Werner Zdouc  
Director of the WTO  Appellate  Body Secretariat since 2006, Werner Zdouc obtained a law degree 
from the University of Graz in Austria. He then went on to earn an LLM from Michigan Law School 
and a PhD from the University of St Gallen in Switzerland. Dr Zdouc joined the WTO  Legal Affairs 
Division in 1995, advised many dispute settlement panels, and conducted technical cooperation 
missions in many developing countries. He became legal counsellor at the Ap pellate  Body Secretariat 
in 2001. In 2008 -2009 he chaired the WTO  Joint Advisory Committee to the Director -General. He 
has been a lecturer and Visiting Professor for international trade law at Vienna Economic University; 
the Universities of St. Gallen, Zur ich, Barcelona, Seoul, and Shanghai; and the Geneva Graduate 
Institute. From 1987 to  1989, he worked for governmental and non -governmental development aid 
organizations in Austria and Latin America. Dr  Zdouc has authored various publications on 
internation al economic law and is a member of the Trade Law Committee of the International Law 
Association.  
 WT/AB/29  
 
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 ANNEX 6 
FORMER APPELLATE BOD Y MEMBERS AND CHAIRP ERSONS  
I. FORMER APPELLATE  BODY MEMBERS  
Name  Nationality  Term(s) of office  
Said El-Naggar  Egypt   1995-2000 
Mitsuo Matsushita  Japan   1995-2000 
Christopher Beeby  New Zealand  1995-1999 
1999-2000 
Claus -Dieter Ehlermann  Germany  1995-1997 
1997-2001 
Florentino Feliciano  Philippines  1995-1997 
1997-2001 
Julio Lacarte -Muró Uruguay  1995-1997 
1997-2001 
James Bacchus  United  States  1995-1999 
1999-2003 
John Lockhart  Australia  2001-2005 
2005-2006 
Yasuhei Taniguchi  Japan  2000-2003 
2003-2007 
Merit E. Janow  United  States  2003-2007 
Arumugamangalam 
Venkatachalam Ganesan  India 2000-2004 
2004-2008 
Georges Michel Abi -Saab Egypt  2000-2004 
2004-2008 
Luiz Olavo Baptista  Brazil  2001-2005 
2005-2009 
Giorgio Sacerdoti  Italy 2001-2005 
2005-2009 
Jennifer Hillman  United  States  2007-2011 
Lilia Bautista  Philippines  2007-2011 
Shotaro Oshima  Japan  2008-2012 
David Unterhalter  South Africa  2006-2009 
2009-2013 
Yuejiao Zhang  China  2008-2012 
2012-2016 
Seung Wha Chang  Korea, Republic of  2012-2016 
Hyun Chong Kim  Korea, Republic of  2016-2017 
Ricardo Ramírez -Hernández  Mexico  2009-2013 
2013-2017 WT/AB/29  
 
- 139 - 
 
  II. FORMER CHAIRPERS ONS OF THE APPELLATE  BODY  
Name  Nationality  Term(s) as Chairperson  
Julio Lacarte -Muró Uruguay  7 February  1996-
6 February 1997  
7 February  1997-
6 February 1998  
Christopher Beeby  New Zealand  7 February  1998-
6 February 1999  
Said El -Naggar  Egypt  7 February  1999-
6 February 2000  
Florentino Feliciano  Philippines  7 February  2000- 
6 February 2001  
Claus -Dieter Ehlermann  Germany  7 February  2001-
10 December 2001  
James Bacchus  United  States  15 December  2001-
14 December 2002  
15 December  2002-
10 December 2003  
Georges Abi -Saab Egypt  13 December  2003-
12 December 2004  
Yasuhei Taniguchi  Japan  17 December  2004-
16 December 2005  
Arumugamangalam 
Venkatachalam Ganesan  India 17 December  2005-
16 December 2006  
Giorgio Sacerdoti  Italy 17 December  2006-
16 December 2007  
Luiz Olavo Baptista  Brazil  17 December  2007-
16 December 2008  
David Unterhalter  South Africa  18 December  2008-
11 December 2009  
12 December  2009-
16 December 2010  
Lilia Bautista  Philippines  17 December  2010-
14 June 2011  
Jennifer Hillman  United  States  15 June 2011-
10 December 2011  
Yuejiao Zhang  China  11 December  2011-
31 May 2012 
1 June 2012-
31 December  2012 
Ricardo Ramírez -Hernández  Mexico  1 January 2013 -
31 December 2013  
1 January 2014 -
31 December 2014  
Peter Van den Bossche  Belgium  1 January 2015 -
31 December 2015  
Thomas Graham  United  States  1 January 2016 -
31 December 2016  
Ujal Singh Bhatia  India 1 January 2017 -
31 December 2017  
1 January 2018 -
31 December 2018  WT/AB/29  
 
- 140 - 
 
  ANNEX 7 
APPEALS FILED: 199 6-2018a 
TOTAL NUMBER OF APPEALS: 199 6-2018  
 
a No appeals  were filed and no Appellate  Body reports were circulated in 1995, the year the 
Appellate  Body was established.  
APPEALS FILED: 199 6-2018  
Year Notices of  
Appeal filed  Notices of Appeal 
in original 
proceedings  Notices of Appeal 
in Article  21.5 
proceedings  
1996   4 4 0 
1997   6a 6 0 
1998   8 8 0 
1999   9b 9 0 
2000  13c 11 2 
2001   9d 5 4 
2002   7e 6 1 
2003   6f 5 1 
2004   5 5 0 
2005  13 11 2 
2006   5 3 2 
2007   4 2 2 
2008  11g 8 3 
2009 3 1 2 
2010 3 3 0 02468101214WT/AB/29  
 
- 141 - 
 
  Year Notices of  
Appeal filed  Notices of Appeal 
in original 
proceedings  Notices of Appeal 
in Article  21.5 
proceedings  
2011 9 9 0 
2012 5 5 0 
2013 2 2 0 
2014 13 11 2 
2015 8h 6 2 
2016 8 7 1 
2017 8 6 2 
2018 12 10 2 
Total  170 143 28 
a This number includes two Notices of Appeal that were filed at the same time in related matters, counted 
separately: EC – Hormones (Canada)  and EC – Hormones (US).  A single Appellate  Body report was 
circulated in relation to those appeals.  
b This number exc ludes one Notice of Appeal that was withdrawn by the United  States, which 
subsequently filed another Notice of Appeal in relation to the same panel report: US – FSC. 
c This number includes two Notices of Appeal that were filed at the same time in related matters, counted 
separately: US – 1916 Act (EC)  and US – 1916 Act (Japan).  A single Appellate  Body report was 
circulated in relation to those appeals.  
d This number excl udes one Notice of Appeal that was withdrawn by the United  States, which 
subsequently filed another Notice of Appeal in relation to the same panel report: US – Line Pipe . 
e This number includes one Notice of Appeal that was subsequently withdrawn: India – Autos ; and 
excludes one Notice of Appeal that was withdrawn by the European Communities, which subsequently 
filed another Notice of Appeal in relation to the same panel report: EC – Sardines . 
f This number excludes one Notice of Appeal that was withdrawn b y the United  States, which 
subsequently filed another Notice of Appeal in relation to the same panel report: US – Softwood 
Lumber  IV. 
g This number includes two Notices of Appeal that were filed at the same time in related matters, counted 
separately: US – Shrimp (Thailand)  and US – Customs Bond Directive.   
h This number includes two Notices of Appeal that were filed at the same time in related matters, counted 
separately: China – Measures Imposing Anti -Dumping Duties on High -Performance Stainless Steel 
Seamless Tubes ("HP -SSST") from Japan  and China – Measures Imposing Anti -Dumping Duties on 
High-Performance Stainless Steel Seamless Tubes ("HP -SSST") from the European  Union .  
 
 
  WT/AB/29  
 
- 142 - 
 
  ANNEX 8 
PERCENTAGE OF PANEL REPORTSa APPEALED BY YEAR OF  CIRCULATIONb: 1996 –2018  c 
 All panel reports  Panel reports other than  
Article  21.5 reports  Article  21.5 
panel  reportsd 
Year of 
adoption  Panel 
reports 
circulated  Panel 
reports 
appealed  Percentage 
appealedf Panel 
reports 
circulated  Panel 
reports 
appealed  Percentage 
appealedf Panel 
reports 
circulated  Panel 
reports 
appealed  Percentage 
appealedf 
1996 9 6 67% 9 6 67% 0 0 – 
1997 7 6 86% 7 6 86% 0 0 – 
1998 16 11 69% 16 11 69% 0 0 – 
1999 18 11 61% 16 11 69% 2 0 0% 
2000 26 15 58% 22 13 59% 4 2 50% 
2001 14 11 79% 9 6 67% 5 5 100%  
2002 14 10 71% 12 8 67% 2 2 100%  
2003 16 13 81% 16 12 75% 0 1 100%e 
2004 11 5 45% 11 5 45% 0 0 – 
2005 18 13 72% 13 11 85% 5 2 40% 
2006 9 5 56% 6 3 50% 3 2 67% 
2007 10 4 40% 7 2 29% 3 2 67% 
2008 13 13 100%  10 10 100%  3 3 100%  
2009 4 3 75% 3 1 33% 1 2 100%e 
2010 11 3 27% 11 3 27% 0 0 – 
2011 14 9 64% 14 9 64% 0 0 – 
2012 10 5 50% 10 5 50% 0 0 – 
2013 5 2 40% 4 2 50% 1 0 0% 
2014 15 13 87% 13 11 85% 2 2 100%  
2015 9 8 89% 6 6 100%  3 2 67% 
2016 12 8 67% 11 7 64% 1 1 100%  
2017 13 11 85% 11 9 82% 2 2 100%  
2018 18 12 67% 14 10 71% 4 2 50% 
Total  292 197 67% 252 167 67%  41 30 73%  
a For ease of comparison, each DS number is counted as corresponding to a separate report, even where 
the panels issued a single report addressing multiple complaints. The only exceptions to this 
methodology are with respect to: (i) the total number of panel reports  circulated in 1999 which count 
the panel reports in EC ‒ Bananas III (Article  21.5 – EC), and EC – Bananas III (Article  21.5 – Ecuador)  
as two separate reports; and (ii)  the total number of panel reports circulated in 2008 which count the 
panel reports in  EC – Bananas III (Article  21.5 – Ecuador II) , and EC – Bananas III (Article  21.5 – US) 
as two separate reports.  
b The figures in this table correspond to the year in which the panel report was circulated, even in cases 
when the panel report was appealed in a different year.  
c No panel reports were circulated in 1995.  
d Under Article  21.5 of the DSU, a panel may be established to hear a "disagreement as to the existence 
or consistency with a covered agreement of measures taken to comply with the r ecommendations and 
rulings" of the DSB upon the adoption of a previous panel or Appellate Body report.  
e The panel report in EC – Bed Linen (Article  21.5 – India) , which was circulated in 2002, was appealed in 
2003. Similarly, the panel report in US – Zeroing (EC) (Article  21.5 – EC), which was circulated in 2008, 
was appealed in 2009.  
f Percentages are rounded  to the nearest whole number.  
 WT/AB/29  
 
- 143 - 
 
  PERCENTAGE OF PANEL REPORTS APPEALED BY YEAR OF CIRCULATION:  1996–2018a 
 
a No appeals  were filed and no Appellate  Body reports were circulated in 1995, the year the 
Appellate  Body was established.  
 
 0102030405060708090100Percentage of panel reports appealed by year of circulation
Precentage of total panel reports appealed
Percentage of panel reports other than Article 21.5 reports appealed
Percentage of Article 21.5 panel reports appealedWT/AB/29  
 
- 144 - 
 
  ANNEX 9 
WTO AGREEMENTS ADDRE SSED IN APPELLATE BO DY REPORTS CIRCULATE D: 1996 -2018 
The chart below shows the number of times specific WTO  agreements have been addressed in 
the Appellate  Body report s circulated from 1996 to 2018.1 
 
 
 
                                                
1 No appeals were filed and no Appellate  Body reports were circulated in 1995, the year that the 
Appellate  Body was established.  
 
  WT/AB/29  
 
- 145 - WTO  AGREEMENTS ADDRESSED IN APPELLATE  BODY REPORTS CIRCULATED: 1996 -2018 a 
Year of 
circulation  DSU WTO 
Agmt  GATT   
1994  Agri- 
culture  SPS ATC TBT TRIMs  Anti-
Dumping  Import 
Licensing  SCM Safe-
guards  GATS  TRIPS  
1996  0 0 2 0 0 0 0 0 0 0 0 0 0 0 
1997  4 1 5 1 0 2 0 0 0 1 1 0 1 1 
1998  7 1 4 1 2 0 0 0 1 1 0 0 0 0 
1999  7 1 6 1 1 0 0 0 0 0 2 1 0 0 
2000  8 1 7 2 0 0 0 0 2 0 5 2 1 1 
2001  7 1 3 1 0 1 1 0 4 0 1 2 0 0 
2002  8 2 4 3 0 0 1 0 1 0 3 1 1 1 
2003  4 2 3 0 1 0 0 0 4 0 1 1 0 0 
2004  2 0 5 0 0 0 0 0 2 0 1 0 0 0 
2005  9 0 5 2 0 0 0 0 2 0 4 0 1 0 
2006  5 0 3 0 0 0 0 0 3 0 2 0 0 0 
2007  5 0 2 1 0 0 0 0 2 0 1 0 0 0 
2008  8 1 9 1 2 0 0 0 3 0 3 0 0 0 
2009  3 0 4 0 0 0 0 0 3 0 0 0 1 0 
2010  1 0 0 0 1 0 0 0 0 0 0 0 0 0 
2011  7 1 6 0 0 0 0 0 1 0 2 0 0 0 
2012  9 0 7 0 0 0 4 0 1 0 2 0 0 0 
2013  0 0 2 0 0 0 0 2 0 0 2 0 0 0 
2014  6 4 7 0 0 0 2 0 0 0 3 0 0 0 
2015  7 0 7 1 0 0 2 0 3 1 0 0 0 0 
2016  6 1 6 0 0 0 0 1 2 0 1 0 1 0 
2017  6 0 2 2 1 0 0 0 2 0 1 0 0 0 
2018  6 0 6 0 0 0 1 1 1 0 3 1 0 0 
Total  125 16 105 16 8 3 11 3 37 3 38 8 6 3 
a No appeals were filed and no Appellate  Body reports were circulated in 1995, the year the Appellate  Body was established.  WT/AB/29  
 
- 146 - 
 
  ANNEX 10 
PARTICIPANTS AND THI RD PARTICIPANTS IN A PPEALS: 1996 -2018 
The chart below shows the ratio of developed country Members to developing country Members in 
terms o f appearances made as appellant, other appellant, appellee, and third participant in appeals 
for which an Appellate  Body report was circulated from 1996 to 2018.1 
WTO  MEMBER PARTICIPATION IN APPEALS 1996 -2018  
  
I. STATISTICAL SUMMA RY 
WTO  Member  Appellant  Other 
appellant  Appellee  Third 
participant  Total  
Antigua & 
Barbuda  0 1 1 0 2 
Argentina  3 5 8 23 39 
Australia  2 2 6 53 63 
Bahrain, 
Kingdom of  0 0 0 1 1 
Barbados  0 0 0 1 1 
Belize  0 0 0 4 4 
Benin  0 0 0 1 1 
Bolivia, 
Plurinational 
State of  0 0 0 1 1 
                                                
1 No appeals were filed and no Appellate  Body reports were circulated in 1995, the year that the 
Appellate  Body was established.  8667198351
75
3488616
050100150200250300350400450500550600650
Appellants Other Appellants Appellees Third ParticipantsAppearances before the 
Appellate Body
Developed Countries Developing CountriesWT/AB/29  
 
- 147 - 
 
  WTO  Member  Appellant  Other 
appellant  Appellee  Third 
participant  Total  
Brazil  6 7 12 46 71 
Cameroon  0 0 0 3 3 
Canada  14 10 23 39 86 
Chad 0 0 0 2 2 
Chile 3 0 2 13 18 
China  16 5 11 60 92 
Colombia  1 0 0 24 25 
Costa Rica  1 0 0 3 4 
Côte d'Ivoire  0 0 0 4 4 
Cuba 0 0 0 4 4 
Dominica  0 0 0 4 4 
Dominican 
Republic  1 0 1 4 6 
Ecuador  0 2 2 20 24 
Egypt  0 0 0 2 2 
El Salvador  0 0 0 6 6 
European  Union  24 24 55 77 180 
Fiji 0 0 0 1 1 
Ghana  0 0 0 2 2 
Grenada  0 0 0 1 1 
Guatemala  1 2 2 14 19 
Guyana  0 0 0 1 1 
Honduras  0 2 2 6 10 
Hong Kong, 
China  0 0 0 8 8 
Iceland  0 0 0 2 2 
India 9 2 8 50 69 
Indonesia  4 1 2 5 12 
Israel  0 0 0 2 2 
Jamaica  0 0 0 5 5 
Japan  7 7 16 75 105 
Kenya  0 0 0 1 1 
Korea  3 5 7 46 61 
Kuwait,  
the State of  0 0 0 1 1 
Madagascar  0 0 0 1 1 
Malaysia  1 0 1 1 3 
Malawi  0 0 0 1 1 
Mauritius  0 0 0 2 2 
Mexico  6 6 9 36 57 
Namibia  0 0 0 1 1 
New Zealand  0 3 8 15 26 
Nicaragua  0 0 0 4 4 WT/AB/29  
 
- 148 - 
 
  WTO  Member  Appellant  Other 
appellant  Appellee  Third 
participant  Total  
Nigeria  0 0 0 1 1 
Norway  2 1 3 36 42 
Oman  0 0 0 4 4 
Pakistan  0 1 3 3 7 
Panama  1 0 2 3 6 
Paraguay  0 0 0 7 7 
Peru 1 1 1 7 10 
Philippines  3 0 3 2 8 
Poland  0 0 1 0 1 
Russian 
Federation  2 0 2 14 18 
Saint Lucia  0 0 0 4 4 
Saudi Arabia, 
Kingdom of  0 0 0 18 18 
Senegal  0 0 0 1 1 
Singapore  0 0 0 3 3 
South Africa  0 0 0 2 2 
St Kitts & Nevis  0 0 0 1 1 
St Vincent &  
the Grenadines  0 0 0 3 3 
Suriname  0 0 0 3 3 
Swaziland  0 0 0 1 1 
Switzerland  0 1 1 1 3 
Chinese Taipei  0 1 1 45 47 
Tanzania  0 0 0 1 1 
Thailand  3 2 5 23 33 
Trinidad 
& Tobago  0 0 0 1 1 
Turkey  1 0 0 22 23 
Ukraine  0 0 0 4 4 
United  States  38 25 87 48 198 
Venezuela, 
Bolivarian 
Republic of  0 0 1 6 7 
Viet Nam  1 1 1 9 12 
Total  154 117 287 946 1,507 
 WT/AB/29  
 
- 149 - 
 
  II. DETAILS BY YEAR OF CIRCULATION  
1996  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Gasoline  
WT/DS2/AB/R  United  States  --- Brazil  
Venezuela  European 
Communities  
Norway  
Japan – Alcoholic Beverages II  
WT/DS8/AB/R,  
WT/DS10/AB/R,  
WT/DS11/AB/R  Japan  United  States  Canada  
European 
Communities  
Japan  
United  States  --- 
 
1997  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Underwear  
WT/DS24/AB/R  Costa Rica  --- United  States  India 
Brazil – Desiccated Coconut  
WT/DS22/AB/R  Philippines  Brazil  Brazil  
Philippines  European 
Communities  
United  States  
US – Wool Shirts and Blouses  
WT/DS33/AB/R and Corr.1  India --- United  States  --- 
Canada – Periodicals  
WT/DS31/AB/R  Canada  United  States  Canada  
United  States  --- 
EC – Bananas III  
WT/DS27/AB/R  European 
Communities  Ecuador  
Guatemala  
Honduras  
Mexico  
United  States  Ecuador  
European 
Communities  
Guatemala  
Honduras  
Mexico  
United  States  Belize  
Cameroon  
Colombia  
Costa Rica  
Côte d'Ivoire  
Dominica  
Dominican 
Republic  
Ghana  
Grenada  
Jamaica  
Japan  
Nicaragua  
St Lucia  
St Vincent  
& the 
Grenadines  
Senegal  
Suriname  
Venezuela  
India – Patents (US)  
WT/DS50/AB/R  India --- United  States  European 
Communities  WT/AB/29  
 
- 150 - 
 
  1998  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
EC – Hormones  
WT/DS26/AB/R,  
WT/DS48/AB/R  European 
Communities  Canada  
United  States  Canada  
European 
Communities  
United  States  Australia  
New Zealand  
Norway  
Argentina – Textiles and Apparel  
WT/DS56/AB/R and Corr.1  Argentina  --- United  States  European 
Communities  
EC – Computer Equipment  
WT/DS62/AB/R,  
WT/DS67/AB/R,  
WT/DS68/AB/R  European 
Communities  --- United  States  Japan  
EC – Poultry  
WT/DS69/AB/R  Brazil  European 
Communities  Brazil  
European 
Communities  Thailand  
United  States  
US – Shrimp  
WT/DS58/AB/R  United  States  --- India 
Malaysia  
Pakistan  
Thailand  Australia  
Ecuador  
European 
Communities  
Hong Kong, 
China  
Mexico  
Nigeria  
Australia – Salmon  
WT/DS18/AB/R  Australia  Canada  Australia  
Canada  European 
Communities  
India 
Norway  
United  States  
Guatemala – Cement  I 
WT/DS60/AB/R  Guatemala  --- Mexico  United  States  
 WT/AB/29  
 
- 151 - 
 
  1999  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Korea – Alcoholic Beverages  
WT/DS75/AB/R,  
WT/DS84/AB/R  Korea  --- European 
Communities  
United  States  Mexico  
Japan – Agricultural Products II  
WT/DS76/AB/R  Japan  United  States  Japan  
United  States  Brazil  
European 
Communities  
Brazil – Aircraft  
WT/DS46/AB/R  Brazil  Canada  Brazil  
Canada  European 
Communities  
United  States  
Canada – Aircraft  
WT/DS70/AB/R  Canada  Brazil  Brazil  
Canada  European 
Communities  
United  States  
India – Quantitative Restrictions  
WT/DS90/AB/R  India --- United  States  --- 
Canada – Dairy  
WT/DS103/AB/R, 
WT/DS113/AB/R and Corr.1  Canada  --- New Zealand  
United  States  --- 
Turkey –Textiles  
WT/DS34/AB/R  Turkey  --- India Hong Kong, 
China  
Japan  
Philippines  
Chile – Alcoholic Beverages  
WT/DS87/AB/R, WT/DS110/AB/R  Chile --- European 
Communities  Mexico  
United  States  
Argentina – Footwear (EC)  
WT/DS121/AB/R  Argentina  European 
Communities  Argentina  
European 
Communities  Indonesia  
United  States  
Korea – Dairy  
WT/DS98/AB/R  Korea  European 
Communities  Korea  
European 
Communities  United  States  
 WT/AB/29  
 
- 152 - 
 
  2000  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – FSC  
WT/DS108/AB/R  United  States  European 
Communities  European 
Communities  
United  States  Canada  
Japan  
US – Lead and Bismuth  II 
WT/DS138/AB/R  United  States  --- European 
Communities  Brazil  
Mexico  
Canada – Autos  
WT/DS139/AB/R  Canada  European 
Communities  
Japan  Canada  
European 
Communities  
Japan  Korea  
United  States  
Brazil – Aircraft  
(Article  21.5 – Canada)  
WT/DS46/AB/RW  Brazil  --- Canada  European 
Communities  
United  States  
Canada – Aircraft  
(Article  21.5 – Brazil)  
WT/DS70/AB/RW  Brazil  --- Canada  European 
Communities  
United  States  
US – 1916 Act  
WT/DS136/AB/R, 
WT/DS162/AB/R  United  States  European 
Communities  
Japan  European 
Communities  
Japan  
United  States  European 
Communitiesa 
India 
Japanb 
Mexico  
Canada – Term of Patent 
Protection  
WT/DS170/AB/R  Canada  --- United  States  --- 
Korea – Various Measures on Beef  
WT/DS161/AB/R, 
WT/DS169/AB/R  Korea  --- Australia  
United  States  Canada  
New Zealand  
US – Certain EC Products  
WT/DS165/AB/R  European 
Communities  United  States  European 
Communities  
United  States  Dominica  
Ecuador  
India 
Jamaica  
Japan  
St Lucia 
US – Wheat Gluten  
WT/DS166/AB/R  United  States  European 
Communities  European 
Communities  
United  States  Australia  
Canada  
New Zealand  
a In complaint brought by Japan.  
b  In complaint brought by the European Communities.  WT/AB/29  
 
- 153 - 
 
  2001  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
EC – Bed Linen  
WT/DS141/AB/R  European 
Communities  India European 
Communities  
India Egypt  
Japan  
United  States  
EC – Asbestos  
WT/DS135/AB/R  Canada  European 
Communities  Canada  
European 
Communities  Brazil  
United  States  
Thailand – H-Beams  
WT/DS122/AB/R  Thailand  --- Poland  European 
Communities  
Japan  
United  States  
US – Lamb  
WT/DS177/AB/R, 
WT/DS178/AB/R  United  States  Australia  
New Zealand  Australia  
New Zealand  
United  States  European 
Communities  
US – Hot-Rolled Steel  
WT/DS184/AB/R  United  States  Japan  Japan  
United  States  Brazil  
Canada  
Chile 
European 
Communities  
Korea  
US – Cotton Yarn  
WT/DS192/AB/R  United  States  --- Pakistan  European 
Communities  
India 
US – Shrimp  
(Article  21.5 – Malaysia)  
WT/DS58/AB/RW  Malaysia  --- United  States  Australia  
European 
Communities  
Hong Kong, 
China  
India 
Japan  
Mexico  
Thailand  
Mexico – Corn Syrup  
(Article  21.5 – US) 
WT/DS132/AB/RW  Mexico  --- United  States  European 
Communities  
Canada – Dairy 
(Article  21.5 – New Zealand 
and US) 
WT/DS103/AB/RW, 
WT/DS113/AB/RW  Canada  --- New Zealand  
United  States  European 
Communities  
 WT/AB/29  
 
- 154 - 
 
  2002  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Section  211 
Appropriations  Act  
WT/DS176/AB/R  European 
Communities  United  States  European 
Communities  
United  States  --- 
US – FSC (Article  21.5 – EC) 
WT/DS108/AB/RW  United  States  European 
Communities  European 
Communities  
United  States  Australia  
Canada  
India 
Japan  
US – Line Pipe  
WT/DS202/AB/R  United  States  Korea  Korea  
United  States  Australia  
Canada  
European 
Communities  
Japan  
Mexico  
India – Autosc 
WT/DS146/AB/R, 
WT/DS175/AB/R  India --- European 
Communities  
United  States  Korea  
Chile – Price Band System  
WT/DS207/AB/R and Corr.1  Chile --- Argentina  Australia  
Brazil  
Colombia  
Ecuador  
European 
Communities  
Paraguay  
United  States  
Venezuela  
EC – Sardines  
WT/DS231/AB/R  European 
Communities  --- Peru Canada  
Chile 
Ecuador  
United  States  
Venezuela  
US – Carbon Steel  
WT/DS213/AB/R and Corr.1  United  States  European 
Communities  European 
Communities  
United  States  Japan  
Norway  
US – Countervailing Measures on 
Certain EC Products  
WT/DS212/AB/R  United  States  --- European 
Communities  Brazil  
India 
Mexico  
Canada – Dairy 
(Article  21.5 – New Zealand  
and US  II) 
WT/DS103/AB/RW2, 
WT/DS113/AB/RW2  Canada  --- New Zealand  
United  States  Argentina  
Australia  
European 
Communities  
c  India withdrew its appeal the day before the oral hearing was scheduled to proceed.  
 
  WT/AB/29  
 
- 155 - 
 
  2003  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Offset Act  
(Byrd Amendment)  
WT/DS217/AB/R, 
WT/DS234/AB/R  United  States  --- Australia  
Brazil  
Canada  
Chile 
European 
Communities  
India 
Indonesia  
Japan  
Korea  
Mexico  
Thailand  Argentina  
Costa Rica  
Hong Kong, 
China  
Israel  
Norway  
EC – Bed Linen  
(Article  21.5 – India) 
WT/DS141/AB/RW  India --- European 
Communities  Japan  
Korea  
United  States  
EC – Tube or Pipe Fittings  
WT/DS219/AB/R  Brazil  --- European 
Communities  Chile 
Japan  
Mexico  
United  States  
US – Steel Safeguards  
WT/DS248/AB/R, 
WT/DS249/AB/R,  
WT/DS251/AB/R, 
WT/DS252/AB/R,  
WT/DS253/AB/R, 
WT/DS254/AB/R,  
WT/DS258/AB/R, 
WT/DS259/AB/R  United  States  Brazil  
China  
European 
Communities  
Japan  
Korea  
New Zealand  
Norway  
Switzerland  Brazil  
China  
European 
Communities  
Japan  
Korea  
New Zealand  
Norway  
Switzerland  
United  States  Canada  
Cuba 
Mexico  
Chinese Taipei  
Thailand  
Turkey  
Venezuela  
Japan – Apples  
WT/DS245/AB/R  Japan  United  States  Japan  
United  States  Australia  
Brazil  
European 
Communities  
New Zealand  
Chinese Taipei  
US – Corrosion -Resistant Steel 
Sunset Review  
WT/DS244/AB/R  Japan  --- United  States  Brazil  
Chile 
European 
Communities  
India 
Korea  
Norway  
 WT/AB/29  
 
- 156 - 
 
  2004  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Softwood Lumber  IV 
WT/DS257/AB/R  United  States  Canada  Canada  
United  States  European 
Communities  
India 
Japan  
EC – Tariff Preferences  
WT/DS246/AB/R  European 
Communities  --- India Bolivia  
Brazil  
Colombia  
Costa Rica  
Cuba 
Ecuador  
El Salvador  
Guatemala  
Honduras  
Mauritius  
Nicaragua  
Pakistan  
Panama  
Paraguay  
Peru 
United  States  
Venezuela  
US – Softwood Lumber  V 
WT/DS264/AB/R  United  States  Canada  Canada  
United  States  European 
Communities  
India 
Japan  
Canada – Wheat Exports and 
Grain Imports  
WT/DS276/AB/R  United  States  Canada  Canada  
United  States  Australia  
China  
European 
Communities  
Mexico  
Chinese Taipei  
US – Oil Country Tubular Goods 
Sunset Reviews  
WT/DS268/AB/R  United  States  Argentina  Argentina  
United  States  European 
Communities  
Japan  
Korea  
Mexico  
Chinese Taipei  
 WT/AB/29  
 
- 157 - 
 
  2005  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Upland Cotton  
WT/DS267/AB/R  United  States  Brazil  Brazil  
United  States  Argentina  
Australia  
Benin  
Canada  
Chad 
China  
European  
Communities  
India 
New Zealand  
Pakistan  
Paraguay  
Chinese Taipei  
Venezuela  
US – Gambling  
WT/DS285/AB/R and Corr.1  United  States  Antigua & 
Barbuda  Antigua & 
Barbuda  
United  States  Canada  
European  
Communities  
Japan  
Mexico  
Chinese Taipei  
EC – Export Subsidies on Sugar  
WT/DS265/AB/R, 
WT/DS266/AB/R, 
WT/DS283/AB/R  European 
Communities  Australia  
Brazil  
Thailand  Australia  
Brazil  
European 
Communities  
Thailand  
 Barbados  
Belize  
Canada  
China  
Colombia  
Côte d'Ivoire  
Cuba 
Fiji 
Guyana  
India 
Jamaica  
Kenya  
Madagascar  
Malawi  
Mauritius  
New Zealand  
Paraguay  
St Kitts &  
Nevis  
Swaziland  
Tanzania  
Trinidad &  
Tobago  
United  States  
 WT/AB/29  
 
- 158 - 
 
  2005 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Dominican Republic – Import and 
Sale of Cigarettes  
WT/DS302/AB/R  Dominican 
Republic  Honduras  Dominican 
Republic  
Honduras  China  
El Salvador  
European 
Communities  
Guatemala  
United  States  
US – Countervailing Duty 
Investigation on DRAMS  
WT/DS296/AB/R  United  States  Korea  Korea  
United  States  China  
European 
Communities  
Japan  
Chinese Taipei  
EC – Chicken Cuts  
WT/DS269/AB/R,  
WT/DS286/AB/R and Corr.1  European  
Communities  Brazil  
Thailand  Brazil  
European  
Communities  
Thailand  China  
United  States  
Mexico – Anti-Dumping Measures  
on Rice  
WT/DS295/AB/R  Mexico  --- United  States  China  
European  
Communities  
US – Anti-Dumping Measures on 
Oil Country Tubular Goods  
WT/DS282/AB/R  Mexico  United  States  Mexico  
United  States  Argentina  
Canada  
China  
European 
Communities  
Japan  
Chinese Taipei  
US – Softwood Lumber  IV 
(Article  21.5 – Canada)  
WT/DS257/AB/RW  United  States  Canada  Canada  
United  States  China  
European 
Communities  
 WT/AB/29  
 
- 159 - 
 
  2006  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – FSC 
(Article  21.5 – EC II)  
WT/DS108/AB/RW2  United  States  European 
Communities  European 
Communities  
United  States  Australia  
Brazil  
China  
Mexico ‒ Taxes on Soft Drinks  
WT/DS308/AB/R  Mexico  --- United  States  Canada  
China  
European 
Communities  
Guatemala  
Japan  
US – Softwood Lumber VI  
(Article  21.5 – Canada)  
WT/DS277/AB/RW and Corr.1  Canada  --- United  States  China  
European 
Communities  
US – Zeroing (EC)  
WT/DS294/AB/R and Corr.1  European 
Communities  United  States  United  States  
European 
Communities  Argentina  
Brazil  
China  
Hong Kong, 
China  
India 
Japan  
Korea  
Mexico  
Norway  
Chinese Taipei  
US – Softwood Lumber V  
(Article  21.5 – Canada)  
WT/DS264/AB/RW  Canada  --- United  States  China  
European 
Communities  
India 
Japan  
New Zealand  
Thailand  
EC – Selected Customs Matters  
WT/DS315/AB/R  United  States  European 
Communities  European 
Communities  
United  States  Argentina  
Australia  
Brazil  
China  
Hong Kong, 
China  
India 
Japan  
Korea  
Chinese Taipei  
 WT/AB/29  
 
- 160 - 
 
  2007  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Zeroing (Japan)  
WT/DS322/AB/R  Japan  United  States  United  States  
Japan  Argentina  
China  
European 
Communities  
Hong Kong, 
China  
India 
Korea  
Mexico  
New Zealand  
Norway  
Thailand  
US – Oil Country Tubular Goods 
Sunset Reviews 
(Article  21.5 ‒ Argentina)  
WT/DS268/AB/RW  United  States  Argentina  Argentina  
United  States  China  
European 
Communities  
Japan  
Korea  
Mexico  
Chile – Price Band System 
(Article  21.5 – Argentina)  
WT/DS207/AB/RW  Chile Argentina  Argentina  
Chile Australia  
Brazil  
Canada  
China  
Colombia  
European 
Communities  
Peru 
Thailand  
United  States  
Japan – DRAMs (Korea)  
WT/DS336/AB/R and Corr.1  Japan  Korea  Korea  
Japan  European 
Communities  
United  States  
Brazil – Retreaded Tyres  
WT/DS332/AB/R  European 
Communities  --- Brazil  Argentina  
Australia  
China  
Cuba 
Guatemala  
Japan  
Korea  
Mexico  
Paraguay  
Chinese Taipei  
Thailand  
United  States  WT/AB/29  
 
- 161 - 
 
  2008  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Stainless Steel (Mexico)  
WT/DS344/AB/R  Mexico  --- United  States  Chile 
China  
European 
Communities  
Japan  
Thailand  
US – Upland Cotton 
(Article  21.5 – Brazil)  
WT/DS267/AB/RW  United  States  Brazil  Brazil  
United  States  Argentina  
Australia  
Canada  
Chad 
China  
European 
Communities  
India 
Japan  
New Zealand  
Thailand  
US – Shrimp (Thailand)  
WT/DS343/AB/R  Thailand  United  States  United  States  
Thailand  Brazil  
Chile 
China  
European 
Communities  
India 
Japan  
Korea  
Mexico  
Viet Nam  
US – Customs Bond Directive  
WT/DS345/AB/R  India United  States  United  States  
India Brazil  
China  
European 
Communities  
Japan  
Thailand  
US – Continued Suspension  
WT/DS320/AB/R  European 
Communities  United  States  United  States  
European 
Communities  Australia  
Brazil  
China  
India 
Mexico  
New Zealand  
Norway  
Chinese Taipei  
Canada – Continued Suspension  
WT/DS321/AB/R  European 
Communities  Canada  Canada  
European 
Communities  Australia  
Brazil  
China  
India 
Mexico  
New Zealand  
Norway  
Chinese Taipei  WT/AB/29  
 
- 162 - 
 
   
2008 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
India – Additional Import Duties  
WT/DS360/AB/R  United  States  India India 
United  States  Australia  
Chile 
European 
Communities  
Japan  
Viet Nam  
EC – Bananas III 
(Article  21.5 ‒ Ecuador  II) 
WT/DS27/AB/RW2/ECU 
and Corr.1  European 
Communities  Ecuador  Ecuador  
European 
Communities  Belize  
Brazil  
Cameroon  
Colombia  
Côte d'Ivoire  
Dominica  
Dominican 
Republic  
Ghana  
Jamaica  
Japan  
Nicaragua  
Panama  
St Lucia 
St Vincent & the 
Grenadines  
Suriname  
United  States  
EC – Bananas III 
(Article  21.5 ‒ US) 
WT/DS27/AB/RW/USA and  Corr.1  European 
Communities  --- United  States  Belize  
Brazil  
Cameroon  
Colombia  
Côte d'Ivoire  
Dominica  
Dominican 
Republic  
Ecuador  
Jamaica  
Japan  
Mexico  
Nicaragua  
Panama  
St Lucia 
St Vincent & 
the Grenadines  
Suriname  WT/AB/29  
 
- 163 - 
 
  2008 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
China – Auto Parts (EC)  
WT/DS339/AB/R  China  --- European 
Communities  Argentina  
Australia  
Brazil  
Japan  
Mexico  
Chinese Taipei  
Thailand  
China – Auto Parts (US)  
WT/DS340/AB/R  China  --- United  States  Argentina  
Australia  
Brazil  
Japan  
Mexico  
Chinese Taipei  
Thailand  
China – Auto Parts (Canada)  
WT/DS342/AB/R  China  --- Canada  Argentina  
Australia  
Brazil  
Japan  
Mexico  
Chinese Taipei  
Thailand  
 WT/AB/29  
 
- 164 - 
 
  2009  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Continued Zeroing  
WT/DS350/AB/R  European 
Communities  United  States  European 
Communities  
United  States  Brazil  
China  
Egypt  
India 
Japan  
Korea  
Mexico  
Norway  
Chinese Taipei  
Thailand  
US – Zeroing (EC) 
(Article  21.5 ‒ EC) 
WT/DS294/AB/RW and Corr.1  European 
Communities  United  States  European 
Communities  
United  States  India 
Japan  
Korea  
Mexico  
Norway  
Chinese Taipei  
Thailand  
US – Zeroing (Japan) 
(Article  21.5 – Japan)  
WT/DS322/AB/RW  United  States  --- Japan  China  
European 
Communities  
Hong Kong, 
China  
Korea  
Mexico  
Norway  
Chinese Taipei  
Thailand  
China – Publications and 
Audiovisual Products  
WT/DS363/AB/R  China  United  States  China  
United  States  Australia  
European 
Communities  
Japan  
Korea  
Chinese Taipei  
 
  WT/AB/29  
 
- 165 - 
 
  2010  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Australia – Apples  
WT/DS367/AB/R  Australia  New Zealand  New Zealand  
Australia  Chile 
European  Union  
Japan  
Pakistan  
Chinese Taipei  
United  States  
  WT/AB/29  
 
- 166 - 
 
  2011  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Anti-Dumping and 
Countervailing Duties (China)  
WT/DS379/AB/R  China  --- United  States  Argentina  
Australia  
Bahrain  
Brazil  
Canada  
European  Union  
India 
Japan  
Kuwait  
Mexico  
Norway  
Saudi Arabia  
Chinese Taipei  
Turkey  
EC and certain member States – 
Large Civil Aircraft  
WT/DS316/AB/R  European  Union  United  States  United  States  
European  Union  Australia  
Brazil  
Canada  
China  
Japan  
Korea  
Thailand – Cigarettes (Philippines)  
WT/DS371/AB/R  Thailand  --- Philippines  Australia  
China  
European  Union  
India 
Chinese Taipei  
United  States  
EC – Fasteners (China)  
WT/DS397/AB/R  European  Union  China  China  
European  Union  Brazil  
Canada  
Chile 
Colombia  
India 
Japan  
Norway  
Chinese Taipei  
Thailand  
Turkey  
United  States  
US – Tyres (China)  
WT/DS399/AB/R  China  --- United  States  European  Union  
Japan  
Chinese Taipei  
Turkey  
Viet Nam  
 WT/AB/29  
 
- 167 - 
 
  2011 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Philippines – Distilled Spirits 
(European  Union)  
WT/DS396/AB/R  Philippines  European  
Union  European  Union  
Philippines  Australia  
China  
India 
Mexico  
Chinese Taipei  
Thailand  
Philippines – Distilled Spirits 
(United  States)  
WT/DS403/AB/R  Philippines  --- United  States  Australia  
China  
Colombia  
India 
Mexico  
Chinese Taipei  
Thailand  
 WT/AB/29  
 
- 168 - 
 
  2012  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
China – Raw Materials 
(United  States)  
WT/DS394/AB/R  China  United  States  China  
United  States  Argentina  
Brazil  
Canada  
Chile 
Colombia  
Ecuador  
India 
Japan  
Korea  
Norway  
Saudi Arabia  
Chinese Taipei  
Turkey  
China – Raw Materials 
(European  Union)  
WT/DS395/AB/R  China  European  
Union  China  
European  Union  Argentina  
Brazil  
Canada  
Chile 
Colombia  
Ecuador  
India 
Japan  
Korea  
Norway  
Saudi Arabia  
Chinese Taipei  
Turkey  
China – Raw Materials  
(Mexico)  
WT/DS398/AB/R  China  Mexico  China  
Mexico  Argentina  
Brazil  
Canada  
Chile 
Colombia  
Ecuador  
India 
Japan  
Korea  
Norway  
Saudi Arabia  
Chinese Taipei  
Turkey  
 
 WT/AB/29  
 
- 169 - 
 
  2012 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Large Civil Aircraft 
(2nd complaint)  
WT/DS353/AB/R  European  Union  United  States  United  States  
European  Union  Australia  
Brazil  
Canada  
China  
Japan  
Korea  
US – Clove Cigarettes  
WT/DS406/AB/R  United  States  --- Indonesia  Brazil  
Colombia  
Dominican 
Republic  
European  Union  
Guatemala  
Mexico  
Norway  
Turkey  
US – Tuna II (Mexico)  
WT/DS381/AB/R  United  States  Mexico  Mexico  
United  States  Argentina  
Australia  
Brazil  
Canada  
China  
Ecuador  
Guatemala  
Japan  
Korea  
New Zealand  
Chinese Taipei  
Thailand  
Turkey  
Venezuela  
US – COOL (Canada)  
WT/DS384/AB/R  United  States  Canada  Canada  
United  States  
 Argentina  
Australia  
Brazil  
China  
Colombia  
European  Union  
Guatemala  
India 
Japan  
Korea  
New Zealand  
Peru 
Chinese Taipei  
 WT/AB/29  
 
- 170 - 
 
  2012 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – COOL (Mexico)  
WT/DS386/AB/R  United  States  Mexico  Mexico  
United  States  Argentina  
Australia  
Brazil  
China  
Colombia  
European  Union  
Guatemala  
India 
Japan  
Korea  
New Zealand  
Peru 
Chinese Taipei  
China – GOES  
WT/DS414/AB/R  China  --- United  States  Argentina  
European  Union  
Honduras  
India 
Japan  
Korea  
Saudi Arabia  
Viet Nam  
 WT/AB/29  
 
- 171 - 
 
  2013  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Canada – Renewable Energy  
WT/DS412/AB/R  Canada  Japan  Japan  
Canada  Australia  
Brazil  
China  
El Salvador  
European  Union  
Honduras  
India 
Korea  
Mexico  
Norway  
Saudi Arabia  
Chinese Taipei  
United  States  
Canada – Feed-in Tariff Program  
WT/DS426/AB/R  Canada  European  Union  European  Union  
Canada  Australia  
Brazil  
China  
El Salvador  
India 
Japan  
Korea  
Mexico  
Norway  
Saudi Arabia  
Chinese Taipei  
Turkey  
United  States  
 WT/AB/29  
 
- 172 - 
 
  2014  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
EC – Seal Products (Canada)  
WT/DS400/AB/R  Canada  
 European  Union  Canada  
European  Union  Argentina  
China  
Colombia  
Ecuador  
Iceland  
Japan  
Mexico  
Russia  
United  States  
EC – Seal Products (Norway)  
WT/DS401/AB/R  Norway  European  Union  Norway  
European  Union  Argentina  
China  
Colombia  
Ecuador  
Iceland  
Japan  
Mexico  
Namibia  
Russia  
United  States  
US – Countervailing and 
Anti-Dumping Measures (China)  
WT/DS449/AB/R and Corr.1  China  United  States  United  States  
China  Australia  
Canada  
European  Union  
India 
Japan  
Russia  
Turkey  
Viet Nam  
China – Rare Earths (US)  
WT/DS431/AB/R  United  States  China  United  States  
China  Argentina  
Australia  
Brazil  
Canada  
Chinese Taipei  
Colombia  
European  Union  
India 
Indonesia  
Korea  
Japan  
Norway  
Oman  
Peru 
Russia  
Saudi Arabia  
Turkey  
Viet Nam  
 WT/AB/29  
 
- 173 - 
 
  2014 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
China – Rare Earths (EU) 
WT/DS432/AB/R  China  --- European  Union  Argentina  
Australia  
Brazil  
Canada  
Chinese Taipei  
Colombia  
India 
Indonesia  
Japan  
Korea  
Norway  
Oman  
Peru 
Russia  
Saudi Arabia   
Turkey  
United  States  
Viet Nam  
China – Rare Earths (Japan)  
WT/DS433/AB/R  China  --- Japan  Argentina  
Australia  
Brazil  
Canada  
Chinese Taipei  
Colombia  
India 
Indonesia  
European  Union  
Korea  
Norway  
Oman  
Peru 
Russia  
United  States  
US – Carbon Steel (India)  
WT/DS436/AB/R  India United  States  India  
United  States  Australia  
Canada  
China  
European  Union  
Saudi Arabia  
Turkey  WT/AB/29  
 
- 174 - 
 
  2014 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Countervailing Measures 
(China)  
WT/DS437/AB/R  China  United  States  United  States  
China  Australia  
Brazil  
Canada  
European  Union  
India 
Japan  
Korea  
Norway  
Russia  
Saudi Arabia  
Turkey  
Viet Nam  
 WT/AB/29  
 
- 175 - 
 
  2015  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Argentina – Import Measures (EU)  
WT/DS438/AB/R  Argentina  European  Union  Argentina  
European  Union  Australia  
Canada  
China  
Ecuador  
Guatemala  
India 
Israel  
Japan  
Korea  
Norway  
Saudi Arabia  
Chinese Taipei  
Thailand  
Turkey  
Switzerland  
United  States  
Argentina – Import Measures 
(US) 
WT/DS444/AB/R  Argentina  --- United  States  Australia  
Canada  
China  
Ecuador  
European  Union  
Guatemala  
India 
Israel  
Japan  
Korea  
Norway  
Saudi Arabia  
Chinese Taipei  
Thailand  
Turkey  
Switzerland  
Argentina – Import Measures 
(Japan)  
WT/DS445/AB/R  Argentina  Japan  Argentina  
Japan  Australia  
Canada  
China  
Ecuador  
European  Union  
Guatemala  
India 
Israel  
Korea  
Norway  
Saudi Arabia  
Chinese Taipei  
Thailand  
Turkey  
Switzerland  
United  States  
 WT/AB/29  
 
- 176 - 
 
  2015 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – COOL (Article  21.5 – 
Canada)  
WT/DS384/AB/RW  United  States  Canada  Canada  
United  States  Australia  
Brazil  
China  
Colombia  
European  Union  
Guatemala  
India 
Japan  
Korea  
Mexico  
New Zealand  
US – COOL (Article  21.5 – 
Mexico)  
WT/DS386/AB/RW  United  States  Mexico  Mexico  
United  States  Australia  
Brazil  
Canada  
China  
Colombia  
European  Union  
Guatemala  
India 
Japan  
Korea  
New Zealand  
US – Shrimp II (Viet  Nam)  
WT/DS429/AB/R  Viet Nam  --- United  States  China  
Ecuador  
European  Union  
Japan  
Norway  
Thailand  
India – Agricultural Products  
WT/DS430/AB/R  India --- United  States  Argentina  
Brazil  
China  
Colombia  
Ecuador  
European  Union  
Guatemala  
Japan  
Peru – Agricultural Products  
WT/DS457/AB/R  Peru Guatemala  Guatemala  
Peru Argentina  
Brazil  
China  
Colombia  
Ecuador  
El Salvador  
European  Union  
Honduras  
India 
Korea  
United  States  WT/AB/29  
 
- 177 - 
 
  2015 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
China – HP-SSST (Japan)  
WT/DS454/AB/R and Add. 1  Japan  China  China  
Japan  European  Union  
India 
Korea  
Russia  
Saudi Arabia  
Turkey  
United  States  
China – HP-SSST (EU)  
WT/DS460/AB/R and Add. 1  China  European  Union  China  
European  Union  India 
Japan  
Korea  
Russia  
Saudi Arabia  
Turkey  
United  States  
US – Tuna II (Mexico)  
(Article  21.5 – Mexico)  
WT/DS381/AB/RW  United  States  Mexico  Mexico  
United  States  Australia  
Canada  
China  
European  Union  
Guatemala  
Japan  
Korea  
New Zealand  
Norway  
Thailand  
 WT/AB/29  
 
- 178 - 
 
  2016  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
EC – Fasteners (China) – 
(Article  21.5 – China)  
WT/DS397/AB/RW  European  Union  China  China  
European  Union  Japan  
United  States  
Argentina – Financial Services  
WT/DS453/AB/R  Panama  Argentina  Argentina  
Panama  Australia  
Brazil  
China  
Ecuador  
European  Union  
Guatemala  
Honduras  
India 
Oman  
Saudi Arabia  
Singapore  
United  States  
Colombia  –Textiles  
WT/DS461 /AB/R  Colombia  --- Panama  China  
Ecuador  
El Salvador  
European  Union  
Guatemala  
Honduras  
Philippines  
United  States  
US – Washing Machines  
WT/DS464/AB/R  United  States  Korea  Korea  
United  States  Brazil  
Canada  
China  
European  Union  
India 
Japan  
Norway  
Saudi Arabia  
Thailand  
Turkey  
Viet Nam  
 WT/AB/29  
 
- 179 - 
 
  2016 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
India – Solar Cells  
WT/DS456/AB/R  India --- United  States  Brazil  
Canada  
China  
Ecuador  
European  Union  
Japan  
Korea  
Malaysia  
Norway  
Russia  
Saudi Arabia  
Chinese Taipei  
Turkey  
EU – Biodiesel (Argentina)  
WT/DS473/AB/R  European  Union  Argentina  Argentina  
European  Union  Australia  
China  
Colombia  
Indonesia  
Mexico  
Norway  
Russia  
Saudi Arabia  
Turkey  
United  States  
 WT/AB/29  
 
- 180 - 
 
  2017  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Russia – Pigs (EU)  
WT/DS475/AB/R  Russia  European  Union  European  Union  
Russia  Australia  
Brazil  
China  
India 
Japan  
Korea  
Norway  
Chinese Taipei  
South Africa  
United  States  
US – Anti-Dumping Methodologies 
(China)  
WT/DS471/AB/R  China  --- United  States  Brazil  
Canada  
European  Union  
India 
Japan  
Korea  
Norway  
Russia  
Saudi Arabia  
Chinese Taipei  
Turkey  
Ukraine  
Viet Nam  
US – Tax Incentives  
WT/DS487/AB/R  United  States  --- European  Union  Australia  
Brazil  
Canada  
China  
Japan  
Korea  
Russia  
EU – Fatty Alcohols (Indonesia)  
WT/DS442/AB/R  Indonesia  European  Union  European  Union  
Indonesia  Korea  
United  States  
Indonesia – Import Licensing 
Regimes  
WT/DS477/AB/R  Indonesia  --- New Zealand  
United  States  Argentina  
Australia  
Brazil  
Canada  
China  
European  Union  
Japan  
Korea  
Norway  
Paraguay  
Singapore  
Chinese Taipei  
 WT/AB/29  
 
- 181 - 
 
  2017 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Indonesia – Import Licensing 
Regimes  
WT/DS478/AB/R  Indonesia  --- New Zealand  
United  States  Argentina  
Australia  
Brazil  
Canada  
China  
European  Union  
Japan  
Korea  
Norway  
Paraguay  
Singapore  
Chinese Taipei  
 
  WT/AB/29  
 
- 182 - 
 
  2018  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Russia – Commercial Vehicles  
WT/DS479/AB/R  Russia  European  Union  European  Union  
Russia  Brazil  
China  
Japan  
Korea  
Turkey  
Ukraine  
United  States  
EC and certain member States  – 
Large Civil Aircraft 
(Article  21.5 – US) 
WT/DS316/AB/RW  European  Union  United  States  United  States  
European  Union  Australia  
Brazil  
Canada  
China  
Japan  
Korea  
EU – PET (Pakistan)  
WT/DS486/AB/R  European  Union  Pakistan  Pakistan  
European  Union  China  
United  States  
Indonesia – Iron or Steel Products  
WT/DS490/AB/R  Indonesia  Chinese  Taipei  
Viet Nam Chinese  Taipei  
Viet Nam  
Indonesia  Australia  
Chile 
China  
European  Union  
India 
Japan  
Korea  
Russia  
Ukraine  
United  States  
Indonesia – Iron or Steel Products  
WT/DS496/AB/R  Indonesia  Chinese  Taipei  
Viet Nam Chinese  Taipei  
Viet Nam  
Indonesia  Australia  
Chile 
China  
European  Union  
India 
Japan  
Korea  
Russia  
Ukraine  
United  States  
 WT/AB/29  
 
- 183 - 
 
  2018 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
Brazil – Taxation  
WT/DS472/AB/R  Brazil  European  Union  European  Union  
Brazil  Argentina  
Australia  
Canada  
China  
Colombia  
India 
Japan  
Korea  
Russia  
South  Africa  
Chinese  Taipei  
Turkey  
United  States  
Brazil – Taxation  
WT/DS497/AB/R  Brazil  Japan  Japan  
Brazil  Argentina  
Australia  
Canada  
China  
Colombia  
European Union  
India 
Korea  
Russia  
Singapore  
Turkey  
Ukraine  
United  States  
US – Tuna II (Mexico) 
(Article  21.5 – US) /  
US – Tuna II (Mexico) 
(Article  21.5 – Mexico II)  
WT/DS381/AB/RW/USA  Mexico  --- United  States  Australia  
Brazil  
Canada  
China  
Ecuador  
European  Union  
Guatemala  
India 
Japan  
Korea  
New Zealand  
Norway  
 WT/AB/29  
 
- 184 - 
 
  2018 (CONT'D)  
Case  Appellant  Other 
appellant(s)  Appellee(s)  Third 
participant(s)  
US – Tuna II (Mexico) 
(Article  21.5 – US) /  
US – Tuna II (Mexico) 
(Article  21.5 – Mexico II)  
WT/DS381/AB/RW/2  Mexico  --- United  States  Australia  
Brazil  
Canada  
China  
Ecuador  
European  Union  
Guatemala  
India 
Japan  
Korea  
New Zealand  
Norway  
 
 
__________