WORLD TRADE  
ORGANIZATION  WT/DS207/RW 
8 December 2006 
 (06-5769) 
 Original:   English 
  
 
     
 
CHILE – PRICE BAND SYSTEM AND 
SAFEGUARD MEASURES RELATING TO 
CERTAIN AGRICULTURAL PRODUCTS 
 
Recourse to Article 21.5 of the DSU by Argentina  
 
  
 
Report of the Panel 
 
  WT/DS207/RW 
 Page i 
 
 
  TABLE OF CONTENTS 
Page  
I. INTRODUCTION ................................................................................................................... .1 
II. FACTUAL ASPECTS ..............................................................................................................1  
A. BACKGROUND .............................................................................................................................1  
B. MEASURES SUBJECT TO TH E ORIGINAL PROCEEDINGS ................................................................2  
C. PANEL AND APPELLATE BODY FINDINGS IN THE ORIGINAL PROCEEDINGS ................................2  
D. CURRENT PROCEEDINGS .............................................................................................................3  
E. MEASURE CHALLENGED BY ARGENTINA :  CHILE'S AMENDED PRICE BAND SYSTEM ................4  
1. The legal instruments .......................................................................................................... .....4 
(a) Law 19.897 ..................................................................................................................... ............4  
(b) Supreme Decree  831 of the Ministry of Finance .......................................................................6  
2. Workings of the amended PBS ..............................................................................................10  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.......................13  
IV. ARGUMENTS OF THE PARTIES ......................................................................................14  
V. ARGUMENTS OF THE THIRD PARTIES ........................................................................14  
VI. INTERIM REVIEW...............................................................................................................14  
Factor applicable to wheat flour ............................................................................................... 15 
Linkage between Argentina's claim under the second sentence of Article II:1(b) of 
GATT 1994 and its claim under Article 4.2 of the Agreement on Agriculture ........................15 
Mathematical calculations submitted by the parties .................................................................15 
Adjustment for import costs in the original PBS ......................................................................16 
Amendments to Chile's PBS .....................................................................................................1 6 
The amended PBS as a border measure other than an ordinary customs duty..........................17 Implementation of rulings and recommendations of the DSB..................................................17 
Additional revisions and corrections.........................................................................................17  
VII.
 FINDINGS....................................................................................................................... ........17  
A. ORDER OF THE PANEL 'S ANALYSIS ...........................................................................................17  
B. ARGENTINA 'S CLAIM UNDER ARTICLE  4.2 OF THE AGREEMENT ON AGRICULTURE ................18  
1. Arguments of the parties....................................................................................................... .18 
2. Relevant provision ............................................................................................................. .....19  
3. Panel's analysis............................................................................................................... .........20  
(a) Issues for the Panel' s consideration........................................................................................... 20 
(b) General considerations......................................................................................................... .....20  
(c) Is the amended PBS a border measure similar to those listed in footnote 1 to 
Article 4.2?................................................................................................................... .............21  
(i) Border measures listed in foot note 1 to Article 4.2 ..................................................................21  WT/DS207/RW 
Page ii  
 
  (ii)
 Definition of the term "variable import levies" in the original proceedings ............................22  
(iii) Definition of the term "minimum import pr ices" in the original proceedings ..........................23  
(iv) Determination that the original PBS was similar to "variable import levies" or 
"minimum import prices"........................................................................................................ ..24 
(v) Is the amended PBS still similar to "var iable import levies" or "minimum import 
prices"?....................................................................................................................... ..............27  
Amendments introduced by Chile in its PBS............................................................................27 
Is the amended PBS still similar to a "variable import levy"?..................................................29 
Is the amended PBS still similar to a "minimum import price"? ..............................................35 The issue of transparency and predicta bility under Chile's amended PBS ...............................37 
Conclusion ..................................................................................................................... ...........38 
(d)
 Conditions of access to Chile's market under the amended PBS..............................................38  
4. Conclusion ..................................................................................................................... ..........39  
C. ARGENTINA 'S CLAIM UNDER THE SECOND SENTENCE OF ARTICLE  II:1( B) OF GATT  
1994 ........................................................................................................................... ...............39  
1. Arguments of the parties....................................................................................................... .39 
2. Relevant provision ............................................................................................................. .....40  
3. Panel's analysis............................................................................................................... .........41  
(a) Issues for the Panel' s consideration........................................................................................... 41 
(b) Findings in the original proceedings.........................................................................................41  
(c) Need for separate findings under Ar ticle II:1(b) of GATT 1994..............................................42  
(d) The issue of the Panel's mandate ..............................................................................................4 3 
(i) Arguments of the parties ....................................................................................................... ....43  
(ii) Relevant provision ............................................................................................................. .......44  
(iii) Interpretation of the Panel's mandate under Article 21.5 of the DSU......................................44  
(iv) Does Argentina's claim under Article II:1(b) of GATT 1994 fall within the Panel's 
mandate?....................................................................................................................... ............48  
Object and purpose of Article 21.5 of the DSU........................................................................48 
A compliance panel's jurisdiction extends beyond the original DSB's 
recommendations and rulings ...................................................................................................4 9 
Conditions under which a compliance panel may consider new claims, not raised 
before the original panel ...................................................................................................... .....50 
4. Conclusion ..................................................................................................................... ..........54  
D. ARGENTINA 'S CLAIM UNDER ARTICLE  XVI:4  OF THE WTO  AGREEMENT ...............................55  
1. Arguments of the parties....................................................................................................... .55 
2. Relevant provision ............................................................................................................. .....55  
3. Panel's analysis............................................................................................................... .........55  
4. Conclusion ..................................................................................................................... ..........56   WT/DS207/RW 
 Page iii 
 
 
  VIII.  CONCLUSIONS AND RECOMMENDATIONS................................................................56  
 WT/DS207/RW 
Page iv  
 
  LIST OF ANNEXES 
 
 
ANNEX A 
 
FIRST WRITTEN SUBMISSIONS FROM THE PARTIES 
 
Contents Page 
Annex A-1  First Written Submission of Argentina (19 April 2006) A-2  
Annex A-2 First Written Submissi on of Chile (3 May 2006) A-57 
 
 
ANNEX B 
 
THIRD PARTY SUBMISSION BY BRAZIL 
(12 May 2006) 
 
 
ANNEX C 
 
REBUTTALS FROM THE PARTIES 
 
Contents Page 
Annex C-1  Rebuttal by Argentina (17 May 2006) C-2  
Annex C-2 Rebuttal by Chile (24 May 2006) C-52 
 
 
ANNEX D 
 
ORAL STATEMENTS OF THE PARTIES AT THE 
SUBSTANTIVE MEETING OF THE PANEL 
 
Contents Page 
Annex D-1  Opening Statement by Argentina (1 August 2006) D-2  
Annex D-2 Closing Statement by Argentina (2 August 2006) D-26 
Annex D-3 Opening Statement by Chile (1August 2006) D-30 
Annex D-4 Closing Statement by Chile (2 August 2006) D-41 
 
 
ANNEX E 
 
ORAL STATEMENTS OF THIRD PARTIES AT THE 
SUBSTANTIVE MEETING OF THE PANEL  
 
Contents Page 
Annex E-1  Oral Statement by Australia (2 August 2006) E-2  
Annex E-2 Oral Statement by Brazil (2 August 2006) E-5 
Annex E-3 Oral Statement by Canada (2 August 2006) E-8 
Annex E-4 Oral Statement by Colombia (2 August 2006) E-11 
Annex E-5 Oral Statement by the European Communities (2 August 2006) E-13 
Annex E-6 Oral Statement by Thailand (2 August 2006) E-17 
Annex E-7 Oral Statement by the United States (2 August 2006) E-19  WT/DS207/RW 
 Page v 
 
 
   
 
ANNEX F 
 
REPLIES BY THE PARTIES TO QU ESTIONS POSED BY THE PANEL 
AND OTHER PARTIES AFTER THE SUBSTANTIVE MEETING OF THE PANEL  
 
Contents Page 
Annex F-1  Replies by Argentina to Questions posed by the Panel  F-2  
Annex F-2  Replies by Argentina to Ques tions posed by the European 
Communities F-71  
Annex F-3 Replies by Chile to Questions posed by the Panel F-77 
Annex F-4 Replies by Chile to Questions posed by Argentina F-116 
 
 
ANNEX G 
 
REQUEST FOR THE ESTABLISHMENT OF A PANEL  
 
 
ANNEX H 
 
WORKING PROCEDURES OF THE PANEL  
 
 
ANNEX I 
 
LISTS OF EXHIBITS SUBMITTED BY THE PARTIES 
 
Contents Page 
Annex I-1  List of Exhibits submitted by Argentina I-2  
Annex I-2 List of Exhibits submitted by Chile I-5 
 WT/DS207/RW 
Page vi  
 
  WTO DISPUTE SETTLEMENT REPORTS AND ARBITRATION AWARDS 
 
Short Title Full Case Title and Citation 
Argentina – Footwear (EC)  Appellate Body Report, Argentina – Safeguard Measures on Imports of 
Footwear , WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515 
Argentina – Textiles and 
Apparel  Appellate Body Report, Argentina – Measures Affecting Imports of Footwear, 
Textiles, Apparel and Other Items , WT/DS56/AB/R and Corr.1, adopted 22 April 
1998, DSR 1998:III, 1003 
Argentina – Textiles and 
Apparel  Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, 
Apparel and Other Items , WT/DS56/R, adopted 22 April 1998, modified by 
Appellate Body Report, WT/DS56/AB/R, DSR 1998:III, 1033 
Australia – Salmon  Appellate Body Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327 
Brazil – Desiccated Coconut  Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut , 
WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, 167 
Canada – Aircraft  
(Article 21.5 – Brazil)  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft – Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW, 
adopted 4 August 2000, DSR 2000:IX, 4299 
Chile – Price Band System  Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products , WT/DS207/AB/R, adopted 23 October 
2002, DSR 2002:VIII, 3045 
Chile – Price Band System  Panel Report, Chile – Price Band System and Safeguard Measures Relating to 
Certain Agricultural Products , WT/DS207/R, adopted 23 October 2002, modified 
by Appellate Body Report, WT/DS207AB/R, DSR 2002:VIII, 3127 
Chile – Price Band System  Award of the Arbitrator, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products – Arbitration under Article 21.3(c) of 
the DSU , WT/DS207/13, 17 March 2003, DSR 2003:III, 1237 
EC – Bananas III  Appellate Body Report, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 1997, 
DSR 1997:II, 591 
EC – Bed Linen  
(Article 21.5 – India)  Appellate Body Report, European Communities – Anti-Dumping Duties on 
Imports of Cotton-Type Bed Linen from I ndia – Recourse to Article 21.5 of the 
DSU  by India , WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, 965  
EC – Bed Linen  
(Article 21.5 – India)  Panel Report, European Communities – Anti-Dumping Duties on Imports of 
Cotton-Type Bed Linen from India – R ecourse to Article 21.5 of the DSU  by 
India , WT/DS141/RW, adopted 24 April 2003, modified by Appellate Body 
Report, WT/DS141/AB/RW, DSR 2003:IV, 1269  
EC – Chicken Cuts Award of the Arbitrator, European Communities – Customs Classification of 
Frozen Boneless Chicken Cuts – Arbitration under Article 21.3(c) of the DSU , 
WT/DS269/13, WT/DS286/15, 20 February 2006 
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, 
DSR 1998:I, 135 
EC – Sardines  Appellate Body Report, European Communities – Trade Description of Sardines , 
WT/DS231/AB/R, adopted 23 October 2002, DSR 2002:VIII, 3359 
EC – Tariff Preferences Appellate Body Report, European Communities – Conditions for the Granting 
of Tariff Preferences to Developing Countries , WT/DS246/AB/R, adopted 
20 April 2004, DSR 2004:III, 925  WT/DS207/RW 
 Page vii 
 
 
  Short Title Full Case Title and Citation 
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical and 
Agricultural Chemical Products , WT/DS50/AB/R, adopted 16 January 1998, 
DSR 1998:I, 9 
Japan – Alcoholic Beverages II  Appellate Body Report, Japan – Taxes on Alcoholic Beverages , WT/DS8/AB/R, 
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97  
Japan – Apples  Appellate Body Report, Japan - Measures Affecting the Importation of Apples , 
WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, 4391 
Korea – Dairy  Appellate Body Report, Korea – Definitive Safe guard Measure on Imports 
of Certain Dairy Products , WT/DS98/AB/R, adopted 12 January 2000, 
DSR 2000:I, 3 
US – 1916 Act (EC)  Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the 
European Communities , WT/DS136/R and Corr.1, adopted 26 September 2000, 
upheld by Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, 
DSR 2000:X, 4593 
US – 1916 Act (Japan)  Panel Report, United States – Anti-Dumping Act of 1916, Complaint by Japan , 
WT/DS162/R and Add.1, adopted 26 September 2000, upheld by Appellate Body 
Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4831 
US – Anti-Dumping Measures 
on Oil Country Tubular Goods Appellate Body Report, United States – Anti-Dumping Measures on Oil Country 
Tubular Goods (OCTG) from Mexico , WT/DS282/AB/R, adopted 28 November 
2005  
US – Countervailing Measures 
on Certain EC Products 
(Article 21.5 – EC) Panel Report, United States – Countervailing Measures Concerning Certain 
Products from the European Communities – Recourse to Article 21.5 of the DSU 
by the European Communities , WT/DS212/RW, adopted 27 September 2005 
US – FSC  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619 
US – FSC  
(Article 21.5 – EC)  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article 21.5 of the DSU by the European Communities , WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 55 
US – FSC  
(Article 21.5 – EC II) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Second Recourse to Arti cle 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW2, adopted 14 March 2006 
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 
US – Section 301 Trade Act  Panel Report, United States – Sections 301-310 of the Trade Act of 1974 , 
WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815 
US – Shrimp  
(Article 21.5 – Malaysia)  Appellate Body Report, United States – Import Prohibition of Certain Shrimp
 and Shrimp Products – Recourse to Ar ticle 21.5 of the DSU by Malaysia , 
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481 
US – Softwood Lumber IV 
(Article 21.5 – Canada) Appellate Body Report, United States – Final Countervailing Duty Determination 
with Respect to Certain Softwood Lumber from Canada – Recourse by Canada to 
Article 21.5 of the DSU , WT/DS257/AB/RW, adopted 20 December 2005  
US – Softwood Lumber VI 
(Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the 
DSU by Canada , WT/DS277/AB/RW, adopted 9 May 2006  
US – Wool Shirts and Blouses  Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R and Corr.1, adopted 
23 May 1997, DSR 1997:I, 323 
 WT/DS207/RW 
Page viii  
 
  TABLE OF ABBREVIATIONS USED IN THIS REPORT 
 
 
DSB Dispute Settlement Body 
DSU Dispute Settlement Understanding 
EC European Communities 
GATT General Agreement on Tariffs and Trade GATT 1947 General Agreement on Tariffs and Trade 1947 GATT 1994 General Agreement on Tariffs and Trade 1994 MFN Most-Favoured Nation 
PBS Chile's Price Band System 
WTO World Trade Organization WTO Agreement Marrakesh Agreement esta blishing the World Trade Organization 
 
  WT/DS207/RW 
 Page 1 
 
 
  I. INTRODUCTION 
1.1 On 29 December 2005, Argentina requested the establishment of a panel pursuant to 
Article 21.5 of the Understanding on Rules and Pr ocedures Governing the Settlement of Disputes 
(hereinafter "DSU") concerning Ch ile's alleged failure to implemen t the recommendations and rulings 
of the Dispute Settlement Body (her einafter "DSB") in the dispute Chile – Price Band System and 
Safeguard Measures Relating to Certain Agricultural Products (hereinafter " Chile – Price Band 
System ").1 
1.2 At its meeting on 20 January 2006, the DSB decided, in accordance with Article 21.5 of the 
DSU, to refer to the original Panel, if possibl e, the matter raised by Argentina in document 
WT/DS207/18.2  At that meeting, the parties to the dis pute also agreed that the Panel should have 
standard terms of reference.  The terms of  reference are, therefore, the following: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by Argentina in document WT/DS207/18, the matter referred to the DSB by Argentina in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those 
agreements."
3 
1.3 On 4 April 2006, the parties agreed that  the Panel would be composed as follows: 
 Chairman: Mr Hardeep Puri 
  Members: Mr Ho-Young Ahn    M r  T i m o t h y  G r o s e r
4 
 
1.4 Australia, Brazil, Canada, China, Colombia, the European Communities, Peru, Thailand and 
the United States reserved their rights to particip ate in the Panel proceedings as third parties.5 
1.5 The Panel met with the parties on 1 and 2 Augu st 2006.  It met with the third parties on 
2 August 2006.  The Panel issued the draft descriptiv e part of its report to the parties on 27 September 
2006.   On the same date, third parties were also sent a copy of the annexes that contained their 
respective submissions and oral statements.  On 2 October 2006, both parti es submitted comments to 
the draft descriptive part of the report.  On 4 Oc tober 2006, the United States requested a correction 
into the annex that contains its oral statement made  at the meeting with the Panel.  The Panel issued 
its interim report to the parties on 11 October 2006. 
II. FACTUAL ASPECTS 
A. BACKGROUND  
2.1 This dispute concerns the amendments made by  Chile to its Price Band System ("PBS") and 
whether, as a result of these amendments, the modi fied system (the "amended PBS") complies with 
                                                      
1 Request for the Establishment of a Panel, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products (Recourse to Article 21.5 of the DSU by Argentina ) (hereinafter 
"Chile – Price Band System (Article 21.5 – Argentina )"), 9 January 2006,WT/DS207/18. 
2 Constitution of the Panel (N ote by the Secretariat), Chile – Price Band System (Article 21.5 – 
Argentina) , 4 April 2006, WT/DS207/19, para. 1. 
3 Ibid., para. 2. 
4 Ibid., para. 3. 
5 Ibid., para. 4. WT/DS207/RW 
Page 2  
 
  the recommendations and rulings approved by the DS B and brings the amended PBS into conformity 
with Chile's obligations under the WTO covered agreements. 
B. M
EASURES SUBJECT TO TH E ORIGINAL PROCEEDINGS  
2.2 The original Panel and Appellate Body proceed ings concerned two distinct matters:  (a) 
Chile's PBS;  and (b) Chile's provisional and de finitive safeguard measures on imports of wheat, 
wheat flour and edible vegetable oils, as well as the extension in time of those measures. 
C. PANEL AND APPELLATE BODY FINDINGS IN THE ORIGINAL PROCEEDINGS  
2.3 With regard to Chile's PBS6, the original Panel found that the PBS was a border measure 
similar to a variable import levy and to a minimum import price, other than ordinary customs duties, 
within the meaning of footnote 1 to the Agreement on Agriculture.7  The Panel found additionally that 
the PBS was not maintained under balance-of-p ayment provisions or under other general, non-
agriculture specific provisions of GATT 1994 or of the other Multilateral Trade Agreements in Annex 
1A to the WTO Agreement, within the meaning of footnote 1 to the Agreement on Agriculture.8  The 
Panel concluded that the PBS was inconsistent w ith Article 4.2 of the Agreement on Agriculture.9 
2.4 The original Panel also found that, since the PBS duties did not constitute ordinary customs 
duties, the fact that those duties were not record ed by Chile in the colu mn of "other duties and 
charges" in its Schedule but were nevertheless le vied, made them inconsistent with the second 
sentence of Article II:1(b) of GATT 1994.10 
2.5 The Appellate Body upheld the Panel's finding that Chile's PBS was a border measure similar 
to a variable import levy and a minimum import pri ce and was therefore inconsistent with Article 4.2 
of the Agreement on Agriculture.11  The Appellate Body, however, disagreed with the Panel's 
definition of "ordinary customs duties" and rever sed the Panel's finding that the term "ordinary 
customs duty", as used in Article 4.2 of the Agreement on Agriculture, was to be understood as "referring to a customs duty which is not a pplied to factors of an exogenous nature".
12 
2.6 The Appellate Body also considered that the Pa nel had acted inconsistently with Article 11 of 
the DSU, by making a finding under the second sentence of Article II:1(b) of the GATT 1994, which 
was not part of the matter before the Panel, and thereby denying Chile the due process of a fair right 
of response.  The Appellate Body consequently re versed the Panel's finding under Article II:1(b) of 
GATT 1994.13 
                                                      
6 The original Panel also made findings with respect to Argentina's claims regarding Chile's provisional 
and definitive safeguards measures on imports of wheat, wheat flour and edible vegetable oils.  Noting that the measures had expired, the Panel abstained from maki ng recommendations regarding these measures.  Panel 
Report on  Chile – Price Band System , paras. 7.112, 7.113, 7.124, 7.126, 7.128, 7.140, 7.149, 7.162, 7.174, 
7.180, 8.1 and 8.3.  These findings were not appealed a nd the measures are not part of the matter in the current 
proceedings. 
7 Panel Report on Chile – Price Band System , paras. 7.25, 7.47 and 7.65. 
8 Ibid., 7.102. 
9 Ibid., paras. 7.102 and 8.1. 
10 Ibid., paras. 7.107, 7.108 and 8.1. 
11 Appellate Body Report on Chile – Price Band System , paras. 262, 280 and 288. 
12 Ibid., paras. 278 and 288.  Panel Report on Chile – Price Band System , para. 7.52. 
13 Appellate Body Report on Chile – Price Band System , paras. 177 and 288.  WT/DS207/RW 
 Page 3 
 
 
  D. CURRENT PROCEEDINGS  
2.7 At its meeting on 23 October 2002, the DS B adopted the Appellate Body Report on Chile – 
Price Band System  (WT/DS207/AB/R) and the Panel Report on the same case (WT/DS207/R), as 
modified by the Appellate Body.14  Pursuant to said reports, the DSB requested Chile to bring its PBS, 
as found to be inconsistent with the Agreement on Ag riculture, into conformity with its obligations 
under that Agreement.15 
2.8 At the DSB meeting of 11 November 2002, pu rsuant to Article 21.3 of the DSU, Chile 
informed the DSB that it was consulting with Argentin a to find a mutually agreeable solution and that 
it would require a "reasonable period of time", pursuant to the terms of Article 21.3, to implement the 
recommendations and rulings of the DSB in the dis pute.  The parties did not agree on the reasonable 
period of time for implementation, and therefore,  pursuant to Chile's request, such period was 
determined by binding arbitration, in accordance with  Article 21.3(c) of the DSU.  The award of the 
arbitrator was circulated to the Members on 17 March 2003.16  It determined that the reasonable 
period of time for Chile to implement the recommenda tions and rulings of the DSB in the case was to 
be 14 months from the date of adoption of the Pa nel and Appellate Body reports by the DSB and 
would therefore expire on 23 December 2003.17 
2.9 In December 2003, Argentina and Chile conc luded an understanding regarding procedures 
under Articles 21 and 22 of the DSU with respect to  the dispute.  The bilateral understanding was 
notified to the Dispute Settlement Body by both  Members through a letter dated 24 December 2003.18 
2.10 In a communication dated 19 May 2004, Argen tina requested consultations with Chile under 
Article 21.5 of the DSU.  In that request, Argen tina disagreed that the changes made to the PBS by 
Chile, as regards wheat and wheat flour, were in compliance with the recommendations contained in 
the reports of the Panel and the Appellate Body.  Specifically, Argentina considered that, through the 
amendments incorporated by Law 19.897 and Supr eme Decree 831 of 2003, imports of wheat and 
wheat flour were still affected by the imposition of  specific duties and rebates whose application 
continued to be subject to floor and ceiling parameters, as well as to  the reference price mechanism.  
This in turn apparently meant that Chile had main tained a measure similar to a variable import levy 
and a minimum import price with respect to tho se products and, at the same time, was imposing 
"other duties or charges" on imports that were not recorded in the relevant column of its Schedule.  
Argentina finally stated that this also meant that  Chile granted imports treatment less favourable than 
that accorded to the same products of Chilean origin .  Argentina concluded that Chile had not ensured 
the conformity of its laws, regul ations and administrative procedur es with its obligations as provided 
in the WTO Agreements and, specifically, that the measures adopted by Chile to implement the 
recommendations and rulings of the DSB were inconsistent, inter alia , with the following provisions 
of the covered agreements:  Article 4.2 of th e Agreement on Agriculture; the second sentence of 
                                                      
14 Chile – Price Band System , Appellate Body Report and Panel Report, Action by the Dispute 
Settlement Body (WT/DS207/8), 29 October 2002.  First written submissions of Argentina and Chile, paras. 4 
and 6 respectively.  
15 Appellate Body Report on Chile – Price Band System , para. 289.  See also, Panel Report on Chile – 
Price Band System , para. 8.3. 
16 Chile – Price Band System , Arbitration under Article 21.3(c) of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes (WT/DS207/14), 19 March 2003. 
17 Chile – Price Band System , Arbitration under Article 21.3(c) of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes – Award of the Arbitrator (WT/DS207/13), 17 March 2003. 
18 Chile – Price Band System , Understanding between Argentina and Chile Regarding Procedures 
Under Articles 21 and 22 of the DSU (WT/DS207/16), 7 January 2004. WT/DS207/RW 
Page 4  
 
  Article II.1(b) of the GATT 1994; paragraph 4 of Article III of the GATT 1994; and, hence, 
Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization.
19 
2.11 As noted, on 29 December 2005, Argentina request ed the establishment of a panel pursuant to 
Article 21.5 of the DSU.  In Argentina's view, th e amendments to the Chilean PBS do not alter the 
PBS in its essence and do not bring it into conformity with the covered agreements.20  The Panel was 
established by the DSB at its meeting on 20 January 2006. 
E. MEASURE CHALLENGED BY ARGENTINA :  CHILE'S AMENDED PRICE BAND SYSTEM  
1. The legal instruments 
2.12 The measure subject to challenge by Argentina through this recourse to Article 21.5 of the 
DSU is Chile's amended PBS, as applied to imports  of wheat and wheat flour, based on the following 
legislation:  (a) Law 19.897, pu blished on 25 September 2003, establis hing rules on the importation of 
goods into the country, which amends Article 12 of  Law 18.525 and the Customs Tariff;  and, (b) 
Supreme Decree  831 of the Ministry of Finan ce, published on 4 October 2003, regulating the 
application of Article 12 of Law 18.525, as substituted by Article 1 of Law 19.897.21 
(a) Law 19.897 
2.13 Law 19.897 modifies Article 12 of Law 18.525 on the Rules on the Importation of Goods.22  
It was published in Chile's Official Journal of 25 September 2003.  The amendments entered into 
force for wheat and wheat flour from 16 Decemb er 2003.  In turn, Law 18.525 was published in 
Chile's Official Journal on 30 June 1986.  Chile's PBS is regulated by Article 12 of Law 18.525 as 
amended by Law No. 19.897.23 
2.14 The text of the relevant portions of Article  12 of Law 18.525, after the modifications 
introduced through Law 19.897, is as follows:  
"Established hereunder are specific duties in  United States dollars per tariff unit and 
rebates on the amounts payable as ad valorem  duties established in the Customs 
Tariff, which could affect the importati on of wheat, wheat flour and sugar, as 
stipulated in this Law. 
The amount of these duties and rebates shall be established as provided for in this 
Article by the President of the Republic, by way of a supreme decree issued by the Chilean Ministry of Finance by order of the President of the Republic, six times for wheat in the course of each twelve-month period extending from 16 December to 15 December of the following year... in terms which, when applied to the price levels 
attained by the products in question on the international markets, allow domestic 
market stability. 
                                                     
 
19 Request for Consultations, Chile – Price Band System (Article 21.5 – Argentina) , 25 May 2004, 
WT/DS207/17. 
20 Request for the Establishment of a Panel, Chile – Price Band System (Article 21.5 – Argentina) , 
9 January 2006, WT/DS207/18. 
21 Ibid., pp. 1-3.  See also, Argentina's reply to question 1 from the Panel and Chile's reply to question 1 
from the Panel. 
22 Law 19.897, in Exhibits ARG-1 and CHL-1. 
23 In the original proceedings, the relevant text of  this provision was the article as amended by Laws 
18.591 (published January 3, 1987) an d 18.573 (published Decembe r 2, 1987).  A fifth paragraph was added to 
the article during the proceedings, by Law 19.772 (published November 19, 2001).  Through this addition, Chile 
placed a cap on the duties payable so as to ensure th ey did not exceed the tariff limits bound in the WTO.  WT/DS207/RW 
 Page 5 
 
 
  For the purpose of determining the duties and rebates up until the annual period 
ending in 2007, the floor and ceiling prices for wheat... shall be considered in the 
drafting of Chilean Ministry of Finance exempt decrees No. 266... published in the Official Journal of 16 May 2002, expressed in  f.o.b. terms in United States dollars per 
tonne.  There shall be established, on the one  hand, specific duties when the reference 
price is below the floor price of US$128 fo r wheat... and, on the other hand, rebates 
on the amounts payable as ad valorem  duties established in the Customs Tariff when 
the reference price is above the ceiling price of US$148 for wheat... 
For the purpose of determining the duties and rebates as from the annual period 
ending in 2008 and up to 2014, the floor a nd ceiling prices established in the previous 
paragraph shall be adjusted annually by multiplying the values in force during the 
previous annual period by a factor of 0. 985 in the case of wheat...  In 2014, the 
President of the Republic shall evaluate the modalities and conditions of application 
of the price band system, taking into cons ideration international market conditions, 
the requirements of the industrial, produc tive and consumer sectors and Chile's trade 
obligations at that date. 
The duties and rebates referred to in this  Article shall correspond to the difference 
between the floor or ceiling prices determin ed above and a f.o.b. reference price, 
multiplied by a factor of one (1), plus the general ad valorem  duty in force for these 
products.  The f.o.b. reference price sha ll consist of the average of the daily 
international prices for wheat... recorded in the most relevant markets over a period of 
15 calendar days for wheat... reckoned from the date fixed by the Regulations for 
each decree. 
[...] The duties and rebates for wheat flour ar e based on those determined for wheat, 
multiplied by a factor of 1.56. 
The duties and rebates applicable to each import transaction shall be those in effect 
on the date of the waybill of the vehicle transporting the goods in question. 
The duties resulting from the application of this Article, added to the ad valorem  
duty, shall not exceed the tariff rate bound by Chile under the World Trade Organization for the goods referred to in paragraph 1, each import transaction being 
considered individually and using the c.i.f. value of the goods concerned in the 
transaction in question as a basis for calculation.  The rebates established as a result 
of the application of this Article sha ll in no circumstances exceed the amount 
corresponding to the ad valorem  duty payable on the importation of the goods.  The 
National Customs Service shall adopt th e measures necessary to enforce the 
provisions of this paragraph. 
The President of the Republic, by way of a supreme decree issued by the Chilean 
Ministry of Finance and endorsed by the Ministry of Agriculture, shall establish, 
pursuant to this Article, the periods in wh ich specific duties and tariff rebates are to 
be established and applied.  Furthermore,  the President shall establish the most 
relevant markets for each product, the procedures and dates for calculating the WT/DS207/RW 
Page 6  
 
  reference prices and other methodological f actors necessary for the implementation of 
this Article."
24 
(b) Supreme Decree  831 of the Ministry of Finance 
2.15 In its version amended through Law 19.897, Ar ticle 12 of Law 18.525 specifically provides 
for the issuance of a Supreme Decree in order to de termine:  (a) the periods in which specific duties 
and tariff rebates are to be established and applied;   (b) the most relevant markets for each product;  
(c) the procedures for calculating the reference pri ces;  (d) the dates for calculating the reference 
prices;  and (e) other necessary methodological factors to implement the provisions in Article 12 of the Law. 
2.16 Decree 831 of the Ministry of Finance of 26 September 2003 contains the implementing 
regulations for Article 12 of Law No. 18.525, as replaced by Article 1 of Law No. 19.897.
25 
"Having regard to the provisions of Arti cle 12 of Law No. 18.525, establishing 'Rules 
on the importation of goods into the country', as substituted by Article 1 of Law No. 19.897, and the powers conferred upon me by paragraph 8 of Article 32 of the 
Political Constitution of the Republic of Chile, I hereby issue the following: 
Decree: 
The following regulations for the application of specific duties in dollars of the 
United States of America, per tariff unit, and rebates on the amounts payable as ad 
valorem  duties established in the Customs Tariff, referred to in Article 12 of Law No. 
18.525, as substituted by Article 1 of Law No. 19.897, are hereby adopted. 
§ 1.  Initial Provisions 
Article 1.- Specific duties and tariff rebates. The specific duties in dollars of the United States of America, per tariff unit, and the 
rebates on the amounts payable as ad valorem  duties established in the Customs 
Tariff, hereinafter referred to as duties and rebates, which may affect the importation of wheat, wheat flour and sugar, shall be determined in accordance with the 
provisions of Article 12 of Law No. 18.525, hereinafter referred to as the Law, and by 
the present regulations.  
The amount of such duties and rebates shall be  set by the President of the Republic by 
a supreme decree, issued by the Ministry of Finance "by order of the President of the 
Republic", six times for wheat in the course of each annual period extending from 16 
December to 15 December of the following year, and twelve times for sugar in the 
course of each annual period extending fro m 1 December to 30 November of the 
following year, in terms which, when applie d to the price levels attained by the 
products in question in international mark ets, are such as to lend stability to the 
domestic market. 
                                                     
 
24 Law 19.897, in Exhibits ARG-1 and CHL-1.  We ha ve omitted references to sugar, which, although 
part of the PBS, it is not at issue in this case. 
25 Decree  831, in Exhibits ARG-2 AND CHL-2.  WT/DS207/RW 
 Page 7 
 
 
  Article 2.- Definitions 
For the purposes of these regulations and th e application of duties and rebates, the 
following definitions shall apply: 
(a) Reference price:  average of the daily inte rnational wheat and sugar prices recorded in 
the most relevant markets, which shall be used for determining the duties and rebates 
under the Law; 
(b) Floor price:  price used to determine the specific duties under the Law, when the 
reference price is lower than the floor price;  and 
(c) Ceiling price:  price used to determine the rebates on the amounts payable as ad 
valorem  duties established in the Customs Tari ff under the Law, when the reference 
price is higher than the ceiling price. 
 
Article 3.- Products covered 
The duties and rebates established in confor mity with the Law and these regulations 
shall apply to the following tariff c odes of the Chilean Customs Tariff: 
Product  Code  Item  
Wheat 1001.9000 Other 
Wheat flour 1101.0000 Wheat flour or meslin 
Sugar [...] [...] 
 
Article 4.- References to values and measures 
The floor and ceiling values and the referen ce prices provided for in these regulations 
shall be expressed in f.o.b. terms in do llars of the United States of America.  
The duties and rebates established in conformity  with these regulations shall be applied in 
dollars of the United States of America, per ta riff unit in the case of duties and per tonne in 
the case of rebates. 
 
§ 2.  Wheat 
Article 5.- Issuing of decrees 
Duties and rebates for wheat shall be determined six times in the course of each 
annual period extending from 16 December to  15 December of the following year by 
a supreme decree, which shall be published in  the Official Journal within a period of 
five days prior to the date of their entry into effect. 
The periods of validity for implementation of each supreme decree establishing duties 
or rebates shall be as follows: 
• From 16 December to 15 February; 
• from 16 February to 15 April; 
• from 16 April to 15 June; WT/DS207/RW 
Page 8  
 
  • from 16 June to 15 August; 
• from 16 August to 15 October;  and 
• from 16 October to 15 December.  
Article 6.- Floor and ceiling prices 
The floor and ceiling prices for wheat during the period from December 2003 to 
December 2014 shall be as follows:  
 
Floor and ceiling prices for wheat, by period of validity 
Period of validity Floor price Ceiling price 
16.12.2003 to 15.12.2007 128 148 
16.12.2007 to 15.12.2008 126 146 
16.12.2008 to 15.12.2009 124 144 
16.12.2009 to 15.12.2010 122 142 
16.12.2010 to 15.12.2011 120 140 
16.12.2011 to 15.12.2012 118 138 
16.12.2012 to 15.12.2013 116 136 
16.12.2013 to 15.12.2014 114 134 
 
Article 7.- Reference price 
The reference price for wheat shall corr espond to the average of the daily prices 
recorded in the markets sp ecified in Article 8, over a period of 15 days counted 
retroactively from the 10th day of the month in which the relevant decree is to be 
published. 
Article 8.- Most relevant market 
The most relevant market for wheat, duri ng the period of application of duties and 
rebates extending from 16 December to 15 June  of the following year, shall be that of 
Trigo Pan Argentino,  and the prices will correspond to the daily prices quoted for that 
product f.o.b. Argentine port ;  during the period of application extending from 16 
June to 15 December, it shall be that of Soft Red Winter No. 2 , and the prices will 
correspond to the daily prices quoted for that product f.o.b. Gulf of Mexico . 
[...] 
 
§ 4.  Determination of specific duties and tariff rebates 
Article 13.- Establishment of duties and rebates 
In each supreme decree issued under these re gulations there shall be established, with 
respect to the products forming its subject matter, specific duties, when the reference 
price is below the floor price, and rebates on the amounts payable as ad valorem  
duties established in the Customs Tariff, when  the reference price is above the ceiling 
price.  WT/DS207/RW 
 Page 9 
 
 
  When the reference price is above the floor  price but below the ceiling price, this 
shall be recorded in the corresponding d ecree, which shall not establish duties or 
rebates during the period in which it remains in force. 
Article 14.- Calculation of specific duties 
The specific duties applicable to imports of  wheat, refined sugar and raw sugar shall 
correspond to the difference between the floor price and the reference price of each 
product multiplied by a factor of one (1) plus the general ad valorem  tariff in force 
established in the Customs Tariff.  
Specific duty = (Floor price in force  
- reference price) * (1 + general ad valorem 
tariff in force,  
Customs Tariff) 
 
 
Article 15.- Calculation of the tariff rebate 
The rebates on amounts payable as ad valorem  Customs Tariff duties, applicable to 
imports of wheat, refined sugar and raw s ugar, shall correspond to the difference 
between the reference price and the ceiling price of each product multiplied by a 
factor of one (1) plus the general ad valorem  tariff in force established in the Customs 
Tariff. 
Tariff rebate = (Reference price  
- ceiling price in force) * (1 + general ad valorem  
tariff in force,  
Customs Tariff)  
 
Article 16.- Wheat flour 
In the case of wheat flour, the duties and reba tes applied shall be those determined for 
wheat multiplied by a factor of 1.56. 
Specific duty or  
tariff rebate for  
wheat flour = Specific duty or  
tariff rebate in  
force for wheat * 1.56 
 
 
Article 17.- Date of application of duties and rebates 
The duties or rebates applicable to each import transaction, established pursuant to 
the procedure specified in these regulations, sh all be those in effect on the date of the 
waybill of the vehicle transporting the goods in question. 
In the case of electronic filing, the waybill da te will be taken to be the date of actual 
acceptance of the vehicle and the goods will be  considered to have been presented at 
the same time, in accordance with Ar ticle 37 of the Customs Ordinance. WT/DS207/RW 
Page 10  
 
  Article 18.- Limitations on the application of duties and rebates 
The duties resulting from the applicati on of these regulations, added to the ad 
valorem  duty, may not exceed the tariff rate bound by Chile under the World Trade 
Organization, each import transaction being considered individu ally and using the 
c.i.f. value of the goods concerned in th e transaction in question as the basis for 
calculation. 
The rebates on the amounts payable as Customs Tariff ad valorem  duties determined 
for each import transaction may not exceed the amount corresponding to the ad 
valorem duty established in the Customs Tariff in force, calculated on the basis of the 
c.i.f. unit value of the goods. 
The National Customs Service shall adopt the measures necessary to enforce the 
provisions of this Article. 
ANNEX 
Summary Table for the implementation of paragraph 2  
Periods for the 
calculation of 
reference prices Period of 
publication of 
decree Periods of validity of 
specific duties or 
rebates Most relevant market 
26 Nov. - 10 Dec. 
27 Jan. - 10 Feb. 27 March - 10 April 27 May - 10 June 27 July - 10 Aug. 26 Sep. - 10 Oct. 11-15 Dec.  
11-15 Feb.  11-15 April 11-15 June 11-15 Aug. 11-15 Oct. 16 Dec. - 15 Feb. 
16 Feb. - 15 April 16 April - 15 June 16 June - 15 Aug. 16 Aug. - 15 Oct. 16 Oct. - 15 Dec. Trigo Pan Argentino 
Trigo Pan Argentino Trigo Pan Argentino Soft Red Winter No. 2Soft Red Winter No. 2Soft Red Winter No. 2 
 
[...]" 
 
2. Workings of the amended PBS 
2.17 Chile has bound its tariff rates for the products re levant in the current proceedings, wheat and 
wheat flour, at 31.5 per cent.26  However, in practice, Chile's applied tariff rates are significantly 
below its bound rate.  Not considering the specifi c duties applied under the amended PBS, the MFN 
tariff generally applicable to imports of wheat and wheat flour is 6 per cent.27 
2.18 Under the amended PBS, the total amount of duties imposed on imports of wheat, wheat flour 
and sugar28 may vary, through the imposition of additional specific duties or through the concession 
of rebates on the amounts payable.  The total amount  of duty applied to imports of wheat and wheat 
flour therefore consists of two components:  the ad valorem  MFN tariff and the applicable specific 
duty, if any, resulting from the amended PBS.29  In other words, the total amount of duties resulting 
                                                      
26 Chile's first written submission, para. 37.  Chile's reply to question 71. 
27 Chile's reply to questions 47 and 71.  Argentina's first written submission, para. 27.  Chile's first 
written submission, para. 18. 
28 As noted above (see footnote 24), sugar is not at issue in this case.  The original PBS was also 
applicable to edible vegetable oils, which have since be en excluded from the system .  Argentina's first written 
submission, paras. 21 and 22.  Chile's first written submission, para. 18.  Chile's reply to question 47 from the 
Panel. 
29 Argentina's first written submission, paras. 24 and 25 .  Chile's first written submission, paras. 18 and 
20.  WT/DS207/RW 
 Page 11 
 
 
  from the application of the amended PBS may vary between:  (a) less than 6 per cent ad valorem , 
when a rebate is gran ted;  (b) 6 per cent ad valorem , when there is no rebate  granted and no additional 
specific duty imposed;  and (c) more than 6 per cent ad valorem , when an additional specific duty is 
imposed. 
2.19 The sum of the applied ad valorem  tariff and the specific duty resulting from the amended 
PBS, if any, is capped at the ad valorem  rate bound at the WTO (31.5 per cent), each import 
transaction being considered individually and usin g the CIF value of the goods concerned in the 
transaction in question as a basis for calculation.  Likewise, the rebates on the amounts payable as Customs Tariff ad valorem  duties determined for each import transaction, if any, may not exceed the 
amount corresponding to the applicable ad valorem duty.
30 
2.20 For the determination of the specific duty app licable, if any, the amended PBS, like the 
original, consists of two elements:  a lower and upper threshold (the band's "floor" and "ceiling") and 
a reference price. 
2.21 Under the amended PBS, the lower and upper th resholds of the band ha ve been determined 
for the period extending from 16 December 2003 to 15 December 2014.  For the period from 16 
December 2003 to 15 December 2007, the lower a nd upper thresholds have been established at 
US$128 per tonne and US$148 per tonne, respectively.  From 16 December 2007 to 15 December 2014, the indicated lower and upper th resholds will be adjusted annually by multiplying the prices in 
force during the previous annual period by a fact or of 0.985.  The lower and upper thresholds 
resulting from this operation are set out in Law 19.897 and in Supreme Decree 831.
31 
2.22 Under the previous system, the lower and upper th resholds of the PBS were determined every 
year on the basis of average monthly prices observed for the preceding 60 months on specific 
exchanges.  In the case of wheat, the calculation was based on Hard Red Winter No. 2 , FOB Gulf 
(Kansas Exchange).  These average prices were adjusted by the percen tage variation in the external 
price index (IPE) drawn by the Central Bank of Chile.  The adjusted prices were listed in descending 
order, eliminating up to 25 per cent of the highest  and lowest values.  Tariff and importation costs 
(such as freight, insurance, opening of a letter of credit, interest on credit, taxes on credit, customs 
agents' fees, unloading, transport to the plant an d wastage costs) were added to the prices thus 
determined in order to fix the lower and upper thresholds on a CIF basis.32 
2.23 The amended PBS also involves the use of a "refer ence price".  This reference price is not the 
transaction price, but a price determined by the Chilean authorities six times in the course of each 
twelve-month period extending from 16 December to 15 December of the following year.33  
According to Law 19.897, the reference prices ar e to be based on "the average of the daily 
international prices for wheat... reco rded in the most relevant markets over a period of 15 calendar 
days".34  The most relevant markets for wheat ar e defined by Decree  831 to be those of Trigo Pan 
                                                      
30 Chile's first written submission, paras. 23, 26 and 37.  Chile's oral statement, paras. 22 and 24.  Law 
19.897, Article 1, in Exhibits ARG-1 and CHL-1.  Decree  831, Article 18, in Exhibits ARG-2 and CHL-2, art. 
18.  See also, Chile's reply to question 66 from the Panel. 
31 Argentina's first written submission, paras. 33, 35 and 66.  Chile's first written submission, 
paras. 28-29.  Chile's oral statement, para. 25.  Law 19.897, in Exhibits ARG-1, CHL-1.  Decree  831, in 
Exhibits ARG-2 and CHL-2.   
32 Panel Report on Chile – Price Band System , paras. 2.4-2.5. 
33 Argentina's first written submission, para. 38.  Ch ile's first written submission, para. 19.  See also, 
Argentina's reply to question 12(d) from the Panel and Chile's reply to questions 12(a), 12(d) and 13 from the 
Panel.  Law 19.897, in Exhibits ARG-1, CHL-1.  Decree  831, in Exhibits ARG-2 and CHL-2. 
34 Argentina's first written submission, para. 40.  Ch ile's first written submission, paras. 30 and 34.  
Law No. 19.897, in Exhibits ARG-1 and CHL-1. WT/DS207/RW 
Page 12  
 
  Argentino  and Soft Red Winter No. 2 .  The prices for those markets are to correspond to the daily 
prices quoted for the products FOB Argentine port  and FOB Gulf of Mexico , respectively.
35 
2.24 Under the previous system, the reference prices were determined weekly (every Friday) by 
the Chilean authorities, using the lowest f.o.b. pri ce for the product in question on foreign "markets of 
concern to Chile".  With respect to wheat, these markets of concern included Argentina, Canada 
Australia and the United States.  The reference price could be consulted by the public at the offices of 
the Chilean customs authorities.36 
2.25 Under the amended PBS, a specific duty is tri ggered when the reference price is below the 
lower threshold of the band.  The additional duty (w hich cannot bring the total duty to a level higher 
than the ad valorem  rate bound at the WTO) is equivalent  to the difference between the lower 
threshold of the band and the reference price, mult iplied by a factor of one (1) plus the general 
ad valorem  tariff (6 per cent).  Conversely, a tariff reba te is triggered when the reference price is 
higher than the upper threshold of the band.  The re bate (which cannot be greater than the applied 
ad valorem  rate) is equivalent to the difference betw een the upper threshold of the band and the 
reference price, multiplied by a factor of one (1) plus the general ad valorem  tariff (6 per cent).37 
2.26 Under the previous system, a specific duty was triggered when the reference price was below 
the lower threshold of the band.  The duty increase was equivalent to  the absolute difference between 
the lower threshold of the band a nd the reference price.  Conversel y, a tariff rebate was triggered 
when the reference price was above the price that determined the upper threshold of the band.  The 
rebate (which could not be greater than the applied ad valorem  rate) was then equivalent to the 
absolute difference between the reference price and the upper threshold of the band.38 
2.27 As regards wheat flour, and similar to the origin al PBS, the price band for wheat is used to 
calculate the duty or rebate, which is then multiplied by a factor of 1.56 to obtain the specific duty or 
rebate for wheat flour.39 
2.28 According to Decree 831, duties and rebates for wheat are to be determined six times in the 
course of each annual period exte nding from 16 December to 15 December of the following year, by a 
Supreme Decree, which is to be published in the Offici al Journal of Chile within a period of five days 
prior to the date of its entry into effect.  The periods of validity for implementation of each Decree 
establishing duties or rebates are as follows:  16 De cember to 15 February;  16 February to 15 April;  
16 April to 15 June;  16 June to 15 August;  16 August to 15 October;  and, 16 October to 
15 December.40 
2.29 Each of these bimonthly decrees contains the sp ecific duties or rebates applicable for wheat 
and wheat flour.  The decrees do not indicate the re ference price calculated for each period.  The 
                                                      
35 Argentina's first written submission, paras. 41 and 42 .  Chile's first written submission, paras. 35 and 
115.  Decree  831, Article 8, in Exhibits ARG-2 and CHL-2. 
36 Panel Report on Chile – Price Band System , paras. 2.4 and 2.6. 
37 Argentina's first written submission, paras. 52, 56-5 7 and 62-63.  Chile's oral statement, paras. 21 
and 23.  Chile's first written submission, paras. 21-22 and 24-25.  Law 19.897, in Exhibits ARG-1, CHL-1.  
Decree  831, in Exhibits ARG-2 and CHL-2. 
38 Panel Report on Chile – Price Band System , para. 2.4. 
39 Argentina's first written submission, para. 59.  Chile 's first written submission, para. 27.  Chile's oral 
statement, para. 62.  Law 19.897, in Exhibits ARG-1, CHL-1.  Decree  831, in Exhibits ARG-2 and CHL-2.  
Panel Report on Chile – Price Band System , para. 2.5. 
40 Chile's first written submission, para. 33.  Chile's rebuttal, para. 48.  Chile's reply to question 6(b) 
from the Panel.  Decree  831, Article  5, in Exhibits ARG-2 and CHL-2.  WT/DS207/RW 
 Page 13 
 
 
  specific duties or rebates remain valid for two months41, "and during that period are completely 
disconnected from what may occur in the reference, or any other, markets."42 
2.30 When a shipment of a product subject to the amended PBS (including wheat and wheat flour) 
arrives at the border for importation into Chile, the customs authorities apply the total amount of 
applicable duties or rebates under th e amended PBS, if any, as indicat ed in the corresponding Decree.  
The specific duty or rebate, applicable to each import  transaction, is the one in effect on the date of 
the waybill of the vehicle transporting the goods in question.43  Under the previous system, the 
applicable reference price for a particular shipment was determined with reference to the date of the 
bill of lading.44 
2.31 According to the data provided by Chile, during the first 109 weeks of operation of the 
amended PBS (from 16 December 2003 to 13 January 2006), in 57 weeks (52.3 per cent) only the 
general ad valorem tariff was applied, in 35 weeks (32.1 per cen t) duty rebates were applied and in 17 
weeks (15.6 per cent) specific duties were applied.   From 13 January to 15 June 2006, wheat imports 
entered into Chile subject only to the general ad valorem  tariff.45 
2.32 The Law states that: 
"In 2014, the President of the Republic sha ll evaluate the modalities and conditions of 
application of the price band system, taking into consideration international market 
conditions, the requirements of the industri al, productive and consumer sectors and 
Chile's trade obligations at that date".46 
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS 
3.1 In turn, Argentina requests that the Panel find th at through the amendments incorporated into 
its PBS, Chile has failed to implement the recomme ndations and rulings of the DSB and continues to 
be in breach of its obligations as a Member of th e WTO.  More specifically, Argentina requests that 
the Panel find that the amended PBS, as applie d to the importation of wheat and wheat flour: 
(a) Is inconsistent with Article 4.2 of the Agreement on Agriculture, since it constitutes a 
border measure similar to a variable im port levy and a minimum import price; 
(b) Is inconsistent with the second sentence of Article II:1(b) of GATT 1994, since it 
falls within the category of "other duties or  charges", has not b een recorded in the 
relevant column of Chile's Schedule of C oncessions and is nevertheless levied;  and, 
                                                      
41 Decree  831, Articles 1 and 5, and Annex "Summary Table for the implementation of paragraph 2", 
in Exhibits ARG-2 and CHL-2. 
42 Chile's first written submission, para. 180.  See also Chile's first written submission, para. 93, Chile's 
oral statement, paras. 31 and 63, and Chile's reply to questions 12(a), 13 and 14 from the Panel.  See also, 
Chile's first written submission, para. 114.  Chile's rebuttal, paras. 8 and 89.  Chile's reply to question 14 from 
the Panel. 
43 Chile's first written submission, para. 36.  Decree  831, Article 17, in Exhibits ARG-2 and CHL-2. 
44 Panel Report on Chile – Price Band System , para. 2.6. 
45 Chile's rebuttal, paras. 173 and 174.  Argentina's reply to question 29 from the Panel. 
46 Law No. 19.897, in Exhibits ARG-1 and CHL-1.  See also, Chile's reply to question 49 from the 
Panel. WT/DS207/RW 
Page 14  
 
  (c) Does not ensure the conformity of Chile 's laws, regulations  and administrative 
procedures with its obligations as provi ded in the WTO Agreements, which is 
inconsistent with Chile's obligations und er Article XVI:4 of the WTO Agreement.
47 
3.2 Chile has requested the Panel to find that the amended PBS has eliminated any inconsistency 
with Article 4.2 of the Agreement on Agricultu re and has implemented the DSB recommendations 
and rulings in the original proceedings.  More speci fically, Chile has requested the Panel to find that: 
(a) Argentina's claim under the second sentence of Article II:1(b) of GATT 1994 is 
outside the terms of reference of this compliance Panel; 
(b) Argentina's "claim ... relating to the factor of 1.56 used to determine the duties or rebates 
for wheat flour" is outside the terms of reference of this compliance Panel48; 
(c) The amendments incorporated by Chile make  the PBS consistent with Article 4.2 of 
the Agreement on Agriculture;  and, 
(d) As a consequence of the PBS not being inconsistent with Article 4.2 of the 
Agreement on Agriculture, the challenged measures are also not in breach of 
Article XVI:4 of the WTO Agreement.49 
IV. ARGUMENTS OF THE PARTIES 
4.1 The arguments of the parties are set out in their submissions to the Panel.  Submissions from 
the parties, including the first written submissions , rebuttals and written versions of their oral 
statements, are attached as annexes to the report. 
V. ARGUMENTS OF THE THIRD PARTIES 
5.1 The arguments of the third parties to these pro ceedings that presented oral statements to the 
Panel are attached as annexes to the report, i.e ., Australia, Brazil, Canada, Colombia, the European 
Communities, Thailand and the United States.  Th e only written submission r eceived by the Panel, 
that presented by Brazil, is likewise attached. 
VI. INTERIM REVIEW 
6.1 On 11 October 2006, the Panel submitted its inte rim report to the parties.  On 18 October 
2006, Argentina and Chile submitted written requests for review of precise aspects of the interim 
report. 
6.2 The Panel modified aspects of its report in light  of the parties' comments where it considered 
that appropriate, as explained below.  The Pane l has also made some additional revisions and 
corrections for the purposes of clarity and accuracy.  References to paragra ph numbers and footnotes 
in this Section refer to those in the interim report, except as otherwise noted. 
                                                      
47 Request for the Establishment of a Panel, Chile – Price Band System (Article 21.5 – Argentina) , 
9 January 2006, WT/DS207/18.  See also, Argentina' s first written submission, paras. 13-14 and 305, 
Argentina's rebuttal, paras. 320-321, and Ar gentina's oral statement, paras. 3-7. 
48 Chile's first written submission, paras. 58-63 and 197.  Chile's rebuttal, paras. 182-195, 206 and 211.  
The Panel is of the view that Argentina has not raised a cl aim specifically related to the use of such 1.56 factor.  
The Panel will consider the parties' arguments related to th is factor in the findings section of this Report.  See 
para. 7.80 below. 
49 Chile's first written submission, paras. 2, 46-57, 64 -197.  Chile's rebuttal, paras. 6 and 211.  Chile's 
oral statement, para. 19.  WT/DS207/RW 
 Page 15 
 
 
  Factor applicable to wheat flour  
6.3 In footnote 48, paragraph 3.2(a), of the interi m report, the Panel had referred to Chile's 
request that the Panel find the claim raised by Argentina relating to the factor of 1.56 used to determine the duties or rebates applicable to wheat flour to be outside of its terms of reference.  Chile  requested 
that this argument not be confined to a footnote a nd that it be addressed separately and not only in the 
context of arguments raised by Argentina. 
6.4 The Panel has reviewed paragraph 3.2 of the re port, in the light of Chile's request, and has 
reflected Chile's argument relating to the 1.56 factor in the main body of that paragraph and not solely in a footnote. 
6.5 The Panel is not persuaded, however, by Chile's  interpretation that Argentina has raised a 
claim related to the use of a factor of 1.56.  The Panel recalls the traditional definition of a claim as 
the affirmation "that the respondent party has violat ed, or nullified or impaired the benefits arising 
from, an identified provision of a particular agreement"
50, as compared to the arguments "adduced by 
a complaining party to demonstrate that the responding party's measure does indeed infringe upon the identified treaty provision".
51  Argentina's comments regarding the 1.56 factor are not a separate 
claim, but rather part of its arguments to support the claim that the amended PBS is similar to a 
"variable import levy" and a "minimum import price," and is thus inconsistent with Article 4.2 of the 
Agreement on Agriculture.  Accordingly, the Panel did not modify its reasoning contained in paragraph 7.80 of the interim report. 
Linkage between Argentina's claim under th e second sentence of Article II:1(b) of GATT 
1994 and its claim under Article 4.2 of the Agreement on Agriculture  
6.6 In paragraph 7.3 of the interim report, the Pa nel noted that Argentina has linked its claim 
under the second sentence of Article II:1(b) of GA TT 1994 to the Panel's requested findings under 
Article 4.2 of the Agreement on Agriculture.  That li nkage is also mentioned in  paragraph 7.157 of the 
interim report.  Argentina  requested that the Panel clarify that, in its request for the establishment of 
this compliance Panel, its claim under Article II: 1(b) of GATT 1994 was not linked to its claim under 
Article 4.2 of the Agreement on Agriculture and that, furthermore, the former claim is one that stands 
on its own. 
6.7 We take note of Argentina's explanation, a nd we have made corresponding adjustments in 
paragraphs 7.107 and 7.157, which reflect Argentina's arguments.  However, we find no need to 
review paragraph 7.3 of the interim report, whic h quotes Argentina's words, linking its claim under 
Article II:1(b) of GATT 1994 to its claim under Arti cle 4.2 of the Agreement on Agriculture, in order 
to discuss what should be the proper order of the Panel's analysis. 
Mathematical calculations submitted by the parties  
6.8 Chile  requested that the Panel review Section V II.B of the interim report (paragraphs 7.6 to 
7.104).  In its opinion, the Panel has not consider ed the extensive mathematical calculations provided 
by the parties, regarding whether the amended PBS works similarly to a variable levy or a minimum 
import price, and the effects of overcompensation and isolation. 
6.9 The Panel had already noted in its interim repor t, the extensive explanations provided by the 
parties regarding the operation of the amended PBS. 
                                                      
50 Appellate Body Report on Korea – Dairy , para. 139. 
51 Ibid. WT/DS207/RW 
Page 16  
 
  6.10 On the basis of such explanations and the ev idence available, the Pa nel concluded that the 
amended PBS continues to have the same features that  were found to make the original PBS similar to 
a "variable import levy".  Such a conclusion was reached mainly on the basis that the amended PBS 
contains a scheme or formula that causes and ensu res that the level of duties collected or rebates 
granted under the system changes automatically and c ontinuously over time, as well as that the design 
and operation of the amended PBS continues to be ch aracterized by a lack of both transparency and 
predictability, features also observed in the course of the original proceedings.  These aspects affect 
the basic elements of the amended PBS, i.e., the reference price and the thresholds of the band. 
6.11 With regard to the similarity to a "minimum import price", and also on the basis of the 
explanations provided by the parties and the evid ence available, the Panel noted that the amended 
PBS operates so as to prevent the entry of imports of  wheat and wheat flour into the Chilean market at 
prices below the lower threshold of the band.  The Panel also noted that, as a result of the combined 
application of the ad valorem  tariff rates and the specific duties or rebates resulting from the PBS, the 
Chilean domestic price has been disconnected from international price developments.  The amended 
PBS was found to go beyond simply ensuring "a reasona ble margin of fluctuation of domestic prices".  
Instead, specific duties resulting from the amended PB S tend to "overcompensate" for price declines 
and to elevate the entry price of wheat imports to Chile above the lower threshold of the price band.  
In these circumstances, the entry price of such im ports to Chile under the amended PBS is higher than 
if Chile simply applied a minimum import price at the level of the lower threshold of the price band. 
6.12 It is on the basis of the configuration and in teraction of the different features of Chile's 
amended PBS, and not only on partic ular mathematical calculations provided by the parties, that the 
Panel found that the amendments introduced by Chile  into its PBS have failed to convert it into a 
measure that is no longer a border measure similar to a "variable import levy" and to a "minimum 
import price", in the terms of footnote 1 to Article 4.2 of the Agreement on Agriculture.  
Consequently, the Panel finds no need to review Section VII.B of the report as requested by Chile. 
Adjustment for import costs in the original PBS
 
6.13 In paragraphs 7.40(d), 7. 48 and 7.50 of the interim report, the Panel had referred to the way in 
which prices used to determine the reference price were not adjusted for "import costs", unlike the 
prices used in the calculation of the upper and lower thresholds of the band.  The Panel also referred 
to the findings made by the Appellate Body a nd by the original Panel in that regard.  Chile  requested 
that these paragraphs be reviewed, since they pe rpetuate a misunderstanding about the way in which 
the original PBS functioned. 
6.14 The Panel has noted Chile's arguments in this regard.52  It is outside the Panel's mandate, 
however, to review the characteristics of the origin al PBS, as they were d escribed in the original 
proceedings by the Appellate Body and by that Panel.  In any event, even if, ad arguendo , we were to 
accept Chile's explanation that there is a misunders tanding about the way in which, in the original 
PBS, the reference price was not adjusted for "imp ort costs", this would not affect the conclusions 
contained in this compliance Panel report. 
Amendments to Chile's PBS  
6.15 Chile  requested that the Panel review the language  of paragraphs 7.53 and 7.92 of the interim 
report, referring to whether the Panel should consider  "specific aspects" of the amended PBS or rather 
determine the nature of the amendments to the PB S and whether those amendments are sufficient to 
comply with the DSB's recommendations and rulings and bring the measure into conformity with the 
                                                      
52 See, for example, Chile's first written submission, paras. 167-169.  WT/DS207/RW 
 Page 17 
 
 
  WTO agreements.  The Panel has reviewed the langua ge of both paragraphs in the light of Chile's 
comments. 
The amended PBS as a border measure other than an ordinary customs duty  
6.16 Paragraph 7.109 of the interim report states th at the Panel had already noted that the 
challenged measures are border measures "other than an ordinary customs duty".  Argentina  
requested that a cross-reference be added to this  paragraph to cite the corresponding section where the 
Panel concluded that the amended PBS is not an ordinary customs duty.  The Panel has included the 
cross-reference requested and reviewed the language  of paragraph 7.104 in the light of Argentina's 
comment. 
Implementation of rulings and recommendations of the DSB  
6.17 In light of the Panel's finding that Chile has ma intained a border measure similar to a variable 
import levy and to a minimum import price, and c onsequently acted in a manner inconsistent with 
Article 4.2 of the Agreement on Agriculture,  Argentina  requested the Panel to make an additional 
explicit finding that Chile has not implemented the recommendations and rulings of the DSB to bring 
its measure into conformity with its obligations  under the Agreement on Agriculture.  The Panel has 
reviewed the language of paragraph 8.2(a)  in the light of Argentina's comments. 
Additional revisions and corrections  
6.18 The Panel made additional revisions and correcti ons to paragraphs 1.5, 7.60 and 7.171 of the 
interim report, as well as to footnote 225. 
VII. FINDINGS 
A. ORDER OF THE PANEL 'S ANALYSIS  
7.1 Argentina claims that the amended PBS is incons istent with Article 4.2 of the Agreement on 
Agriculture, with the second sentence of Article II: 1(b) of GATT 1994 and with Article XVI:4 of the 
WTO Agreement. 
7.2 In the original proceedings, when dealing with  Argentina's claims under Article 4.2 of the 
Agreement on Agriculture and Article II:1(b) of  GATT 1994, the Panel decided to commence its 
analysis with an examination of the first claim.  The Panel's decision was based on the consideration 
"that Article 4.2 of the Agreement on Agriculture deal s more specifically and in detail with measures 
affecting market access of agricultural products".53  In this regard, the Appellate Body stated that, 
inasmuch as the two provisions "establish distinct  legal obligations... the outcome of this case would 
be the same" whether the analysis had begun with an  examination of Article 4.2 of the Agreement on 
Agriculture or of Article II:1(b) of the GATT 1994.54  In any event, the Appellate Body concluded 
that the Panel had not erred in examining Argen tina's claim under Article 4.2 of the Agreement on 
Agriculture before the claim under Article II:1(b) of the GATT 1994 and decided to follow the same 
order.55 
7.3 There is an additional reason to  follow the same order in the current proceedings.  Argentina 
has linked its claim under the second sentence of  Article II:1(b) of GATT 1994 to the Panel's 
requested findings under Article 4.2 of the Agre ement on Agriculture.  In Argentina's words: 
                                                      
53 Panel Report on Chile – Price Band System,  para. 7.16. 
54 Appellate Body Report on Chile – Price Band System,  para. 189. 
55 Appellate Body Report on Chile – Price Band System,  para. 191. WT/DS207/RW 
Page 18  
 
  "Insofar as the amended PBS is a border measu re similar to a variable import levy 
and a minimum import price, it is inconsistent with Article 4.2 of the Agreement on 
Agriculture , since it is a measure other than an ordinary customs duty. 
Not being an ordinary customs duty, the amended PBS constitutes 'other duties or 
charges' not recorded in the appropriate column of Chile's Schedule of concessions 
(No. VII). 
Therefore, if the amended PBS was not reco rded but is nonetheless being levied, it is 
in breach of the second  sentence of Article II:1(b) of the GATT 1994, pursuant to the 
Understanding on the Interpretation of Article II:1(b) of the GATT 1994 ."
56 
7.4 Likewise, Argentina has made its claim under Article XVI:4 of the WTO Agreement 
contingent on the Panel making findings under Artic le 4.2 of the Agreement on Agriculture and the 
second sentence of Article II:1(b) of GATT 1994: 
"[B]eing inconsistent with Article 4.2 of the Agreement on Agriculture  and the 
second sentence of Article II:1(b) of the GATT 1994, the amended PBS is in breach 
of Article XVI:4 of the Marrakesh Agreement Estab lishing the World Trade 
Organization  since, while it remains in force, Chile  is not ensuring the conformity of 
its laws, regulations and administrative pr ocedures with its obligations under the 
WTO Agreements."57 
7.5 In light of the above, as was done in the original proceedings, we will start our analysis with an 
examination of the amended PBS under Article 4.2 of the Agreement on Agriculture.  We will then turn 
to Argentina's claim under the se cond sentence of Article II:1(b) of GATT 1994 and finally to the 
claim under Article XVI:4 of the WTO Agreement. 
B. ARGENTINA 'S CLAIM UNDER ARTICLE  4.2 OF THE AGREEMENT ON AGRICULTURE  
1. Arguments of the parties 
7.6 Argentina claims that the amended PBS is incons istent with Article 4.2 of the Agreement on 
Agriculture.  It argues that the essence of the PB S was unaffected by the changes introduced by Chile 
through Law 19.897 and Supreme Decree 831.58  In its view, both the way in which the amended PBS 
is designed as well as the way in which it operates ar e sufficiently similar to the characteristics of a 
"variable import levy" and a "minimum import price" as to make the PBS not an ordinary customs duty, but rather a "similar border measure", in the terms of footnote 1 to Article 4.2 of the Agreement 
on Agriculture.
59 
7.7 Argentina adds that the particular configurati on and interaction of the specific characteristics 
of the amended PBS generate certain market access conditions that l ack transparency and 
predictability, disconnecting the Chilean market from in ternational price trends in a way that insulates 
the Chilean market from the transmission of inte rnational prices, and prevents enhanced market 
access for imports of  wheat and wheat flour.60  Argentina also contends th at the factor of 1.56 applied 
to the duties and rebates determined for wheat, in or der to calculate the duties and rebates applicable 
                                                      
56 Argentina's first written submission,  paras. 293-295 (Footnote omitted). 
57 Ibid., para. 304. 
58 Ibid., para. 70. 
59 Ibid., paras. 71, 72, 74, 285, 286 and 288.  Argentina's rebuttal, paras. 5, 6 and 12. 
60 Argentina's first written submission, paras. 73 and 287.  Argentina's rebuttal, paras. 7 and 13.  WT/DS207/RW 
 Page 19 
 
 
  to wheat flour, further insulates the entry pr ice for wheat flour from international price 
developments.61 
7.8 Argentina argues that, in the light of the Appella te Body's findings in the original case, Chile 
should have abolished its PBS as a pplied to wheat and wheat flour, as it did in the case of edible 
vegetable oils.62 
7.9 Chile responds that the amendments made to its PBS under Law 19.897 and its Regulations are 
in keeping with the findings and conclusions of the Ap pellate Body and that Chile has therefore complied 
with the recommendations and rulings of the WTO Dispute Settlement Body.63  In Chile's opinion, it 
was only required to take action with respect to sp ecific aspects of the PBS that the Appellate Body 
had identified.64  Chile adds that this is without prejudice to the fact that, in its view, the amendments 
introduced to the PBS do not have the effects that  Argentina alleges and which would continue to 
make it inconsistent with Article 4.2 of the Agreement on Agriculture.65 
7.10 Chile argues that the amendments help to gra dually reduce protection in the domestic wheat 
and milling sector.  The parameters used for the ass essment of specific duties, namely floor, ceiling 
and reference prices, have been establishe d in a transparent and predictable manner.66  In its opinion, 
the Chilean wheat and wheat flour market has be en connected to the international market, and 
protection levels will increasingly diminish, meani ng that in addition to closer connection with 
foreign markets, there will be a decrease in rela tive prices that will render Chile's wheat market more 
competitive.67 
7.11 Chile states that, as a result, the new PBS operat es in such a way that it does not constitute a 
variable import levy or a minimum import price, or a measure similar to a variable import levy or a 
minimum import price. Therefore, in Chile's view , the amended PBS does not constitute one of the 
measures cited in the footnote to Article 4.2 of the Agreement on Agriculture and is thus not among 
the measures required to be converted into ordinary customs duties.68 
7.12 With respect to the factor of 1.56 used to dete rmine the duties or rebates for wheat flour, Chile 
requests the Panel to find that this is a claim that fa lls outside the terms of reference of this compliance 
Panel.69 
2. Relevant provision 
7.13 In the original proceedings, the Appellate Body defined in its report Article 4 of the 
Agreement on Agriculture, the provision cited by Ar gentina, as "the legal vehicle for requiring the 
conversion into ordinary customs duties of certa in market access barriers affecting imports of 
agricultural products".70  Article 4.2 provides: 
"Members shall not maintain, resort to, or revert to any measures of the kind which 
have been required to be convert ed into ordinary customs duties1, except as otherwise 
provided for in Article 5 and Annex 5." 
                                                      
61 Argentina's first written submission, paras. 224-235. 
62 Argentina's rebuttal, paras. 317-319. 
63 Chile's first written submission, paras. 64, 89, 193 and 197.  Chile's rebuttal, paras. 6, 81 and 207. 
64 Chile's first written submission, para. 88.  Chile's rebuttal, para. 208. 
65 Chile's first written submission, para. 88. 
66 Ibid., para. 193. 
67 Ibid., para. 195. 
68 Ibid., paras. 194, 196.  Chile's rebuttal, para. 210. 
69 Chile's first written submission, paras. 58-63 and 197 .  Chile's rebuttal, paras. 182-195, 206 and 211. 
70 Appellate Body Report on Chile – Price Band System,  para. 201. WT/DS207/RW 
Page 20  
 
   "__________ 
 1 These measures include quantitative import restrictions, variable import levies, 
minimum import prices, discretionary import licensing, non-tariff measures maintained 
through state-trading enterprises, voluntary ex port restraints, and similar border measures 
other than ordinary customs duties, whether or not the measures are maintained under country-specific derogations from the provisions of GATT 1947, but not measures maintained 
under balance-of-payments provisions or under other general, non-agriculture-specific 
provisions of GATT 1994 or of the other Multila teral Trade Agreements in Annex 1A to the 
WTO Agreement." 
3. Panel's analysis 
(a) Issues for the Panel's consideration 
7.14 The main issue for the Panel to decide under this  particular claim is whether the amendments 
introduced by Chile to its PBS are such as to make  the measure consistent with Article 4.2 of the 
Agreement on Agriculture.  More specifically, whethe r the measure can no longer be considered to be 
a border measure that is similar to a variable  import levy or to a minimum import price. 
7.15 In the original proceedings, Chile's PBS was not found to be a "variable import levy" or a 
"minimum import price" system, but rather an inst rument that had sufficient likeness or resemblance 
to be considered similar to those schemes.71 
7.16 Variable import levies and minimum import prices are included in the list in footnote 1 to 
Article 4.2 of the Agreement on Agriculture as ex amples of "measures of the kind which have been 
required to be converted into ordinary customs duties" .  The list in footnote 1 contains other types of 
measures, such as quantitative import restrictions, discretionary import licensing, non-tariff measures 
maintained through state-trading enterprises and voluntary export restraints. 
7.17 In the current case, Argentina has argued that th e amended PBS is similar to variable import 
levies and to minimum import prices.72  Accordingly, the Panel will limit itself to considering the 
possible similarity between the amended PBS and those two categories of measures (variable import 
levies and minimum import prices) and not other categories of measures also listed in footnote 1 to Article 4.2 of the Agreement on Agriculture. 
(b) General considerations 
7.18 The Panel begins by noting the objectives of the WTO Agreement on Agriculture, as 
described in its preamble:  "to establish a fair and market-oriented agricultural trading system", and to 
initiate a reform process "through the negotiati on of commitments on support and protection and 
through the establishment of strengthened and more operationally effective GATT rules and 
disciplines".
73  To achieve this objective, the preamb le states that it is necessary to provide for 
reductions in protection, "resulting in correcting and preventing restrictions and distortions in world 
agricultural markets,"74 through achieving "specific binding commitments," inter alia , in the area of 
market access75.76 
                                                      
71 Ibid., paras. 222-262.  Panel Report on Chile – Price Band System,  paras. 7.38-7.47. 
72 Argentina's first written submission, paras. 71-72, 285 -286.  Argentina's rebuttal, paras. 5-6, 12, 159, 
205 and 320. 
73 Preamble to the Agreement on Agriculture, recital 2. 
74 Ibid., recital 3. 
75 Ibid., recital 4. 
76 Appellate Body Report on Chile – Price Band System,  para. 196.  WT/DS207/RW 
 Page 21 
 
 
  7.19 As noted by the Appellate Body in the original proceedings, during the course of the Uruguay 
Round, negotiators decided that certain border measu res, which restricted the volume of trade or 
distorted the price of imports of agricultural pro ducts, had to be converted into ordinary customs 
duties, with a view to ensuring enhanced market a ccess for such imports.  This agreement is reflected 
in the text of Article 4 of the Agreement on Ag riculture which, as its title indicates, deals with 
"Market Access".77 
(c) Is the amended PBS a border measure similar to  those listed in footnote 1 to Article 4.2? 
(i) Border measures listed in footnote 1 to Article 4.2 
7.20 We now turn to Argentina's contention that Ch ile's amended PBS is a border measure similar 
to a variable import levy and a minimum import pric e within the meaning of footnote 1 to Article 4.2 
of the Agreement on Agriculture. 
7.21 As in the case of the original measure78, we note that the amended PBS continues to apply 
exclusively to imported goods and is enforced  at the border by Chilean customs authorities.79  Chile 
has not disputed these facts.  It is therefore cl ear and undisputed that the amended PBS, like the 
original PBS, is still a border measure. 
7.22 Footnote 1 lists six categories of border meas ures and a residual category of such measures 
that are included  in "measures of the kind which have been required to be converted into ordinary 
customs duties" within the meaning of Article 4.2.80  The list is illustrative, and includes "quantitative 
import restrictions, variable import levies, minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trad ing enterprises, voluntary export restraints, and 
similar border measures other than ordinary customs duties " (emphasis added). 
7.23 Argentina has alleged that Chile's amended PB S has characteristics sufficiently similar to 
those of a "variable import levy" and a "minimum im port price" so as to render it a "similar border 
measure", in the terms of footnote 1 to Article 4. 2 of the Agreement on Agriculture, rather than an 
ordinary customs duty.
81 
7.24 As indicated by the Appellate Body, in order to determine whether Ch ile's amended PBS is a 
border measure similar to a variable import levy or a minimum import price within the meaning of 
footnote 1 to Article 4.2, we should start by considering, on an empirical basis, whether it bears sufficient likeness or resemblance to those two categor ies of measures so as to be considered similar.
82 
7.25 We will thus compare Chile's amended PBS to th ose two categories of measures (i.e., variable 
import levies and minimum import prices).  Before looking at these two categories of measures, we recall the words of the Appellate  Body in the original case: 
"[A]ll  of the border measures listed in footnote 1 have in common the object and 
effect of restricting the volumes, and distorting the prices, of imports of agricultural 
                                                     
 
77 Ibid., para. 200. 
78 Panel Report on Chile – Price Band System,  para. 7.25. 
79 Law 19.897, in Exhibits ARG-1, CHL-1. 
80 Footnote 1 exempts "measures ma intained under balance-of-payments provisions or under other 
general, non-agriculture-specific provisions of the GA TT 1994 or the other Multilateral Trade Agreements in 
Annex 1A to the WTO Agreement."  These "measures" are not relevant in these proceedings .  
81 Argentina's first written submission, paras. 72 an d 286.  Argentina's rebuttal, paras. 6 and 12.  
Argentina's closing oral statement,  para. 19.  Argentina's reply to question 5(b) from the Panel. 
82 Appellate Body Report on Chile – Price Band System,  paras. 225-226.  See also, Panel Report on 
Chile – Price Band System,  para. 7.26. WT/DS207/RW 
Page 22  
 
  products in ways different from the ways that ordinary customs duties do.  Moreover, 
all of these measures have in common also th at they disconnect domestic prices from 
international price developmen ts, and thus impede the transmission of world market 
prices to the domestic market.  However, even if Chile's price band system were to share these common characteristics with all of these border measures, it would not be 
sufficient to make that system a 'simil ar border measure' within the meaning of 
footnote 1.  There must be something mo re.  To be 'similar', Chile's price band 
system—in its specific factual configuration—must have, to recall the dictionary definitions we mentioned, sufficient 'resembl ance or likeness to', or be 'of the same 
nature or kind' as, at least one of the specific categories of measures listed in 
footnote 1."
83 
(ii) Definition of the term "variable import levies" in the original proceedings 
7.26 In the original proceedings, the Appellate Body  noted that the terms "variable import levies" 
and "minimum import prices" are not defined in the Agreement on Agriculture nor in any other of the 
WTO Agreements.84  In those proceedings, the Panel conclude d that it could not interpret those terms 
solely by looking at their text and context and on the basis of the general method of interpretation 
codified in Article 31 of the Vienna Convention on the Law of Treaties.85  It consequently decided to 
resort to supplementary means of interpretation as codified in Article 32 of the Vienna Convention.86  
The Appellate Body disagreed with the Panel's appr oach and decided to interpret the terms "variable 
import levies" and "minimum import prices" using the customary rules of interpretation as codified in 
Article 31 the Vienna Convention, i.e., discussing the ordinary meaning of these terms in their 
context, and in the light of their object and purpose.87 
7.27 Applying those customary rules to the interpreta tion of the term "variable import levies", the 
Appellate Body stated: 
"In examining the ordinary meaning of the term ' variable import levies ' as it appears 
in footnote 1, we note that a 'levy' is a duty, tax, charge, or other exaction usually 
imposed or raised by legal execution or process.88  An 'import' levy is, of course, a 
duty assessed upon importation.  A levy is 'variable' when it is 'liable to vary'.89  This 
feature alone, however, is not conclusive as to what constitutes a 'variable import levy' within the meaning of footnote 1.  An 'ordinary customs duty' could also fit this description.  A Member may, fully in accordance with Article II of the GATT 1994, exact a duty upon importation and periodically change the rate at which it applies that 
duty (provided the changed rates remain below the tariff rates bound in the Member's 
Schedule).
90  This change in the applied  rate of duty could be made, for example, 
through an act of a Member's legislature or  executive at any time.  Moreover, it is 
clear that the term 'variable import levies' as used in footnote 1 must have a meaning 
different from 'ordinary customs duties', b ecause 'variable import levies' must be 
converted into 'ordinary customs duties'.  Thus, the mere fact that an import duty can 
                                                      
83 Appellate Body Report on Chile – Price Band System,  para. 227. 
84 Ibid., para. 229. 
85 Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331;  8 International Legal Materials 679. 
86 Panel Report on Chile – Price Band System,  para. 7.35.  See also, Appellate Body Report on Chile – 
Price Band System,  para. 229. 
87 Appellate Body Report on Chile – Price Band System,  paras. 230-231. 
88 (original footnote ) The New Shorter Oxford English Dictionary ..., p. 1574. 
89 (original footnote ) Ibid., p. 3547. 
90 (original footnote ) Appellate Body Report, Argentina – Textiles and Apparel ..., para. 46.  WT/DS207/RW 
 Page 23 
 
 
  be varied cannot, alone, bring that duty with in the category of 'variable import levies' 
for purposes of footnote 1. 
To determine what kind of variability makes an import levy a 'variable import levy', 
we turn to the immediate context of the othe r words in footnote 1.  The term 'variable 
import levies' appears after the introductory phrase '[t]hese measures include'.  
Article 4.2—to which the footnote is attached—also speaks of ' measures '.  This 
suggests that at least one feature of 'varia ble import levies' is the fact that the 
measure itself—as a mechanism—must impose the variability of the duties.  
Variability is inherent in a measure if the measure incorporates a scheme or formula that causes and ensures that levies change automatically and continuously.  Ordinary 
customs duties, by contrast, are subject to discrete changes in applied tariff rates that 
occur independently, and unrelated to such  an underlying scheme or formula.  The 
level at which ordinary customs duties are applied can be varied by a legislature, but 
such duties will not be automatically and continuously variable.   To vary the applied 
rate of duty in the case of ordinary  customs duties will always require 
separate legislative or administrative action, whereas the ordinary meaning of the 
term 'variable' implies that no such action is required. 
However, in our view, the presence of a formula causing automatic and continuous 
variability of duties is a necessary, but by no means a sufficient,  condition for a 
particular measure to be a 'variable import levy' within the meaning of footnote 1.
91  
'Variable import levies' have additional features that undermine the object and 
purpose of Article 4, which is to achieve improved market access conditions for 
imports of agricultural products by perm itting only the application of ordinary 
customs duties.  These additional features include  a lack of transparency and a lack of 
predictability in the level of duties that will result from such measures.  This lack of 
transparency and this lack of predictability are liable to restrict the volume of imports.  
As Argentina points out, an exporter is less likely to ship to a market if that exporter 
does not know and cannot reasonably predic t what the amount of duties will be.92  
This lack of transparency and predictab ility will also contribute to distorting the 
prices of imports by impeding the transmission of international prices to the domestic market."
93 
7.28 In essence, a variable import levy is a duty assessed upon importation, which is liable to vary 
automatically and continuously on the basis of an  underlying scheme or formula that does not require 
any discrete or independent legislative or administ rative action and is intransparent and unpredictable 
as to the level of resulting duties. 
(iii) Definition of the term "minimum import prices" in the original proceedings 
7.29 As noted above94, the Appellate Body defined the term "minimum import prices" by using the 
customary rules of interpretation as codified in Ar ticle 31 the Vienna Convention, i.e., discussing the 
ordinary meaning of these terms in their context, and in the light of their object and purpose.95  
Applying those customary rules to the interpreta tion of the term "minimum import prices", the 
Appellate Body stated: 
                                                      
91 (original footnote ) The participants agreed with this in th eir responses to questioning at the oral 
hearing. 
92 (original footnote )  Argentina's responses to questioning at the oral hearing. 
93 Appellate Body Report on Chile – Price Band System,  paras. 232-234. 
94 See para. 7.26 above. 
95 Appellate Body Report on Chile – Price Band System,  paras. 230-231. WT/DS207/RW 
Page 24  
 
  "The term 'minimum import price' refers generally to the lowest price at which 
imports of a certain product may enter a Me mber's domestic market.  Here, too, no 
definition has been provided by the drafters of the Agreement on Agriculture .  
However, the Panel described 'minimum import prices' as follows: 
[these] schemes generally operate in relation to the actual transaction 
value of the imports.  If the price of an individual consignment is 
below a specified minimum import price, an additional charge is imposed corresponding to the difference.
96 
The Panel also said that minimum import prices 'are generally not dissimilar from 
variable import levies in many respects, including in terms of their protective and 
stabilization effects, but that their mode of operation is generally less complicated.'97  
The main difference between minimum import prices and variable import levies is, according to the Panel, that 'variable import levies are generally based on the difference between the governmentally determined threshold and the lowest world 
market offer price for the product concer ned, while minimum import price schemes 
generally operate in relation to the actual transaction value of the imports.'
98 
(emphasis added)."99 
7.30 In essence, a minimum import price is a measure which ensures that certain imported 
products will not enter a domestic market at a pri ce lower than a certain threshold, normally by 
imposing an import duty assessed on the basis of th e difference between such threshold and the 
transaction value of the imported goods. 
(iv) Determination that the original PBS was sim ilar to "variable import levies" or "minimum 
import prices" 
7.31 After having defined the terms, the original Pa nel and the Appellate Body found Chile's PBS 
to be a border measure similar to a "variable import levy" or a "minimum import price".100 
7.32 The original Panel highlighted the fact that Chile's PBS had features that revealed "its 
intrinsically unstable, intransparent and unpredictabl e nature, as well as the insulation of the domestic 
market from international price competition which it [achieved].101  The Appellate Body emphasized 
the fact that "a formula inherent in Chile's pr ice band system [caused] and [ensured] automatic and 
continuous variability of the duties resulting from that system".102 
7.33 Looking at the way in which the lower and upper thresholds of Chile's PBS were determined, 
the original Panel noted that those thresholds varied in relation to "world prices", and not in relation to 
domestic prices, or to some target price set by th e Chilean authorities.  In  the words of the Panel: 
"We recognize that, on the face of it, the Chilean PBS does not share all the 
characteristics of both 'variable import levies' and 'minimum import prices'...  [T]he 
lower threshold of the Chilean PBS is not explicitly derived from, or linked to, an 
internal market-related price, as is often the case in variable import levy schemes.  
                                                      
96 (original footnote ) Panel Report, para. 7.36(e).   
97 (original footnote ) Ibid. 
98 (original footnote ) Ibid. 
99 Appellate Body Report on Chile – Price Band System,  paras. 236-237. 
100 Panel Report on Chile – Price Band System,  para. 7.47.  Appellate Body Report on Chile – Price 
Band System,  paras. 252 and 262. 
101 Panel Report on Chile – Price Band System,  para. 7.61. 
102 Appellate Body Report on Chile – Price Band System,  para. 241.  WT/DS207/RW 
 Page 25 
 
 
  Instead, it corresponds to an administrativel y determined threshold price which may, 
but will not necessarily, be equal to or above the domestic market price.  Nonetheless, 
we consider that, on the basis of the evid ence before us, it cannot be excluded that the 
lower threshold of the PBS, given the way in  which it is designed, particularly with 
the many adjustments made by the administ ering agencies to the basic world market 
price quotations employed, including for inflation, operates in practice as a 'proxy' for 
such internal prices."103 
7.34 In other words, taking into account the evidence submitted, the original Panel considered that 
the lower thresholds of Chile's price bands, under th e original PBS, could often, although admittedly 
not in all cases, be equal to or higher than the domes tic price.  The Panel also noted that this could 
have been due, in part, to the way in which the pr ice band thresholds, which were first calculated on 
the basis of monthly f.o.b. world prices over the previ ous five years, were then converted to a c.i.f. 
basis.104 
7.35 In this respect, the original Panel also noted th e fact that the PBS thresholds were determined: 
"[I]nter alia , after discarding 25 per cent of 'atypical observations' at the bottom and 
at the top, hence substantially increasing the likelihood that the lower threshold of the 
PBS [would] equal or exceed the higher internal price."105 
7.36 Based on these elements, the original Panel conc luded that the lower thresholds of Chile's 
price bands operated like substitutes for domestic target prices and that this feature of Chile's PBS was 
similar to the features of variable import levies and those of minimum import prices.106 
7.37 The Appellate Body agreed only partially with the original Pa nel's assessment.  In the words 
of the Appellate Body: 
"[T]he Panel placed too much emphasis on whether or not Chile's price bands are 
related to domestic target prices or domestic market prices.  In our view—even though Chile's price bands are set in relation to world prices from a past five-year period—Chile's price band system can still have the effect of impeding the 
transmission of international price developm ents to the domestic market in a way 
similar to that of other categories of prohi bited measures listed in footnote 1.  There 
are factors other than world market prices that are relevant to the assessment of 
Chile's price bands.  The prices that re present the highest 25 per cent as well as the 
lowest 25 per cent of the world prices from the past five years are discarded in selecting the 'highest and lowest f.o.b. pri ces' for the determination of Chile's annual 
price bands.  Furthermore, we place considerable importance on the intransparent and 
unpredictable way in which the 'highest and lowest f.o.b. prices' that have been selected are converted to a c.i.f. basis by a dding 'import costs'.  As Chile concedes, no 
published legislation or regulation sets out how these 'import costs' are calculated."
107 
7.38 The Appellate Body also found that the way in which the second essential element of Chile's 
PBS, i.e., the "reference price", was established was si milarly affected by a lack of transparency and 
predictability: 
                                                      
103 Panel Report on Chile – Price Band System,  para. 7.45. 
104 Appellate Body Report on Chile – Price Band System,  para. 244. 
105 Panel Report on Chile – Price Band System,  para. 7.45 (footnote omitted).  See also, Appellate Body 
Report on Chile – Price Band System,  para. 245. 
106 Panel Report on Chile – Price Band System,  para. 7.46. 
107 Appellate Body Report on Chile – Price Band System,  para. 246. WT/DS207/RW 
Page 26  
 
  "In addition to the lack of transparency and th e lack of predictability that are inherent 
in how Chile's price bands are established, we see similar shortcomings in the way the 
other essential element of Chile's price band system—the reference price—is determined.  As we have explained, the duties resulting from Chile's price band 
system are equal to the difference between the price band thresholds and the reference 
price.  Chile sets the reference price on a week ly basis, and it does so in a way that is 
neither transparent nor predictable."
108 
7.39 The Appellate Body thus concl uded that, even assuming that one of the two parameters of the 
original PBS, the band thresholds, did not distort the transmission of world market prices to Chile's 
market, it would nevertheless remain that the other parameter, the weekly reference prices, was liable 
to distort, if not disconnect, that transmission by vi rtue of the way in which it was determined.  That 
was because specific duties resulting from Chile's PBS were equal to the difference between two 
parameters:  the annual price band thresholds and the weekly reference prices applicable to the 
shipment in question.  Consequently, even in su ch a case, the duties resu lting from Chile's PBS would 
not transmit world market price developments to Ch ile's market in the same way as "ordinary customs 
duties".109 
7.40 The Appellate Body cited the following feat ures that compromised transparency and 
predictability in the way in which the PBS's re ference price was established and impeded the 
transmission of international price developments to Chile's market: 
(a) No Chilean legislation or regulation speci fied how the international "markets of 
concern" and the "qualities of concern" were selected, so that it was not certain that 
the weekly reference price was representa tive of the current world market price. 
(b) The weekly reference price was not represen tative of an average of current lowest 
prices found in all markets of concern. 
(c) The same weekly reference price applied to imports of all goods falling within the 
same product category, regardless of the or igin of the goods, and regardless of the 
transaction value of the shipment. 
(d) Unlike with the prices used in the calculati on of the upper and lower thresholds of the 
band, the price used to determine the week ly reference price was not adjusted for 
"import costs", and thus was not converted from an f.o.b. basis to a c.i.f. basis.  This 
was likely to inflate the amount of specific duties applied under Chile's PBS, because the duties were imposed in an amount equal to the difference between the 
annual price band thresholds, based on higher  c.i.f. prices, and the weekly reference 
prices, based on lower  f.o.b. prices.
110 
7.41 The Appellate Body also found that, contrary to what Chile had contended, the PBS did not 
merely moderate the effect of fluctuations in wo rld market prices on Chile's market, nor did it tend 
only to compensate for price declines.  Rather , the duties resulting from Chile's PBS tended to 
"overcompensate" for such price declines, and to el evate the entry price of imports to Chile above the 
lower threshold of the relevant price band.  In other words, when international prices fell, and when 
the weekly reference prices were below the lower th resholds of the band, the total duties applied to 
                                                      
108 Ibid., para. 247. 
109 Ibid., para. 251. 
110 Appellate Body Report on Chile – Price Band System,  paras. 249-250.  WT/DS207/RW 
 Page 27 
 
 
  particular shipments would, in many cases, result in overall entry prices for those shipments that rose 
rather than fell.111 
7.42 The fact that the PBS duties were "capped" at the level of the 31.5 per cent ad valorem tariff 
rate bound in Chile's WTO Schedule was not consid ered relevant by the Panel and the Appellate 
Body, with respect to whether the PB S was any less distortive or insulating.112  In this regard, the 
Appellate Body found "nothing in Article 4.2 [of the Agreement on Agriculture] to suggest that a 
measure prohibited by that provision would be rend ered consistent with it if applied with a cap."113  
The Appellate Body concluded that the fact that the duties resulting from Chile's PBS were capped at 
31.5 per cent ad valorem reduced the extent of the trade distortions in that system by reducing the 
extent  to which those duties fluctuate, but it did not eliminate those distortions.  Moreover, the cap did 
not eliminate the lack of transparency, or the lack  of predictability, in the fluctuation of the duties 
resulting from the PBS.114 
7.43 The Appellate Body emphasized that it had reached its conclusions on the basis of the 
particular configuration and interaction of  all the specific features of Chile's PBS.115 
(v) Is the amended PBS still similar to "variabl e import levies" or "minimum import prices"? 
Amendments introduced by Chile in its PBS  
7.44 The parties are in agreement th at Chile has amended its PBS.116  The Panel must determine, 
however, if such amendments are sufficient to co mply with the DSB's recommendations and rulings 
to bring the measure into conformity with the WTO agreements. 
7.45 In this respect, we initially not e that Chile has argued that it was only "required to take action" 
on "specific aspects of the PBS that made the system a measure similar to a variable import levy and a 
minimum import price", identified by the Appellate Body.117 
7.46 Chile maintains that several features that were observed by the Panel and the Appellate Body 
in the course of the original proceedings, and which were related to the matter of transparency or 
predictability, have been modi fied under the amended PBS. 
7.47 For example, Chile notes that the amended PB S has abolished the formula which, under the 
original PBS, discarded the highest 25 per cent as well as the lowest 25 per cent of world prices over 
the preceding five years for the calculation of the lower and upper thresholds of the band.118  
Additionally, in the amended PBS both the lower and uppe r thresholds of the band are to be defined in 
f.o.b. terms, so that there is no explicit process of conversion of prices from f.o.b. to c.i.f. and it is no 
longer necessary to add "import costs".119 
7.48 Indeed, in the original proceedings, the way in  which the lower threshold was determined was 
found to artificially increase the margin between th e lower threshold of the PBS and the reference 
price, and thus the applicable PBS duty.  This fo r two reasons.  First, because the lowest 25 per cent 
                                                      
111 Ibid., para. 260. 
112 Ibid., paras. 254-259.  See also, Panel Report on Chile – Price Band System,  footnote 608. 
113 Appellate Body Report on Chile – Price Band System,  para. 254. 
114 Ibid., para. 259. 
115 Ibid., para. 261. 
116 See, inter alia , Argentina's first written submission, paras.  2, 14, 21 and 23, Chile's first written 
submission, paras. 15, 45, 64 and 88. 
117 Chile's first written submission, para. 88. 
118 Chile's first written submission, para. 108.  S ee also, Law 19.897, in E xhibits ARG-1, CHL-1. 
119 Law 19.897, in Exhibits ARG-1, CHL-1.  Chile's first written submission, para. 109. WT/DS207/RW 
Page 28  
 
  of all observed international market prices over th e preceding 60 months were discarded, while the 
prices observed in "markets of concern" used for the calculation of the reference price did not undergo the same operation.  Second, because the f.o.b. pr ices used for the threshold values were adjusted, 
inter alia , for "usual import costs", whereas the f.o.b. prices used for the reference prices were not.
120  
For the same two reasons, the Panel also found that it could not be excluded that this threshold would 
operate in practice as a "proxy" for a domestic target price or domestic market price.121 
7.49 In the original proceedings, the Appellate Body  had also placed considerable importance on 
the way in which, in determining the thresholds of  the bands, "import costs" were added to convert 
f.o.b. prices to a c.i.f. basis.  The Appellate Body found that process to be neither transparent nor 
predictable, since no published legislation or re gulation set out how those "import costs" were 
calculated.122 
7.50 The Appellate Body add itionally noted that, unlike the five -year average monthly prices used 
in the calculation of Chile's annual price bands, th e lowest "market of concern" price used to 
determine the weekly reference price was not adjust ed for "import costs" and thus not converted from 
a f.o.b. basis to a c.i.f. basis.  This made it likely that the amount of specific duties applied under 
Chile's PBS would be inflated, because these duti es were imposed in an amount equal to the 
difference between Chile's annual price band thresholds, which were based on higher  c.i.f. prices, and 
Chile's weekly reference prices, which were based on lower  f.o.b. prices.  This factor was found, inter 
alia, to contribute to giving Chile's PBS "the effect of impeding the transmission of international price 
developments to Chile's market".123 
7.51 Chile has also highlighted the fact that, under the amended PBS, the most relevant markets for 
wheat in Chile are explicitly indicated in Supreme Decree 831.124  According to Supreme Decree 831, 
during the yearly periods extending from 16 December to 15 June of the following year, the "most relevant market" for wheat will be that for Trigo Pan Argentino  (Argentine bread wheat) and the 
prices will correspond to the daily prices quoted for that product f.o.b. Puerto Argentino (Argentine 
port).  Likewise, during the period extending from 16 June to 15 December every year, the "most 
relevant market" will be that for Soft Red Winter No. 2  and the prices will correspond to the daily 
prices quoted for that product f.o.b. Gulf of Mexico .
125 
7.52 In the original proceedings, the Appellate Body had called attention to the fact that no Chilean 
legislation specified how the international "marke ts of concern" to Chile and the "qualities of 
concern" of products actually liable to be imported to Chile were selected in order to set the reference 
prices.  Thus, as stated by the Appellate Body it w as not "certain that the weekly reference price 
[would be] representative of the current world market price".126 
7.53 We have noted the features highlighted by Chile127 and some of them will be further discussed 
below.  However, we are not persuaded by Chile's argument that all it was required to do was to take 
action on certain specific aspects of the PBS.  On the contrary, a determination of whether Chile has 
amended its PBS in a manner so as to comply w ith the DSB's recommendations and rulings and to 
bring the measure into conformity with the WTO agreements, requires a review that goes beyond the 
consideration of "specific aspects".  We recall, in th is regard, the statement of the Appellate Body in 
the original case: 
                                                      
120 Panel Report on Chile – Price Band System,  para. 7.63. 
121 Ibid., para. 7.45.  See also, Appellate Body Report on Chile – Price Band System,  paras. 243-245. 
122 Appellate Body Report, Chile – Price Band System,  para. 246. 
123 Ibid., para. 250. 
124 Chile's first written submission, paras. 35 and 115. 
125 Supreme Decree  831, Article 8, in Exhibits ARG-2 and CHL-2. 
126 Appellate Body Report on Chile – Price Band System,  para. 249. 
127 See paras. 7.47 and 7.51 above.  WT/DS207/RW 
 Page 29 
 
 
  "[W]e reach our conclusion on the basis of the particular configuration and 
interaction of all these specific features of Chile's price band system.  In assessing this measure, no one feature is determinative of whether a specific measure creates 
intransparent and unpredictable market access conditions.  Nor does any particular 
feature of Chile's price band system, on its own, have the effect of disconnecting 
Chile's market from international price deve lopments in a way that insulates Chile's 
market from the transmission of internationa l prices, and prevents enhanced market 
access for imports of certain agricultural products." 
7.54 We will thus examine Chile's am ended PBS, considering the conf iguration and interaction of 
its different features, in order to determine whethe r it can still be considered  to be a border measure 
similar to a "variable import levy" or a "minimum  import price", in the terms of footnote 1 to 
Article 4.2 of the Agreement on Agriculture. 
Is the amended PBS still similar to a "variable import levy"?
 
7.55 We have already described the considerations th at led the Appellate Body to find that Chile's 
original PBS, in respect of its particular features,  shared sufficient similarity with "variable import 
levies" as to resemble, or be considered to be  of the same nature or kind as such levies.128  We will 
now address the issue of whether the amended PBS continues to have sufficient resemblance or 
likeness, to a "variable import levy". 
7.56 In light of the Appellate Body's interpretati on of the term "variable import levies", we 
consider first the ordinary meaning of the words them selves.  In this regard, we note that the amended 
PBS continues to be a system for the determinati on of certain duties or rebates imposed on specific 
products upon their importation.  We also note th at the duties resulting from the amended PBS (i.e., 
the total amount of duties resulting from the application of the amended PBS129) continue to be 
"variable", i.e., "liable to vary".130 
7.57 Recalling a statement of the Appellate Body, Chile has stated that "the mere fact that a levy is 
variable does not mean that it is a 'variable import levy'."131  Indeed, not all import duties that are 
liable to vary can be categorized as "variable import levies".  A particular type of variability is needed 
to make an import levy a "variable import levy".  Looking at the context in which the term "variable import levy" is used  in footnote 1 to Article 4.2, th e Appellate Body noted that at least one feature of 
"variable import levies" is the fact that the measure itself, as a mechanism, must impose the 
variability in the duties. 
7.58 On its face, the language of the legislation for the amended PBS will necessarily result in 
variability in the level of duties collected or rebates granted under the system, due to the fact that such 
language contemplates a scheme or formula that bot h causes and ensures that the level of such duties 
or rebates changes automatically and continuously over time.  Chile has contested this fact.  In 
particular, when asked about this by the Panel, Chile asserted that: 
"[T]he changes introduced by Chile by means of Law 19.897, the price bands no 
longer operate as a scheme or formula for th e calculation of duties or rebates at the 
                                                     
 
128 See paras. 7.31, 7.32, and 7.37-7.43 above. 
129 The total amount of duties resulti ng from the application of the am ended PBS will vary between:  
(a) less than 6 per cent ad valorem , when a rebate is granted;  (b) 6 per cent ad valorem , when there is no rebate 
granted and no additional specific duty imposed;  and (c) more than 6 per cent ad valorem , when an additional 
specific duty is imposed in cases when the reference price is below the lower threshold. 
130 Appellate Body Report on Chile – Price Band System,  para. 232. 
131 Chile's first written submission, para. 134.  Cfr., Appellate Body Report on Chile – Price Band 
System,  para. 232.  See also, Chile's rebuttal, para. 5. WT/DS207/RW 
Page 30  
 
  border, in the manner indicated by the DSB in the original proceedings...  Law 19.897 
establishes a single specific duty (or tari ff rebate) applicable to every import 
operation.  This duty, like any other ordina ry customs duty, remains invariable until it 
is changed by an administrative act.  The other parameters laid down in Law 19.897 
are no longer part of a scheme or formul a, as they were under the PBS, but are 
elements for defining the framework of th e border protection applied by the Chilean 
Government."
132 
7.59 We find this statement by Chile unpersuasive in light of the available evidence to the contrary 
and, indeed, of Chile's own explanations of how the amended PBS operates in practice.133  T h e  
variability of the total amount of applied duties resulting from the operation of the amended PBS is 
not equivalent to the result of discrete changes in tariff rates.134  Nor is the variability in the level of 
such specific duties or rebates the result of sep arate, independent and discrete legislative or 
administrative acts.  Rather, the level of speci fic duties or rebates under the amended PBS is 
determined and announced six times during the course of each annual period, pursuant to the mandate 
of the legislation itself.  As noted, such legislati on sets forth a scheme or formula that establishes an 
automatic and periodic adjustment in such levels.  Furthermore, under the terms of the legislation, any 
administrative action is limited merely to announc ing (by means of a Supreme Decree published in 
the Official Journal of Chile) the level of the sp ecific duties or rebates resulting from the application 
of the scheme or formula set out in such legislation.   Under the applicable legislation, administrative 
action occurs after  the amount of the applicable duties resulting from the amended PBS has been 
calculated in accordance with a formula. 
7.60 Chile has highlighted the fact that ordinary cu stoms duties may also vary over time.  It has 
illustrated this fact, by citing the changes it made in its own ad valorem  tariff from 1984 to 2003, 
lowering it gradually from 35 per cent to 6 pe r cent.  That progressive decrease of the ad valorem  
tariff was achieved through successive variations of  the tariff rate, in the context of a trade 
liberalization policy.135  In our opinion, however, the variab le features in the amended PBS are 
different from the possible modifications that a Memb er may introduce in its ordinary customs duties.  
The level of ordinary customs duties is in principl e stable and predictable, at least until those duties 
are replaced with altogether new tariff rates.   Chile's programme of gradually lowering its ad valorem  
tariff is an example of a predictable movement in  the conditions of market access.  Indeed, Chile 
referred to the latter stage of that programme as "a plan for the progressive and automatic reduction of 
Chile's general tariff from 11 per cent to 6 pe r cent between January 1999 and January 2003".136 
7.61 In contrast, the only thing truly predictable about the level of duties ultimately assessed under 
the amended PBS is that in principle such level will change every two months.  In other words, 
continuous variability of the duties is a feature inherent in the amended PBS. 
7.62 This being said, the amended PBS is affected by more than the lack of predictability 
explained above.  In the original proceedings, bot h the Panel and the Appellate Body emphasized the 
fact that the measures listed in footnote 1 to  Article 4.2 of the Agreement on Agriculture are 
                                                      
132 Chile's response to question 7. 
133 Law 19.897, in Exhibits ARG-1, CHL-1.  Supreme Decree  831, in Exhibits ARG-2 and CHL-2.  
See also, Chile's response to questions 6(b) and 16. 
134 Discrete changes occur independently and unrelated to an underlying statutory scheme or formula.  
Cfr., Appellate Body Report on Chile – Price Band System,  para. 233 ("Ordinary customs duties, by contrast, 
are subject to discrete changes in applied tariff rates that occur independently, and unrelated to such an 
underlying scheme or formula"). 
135 Chile's first written submission, paras. 134-136. 
136 Chile's rebuttal, para. 105.  See Exhibit CHL-8.  WT/DS207/RW 
 Page 31 
 
 
  characterized by a lack of tr ansparency and predictability.137  Both these features were noted by the 
Appellate Body as undermining the object and purpos e of Article 4 of the Agreement on Agriculture:  
"to achieve improved market access conditions for impor ts of agricultural products by permitting only 
the application of ordinary customs duties".  Ac cordingly, the Panel must examine whether the 
amended PBS  lacks not only predictability but also lacks the requisite transparency.138 
7.63 Notwithstanding the amendments incorporated by Chile into its PBS, several crucial aspects 
of the design and operation of the amended PBS c ontinue to be characterized by a lack of both 
transparency and predictability, which was also ob served in the course of the original proceedings.  
On its face, the amended PBS is based on a scheme or  formula that determines the level of specific 
duties or rebates that are to be applied on imports of wheat and wheat flour.  As will be discussed 
below, several specific features, re lated to the matter of transparency or predictability, that were 
observed by the Panel and the Appellate Body in th e course of the original proceedings, have been 
rendered moot in the amended PBS.  Further, Chile asserts that, any interested exporter with 
knowledge of the market should be now able to pr edict, by applying the PBS's formulas, the amount 
of applicable duties or rebates. In Chile's words: 
"[W]hat is necessary in order to foresee th e amount of the specific duty is a wheat 
trader's own skills in predicting prices and negotiating sales or purchases."139 
7.64 In practice, however, several features of the system continue to be affected by a lack of 
transparency and predictability.  The basic feature of the system is that, every two months, specific 
duties are to be imposed when the reference price is  calculated by Chilean authorities to be below the 
lower threshold of the band.  Conversely, rebates are to be granted when the reference price is 
calculated to be above the upper threshold.  The tw o basic elements of the amended PBS are thus the 
reference price and the thresholds of the band.140 
7.65 Supreme Decree 831 provides a technical definition of the term "reference price":  the 
"average of the daily international wheat and suga r prices recorded in the most relevant markets".141  
As explained in the descriptive section of this report142, the reference price is determined by the 
Chilean authorities six times in the course of each year and based, by statute, on an average of the 
daily international prices recorded over a period  of 15 calendar days for two specific qualities of 
wheat in two selected markets (those of Trigo Pan Argentino  and Soft Red Winter No. 2 , quoted f.o.b. 
Argentine port and f.o.b. Gulf of Mexico, respectively). 
7.66 The parties have extensively discussed with th e Panel the manner in which reference prices 
are established by Chilean authorities.  Despite the technical explanation of how reference prices are 
supposed to be calculated, the available evidence suggests that the manner in which these prices are 
determined continues to be affected by a serious lack  of transparency.  To begin with, reference prices 
are supposed to be determined through a scheme or  formula, based on average daily prices for 15 
calendar days out of each 60-day period.143  The fact that authorities are statutorily limited to 
averaging the observations made during 15 calen dar days does not guarantee that the resulting 
reference prices will be representative for the whole pe riod.  In response to a question from the Panel, 
Chile has stated that: 
                                                      
137 Appellate Body Report on Chile – Price Band System,  para. 234.  Panel Report on Chile – Price 
Band System,  para. 7.34. 
138 Appellate Body Report on Chile – Price Band System,  para. 234. 
139 Chile's first written submission, para. 162. 
140 See paras. 2.20, 2.25 and 2.28 above. 
141 Supreme Decree  831, Article 2(a) , in Exhibits ARG-2 and CHL-2. 
142 See para. 2.23 above. 
143 Law 19.897, in Exhibits ARG-1, CHL-1.  See para. 2.23 above. WT/DS207/RW 
Page 32  
 
  "It has been estimated that the average pri ce over the period of at least fifteen days 
closest to the date of calculation of the duty or rebate (corr esponding roughly to ten 
working days) is the minimum necessary fo r the result to be representative of the 
conditions prevailing at that time on the ma rket, so as to prevent that average from 
potentially being influenced by extreme quot ations which occasionally appear in the 
market and which do not necessarily reflect th e level and trend of prices at that point 
in time."
144 
7.67 It is noteworthy that Chile has stated also that  "the representativeness [of the reference price] 
at each point in time is of no relevance" and has high lighted instead that this price is supposed to be 
representative "of trends in the international market".145  In Chile's words: 
"The reference price is based on informati on generated in the international markets 
and supplied by reliable sources.  At the time it is calculated, therefore, it is representative of trends in the internationa l market.  However, it should be pointed 
out that the reference price is used as an in strument to facilitate determination of the 
level of protection for wheat, and that it has no useful bearing on commercial 
operations in that product.  Accordingly, its  representativeness at each point in time is 
of no relevance."
146 
7.68 However, the Panel notes that, in the course of the original proceedings, the Appellate Body 
reached the conclusion that the process of selecting the reference price was not transparent and not 
predictable for traders, based inter alia  on the fact that it was not certain  that the weekly reference 
prices under the original PBS were representative  of current world market prices.147 
7.69 Likewise, under the amended PBS, the refere nce prices are supposed to correspond to the 
wheat prices recorded in only two markets select ed by Chile, i.e., Argentina and the United States.148  
Available evidence demonstrates, however, that dur ing the years 2004 and 2005, Canada was a larger 
exporter of wheat to Chile than the United States, in volume and in monetary terms.149  In other 
words, at least for some periods, and despite the de finition contained in the Chilean legislation, the 
reference price has not reflected the prices recorded in some of the most relevant markets of concern 
for Chile.150 
7.70 It should be noted again that, in the original proceedings, the fact that the weekly reference 
price used under Chile's PBS was not representative of  an average of current lowest prices found in 
all markets of concern, was another factor cons idered by the Appellate Body in reaching its 
conclusion that the process of selec ting the reference price was not transparent and not predictable for 
traders.151 
7.71 Furthermore, as pointed out by Argentina, b ecause of the way in which reference prices are 
calculated, traders will still have difficulty to estimate the total amount of applicable duties under the 
amended PBS before they send a particular shipment.152  Depending on the time it takes for a 
                                                      
144 Chile's response to question 12(a). 
145 Chile's response to question 12(b). 
146 Ibid. 
147 Appellate Body Report on Chile – Price Band System,  para. 249. 
148 Supreme Decree  831, Article 8, in Exhibits ARG-2 and CHL-2.  See para. 2.23 above. 
149 Argentina's oral statement, para. 54.  See also, Exhibit ARG-31 and Chile's response to question 60. 
150 Indeed, because of the changing nature of trad e patterns, which are the markets of concern for a 
particular product is an evolving matter.  Current markets of concerns may become irrelevant in one or two 
years, due to many different reasons. 
151 Appellate Body Report on Chile – Price Band System,  para. 249. 
152 Argentina's first written submission, paras. 278-280.  WT/DS207/RW 
 Page 33 
 
 
  particular shipment to arrive to Chile, and depending on the dates of that shipment, it is possible that 
at the time of exportation, the 15-day period of collection of prices used by the Chilean authorities for calculating the reference prices will not have ended.   Indeed, the fact that the total amount of 
applicable duties under the amended PBS is linked to th e fluctuation of world market prices is in itself 
a factor of uncertainty and unpredictability.  We  find merit in Brazil's statement during the Panel 
meeting: 
"[E]ven though traders often speculate on the evolution of prices, they cannot predict 
changes with the certainty required to afford  predictability to trade.  Variable import 
levies are prohibited precisely because the Agreement on Agriculture  requires that 
market access be based on predictable re gulation that does not alter with market 
prices."
153 
7.72 Transparency and predictability in the system are also affected by the mere existence of a 
"reference price".  The fact that sp ecific duties are added to the applied ad valorem  tariff, on the basis 
of some periodically determined a nd constantly changing reference price, rather than on the basis of 
either the value or the volume of the imported goods , entails a systemic lack of transparency and 
predictability.  This in turn is likely to lead to a reduction in the volume of imports and to impede the 
transmission of international prices to the domestic market. 
7.73 As previously noted154, under the amended PBS, the refere nce price is determined by the 
Chilean authorities six times per year, on the basis of the daily prices recorded in the "most relevant 
markets for wheat" over the 15 preceding days.  This refe rence price so determined is then used to set 
the level of duties or rebates under the PBS, if any,  applicable to all imports of wheat, regardless of 
their origin, and regardless of the transaction valu e of the respective shipment.  In other words, 
according to the current legislation, the same refe rence price, determined from prices pertaining to 
specific varieties of wheat from specific origins, is  to be used to determine the specific duties (or 
rebates, if applicable) that are imposed on "imports of all goods falling within the same product 
category, regardless of the origin of the goods , and regardless of the transaction value of the 
shipment".155  The same specific duties or rebates under the amended PBS are also applicable to all 
imports of wheat flour, with the corresponding conversion factor of 1.56.156  This feature was found, 
in the course of the original proceedings, to contri bute in giving the PBS "the  effect of impeding the 
transmission of international price developments to Chile's market".157 
7.74 The thresholds of the band are the second basic element of the amended PBS.  Chile has set 
the upper and lower thresholds of the band at  US$148 and US$128, respectively, which will be 
adjusted annually beginning in 2007.158  When asked about the way in which these two figures were 
determined, Chile has explained that it was done on the basis of the floor and ceiling prices provided 
for under the original PBS.159  In Chile's words: 
"[T]he f.o.b. equivalents we re determined on the basis of  the floor and ceiling prices 
provided for in Decree No. 266 of May 2002, expressed at import cost level, by 
deducting all import costs applicable to an or dinary trading transaction at the date of 
entry into force of the Law (second half of 2003)."160 
                                                      
153 Brazil's oral statement, para. 10. 
154 See para. 7.65 above. 
155 Cfr. Appellate Body Report on Chile – Price Band System,  para. 250. 
156 Cfr. Chile's response to question 15. 
157 Appellate Body Report on Chile – Price Band System,  para. 250. 
158 Law 19.897, in Exhibits ARG-1, CHL-1.  See para. 2.21 above. 
159 Chile's response to question 52. 
160 Ibid. WT/DS207/RW 
Page 34  
 
  7.75 In the course of the original proceedings, th e way in which thresholds were determined 
(inter alia , after discarding 25 per cent of "atypical observations" at the bottom and at the top) was 
found by the Appellate Body to increase the likelih ood that the lower threshold of the band would 
equal or exceed the higher internal price.  In othe r words, the lower threshold of the band was found 
to operate like a substitute for domestic target prices.
161  For a similar reason, Chile's original PBS 
was also found to have the effect of impeding the tr ansmission of international price developments to 
the domestic market in a way similar to that of  other categories of prohibited measures listed in 
footnote 1.162 
7.76 Chile states that, under the amended PBS, in  order to determine the upper and lower 
thresholds of the band, it has converted c.i.f. valu es to f.o.b. equivalents "by deducting all import costs 
applicable to an ordinary trading transaction at the date of entry into force of the Law".163  I n t hi s  
regard, we recall the findings of the Appellate Bo dy with respect to the manner in which Chile 
determined the upper and lower thresholds of the ba nd under the original PBS.  In those proceedings, 
the Appellate Body determined that the way in which Chile converted f.o.b. prices into a c.i.f. basis, 
by adding "import costs", was intransparent and unpredictable, inter alia , because no published 
legislation or regulation set out how those "import costs" were calculated.164 
7.77 In other words, under the amended PBS the upper and lower thresholds of the band have been 
set on the basis of a methodology that was found, in  the course of the original proceedings, to be 
intransparent and unpredictable and to have the eff ect of impeding the transmission of international 
price developments to the domestic market.  The new thresholds are thus affected by the same 
deficiencies that were identified in the original PBS. 
7.78 Chile has asserted that under the amended PB S it "abolished the calculation formula that 
included discarding the highest 25 per cent as well as the lowest 25 per cent of world prices over the past five years".
165  It has added that all prices are now "set as f.o.b., meaning that today there is no 
price or value that converts an f.o.b. price to a c. i.f. basis, and it is no longer necessary to add 'import 
costs', which makes the system a great deal more transparent".166 
7.79 The Panel has noted, however167, that the upper and lower thresholds of the band were set by 
Chile on the basis of the floor and ceiling prices pr ovided for under the original PBS, after deducting 
"import costs".  In other words, Chile has admitted that these thresholds were set using figures that 
were determined through a methodology that, in th e original proceedings, was found to increase "the 
likelihood that the lower threshold of the PBS [woul d] equal or exceed the higher internal price".168  
Chile has not demonstrated that the alleged a bolition of the calculation formula that included 
discarding the highest and lowest 25 per cent of world prices, has had any practical impact on the 
levels at which the upper and lower thresholds of the band have been set.  Nor has Chile provided any 
evidence to support its assertion that "import costs" were indeed deducted in the process of calculating 
the current thresholds.  The mere assertion by Chile  that the calculation formula has been abolished 
and that import costs have been deducted is not enou gh to demonstrate that, in this regard, the current 
system is any less intransparent and unpredictabl e than the original.  Moreover, under the amended 
PBS, the upper and lower thresholds of the band, set on the basis of the methodology described above, 
have been fixed until 2014, with annual predetermine d adjustments that will enter in force beginning 
                                                      
161 Panel Report on Chile – Price Band System,  para. 7.45. 
162 Appellate Body Report on Chile – Price Band System,  para. 246. 
163 Chile's response to question 52. 
164 Appellate Body Report on Chile – Price Band System,  para. 246. 
165 Chile's first written submission, para. 108. 
166 Ibid., para. 109. 
167 See para. 7.74 above. 
168 Panel Report on Chile – Price Band System,  para. 7.45.  Appellate Body Report on Chile – Price 
Band System,  para. 245.  WT/DS207/RW 
 Page 35 
 
 
  in 2007.  By fixing the thresholds in this ma nner, the effect of disconnecting domestic prices from 
international price developments, thus impeding the transmission of  world market prices to the 
Chilean domestic market, has been carried on into the amended PBS. 
7.80 Argentina has also referred to th e issue of the factor of 1.56 applied to the duties and rebates 
determined for wheat, under the amended PBS, in orde r to calculate the duties and rebates applicable 
to wheat flour.169  We are not convinced by Chile's contention that this is a claim that falls outside the 
terms of reference of this compliance Panel.170  In our view, Argentina's comments regarding the 1.56 
factor are rather part of its arguments to suppor t its claim that the amended PBS is similar to a 
"variable import levy" and a "minimum import price" and is thus inconsistent with Article 4.2 of the 
Agreement on Agriculture.  It is therefore not a sep arate claim.  In that respect, through the 1.56 
factor, wheat flour is subject to an additional element of insulation from the transmission of 
international prices.  As explained by Chile, the figure of 1.56 results from the fact that "between January 1986 and December 1995 (the period of app lication of the band at that time), the average 
ratio of the price of flour to the price of wheat was 1.566".
171  This figure was then "built into the 
Chilean legislation and it has remained unchanged ever since".172  Chile, however, admits that the 
ratio of the price of wheat flour to the price of wh eat may change over time.  Previous legislation had 
estimated this ratio at 1.41.173  In conclusion, by basing the total amount of duties applicable to wheat 
flour on the level of duties applicable to wheat, the amended PBS is transmitting to wheat flour the 
same features of insulation from international price developments to the domestic market and of lack 
of transparency and predictability that were obser ved  above with respect to wheat.  Furthermore, 
these effects are compounded by having built this factor into the legislation and preventing any 
adjustments to the ratio. 
7.81 For the reasons indicated above, we find that the amended PBS continues to have the same 
features which were found to make the original PBS similar to a "variable import levy". 
Is the amended PBS still similar to a "minimum import price"?  
7.82 We have already described the considerations th at led the Appellate Body to find that Chile's 
original PBS, in its particular features, shared sufficient features with "minimum import prices" to 
resemble, or be considered to be of the same nature  or kind to those measures and, thus, prohibited by 
Article 4.2 of the Agreement on Agriculture.  We have also found that the amended PBS continues to 
have features which make it similar to a "variabl e import levy".  We will now address the issue of 
whether the amended PBS also continues to have sufficient resemblance or likeness, to a "minimum 
import price". 
7.83 In the original proceedings, the Appellate Body noted that the term "minimum import price", 
"refers generally to the lowest price at which imports of a certain product may enter a Member's domestic market".  It went on to note that the Panel had indicated that minimum import prices "are generally not dissimilar from variable levies in ma ny respects, including in terms of their protective 
and stabilization effects, but that their mode of operation is generally less complicated" and had 
defined the term by indicating that: 
"[M]inimum import price schemes generally operate in relation to the actual 
transaction value of the imports.  If the pri ce of an individual consignment is below a 
                                                     
 
169 Argentina's first written submission, paras. 224-235. 
170 Chile's first written submission, paras. 58-63 and 19 7.  Chile's rebuttal, paras. 182-195, 206 and 211.  
Chile's response to question 17 (d). 
171 Chile's rebuttal, para. 201.  See also, Exhibits CHL-10 and CHL-11. 
172 Ibid. 
173 Chile's rebuttal, para. 187.  See also, Argentina's response to question 32 and Exhibit ARG-29. WT/DS207/RW 
Page 36  
 
  specified minimum import price, an additional charge is imposed corresponding to 
the difference."
174 
7.84 When asked by the Panel, Chile stated its vi ew that "[t]he defining characteristic of a 
minimum import price is the impossibility for any co mmercial operation to be expressed in terms of a 
price lower than the established price."175 
7.85 In the original proceedings, the Panel noted that it could not : 
"[B]e excluded that the lower threshold of  the PBS, given the way in which it is 
designed, particularly with the many adjustments made by the administering agencies to the basic world market price quotations employed, including for inflation, operates in practice as a 'proxy' fo r such internal prices".
176 
7.86 As we have noted, the lower threshold of the band in the amended PBS was set by Chile by 
resorting to the figures of the lowe r thresholds in the original PBS.177  In other words, the lower 
threshold of the band in the amended PBS was dete rmined by resorting to a methodology that had 
already been found to make such a threshold opera te like a substitute for domestic target prices. 
7.87 Considering the available evidence, we note th at the lower threshold of the band in the 
amended PBS appears to continue to operate in pr actice as a "proxy" or substitute for a minimum 
import price.  As a result of the combined application of the ad valorem  tariff rates and the specific 
duties or rebates resulting from the PBS, the Ch ilean domestic price has been disconnected from 
international price developments.178 
7.88 Similarly to what was noted in the origin al proceedings, the amended PBS goes beyond 
simply ensuring "a reasonable margin of fluctuation of domestic prices".179  In practice, when 
international prices fall, and when the referenc e prices are determined to be below the lower 
thresholds of the price band, the combined application of the ad valorem  tariff rates and the specific 
duties resulting from the PBS may result in an overall entry price of that shipment that rises rather 
than falls.  Therefore, the amended PBS does not ensu re that the entry price of imports to Chile falls 
in tandem with falling world market prices, even albe it to a lesser extent than the decrease in those 
prices.  Instead, specific duties resulting from the amended PBS tend to "ove rcompensate" for price 
declines and to elevate the entry price of wheat impor ts to Chile above the lower threshold of the price 
band.  In these circumstances, the entry price of such imports to Chile under the amended PBS is 
higher than if Chile simply applied a minimum import price at the level of the lower threshold of the price band. 
7.89 According to the available evidence it seems  improbable that, under the amended PBS, 
imports of wheat or wheat flour will enter the Chil ean market at prices below the price band floor.  
When asked by the Panel, Chile confirmed that "the  likelihood of the entry price exceeding the floor 
price is very high".
180  In Chile's words, 
"[T]he unlikely but not impossible situation [that imports of wheat or wheat flour 
may enter the Chilean market at prices lo wer than the lower threshold of the price 
                                                      
174 Appellate Body Report on Chile – Price Band System,  para. 236.  Panel Report on Chile – Price 
Band System,  para. 7.36(e). 
175 Chile's response to question 19. 
176 Panel Report on Chile – Price Band System,  para. 7.45. 
177 See para. 7.74 above. 
178 See, e.g., Exhibits ARG-11 and ARG-12. 
179 Appellate Body Report on Chile – Price Band System,  para. 260. 
180 Chile's response to question 58.  WT/DS207/RW 
 Page 37 
 
 
  band] could arise whereby, once a specific duty has been established, international 
prices fall substantially, which in turn is re flected in c.i.f. prices low enough to result 
in entry prices of below US$128."181 
7.90 As stated by Brazil in its response to a question from the Panel: 
"[A]lthough imports can legally enter at prices below the price band floor, this will 
occur only in a highly improbable factual scenario – namely, when world market 
prices drop dramatically within a period of two months.  Falls in the world market 
price of this magnitude have not happened over the lifetime of the new PBS and, to 
Brazil's knowledge, have not happened in recen t history.  Even if such improbable 
price decreases occurred, the new PBS would neutralize it after just two months 
because, at the end of the period, the re ference price would be updated, thereby 
pushing the entry price again above the price band floor."182 
7.91 In other words, the amended PBS operates so as to prevent the entry of imports of wheat or 
wheat flour into the Chilean market at pr ices below the lower threshold of the band. 
7.92 Therefore, we find no elements that suggest that the amended PBS has been modified with 
respect to the features that were found to make the original PBS similar to a "minimum import price". 
The issue of transparency and predic tability under Chile's amended PBS  
7.93 We have already noted Chile's contention that  it was only "required to take action" on 
"specific aspects of the PBS " that had been identified by the Appellate Body.183  Chile has further 
asserted that "the lack of transparency and predictabi lity of certain aspects of the [original] PBS were 
called into question precisely because they le d to the insulation of domestic prices".184  Chile has 
contended that Argentina's claims are reduced to "[in sisting] that there is a lack of transparency and 
predictability in irrelevant aspects of the scheme in  force", but that Argentina "has been unable to 
show that the current scheme based on Law 19.897 is  preventing the transmission of international 
prices to the Chilean market or restricting the volume of imports".185 
7.94 We do not agree with Chile's view that "the lack  of transparency and predictability of certain 
aspects of the PBS were [only] called into question ... because they led to the insulation of domestic 
prices".186  We have found that the amended PBS has the effect of impeding the transmission of 
international price developments to  the domestic market.  We have also found that, with respect to 
basic features of the system, the amended PBS is aff ected by a lack of transparency and predictability.  
We note, however, that, in the course of the or iginal proceedings, the l ack of transparency and 
predictability in the level of duties that resulte d from the PBS was not called into question by the 
Appellate Body solely  because it led to the insulation of domes tic prices.  Rather the Appellate Body 
explicitly stated that: 
"This lack of transparency and this lack of predictability are liable to restrict the 
volume of imports.  As Argentina points out, an exporter is less likely to ship to a 
                                                      
181 Ibid. 
182 Brazil's response to question 104, paras. 14-15. 
183 Chile's first written submission, para. 88. 
184 Chile's rebuttal, para. 207. 
185 Ibid. 
186 Chile's rebuttal, para. 207. WT/DS207/RW 
Page 38  
 
  market if that exporter does not know and cannot reasonably predict what the amount 
of duties will be."
187 
7.95 In other words, even assuming, ad arguendo , that Argentina had only been able to prove that 
the amended PBS is affected by a lack of transpar ency and predictability in the level of duties that 
result from the system, such finding would not be irre levant.  On the contrary, the configuration and 
interaction of all these different el ements of intransparency and unpred ictability, as they refer to basic 
features of the system, would rather demonstrate th at the amended measure continues to be a border 
measure similar to a "variable import levy" and to a "minimum import price". 
Conclusion  
7.96 Having considered the configuration and inter action of the different features of Chile's 
amended PBS, we find that the amendments introduced  by Chile into its PBS have failed to convert it 
into a measure which is no longer a border measur e similar to a "variable import levy" and to a 
"minimum import price", in the terms of footnote 1 to Article 4.2 of the Agreement on Agriculture. 
(d) Conditions of access to Chile's market under the amended PBS 
7.97 In the course of the proceedings, Chile has stat ed that, under the amended PBS, the conditions 
of access to its market are more favourable than they  would have been if the original PBS was still in 
force.188  Chile has argued, for example, that: 
"Law No. 19.897 and its Regulations have  improved conditions of access to the 
Chilean market for wheat and wheat flour.  This can be seen from the amount of time 
for which the duties and rebates have b een applied since the Law entered into 
force."189 
7.98 To support this argument, Chile has stated th at, under the amended PBS, in the period from 
16 December 2003 to 13 January 2006, specific duties have only been imposed in 17 weeks, whereas 
if the original PBS had been in place they would ha ve been imposed in 27 weeks.  Moreover, in the 
same period, under the amended PBS, rebates were granted in 35 weeks, whereas under the original 
PBS they would have only been granted in 27 weeks.190 
7.99 Chile has further stated that the scheduled reduction of the thresholds of the band indicates 
that, irrespective of international price levels, the amount of the specific duties under the PBS "will 
increasingly diminish compared to those currently being established, just as the probability of duties 
actually being assessed will increasingly diminish".191  In other words, in Chile's view, under the 
amended PBS, there is an "in-built process of gradual reduction of border protection of wheat".192 
7.100  Chile has finally stated that an alternative to the amended PBS would be "to increase that 
protection to an ad valorem  duty of 31.5[per cent]… a scenario where Argentinean wheat producers 
will be worse off".193 
                                                      
187 Appellate Body Report on Chile – Price Band System,  para. 234. 
188 Chile's rebuttal, para. 163. 
189 Chile's first written submission, para. 183. 
190 Ibid., paras. 183-185.  See also, Argentina's rebuttal, paras. 206-216, and Chile's rebuttal, 
paras. 63-174. 
191 Chile's first written submission, para. 186.  S ee also, Argentina's rebuttal, paras. 217-238, and 
Chile's rebuttal, paras. 175-181. 
192 Chile's first written submission, para. 192. 
193 Chile's oral statement, para. 77.  WT/DS207/RW 
 Page 39 
 
 
  7.101  Having found that the amended PBS is a border measure similar to a "variable import levy" 
and to a "minimum import price", the Panel cannot agree with Chile's arguments.  The amended PBS 
is not necessarily less trade-distorting, less insulati ng of Chile's domestic market, nor less inconsistent 
with Chile's obligations under Article 4.2 of the Agreement on Agriculture, ju st because it may lead to 
the imposition of specific duties in fewer occasions (or even to the granting of rebates in more 
occasions) than would have been the case under the orig inal PBS.  Nor does the fact that the amended 
PBS incorporates an in-built process of gradual re duction of the thresholds of the band necessarily 
make the amended PBS any less similar to a variable import levy or to a minimum import price.  None of these two factors eliminates the lack of transparency and predictability regarding the amount 
of the duties that are ultimately  to be imposed on imported wheat and wheat flour, under the amended 
PBS, as a result of the combination of the ad valorem  tariff and the applicable duties or rebates. 
7.102  The Panel recalls in this regard the stat ement by the Appellate Body in the original 
proceedings: 
"[T]he amount of a duty is not the only c oncern of Chile's trading partners.  As 
Argentina argues, significant for traders, also , are the lack of transparency of certain 
features of Chile's price band system;  the unpredictability of the level of duties;  and 
the automaticity, the frequency, and the exte nt to which the duties fluctuate.  These 
specific characteristics of Chile's price ba nd system prevent enhanced market access 
for imports of agricultural products, contrary to the object and purpose of Article 4."
194 
7.103  The findings of the Panel in the current pro ceedings do not affect Chile's right to impose 
ordinary customs duties, based on the value or the volume of imported goods, up to its ad valorem  
rates bound in the WTO, and in accordance with its obligations under the WTO agreements. 
4. Conclusion 
7.104  For the reasons indicated above, the Panel conc ludes that Chile's amended PBS is a border 
measure similar to a variable import levy and a minimum import price within the meaning of 
footnote 1 to Article 4.2 of the Agreement on Agricu lture.  As such, it is not an ordinary customs 
duty. 
C. ARGENTINA 'S CLAIM UNDER THE SECOND SENTENCE OF ARTICLE  II:1( B) OF GATT  1994 
1. Arguments of the parties 
7.105  Argentina claims that  the amended PBS is inconsiste nt with the second sentence of 
Article II:1(b) of GATT 1994, because it constitutes "o ther duties or charges" not recorded in the 
appropriate column of Chile's Schedules of Concessions.195 
7.106  Chile responds that, since the entry into force of Law 19. 897, the amended PBS is consistent 
with Article 4.2 of the Agreement on Agriculture an d is consequently not a measure that has to be 
converted into an ordinary customs duty.196  Chile argues, nevertheless, that the Panel is prevented from 
making findings on this claim, since the claim falls outside its terms of refere nce.  In Chile's opinion, 
this is a claim Argentina could have raised in the original proceedings but did not, when it claimed 
                                                      
194 Appellate Body Report on Chile – Price Band System,  para. 258. 
195 Argentina's first written submission,  paras. 289-295.  Argentina's re buttal, para. 287.  Argentina's 
oral statement, paras. 4 and 110-112 and 118.  Argentina's response to question 25. 
196 Chile's first written submission, para. 47. WT/DS207/RW 
Page 40  
 
  instead that the PBS was in breach of both Arti cle 4.2 of the Agreement on Agriculture and the first 
sentence of Article II:1(b) of the GATT 1994.
197 
7.107  In its rebuttal, Argentina admits that its claim under the second sentence of Article II:1(b) of 
GATT 1994 is a new claim that was not ra ised in the original proceedings.198  Argentina argues, 
however, that this claim could not have been pr esented before, because the modified PBS is a "new" 
measure, different from the PBS which was at issue in the original proceedings.199  Argentina also 
argues that its claim relates to the modified PBS in it s entirety rather than to one aspect of this system 
in particular, so that it is not challenging one par ticular aspect of the original measure which has not 
changed.200  Finally, Argentina added that, irrespective of the violation of Article 4.2 of the Agreement 
on Agriculture, its claim under Article II:1(b) of the GATT 1994 is one that stands on its own.201 
2. Relevant provision 
7.108  Argentina's claim in the current proceedings concerns only the second sentence of 
Article II:1(b) of GATT 1994.  To understand the contex t of this sentence, it is useful to note the full 
text of subparagraphs (a) and (b) of Article II:1: 
"(a) Each contracting party shall accord to  the commerce of the other contracting 
parties treatment no less favourable than that  provided for in the appropriate Part of 
the appropriate Schedule anne xed to this Agreement. 
(b) The products described in Part I of the Schedule relating to any contracting 
party, which are the products of territories of other contracting parties, shall, on their 
importation into the territory to which the Sc hedule relates, and subject to the terms, 
conditions or qualifications set forth in that Schedule, be exempt from ordinary 
customs duties in excess of those set forth and provided therein.   Such products shall 
also be exempt from all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement or those directly and mandator ily required to be imposed thereafter by 
legislation in force in the importing territory on that date." 
7.109  The Panel has already noted that the challenge d measures are border measures "other than an 
ordinary customs duty".
202  The Uruguay Round Understanding on the Interpretation of Article II:1(b) 
of the GATT 1994 ("the Understanding on Article II:1(b) ") provides that such measures, other than 
ordinary customs duties should have been recorded by Members at the end of the Uruguay Round in a column entitled "other duties and charges" in thei r Schedules.  Paragraph 1 of the Understanding on 
Article II:1(b) reads: 
"(…) [i]n order to ensure transparency of  the legal rights and obligations deriving 
from paragraph 1(b) of Article II, the nature and level of any 'other duties or charges' 
levied on bound tariff items, as referred in th at provision, shall be recorded in the 
Schedules and concessions annexed to GATT 1994 against the tariff item to which 
they apply.  It is understood that such reco rding does not change the legal character of 
'other duties or charges'." 
                                                     
 
197 Chile's first written submission, paras. 47-48.  Chile's rebuttal, paras. 202-206.  Chile's oral 
statement, para. 13.  Chile's response to question 2. 
198 Argentina's rebuttal, paras. 290 and 295.  Argentina's oral statement, para. 113. 
199 Argentina's rebuttal, paras. 291-292, 296, 303 and 306.  Argentina's oral statement, paras. 114-116.  
Argentina's response to questions 2 and 25. 
200 Argentina's rebuttal, paras. 301-302.  Argentina's response to question 25. 
201 Argentina's oral statement, para. 118. 
202 See para. 7.104 above.  WT/DS207/RW 
 Page 41 
 
 
  3. Panel's analysis 
(a) Issues for the Panel's consideration 
7.110  In response to Argentina's claim under the second sentence of Article II:1(b) of GATT 1994, 
Chile has put forward two defences. 
7.111  First, Chile has argued that the amended PBS is no t a measure that has to be converted into an 
ordinary customs duty.  It has stated that as a result of the amendments introduced, the PBS is now 
consistent with Article 4.2 of the Agreement on Agri culture and consequently is not in breach of the 
second sentence of Article II:1(b) of GATT 1994. 
7.112  Second, Chile has argued that in any event the Panel is precluded from making findings with 
regard to this claim because it is a claim that Argentina s hould have raised in the original proceedings 
but did not.  In Chile's view, Argentina's claim under Article II:1(b) of GATT 1994 is therefore outside 
the Panel's mandate. 
(b) Findings in the original proceedings 
7.113  We recall the particular set of circumstanc es surrounding this claim.  In the original 
proceedings, Argentina had claimed that the PB S was inconsistent with Article II of GATT 1994203, 
because it led to the imposition of duties in  excess of Chile's tariff rate bindings.204  The Panel found 
that the PBS duties were a border measure "other than an ordinary customs duty", prohibited under 
Article 4.2 of the Agreement on Agriculture.  The Panel also stated that the expression "ordinary 
customs duties" has the same meaning in Article  4.2 of the Agreement on Agriculture and in 
Article II:1(b) of GATT 1994.  The Panel went on to  find that the consistency of the duties resulting 
from Chile's PBS with Article II:1(b) of GATT 1994 could not be assessed under the first sentence of 
that provision, which deals with ordinary custom s duties, but rather with the second sentence, which 
deals with "other duties or charges of any kind" imposed on or in connection with importation.205 
7.114  The Panel then stated that, if other duties or charges were not record ed but are nevertheless 
levied, they are inconsistent with the second se ntence of Article II:1(b), in the light of the 
Understanding on Article II:1(b).  Noting that Chile did not record its PBS in the "other duties and 
charges" column of its Schedule, the Panel th erefore found that the Chilean PBS duties were 
inconsistent with Artic le II:1(b) of GATT 1994.206 
7.115  The Appellate Body reversed th e Panel's findings regarding the breach of Article II:1(b) of 
GATT 1994.  The Appellate Body found that the Pane l had acted in a manner inconsistent with its 
duties under Article 11 of the DSU, since the second sentence of Article II:1(b)  was not part of the 
matter before the Panel and, furthermore, Chile had been denied its fair right of response regarding 
this claim.  The Appellate Body determined that, while the Panel's terms of reference, as defined in 
the request for the establishment of  the panel, were broad enough to have included a claim under the 
second sentence of Article II:1(b), Argentina had not articulated a claim under that sentence, nor had 
it submitted any arguments on the consistency of Ch ile's PBS with the second sentence.  Therefore, 
the second sentence of Article II:1(b) was not the subject of a claim before the Panel.207 
                                                      
203 Chile – Price Band System,  Request for the Establishment of a Panel by Argentina (WT/DS207/2), 
19 January 2001, p. 1. 
204 Panel Report on  Chile – Price Band System,  paras. 4.6-4.7. 
205 Ibid., paras. 7.104-7.105. 
206 Panel Report on  Chile – Price Band System , para. 7.107-7.108. 
207 Appellate Body Report on  Chile – Price Band System , paras. 173-177. WT/DS207/RW 
Page 42  
 
  7.116  The Appellate Body's statement does not n ecessarily invalidate the substantive reasoning 
behind the Panel's findings on Article II:1(b).  On the contrary, the Appellate Body confirmed the 
possible parallelism between the obligations in Ar ticle 4.2 of the Agreement on Agriculture and 
Article II:1(b) of the GATT 1994.  Indeed, the Appe llate Body indicated that a finding of violation 
under Article 4.2 of the Agreement on Agriculture  would make it unnecessary to issue a separate 
finding with regard to the second sentence of Article II:1(b) of GATT 1994.  In the words of the 
Appellate Body: 
"[I]f we were to find first that Chile's price band system is inconsistent with 
Article 4.2 of the Agreement on Agriculture , we would not need to make a separate 
finding on whether the price band system also results in a violation of Article II:1(b) 
of the GATT 1994 in order to resolve this dispute.  This is because a finding that 
Chile's price band system as such is a meas ure prohibited by Article 4.2 would mean 
that the duties resulting from the application of that price band system could no 
longer be levied —no matter what the level of those duties may be.  Without a price 
band system, there could be no price band duties."
208 
(c) Need for separate findings under Article II:1(b) of GATT 1994 
7.117  The Panel has already found that the amended PBS, challenged in the current Article 21.5 
proceedings, is inconsistent with Article 4.2 of  the Agreement on Agriculture.  As noted, the 
Appellate Body indicated in the original proceedings that a finding of violation under Article 4.2 of the Agreement on Agriculture made it unnecessary to issue a separate finding with regard to the 
second sentence of Article II:1(b) of GATT 1994.  It is our view that the position of the Appellate 
Body on that regard was not based solely on the par ticular characteristics of the original PBS, but 
rather on the basis of the respective obligations  contained in Article 4.2 of the Agreement on 
Agriculture and in the second sentence of Article II:1(b) of GATT 1994.  Consequently, we believe 
that having found that the amended PB S is inconsistent with the form er, we do not need to make a 
separate finding on whether it is also a violation of the latter. 
7.118  When asked by the Panel, Argentina was not able to explain why, assuming that the Panel 
were to make a determination that the amended PBS is in breach of Article 4.2 of the Agreement on 
Agriculture, the Panel would then need to make a separate finding on whether the same measure also 
results in a violation of Article II:1(b) of the GA TT 1994 in order to resolve the dispute.  Argentina 
only stated that, in the absence of  such separate determination, Chile would try to maintain its 
measure with "cosmetic amendments", and that a se parate determina tion would contribute to Chile 
withdrawing the inconsistent measure and that it would avoid a "never-ending cycle of dispute 
settlement proceedings".
209  The Panel is unconvinced by such arguments.  Even leaving aside the 
presumption that Members should act in good faith210, it is not clear why Chile's compliance with the 
determinations regarding Ar ticle 4.2 of the Agreement on Agriculture would not be enough to achieve 
the objectives identified by Argentina and whether a separate determination on Article II:1(b) of the 
GATT 1994 would have any additional effect. 
7.119  The Panel notes in this regard that it does not need to examine all legal claims made by 
Argentina.  As was stated by the Appellate Body: 
                                                      
208 Ibid., para. 190.  See also para. 287. 
209 Argentina's response to question 28. 
210 "We must assume that WTO Members will perform thei r treaty obligations in good faith, as they are 
required to do by the WTO Agreement and by international law".  Panel Report on Argentina – Textiles and 
Apparel , para. 6.14.  WT/DS207/RW 
 Page 43 
 
 
  "Given the explicit aim of dispute settlement that permeates the DSU , we do not 
consider that Article 3.2 of the DSU  is meant to encourage either panels or the 
Appellate Body to 'make law' by clarifying existing provisions of the WTO 
Agreement  outside the context of resolving a particular dispute.  A panel need only 
address those claims which must be addressed in order to resolve the matter in issue 
in the dispute."211 
7.120  In consequence, once determined that the amende d PBS is inconsistent with Article 4.2 of the 
Agreement on Agriculture, an additional finding on whethe r the same measure is also in breach of the 
second sentence of Article II:1(b) of GATT 1994 is not necessary in order to resolve the dispute 
between the parties. 
(d) The issue of the Panel's mandate 
7.121  In light of the consideration that a separate fi nding on whether the amended PBS is in breach 
of the second sentence of Article II:1(b) of GATT 1994 is not necessary in order to resolve this 
dispute between the parties, there would normally be no need to go any further.  However, the Parties 
have extensively discussed whether Argentina's clai m under Article II:1(b) has been properly brought 
before this Panel.  This question relates to the i ssue of the Panel's mandate and is therefore of great 
systemic importance.  Accordingly, and notwithstandi ng its decision not to make an additional finding 
under Article II:1(b) of GATT 1994, the Panel finds it worthwhile, obiter dicta , to express its views 
on some of the issues related to the question of the Panel's mandate under Article 21.5 of the DSU. 
(i) Arguments of the parties 
7.122  As described above, the parties are in agreemen t that Argentina did not raise a claim under the 
second sentence of Article II:1(b) of GATT 1994 in the course of the original proceedings.  In other 
words, both Chile and Argentina agree that Ar gentina's claim in this respect constitutes a new claim  
which had not been before the original Panel.  E ach of the two parties, however, attaches different 
significance to this fact and interprets the app licable WTO precedents, on whether new claims would 
fall within this Panel's mandate , arriving at opposite conclusions. 
7.123  Chile argues that Argentina's claim under the sec ond sentence of Article II:1(b) falls outside 
the terms of reference of the Panel, because it shoul d have been raised and substantiated during the 
original proceedings.212  Chile also stresses that, should this Panel consider that such new claim falls 
properly within its mandate, its due process rights would be "significantly affected."213 
7.124  Chile points primarily to the Appellate Body decision in EC – Bed Linen (Article 21.5 – 
India)  in support of its position that Argentina's clai m under Article II:1(b) is not within the Panel's 
mandate.  In that case, the Appellate Body upheld the compliance panel's finding that a claim 
advanced by India was not properly before the panel, because it was not a new claim, but rather the 
same claim that had been raised before  the original panel, against an unchanged  feature of EC law.  
Chile argues that, as in EC – Bed Linen , Argentina's claim under the sec ond sentence of Article II:1(b) 
of GATT 1994 relates to an unchanged feature of the PBS, and therefore should not be within this 
Panel's mandate.  In this sense, Chile claims th at this particular claim by Argentina is the same claim 
that Argentina could have brought, but did not, befo re the original panel proceedings, relating to the 
same  feature of the PBS system, i.e., the imposition of duties and charges no t recorded in Chile's 
Schedules. 
                                                      
211 Appellate Body Report on US – Wool Shirts and Blouses , p. 19. 
212 Chile's rebuttal, para. 204.  
213 Ibid., para. 205. WT/DS207/RW 
Page 44  
 
  7.125  Argentina disputes Chile's interpretation.  It ar gues that its claim refers to the "measures taken 
to comply", within the meaning of Article 21.5 of the DSU, which constitute a new and different  
measure that did not exist before. In this sense, cl aims relating to its overall structure and operation 
would be properly before this Panel.  The measu res adopted by Chile to comply with the DSB's 
recommendations and rulings, Law 19.897 and Supreme Decree 831, turned the PBS into a 
completely new measure.
214 
7.126  Argentina refers to the meaning attributed by the Appellate Body to the language of 
Article 21.5 in Canada – Aircraft (Article 21.5 – Brazil) , which established that, in carrying out its 
review under Article 21.5 of the DSU, a panel is no t confined to examining the "measures taken to 
comply" from the perspective of the claims, arguments and factual circumstances that related to the 
measure that was the subject of the original proceedings. 
7.127  In light of the above, Argentina concludes that it could not have raised this claim during the 
original proceedings.  For the purposes of interpreting the mandate of panels under  Article 21.5, this is 
a new claim related to a new measure, i.e., the amended PBS.215 
(ii) Relevant provision 
7.128  Article 21.5 of the DSU states that: 
"Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, 
including wherever possible resort to the original panel ..." 
(iii) Interpretation of the Panel's mandate under Article 21.5 of the DSU 
7.129  The issue of whether the mandate of a Pane l established under Article 21.5 of the DSU may 
include claims that had not been raised in the or iginal proceedings was addressed by the Appellate 
Body in Canada – Aircraft (Article 21.5 – Brazil) .  The compliance panel had declined to examine a 
claim by Brazil regarding a new subsidy, on the gro unds that the new measure was not covered by the 
DSB's original recommendation that Canada should withdraw a prohibited export subsidy.  The DSB 
recommendation did not cover the new subsidy, which did not exist at the time when such 
recommendation was issued.
216  In its ruling, the Appellate Body clarified that Article 21.5 
proceedings were not confined to claims, argument s and factual circumstances related to the measure 
subject of the original proceedings, but indeed that they usually relate to a new and different measure 
to that before the original panel.  Thus, it would only be natural that Article  21.5 panels, in carrying 
out their functions, would have to examine claims, arguments, and factual circumstances not 
addressed during the original proceedings.  In the words of the Appellate Body: 
"[W]e disagree with the Article 21.5 Panel that the scope of these Article 21.5 dispute 
settlement proceedings is limited to 't he issue of whether or not Canada has 
implemented the DSB recommendation '.  The recommendation of the DSB was that 
the measure found to be a prohibited expor t subsidy must be withdrawn within 90 
days of the adoption of the Appellate Body  Report and the original panel report, as 
modified – that is, by 18 November 1999.  That recommendation to 'withdraw' the prohibited export subsidy did not, of c ourse, cover the new measure – because the 
new measure did not exist when the DSB made its recommendation.  It follows then 
                                                     
 
214 Argentina's response to questions 3, 25 and 26. 
215 Argentina's rebuttal, paras. 296 and 307.  Argentina's response to question 26. 
216 Appellate Body Report on Canada –Aircraft (Article 21.5 – Brazil) , paras. 39-40.  WT/DS207/RW 
 Page 45 
 
 
  that the task of the Article 21.5 Panel in this  case is, in fact, to determine whether the 
new measure – the revised TPC programme – is  consistent with Article 3.1(a) of the 
SCM Agreement . 
Accordingly, in carrying out its review unde r Article 21.5 of the DSU, a panel is not 
confined to examining the 'measures take n to comply' from the perspective of the 
claims, arguments and factual circumstances that related to the measure that was the 
subject of the original proceedings.  Although these may have some relevance in proceedings under Article 21.5 of the DSU, Article 21.5 proceedings involve, in principle, not the original measure, but ra ther a new and different measure which was 
not before the original panel.  In add ition, the relevant facts bearing upon the 
'measure taken to comply' may be different  from the relevant facts relating to the 
measure at issue in the original proceedings.  It is natural, therefore, that the claims, 
arguments and factual circumstances which are pertinent to the 'measure taken to 
comply' will not, necessarily, be the same as those which were pertinent in the 
original dispute.  Indeed, the utility of th e review envisaged under Article 21.5 of the 
DSU would be seriously undermined if a panel were restricted to examining the new 
measure from the perspective of the claims, arguments and factual circumstances that related to the original measure, because an Article 21.5 panel would then be unable to 
examine fully the 'consistency with a cove red agreement of the measures taken to 
comply', as required by Article 21.5 of the DSU."
217 
7.130  Thereafter, panels and the Appellate Body have  conducted a case-by-case analysis in deciding 
whether it is proper to address claims that were not raised during the original proceedings.  In US – 
Shrimp (Article 21.5 – Malaysia) , even though the Appellate Body r ecognized that the mandate of an 
Article 21.5 panel might require an analysis of new claims, it decided that the panel had acted 
correctly when it declined to address a claim made by  Malaysia because it had not been put forward in 
its request for the establishment of a panel under Artic le 21.5 of the DSU.  Malaysia argued that the 
panel in that case had improperly limited its analys is to the DSB's recommendations and rulings and 
had not addressed other possible inconsistencies that ha d not been raised by Malaysia in its request for 
the establishment of the Article 21.5 panel.  The Appellate Body ruled that the mandate of an 
Article 21.5 panel is limited by its terms of refe rence, which are based on the claims put forward by 
the complainant in the request fo r the establishment of the panel.218  The Appellate Body added, 
however, that not all claims in a request for the establishment of an Article 21.5 panel can 
automatically be considered to have been properl y put before the panel and consequently to have 
become the mandate for the panel.  Malaysia ha d presented claims against an unchanged aspect of a 
measure that had already been found to be WTO-cons istent.  The Appellate Body found that the panel 
had not erred when it examined the measure, found that it had not changed since the original proceedings and concluded that the earlier ruling still stood.
219  As stated by the Appellate Body: 
"[A]s we have said, it is not part of a pane l's task to go beyond the particular claims 
that have been made with respect to the consistency of a new measure with a covered 
agreement when a matter is referred to it by  the DSB for an Article 21.5 proceeding.  
Thus, it would not have been appropriate in this case for the Panel to address a claim 
that was not made by Malaysia when requesting th at this matter be referred by the 
DSB for an Article 21.5 proceeding."220 
                                                      
217 Ibid., paras. 40-41. 
218 Appellate Body Report on US –Shrimp (Article 21.5 – Malaysia) , paras. 83-88. 
219 Appellate Body Report on US –Shrimp (Article 21.5 – Malaysia) , paras. 89-97. 
220 Ibid., para. 88. WT/DS207/RW 
Page 46  
 
  7.131  With respect to a claim that had been included in  Malaysia's request for the establishment of a 
panel under Article 21.5 of the DSU, but which related to an unchanged  aspect in the new measure, in 
the same case the Appellate Body stated: 
"With respect to a claim that has been made when a matter is referred by the DSB for 
an Article 21.5 proceeding, Malaysia seems to suggest as well that a panel must re-
examine, for WTO-consistency, even those aspects of a new measure that were part 
of a previous measure that was the subject of a dispute, and were found by the Appellate Body to be WTO – consistent in that dispute, and that remain unchanged as 
part of the new measure. 
It is not disputed that the wording of Section 609 has not been changed since the first 
case.  The Congress of the United States has not  amended the statute.  In addition, the 
meaning of Section 609 has not been changed by the decision of the United States Court of International Trade... 
As we see it, then, the Panel properly examin ed Section 609 as part of its examination 
of the totality of the new measure, correctly found that Section 609 had not been 
changed since the original proceedings, a nd rightly concluded that our ruling in 
United States – Shrimp  with respect to the consistency of Section 609, therefore, still 
stands."
221 
7.132  In EC – Bed Linen (Article 21.5 – India) , the Appellate Body upheld the compliance panel's 
finding that a claim advanced by India was not properly before the panel, because it was not a new 
claim, but rather the same claim that had been raised before  the original panel, against an unchanged  
feature of EC law. 
"[W]e agree with the Panel's statement distinguishing, in this respect, the Canada – 
Aircraft (Article 21.5 – Brazil )  dispute from these Article 21.5 proceedings: 
In that case, Canada had implemented the recommendation of the 
DSB by adopting a new and different measure.  In the Article 21.5 
proceeding, Brazil made claims regarding that measure that it had not 
made in the original dispute.  Ca nada objected to claims raised by 
Brazil against the new measure on the grounds that no similar claims had been raised against the original  measure.  Had Canada's objection 
been upheld, Brazil would have been  barred from making claims that 
could not have been raised in the orig inal proceedings.  The issue 
before us is whether India should be allowed to raise, in this 
Article 21.5 proceeding, claims with respect to Article 3.5 which it could and  did raise before the original panel, but which it did not 
pursue, and which the Panel dismissed for failure to present a prima  
facie case of violation.[Footnote omitted] (original boldface) 
We agree with the Panel that the Canada – Aircraft (Article 21.5 – Brazil)  dispute 
involved a new claim challenging a new component of the measure taken to comply 
which was not part of the original measure.  The situation in Canada – Aircraft 
(Article 21.5 – Brazil)  was thus different from the situation in this appeal."
222 
                                                      
221 Ibid., paras. 89-96. 
222 Appellate Body Report on EC –Bed Linen (Article 21.5 – India) , para. 88.  WT/DS207/RW 
 Page 47 
 
 
  7.133  In a report that was not appealed, the Article 21.5 compliance panel in the US – 
Countervailing Measures on Certain EC Products  dealt with the issue of a new claim related to an 
aspect that was present in the original measures.  The panel decided that it could not consider the new 
claim because it had already concluded that the chal lenged measure was "not an aspect of the measure 
taken to comply".  The panel went on to indicate that , even if it were to consider that such challenged 
measure was an aspect of the measures taken to comp ly, it would nevertheless still conclude that the 
new claim was not within its mandate.  The panel found  that it was not legally empowered to consider 
new claims on aspects of the original measure th at were unchanged and were  not challenged in the 
original proceedings, since this would provide th e complainant with a second chance to raise a claim 
that it had failed to raise in the original case a nd it would jeopardize the principles of fundamental 
fairness and due process.  The panel framed the issue in these terms: 
"Even if we were to consider that the likelihood-of-injury analysis were an aspect of 
the measures taken to comply , we would nevertheless still c onclude that the European 
Communities' claim  on failure to reconsider likeliho od of injury is not within our 
mandate.  The Appellate Body jurisprudence summarized in EC – Bed Linen 
(Article 21.5 – India)  seems to indicate that the European Communities is not 
precluded from raising claims that it did not raise in the original proceedings, provided that these claims concern the meas ures taken to comply and are included in 
the Panel request.  We recall that the Appe llate Body’s reasoning for the inclusion of 
new claims in the scope of Article 21.5 proceedings was that "the 'measure taken to comply' may be inconsistent  with WTO obligations in ways different from the 
original measure".
223  The question here is whether this conclusion should also apply 
to new claims where the measure taken to comply is unchanged from the original 
measure and thus allegedly inconsiste nt with WTO obligations in ways identical to  
(not different from ) the original measure. 
In this dispute, this Panel confronts the i ssue of whether to consider new claims on 
aspects of the original measure that are unchanged and were not  challenged in the 
original proceedings.  The purpose of Artic le 21.5 is to provide an expeditious 
procedure to establish whether a Member has properly implemented the DSB recommendations and rulings.  Admitting such a new claim would mean providing the European Communities with a second chance to raise a claim that it failed to raise 
in the original proceedings.  The Appellate  Body, however, has found that a party 
cannot cure the failure to include a claim in  the panel request by raising the claim in 
subsequent submissions or statements.
224 
                                                      
223 (original footnote )  Appellate Body Report on EC – Bed Linen (Article 21.5) , para. 79 (emphasis 
added); see also  Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , para. 41; Appellate Body 
Report on  US – Shrimp (Article 21.5 – Malaysia), paras. 86-87. 
224 (original footnote )  In EC – Bananas III , the Appellate Body explained that:  
"Article 6.2 of the DS U requires that the claims , but not the arguments , must all be specified 
sufficiently in the request for the establishment of a panel in order to allow the defending 
party and any third parties to know the legal basis of the complaint.  If a claim  is not specified 
in the request for the establishment of a panel,  then a faulty request cannot be subsequently 
'cured' by a complaining party's argumentation in its first written submission to the panel or in 
any other submission or statement made later in the panel proceeding." 
Appellate Body Report on EC – Bananas III , para. 143; see also  Appellate Body Report on Brazil – 
Desiccated Coconut , p. 22, DSR 1997:I, p. 167, at p. 186 (stating that a claim falls outside a panel's terms of 
reference unless it is identified in the document specify ing the panel's terms of reference); Appellate Body 
Report on India – Patents (US) , para. 88 (emphasizing the difference between the claims, which must be 
included in the request for establishment as they estab lish the panel's terms of reference, and the arguments, 
which are set out and clarified in th e written submissions and oral statements throughout the panel proceedings). WT/DS207/RW 
Page 48  
 
  Moreover, the Panel is concerned that allowing a new claim on the likelihood-of-
injury in the current proceedings may jeopardize the principles of fundamental fairness and due process.  In our view, it w ould be unfair to expose the United States 
to the possibility of a finding of violation on an aspect of the original measure that the United States was entitled to assume was c onsistent with its obligations under the 
relevant agreement given the absence of a finding of violation in the original 
report.
225 
In sum, permitting the European Communiti es to introduce a new claim on an aspect 
of the original measure that was never challenged and remained unchanged raises 
serious issues regarding the United States' due process rights.  On balance, the utility 
of an Article 21.5 proceeding should not override the basic due process rights of the 
parties to a dispute.226"227 
(iv) Does Argentina's claim under Article II:1(b) of  GATT 1994 fall within the Panel's mandate? 
Object and purpose of Article 21.5 of the DSU  
7.134  As noted above, in light of its decision not to  make a separate finding under Article II:1(b) of 
GATT 1994, the Panel would normally not need to go any further.  However, because of the broad 
systemic implications of the matter, the Pane l finds it worthwhile to present its views, obiter dicta , on 
some of the issues related to whether Argentina's claim under Article II:1(b) could be considered to 
fall within the Panel's mandate. 
7.135  The Panel notes in this regard that the object and purpose of Article 21.5 of the DSU is to 
provide for an expedited procedure through whic h Members can examine whether measures adopted 
by a Member, allegedly to comply with the recommendations and rulings of the DSB, have indeed 
                                                      
225 (original footnote )  The Panel notes that in EC – Bed Linen (Article 21.5 – India) , the panel  
explained that, in such a situation, a defending Member would not have the opportunity to bring the measure into conformity.  Panel Report on EC – Bed Linen (Article 21.5 – India) , para. 6.40.  Indeed, there is no 
provision for a "reasonable period" to implement the ruling in an Article 21.5 dispute.  Thus, an Article 21.5 
panel ruling on such a new claim may immediately give rise to rights for compensation or suspension of concessions under Article 22 DSU.  Moreover, the parties do not have the same opportunity to present evidence 
and arguments in Article 21.5 proceedings.   
The circumstances of the present case illustrate the potential procedural unfairness.  The European 
Communities did not agree that the United States could submit consecutive rebuttals and required that the 
rebuttals be simultaneous.  Therefore, the United States could only rebut the arguments in the European Communities' Second written submission during the sole m eeting with the parties.  Consequently, important 
facts and issues continued to surface qu ite late into the Article 21.5 pro ceedings, proceedings that are already 
abbreviated.  In addition, we note that the record of the original proceedings does not even include evidence regarding the likelihood-of-injury determinations which, as noted above, were made by a different agency than 
the likelihood-of-subsidization determinations at issue in the original dispute.  Thus, were we to consider the 
injury claim as within our mandate, we would have an extremely limited evidentiary basis on which to rule.  Finally, the shorter timeline significantly limits both the pa nel's opportunity to interact with the parties and the 
panel's time to deliberate.  The panel typically has onl y one opportunity to meet with the parties, unlike the 
normal proceedings where two subs tantive meetings take place.   
226 (original footnote )  As indicated by the Panel in  EC – Bed Linen (Article 21.5 – India) :  
"[s]uch an outcome would not seem to be consistent with the overall object and purpose of the 
DSU to achieve satisfactory resolution of disputes, effective functioning of the WTO, to maintain a proper balance between the rights and obligations of Members, and to ensure that 
benefits accruing to any Member under covered ag reements are not to nu llified or impaired."  
Panel Report on EC – Bed Linen (Article 21.5 – India) , para. 6.40. 
227 Panel Report on  US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , 
paras. 7.73-7.76.  WT/DS207/RW 
 Page 49 
 
 
  brought the original offending measure into confor mity with that Member's obligations under the 
WTO agreements.  It is in light of this object and purpose that the text of Article 21.5 of the DSU should be read. 
A compliance panel's jurisdiction extends beyo nd the original DSB's recommendations and 
rulings  
7.136  The task of a compliance panel under Article 21. 5 of the DSU is not limited to the DSB's 
original recommendations and rulings.  If compliance panels were so limited, the objective of these 
procedures could be easily rendered ineffective.  As noted by the Appellate Body, the title of 
Article 21 of the DSU makes clear that "the task of   panels under Article 21.5 forms part of the 
process of the ' Surveillance of Implementation  of the Recommendations and Rulings ' of the DSB."228  
Ensuring implementation of the DSB's recommendations  and rulings is an essential element of the 
WTO dispute settlement mechanism.  Collective surveillance is necessary to achieve the first 
objective of this mechanism, as described in the DS U, "to secure the withdrawal of measures found to 
be inconsistent with the provisions of any of the covered agreements".229  Implementation is in turn 
necessary to "preserve the rights and obligations  of Members under the covered agreements", 
"providing security and predictability to the multilateral trading system". 
7.137  In its statement in Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body made it clear 
that the task of a compliance panel under Article 21.5 of the DSU is not limited to the DSB's original 
recommendations and rulings.  The Appellate Body reach ed its conclusion by noting that, in principle, 
Article 21.5 panels are faced, not with the original  measure, but rather with a new and different 
measure which was not before the original panel.  The Appellate Body also noted that the relevant 
facts bearing upon the "measure taken to comply" may be different from the relevant facts relating to 
the measure at issue in the original proceedings. 
7.138  At the same time, in view of the object a nd purpose of Article 21.5, a compliance panel's 
jurisdiction is subject to certain limitations.  In US – Shrimp (Article 21.5 – Malaysia) , the Appellate 
Body clarified the issue further, stating that Artic le 21.5 panels have no aut hority to re-examine the 
WTO-consistency of unchanged aspects of a new measure that are part of a previous measure that was 
the subject of a dispute, which were already f ound to be WTO-consistent in that dispute. 
7.139  In its unappealed report, the Article 21.5 compliance panel in US – Countervailing Measures 
on Certain EC Products (Article 21.5 – EC) found that panels are not le gally empowered to consider 
new claims  on aspects of a measure that are unchanged  and were not challenged  in the original 
proceedings, since this would provide the complain ant with a second chance to raise a claim that it 
had failed to raise in the original case and it would jeopardize the principles of fundamental fairness 
and due process. 
7.140  In conclusion, the interpretation of Article 21. 5 of the DSU makes it clear that a compliance 
panel is not limited to examining th e consistency of the "measures taken to comply" with the original 
DSB's rulings and recommendations.  The task of a compliance panel is rather to examine the 
consistency of the measures with "a covered agreemen t".  That is, with the covered agreement that is 
within the terms of reference of  the respective compliance panel. 
                                                      
228 Appellate Body Report on US –Shrimp (Article 21.5 – Malaysia) , para. 87. 
229 DSU, Article 3.7. WT/DS207/RW 
Page 50  
 
  Conditions under which a complianc e panel may consider new clai ms, not raised before the 
original panel  
7.141  An Article 21.5 compliance panel may accordi ngly consider new claims, which were not 
raised before the original panel.  However, it is our  view that in order for new claims to be properly 
put before an Article 21.5 compliance panel, the follo wing conditions must be present.  First, that the 
claim is identified by the complainant in its requ est for the establishment of the compliance panel.  
Second, that the claim concerns a new measure, adopted by the respondent allegedly to comply with the recommendations and rulings of the DSB.  Third, that the claim does not relate to aspects of the 
original measure that remain unchanged in the ne w measure and were not challenged in the original 
proceedings or, if challenged, were addressed in  those proceedings and not found to be WTO-
inconsistent. 
7.142  The first two conditions flow from the decisions of the Appellate Body in previous 
compliance proceedings under Article 21.5  that have already been commented.
230  The third condition 
was addressed only partially (and mainly with resp ect to unchanged aspects of a new measure that 
were already found to be WTO-consis tent) by the Appellate Body in US – Shrimp (Article 21.5 – 
Malaysia)  and in EC – Bed Linen (Article 21.5 – India) .231  In our opinion, this third requirement is 
also related to the findings of the compliance panel in US – Countervailing Measures on Certain EC 
Products (Article 21.5 – EC) .  In our view, while this third condition has not been fully addressed yet 
by the Appellate Body, it is an essential requirement  to prevent the misuse of the special expedited 
procedures contemplated in Article 21.5 of the DSU. 
7.143  Moreover, we consider that these three conditions are in line with two additional 
considerations highlighted in past rulings by th e Appellate Body, namely that:  (i) the task of 
Article 21.5 panels is part of the process of "s urveillance of implementation of the recommendations 
and rulings of the DSB"232;  and, (ii) the main test is whether or not the complaining Member could 
have raised its claim during the original proceedings.233 
7.144  The first condition is formal and in the current case is clearly met.  Argentina raised a specific 
claim under the second sentence of Article II:1(b) of  GATT 1994 in its request for the establishment 
of the compliance panel, dated 29 December 2005.234 
7.145  The second condition is also met.  Indeed, it is a general requirement for Article 21.5 
compliance proceedings.  In the words of the Appellate Body: 
"Proceedings under Article 21.5 do not concern just any measure of a Member of the 
WTO; rather, Article 21.5 proceedings are limited to those 'measures taken to 
comply  with the recommendations and rulings' of the DSB.  In our view, the phrase 
'measures taken to comply' refers to meas ures which have been , or which should be, 
adopted by a Member to bring about compli ance with the recommendations and rulings 
of the DSB.  In principle, a measure wh ich has been 'taken to comply with the 
                                                      
230 Appellate Body Report on US – Shrimp (Article 21.5 – Malaysia) , Appellate Body Report on 
Canada –Aircraft (Article 21.5 – Brazil)  and Appellate Body Report on EC –Bed Linen (Article 21.5 – India) . 
231 As noted above, in US – Shrimp (Article 21.5 – Malaysia) , the Appellate Body agreed with the 
panel's rejection of a particular claim raised by Malaysia which related to unchanged  aspects of the original 
measure that had been addressed by the Appellate Body in the original proceedings and found to be WTO-
consistent. 
232 Appellate Body Report on US – Shrimp (Article 21.5 – Malaysia) , para. 87. 
233 Appellate Body Report on EC –Bed Linen (Article 21.5 – India) , para. 88. 
234 Request for the Establishment of a Panel, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products (Recou rse to Article 21.5 of the DSU by Argentina) , 9 January 2006, 
WT/DS207/18.  WT/DS207/RW 
 Page 51 
 
 
  recommendations and rulings' of the DSB will not be the same measure as the measure 
which was the subject of the original dispute,  so that, in principle, there would be two 
separate and distinct measures235:  the original measure which gave rise to the 
recommendations and rulings of the DSB, and the "measures taken to comply" which 
are – or should be – adopted to implement  those recommendations and rulings...."236 
7.146  Argentina's claim under the second sentence of Ar ticle II:1(b) concerns the amended PBS, as 
regulated by Law 19.897 and Supreme Decree 831.  This amended PBS is formally  a new and 
different measure from the one that was the object of the original proceedings.  The amended PBS 
was adopted by Chile, allegedly to comply with the recommendations and rulings of the DSB in the 
original case.  Indeed, Argentina emphasizes this fo rmal aspect, the fact that its claim under the 
second sentence of Article II:1(b) concerns a new measure and that it relates to the amended PBS in 
its entirety rather than to one aspect in particular.237 
7.147  As proposed above238, however, it is not enough that the claim concerns a measure that is 
formally different from the one that was the object of  the original proceedings.  In our view, a third 
condition needs to be fulfilled, i.e., that the claim does not relate to aspects of the original measure 
that remain unchanged in the new measure and either  were not challenged in the original proceedings 
or, if challenged, were addressed in those proceed ings and not found to be WTO-inconsistent.  
Argentina's claim under the second sentence of Article  II:1(b) was not articulated in the original 
proceedings.239  Accordingly, an issue for the Panel to determine, were it necessary, would be to 
verify whether Argentina's claim relates to aspects of the original measure that remain unchanged in 
the amended PBS.  This determination goes beyond the verification of whether the amended PBS is 
formally  a new and different measure from the one that was the object of the original proceedings.  
The Panel is cognizant of the practical difficulty of separating unchanged  aspects from changed  
aspects in a new measure.  However, such efforts w ould have been called for,  in order to discourage 
the possibility of misuse of a compliance panel's process. 
7.148  Some third parties expressed their systemic c oncern if the Panel were to decide that a 
"Member is precluded from challenging, in Article  21.5 proceedings, any aspect of a new measure 
that was present in the original measure but that was not challenged in the original proceedings".240  In 
the words of one third party, this would add "a new and undue burden on the complaining party, since 
it would force it to prosecute every conceivable violation  in the original proceedings in order to 
preserve its rights on implementation".241  We agree that excluding claims against unchanged aspects 
of a measure that were not challenged in the original proceedings places a burden on the complaining 
party.  However, we do not consider that this is a new or undue burden.  The complaining party's 
burden to frame the matter brought before the original panel, in terms of identifying both the challenged measure and its legal claims, is cl early contained in Article 6.2 of the DSU: 
"The request for the establishment of a pane l shall be made in writing.  It shall 
indicate whether consultations were held, identify the specific measures at issue and 
                                                     
 
235 (original footnote )  We recognize that, where it is alleged that there exist no "measures taken to 
comply", a panel may find that there is no new measure. 
236 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , para. 36. 
237 Argentina's rebuttal, paras. 291-292, 296, 301-303, and 306.  Argentina's response to questions 2, 25 
and 26. 
238 See paras. 7.141-7.143 above. 
239 See para. 7.115 above.  See also, Appellate Body Report on  Chile – Price Band System , para. 173 
and Argentina's oral statement, para. 113. 
240 Brazil's oral statement, para. 15.  See also, Canada's oral statement,  para. 6-14, EC's oral statement, 
paras. 15-20. 
241 Brazil's oral statement, para. 16. WT/DS207/RW 
Page 52  
 
  provide a brief summary of the legal basis of the complaint sufficient to present the 
problem clearly." 
7.149  As has been frequently indicated, the complaini ng party's burden to identify its claims against 
the challenged measure in its initial request for the establishment of the panel serves two purposes.  It 
defines the terms of reference of the panel and it fulfils an important due process objective, giving 
parties and third parties sufficient information concerning the claims at issue in the dispute, in order to 
allow them an opportunity to respond to the complainant's case.
242  In the words of the Appellate Body: 
"Identification of the treaty provisions claimed to have been violated by the 
respondent is always necessary both for purposes of defining the terms of reference of a panel and for informing the respondent and the third parties of the claims made by 
the complainant;  such identification is a mi nimum prerequisite if the legal basis of 
the complaint is to be presented at all."
243 
7.150  In original panel proceedings, the failure by the complaining party to identify its claims in the 
request for the establishment of a panel cannot be cured subsequently: 
"If a claim  is not specified in the request for the establishment of a panel, then a 
faulty request cannot be subsequently 'cur ed' by a complaining party's argumentation 
in its first written submission to the panel or in any other submission or statement 
made later in the panel proceeding."244 
7.151  The burden placed on the complaining party to identify its claims in the request for the 
establishment of a panel is related to the due pro cess rights of the respondent to be properly informed 
of the nature of such claims, so that it can pr operly respond.  As noted, it is our view that an 
Article 21.5 compliance panel may cons ider a new claim, not raised befo re the original panel, as long 
as:  (a) that claim is identified by the compla inant in its request for the establishment of the 
compliance panel;  (b) the claim concerns a new measure, adopted by the respondent allegedly to 
comply with the DSB's recommendations and rulings;  and, (c) the claim relates to changed  aspects of 
the new measure. 
7.152  The admission by a compliance panel of new clai ms, not raised before the original panel, 
against unchanged aspects of the original measure, would create a situation of uncertainty for the 
respondent.  Even a respondent Member who had complied in good faith with the DSB's 
recommendations and rulings in a particular case,  by modifying the challenged measure, without 
incurring any new violations, could still be subj ect to continuous challenges against unchanged 
aspects of the original measure.  Moreover, this co uld lead to "case-splitting", a tactical decision by a 
complainant to advance some claims in the origin al proceedings, while savi ng some claims for the 
compliance stage.245  The admission of such new claims would jeopardize the security and 
predictability that the WTO dispute settlement sy stem should provide to the multilateral trading 
system.  We recall in this regard  the words of the panel in the EC –Bed Linen (Article 21.5 – India)  
case: 
"To rule on this aspect of India's claim under Article 3.5 in this proceeding would be 
to allow India a second chance to prevail on a claim which it raised, but did not 
                                                      
242 Cfr., Appellate Body Report on Brazil – Desiccated Coconut , p. 22. 
243 Appellate Body Report on Korea – Dairy , para. 124. 
244 Appellate Body Report on EC – Bananas III , para. 143. 
245 This risk was identified by a third party, who was nevertheless of the view that:  "Where the 
measure is appropriately before a panel, and the DSB has made no findings or recommendations in respect of such measure or the claims made by the complaining party, a panel may not then reject such claims or 
arguments on the sole basis that they could have been raised previously."  Canada's oral statement, paras. 6-14.  WT/DS207/RW 
 Page 53 
 
 
  pursue, in the original proceeding.  We cannot conclude that such a result is required 
by Article 21.5 of the DSU, or any other provision.  The possibility for manipulative or abusive litigation tactics that would be opened by allowing Members an opportunity to obtain a ruling in an Article  21.5 that they could have sought and 
obtained in the original dispute would, in  our view, be inestimably harmful to the 
effective operation of the dispute settlement system.
246  We hasten to emphasise that 
we do not consider that India has engaged in any such harmful tactics, or has engaged in this dispute settlement procedure in anyt hing other than entirely good faith in an 
effort to resolve the dispute, as required by  Article 3.10 of the DSU.  We nonetheless 
consider that a claim which, as a legal and practical matter, could have been raised 
and pursued in the original dispute, but was not, cannot be raised on the same facts 
and legal premises in an Article 21.5 pr oceeding to determine the existence or 
consistency of measures taken to comply with the recommendation of the DSB in the 
original dispute.  In our view, this ruling furthers the object and purpose of the DSU."
247 
7.153  On the other hand, if a WTO Member should wish to bring a legal complaint against 
unchanged aspects of an original measure that it di d not raise before an original panel, nothing 
prevents that Member from bringing a new challe nge under the regular procedures, by requesting 
consultations on the matter and then, if those consultations fail to resolve the issue, by requesting the 
establishment of a regular panel.  In our view, what  that Member is prevented from doing is to use the 
expedited procedures in Article 21.5 of the DSU to bring new claims that it neglected to make in the 
original proceedings. 
7.154  As regards the determination of whether a particular claim relates to aspects that remain 
unchanged in a new measure, we have noted that  this determination should go beyond a formal 
verification of the existence of a new and different measure.  In previous cases, and in the context of 
other provisions, panels and the Appellate Body have favoured a non-fo rmalistic approach to the issue 
of whether changes incorporated into a measure are enough to make that measure a new measure, as 
compared to an old measure.  Notably, in the original Chile – Price Band System  case, the Appellate 
Body found that, after the enactment of Law 19.772  during the course of the proceedings, Chile's PBS 
remained essentially the same, since the modificati ons made to the original measure had not "changed 
its essence".248 
7.155  The test under Article 21.5, however, is in our opinion not whether the measure is the same, 
but rather whether the challenged aspects in the new measure are changed  or unchanged  when 
compared to the old measure.  Despite the fact that the t est is different, there is no reason why the 
criterion should be an y more formalistic. 
7.156  The parties differ on whether Argentina's clai m concerns a changed or unchanged aspect of 
the original measure and consequently whether Ar gentina could have raised it during the original 
proceedings.  Argentina argues that its claim "relates to  the whole of the modified PBS, that is to say, 
the modified PBS in its totality rather than to one aspect  in particular" so that it is not "challenging an 
aspect  of the original measure which has not changed ".249  Chile contends that Argentina's challenge 
                                                      
246 (original footnote ) As the Appellate Body has noted, "The procedural rules of WTO dispute 
settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and effective resolution of trade disputes".  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" ("US – FSC
 "), WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619,  at para. 166. 
247 Panel Report on EC –Bed Linen (Article 21.5 – India) , para. 6.43. 
248 Appellate Body Report on Chile – Price Band System,  paras. 138-139. 
249 Argentina's rebuttal, paras. 301-302.  Argentina's response to questions 25 and 26. WT/DS207/RW 
Page 54  
 
  should have been raised and substa ntiated in the original proceedings, because it is applicable both to 
the amended PBS as well as to the original measure.
250 
7.157  Argentina's claim under Article II:1(b) is th at the duties from the amended PBS constitute 
"other duties or charges" not recorded in the appr opriate column of Chile's Schedules of Concessions.  
Argentina argues that, since the amended PBS is in consistent with Article 4.2 of the Agreement on 
Agriculture, as a border measure similar to a variab le import levy and to a minimum import price, 
which is not an ordinary customs duty, the resulti ng duties constitute "other duties or charges" that 
have not been recorded in Chile's Schedule of con cessions.  In Argentina's view, this would translate 
into a violation of the second sente nce of Article II:1(b) of GATT 1994.251 
7.158  The amended PBS, as regulated in Law 19.897 and Supreme Decree  831, is formally a new 
measure from the one that was the object of the or iginal proceedings in this case.  The Panel has 
already noted that, in a number of important aspect s, the amended PBS has changed when compared 
to the original measure.  Such aspects include, fo r example, the product coverage of the PBS (since 
edible vegetable oils are now excluded from the system ); the fact that the lower and higher thresholds 
of the price band (the floor and ceiling prices) ha ve been set until December 2014, instead of being 
established yearly as was the case under the original PB S; and the fact that the amount of the duties 
and rebates is determined  bimonthly through a Supreme Decree of the Ministry of Finance, rather 
than established for each transaction on the basis of a weekly reference price as was done previously. 
7.159  Argentina has asserted that: 
"[T]he essence of the PBS was unaffected  by the changes introduced by Law 19.897 
and Decree 831/2003.  In other words, these changes did not convert the price band 
system into a measure different from the pr ice band system that was in force before 
the changes were introduced."252 
7.160  When asked by the Panel, Argentina did not identify the new aspects of the amended PBS, 
different from those in the original measure, that were the target of its claim.  Nor did Argentina 
explain which were the new features  that the amended PBS contained that would, in its opinion, 
violate the second sentence of Article II:1(b) in ways that the original PBS did not.253 
7.161  Having identified the issues that in our view are related to the matter, however, the Panel 
finds that there is no need to proceed further and make a specific finding on whether Argentina's claim 
under the second sentence of Article II:1(b) of GATT 1994  has been properly put before this Panel.  
We do not find that, under the particular circumstan ces of this case, such a finding would be necessary 
to resolve the dispute between the parties. 
4. Conclusion 
7.162  In light of the discussion above, and having found that the amended PBS is inconsistent with 
Article 4.2 of the Agreement of Agriculture, the Pa nel finds it unnecessary, for the resolution of this 
dispute, to address Argentina's claim that the am ended PBS is also inconsistent with the second 
sentence of Article II:1(b) of GATT 1994. 
                                                      
250 Chile's first written submission, paras. 48, 50, 56.  Chile's rebuttal, para. 204.  Chile's response to 
question 2. 
251 Argentina's first written submission, paras. 289-295. 
252 Ibid., para. 190.  See also, Argentina's first written submission, para. 241. 
253 Argentina's response to questions 25 and 26.  WT/DS207/RW 
 Page 55 
 
 
  D. ARGENTINA 'S CLAIM UNDER ARTICLE  XVI:4  OF THE WTO  AGREEMENT  
1. Arguments of the parties 
7.163  Argentina argues that, insofar as the amended PBS infringes both Article 4.2 of the 
Agreement on Agriculture and the second sentence of Article II:1(b) of the GATT 1994, it must be in breach of Article XVI:4 of the WTO Agreement, si nce Chile has not ensured the conformity of its 
existing laws, regulations and administrative proce dures with its obligations under the WTO covered 
agreements.
254 
7.164  Chile responds that, since it has not maintained a measure inconsistent with Article 4.2 of the 
Agreement on Agriculture, it is not in breach  of Article XVI:4 of the WTO Agreement.255 
2. Relevant provision 
7.165  Article XVI:4 of the WTO Agreement provides: 
"Each Member shall ensure the conformity of its laws, regulations and administrative 
procedures with its obligations as pr ovided in the annexed Agreements." 
3. Panel's analysis 
7.166  As noted, in response to Argentina's claim, Ch ile has only responded that, since the amended 
PBS is not inconsistent with Article 4.2 of th e Agreement on Agriculture, it is not in breach of 
Article XVI:4 of the WTO Agreement.256  In contrast with its respon se to Argentina's claim under the 
second sentence of Article II:1(b) of GATT 1994,  Chile has not argued that the claim under 
Article XVI:4 of the WTO Agreement falls outsi de the terms of reference of the Panel. 
7.167  The Panel has already found that the amended PBS, challenged in the current Article 21.5 
proceedings, is inconsistent with Article 4.2 of  the Agreement on Agriculture.  Normally, the 
determination of a breach of any provision of any WTO covered agreement gives automatically rise to 
a violation of Article XVI:4 of the WTO Agreement.  As stated by the Panel in US – 1916 Act 
(Japan) : 
"[I]f a provision of an 'annexed Agreement' is breached, a violation of Article XVI:4 
immediately occurs. GATT 1994 is one of  the 'annexed Agreements' within the 
meaning of Article XVI:4. Since we found that  provisions of Article VI of the GATT 
1994 has been breached, we conclude that, by violating this provision, the United States violates Article XVI:4 of the WTO Agreement."
257 
7.168  Similarly, the Panel in US – 1916 Act (EC)  found that: 
"If Article XVI:4 has any meaning, it is that when a law, regulation or administrative 
procedure of a Member has been found in compatible with the WTO obligations of 
that Member under any agreement annexed to  the WTO Agreement, that Member is 
also in breach of its obligations under Article XVI:4."258 
                                                      
254 Argentina's first written submission, paras. 296-304.  Argentina's rebuttal, para. 320. 
255 Chile's first written submission, para. 197.  Chile's rebuttal, para. 211. 
256 Ibid. 
257 Panel Report on US – 1916 Act (Japan) , para. 6.287. 
258 Panel Report on US – 1916 Act (EC) , para. 6.223. WT/DS207/RW 
Page 56  
 
  7.169  Having made the determination th at the amended PBS is inconsis tent with Article 4.2 of the 
Agreement on Agriculture, it follows that Chile has no t ensured the conformity of its laws, regulations 
and administrative procedures with the obligations est ablished in the WTO agreements.  It would flow 
automatically that the measure is also in br each of Article XVI:4 of the WTO Agreement.  
Notwithstanding the above, we do not feel that such additional finding is necessary in order to resolve 
the dispute between the parties. 
7.170  Indeed, once it is determined that the amended PBS is inconsistent with Article 4.2 of the 
Agreement on Agriculture, an additional finding on wh ether the same measure is also in breach of 
Article XVI:4 of the WTO Agreement would not be necessary in order to resolve the dispute between 
the parties.   It was already noted that a Panel does not n eed to examine all legal claims made by a 
complaining party, but just those "which must be addressed in order to resolve the matter in issue in 
the dispute."
 259 
4. Conclusion 
7.171  In light of the discussion above, and having found that the amended PBS is inconsistent with 
Article 4.2 of the Agreement on Agriculture, the Pa nel finds it unnecessary, for the resolution of this 
dispute, to address Argentina's claim that the amended PBS is also a violation by Chile of 
Article XVI:4 of the WTO Agreement, because it do es not ensure the conformity of Chile's laws, 
regulations and administrative procedures with its  obligations under the WTO covered agreements. 
VIII.  CONCLUSIONS AND RECOMMENDATIONS 
8.1 As a preliminary comment, we note that the parties in this dispute are both developing 
country Members.  However, as was the case in the original proceedings260, there were no provisions 
on special and differential treatment for developing country Members invoked by any of the parties.  
In any event, we find that these provisions were not relevant for the resolution of the specific matter 
that was brought before this Panel. 
8.2 In light of the findings above, we conclude that: 
(a) By maintaining a border measur e similar to a variable import levy and to a minimum 
import price, Chile is acting in a manner inconsistent with Article 4.2 of the 
Agreement on Agriculture, and has thus failed to implement the recommendations 
and rulings of the DSB; 
(b) It is unnecessary, for the resolution of this dispute, to make a separate finding on 
Argentina's claim under the second sentence of Article II:1(b) of GATT 1994;  and, 
(c) It is unnecessary, for the resolution of this dispute, to make a separate finding on 
Argentina's claim under Article XVI:4 of the WTO Agreement. 
8.3 Under Article 3.8 of the DSU, in cases where there is infringement of obligations assumed 
under a covered agreement, the action is considered prima facie to cons titute a case of nullification or 
impairment of benefits under that  agreement.  Chile has failed to rebut this presumption.  
Accordingly, we conclude that to the extent Chile  has maintained a measure inconsistent with the 
provisions of the Agreement on Agriculture, it con tinues to nullify or impair benefits accruing to 
Argentina under that Agreement. 
                                                      
259 Appellate Body Report on US – Wool Shirts and Blouses , p. 19. 
260 Appellate Body Report on Chile – Price Band System,  paras. 196-199.  WT/DS207/RW 
 Page 57 
 
 
  8.4 We recommend that the Dispute Settlement Body request Chile to bring its PBS into 
conformity with its obligations under the Agreement on Agriculture. 
 
_______________