WT/DS207/RW 
 Page C-1 
 
 
  ANNEX C 
 
REBUTTALS FROM 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 
 WT/DS207/RW 
Page C-2  
 
  ANNEX C-1
* 
 
REBUTTAL BY ARGENTINA 
(17 MAY 2006) 
  
TABLE OF CONTENTS 
 
A.
 INTRODUCTION ..................................................................................................................C -5 
B. THE  AMENDED  PBS  IS IN BREACH  OF ARTICLE  4.2 OF THE  AGREEMENT  
ON AGRICULTURE..............................................................................................................C-6  
1. Scope of the present proceedings unde r Article 21.5 of the DSU .....................................C-6  
2. The amended PBS causes insulation from the international market ...............................C-8  
2.1 The amended PBS tends to "overcompensa te" for the effect of decreases in 
international prices on the domestic ma rket when the reference prices are set 
below the price band floor....................................................................................................C -9 
2.2 The amended PBS does not merely moderate the effect of fluctuations in world 
market prices on Chile's market becau se it does not ensure that the entry price 
of imports to Chile falls in tandem with falling world market prices ............................C-10  
2.3 The floor and ceiling of the amended PBS insulate Chile's market from 
international price developments and are not transparent, having been 
determined once only for the entire period extending from 16 December 2003 to 
15 December 2014 and having been estab lished as from 2007 on the basis of 
fixed coefficients............................................................................................................. .....C-15  
2.4 The reference prices insulate Chile's market from international price 
developments by remaining unchanged fo r two months, by being established on 
the basis of the average of the daily pr ices recorded on only two predetermined 
markets and in being unrelated to the transaction price ................................................C-16  
3. The amended PBS is neither tran sparent nor predictable..............................................C-18  
4. The amended PBS is a measure simila r to a variable import levy .................................C-24  
5. The amended PBS is a measure simila r to a minimum import price.............................C-28  
6. The amended PBS has not produced any improvement in the conditions of 
access to the Chilean market..............................................................................................C-34  
C. THE  ARGUMENT  RELATING  TO THE  FACTOR  OF 1.56  APPLICABLE  TO 
WHEAT  FLOUR  AND  THE  CLAIM  RELATING  TO THE  SECOND  SENTENCE  
OF ARTICLE II:1( B) OF THE  GATT  1994  FALL  WITHIN  THE  TERMS  OF 
REFERENCE  OF THE  PRESENT  PANEL .........................................................................C-39  
1. Argentina's argument relating to the factor of 1.56 applicable to wheat flour lies 
within the terms of referen ce of the present Panel ..........................................................C-39  
(a) The questioning of the factor of 1.56 applicable to wheat flour is an argument, not a 
claim.......................................................................................................................... ............C-39  
                                                      
* Annex C-1 contains the rebuttal by Argentina.  This text was originally submitted in Spanish by 
Argentina.  WT/DS207/RW 
 Page C-3 
 
 
  (b) Even if the Panel were to find that the Argentine arguments relating to the factor of 
1.56 applicable to wheat flour constitute a new "claim", those arguments fall within 
the terms of reference of  the present Panel...........................................................................C-41  
2. The Argentine claim relating to the second sentence of Article II:1(b) of the 
GATT 1994 falls within the Pane l's terms of reference...................................................C-46  
D. CONCLUSIONS ..................................................................................................................C- 50 WT/DS207/RW 
Page C-4  
 
  TABLE OF REPORTS CITED 
 
Short title Full title and reference 
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.  
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.  
US – Shrimp 
(Article 21.5 – Malaysia) Appellate Body Report " United States – Import Prohibition of Certain 
Shrimp and Shrimp Products – Recourse by Malaysia to Article 21.5 of 
the DSU ", WT/DS58/AB/RW, adopted 22 October 2001. 
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 21 July 2000.  
EC – Bed Linen (Article 21.5 – India ) Appellate Body Report " European Communities – Anti-Dumping Duties 
on Imports of Cotton-Type Bed Linen from India – Recourse by India to 
Article 21.5 of the DSU", WT/DS141/AB/RW, adopted 8 April 2003.  
US – Certain EC Products 
(Article 21.5 – EC)  Panel Report " United States – Countervailing Measures on Certain EC 
Products – Recourse by the European Communities to Article 21.5 of 
the DSU", WT/DS212/RW, adopted 17 August 2005.  
Korea – Dairy Products  Appellate Body Report "Korea – Definitive Safeguard Measures on 
Imports of Certain Dairy Products"  WT/DS98/AB/R, adopted 
14 December 1999.  WT/DS207/RW 
 Page C-5 
 
 
  A. INTRODUCTION 
1. The Government of the Argentine Republic thanks  the members of the Panel for enabling it to 
submit for their consideration its Rebuttal of the arguments put forward by the Government of Chile 
in its written submission of 3 May 2006 (herei nafter "Chile's First Written Submission"). 
2. Argentina takes this opportunity to reiterate th at, as follows from its written submission of 
19 April 2006 (hereinafter "Argentina's First Writte n Submission"), Chile has failed to implement the 
recommendations and rulings of the Dispute Settlement  Body (DSB), and that the Price Band System 
(PBS) which Chile applies to imports of wheat and wheat flour, as modified by Law 19.897 and Exempt Decree No. 831/2003 (hereinafter the "amended PBS") – that is to say, the measure taken to 
comply – is inconsistent with the ag reements concerned in this dispute. 
3. First of all , Argentina will address Chile's claims rela ting to the inconsistency of the amended 
PBS with Article 4.2 of the Agreement on Agriculture  (Section B).  
4. In this connection, Argentina will demonstrate to  the Panel that Chile is seeking to show that 
it has complied with the recommendations and rulin gs of the DSB by putting its own construction on 
what the DSB said. At the same time, Chile fails  to show that the amended PBS is a measure 
consistent with the Agreement on Agriculture . 
5. In this respect, Argentina reaffirms that, as de monstrated in its First Written Submission, the 
amended PBS is a border measure similar to a "var iable import levy" and a "minimum import price" 
within the meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture .
1 
6. Argentina reiterates that "this is because the wa y in which the system is designed and the way 
it operates in its overall nature are sufficiently sim ilar to the characteristics of these two categories of 
prohibited measures as to make the amended PBS, with  its particular characteristics, a 'similar border 
measure'".2 
7. Thus, Argentina will make it clear to the Panel th at Chile has been unable to refute that "the 
particular configuration and interaction of the specific characteristics of Chile's price band system generate certain market access conditions that lack  transparency and predictability and disconnect the 
Chilean market from international price trends in a way that insulates the Chilean market from the 
transmission of international prices and prevents enhanced market access for imports of  wheat and 
wheat flour", in a manner inconsistent with Article 4.2 of the Agreement on Agriculture .
3 
8. Secondly , Argentina will explain why the arguments re lating to the factor of 1.56 applicable 
to wheat flour and the claim concerning the second sentence of Article II:1(b) of the GATT 1994 can 
and should be examined by this Panel (Section C).  
9. Thus, Argentina requests the Panel to examine th e arguments relating to the factor of 1.56 
applicable to wheat flour inasmuch as these argu ments help to show that the amended PBS is a 
measure inconsistent with Article 4.2 of the Agreement on Agriculture . 
10. Moreover, Argentina requests the Panel to find  that the amended PBS is in breach of the 
second sentence of Article II:1(b) of the GATT 1994, given that it was not recorded in the 
corresponding column of Chile's Schedule of concessi ons (No. VII) but is neve rtheless being applied. 
                                                      
1 Argentina's First Written Submission, paragraph 71. 
2 Argentina's First Written Submission, paragraph 72. 
3 Argentina's First Written Submission, paragraph 73. WT/DS207/RW 
Page C-6  
 
  11. Finally , Argentina presents its conclusions (Section D) and requests the Panel to find that the 
measure taken to comply – that is to say, the am ended PBS – is inconsistent, both in itself and as 
applied, with Article 4.2 of the Agreement on Agriculture , the second sentence of Article II:1(b) of the 
GATT 1994, and Article XVI.4 of the Marrakesh Agreement Establishing the World Trade 
Organization . 
B. THE
 AMENDED  PBS  IS IN BREACH  OF ARTICLE  4.2 OF THE  AGREEMENT  ON 
AGRICULTURE 
12. In its First Written Submission, Argentina show ed that the 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 Agriculture , because the way in which the system is designed and the 
way it operates in its overall nature are suffici ently similar to the characteristics of these two 
categories of prohibited measures as to make the ame nded PBS, with its particular characteristics, a 
"similar border measure".4 
13. Argentina has shown, on the basis of evidence, that the amended PBS causes insulation from 
the international market by disconnecting the Chilean  market from the transmission of international 
prices and impeding enhanced access to the Chilean market for imports of wheat and wheat flour, and 
that it is neither transparent nor predictable as only ordinary customs duties can be.5 
14. In its First Written Submission, Chile fails to  refute any of the claims and evidence put 
forward by Argentina. Below, Argentina presents its  analysis of the defence offered by Chile, seeking 
to organize Chile's arguments according to how they presumably should correspond to the Argentine claims. 
1. Scope of the present proceedings under Article 21.5 of the DSU 
15. Chile devotes an entire section to an attempt to  "demonstrate" that the changes introduced by 
Law 19.897 and its Regulations reflect the findings and conclusions of the Appellate Body. Thus, 
Chile claims to have complied with the recomme ndations and rulings of the Dispute Settlement 
Body.
6 
16. However, the changes made to the Price Ba nd System do not make it consistent with 
Article 4.2 of the Agreement on Agriculture  and consequently Chile has not implemented the 
recommendations and rulings of the Dispute Settlement Body. 
17. Argentina cannot agree with Chile's contention that: 
"… The recommendations and rulings are ther efore those which establish not only the 
framework of compliance, but also the framework for possible Article 21.5 
compliance review proceedings …"7  
18. This is incorrect. In a compliance review proceeding under Article 21.5 of the DSU it is not 
simply a question of whether the Member has comp lied with the recommendations of the DSB. It is 
also a question of whether the measures taken to co mply are consistent with the covered agreements .  
                                                      
4 Argentina's First Written Submission, Section C.I. 
5 Argentina's First Written Submissi on, Sections C.I.2 and C.I.3. 
6 Chile's First Written Submission, Section IV. 
7 Chile's First Written Submission, paragraph 77.  WT/DS207/RW 
 Page C-7 
 
 
  19. This was established by the Appellate Body when it held that panels established under 
Article 21.5 of the DSU are not merely called upon to assess whether "measures taken to comply" implement specific "recommendations and rulings" adopt ed by the DSB in the original dispute but, 
"more frequently" should assess the " consistency with a covered agreement " of the implementing 
measures: 
"We addressed the function and scope of Artic le 21.5 proceedings for the first time in 
Canada – Aircraft (Article 21.5 – Brazil) .  There, we found that Article 21.5 panels 
are not merely called upon to assess whether 'measures taken to comply' implement specific 'recommendations and rulings' adopted by the DSB in the original dispute.
  
We explained there that the mandate of Artic le 21.5 panels is to examine either the 
'existence' of 'measures taken to comply' or, more frequently, the ' consistency with a 
covered agreement'  of implementing measures …"8  
20. Moreover, Chile misinterprets the findings a nd conclusions of the Pa nel and the Appellate 
Body when it suggests that there were only "specific aspects" of the PBS that had to be brought into 
conformity.9  
21. Chile disregards the fact that, as follows from a simple reading of the recommendations and 
rulings in the reports of both the Panel and the Appe llate Body adopted by the DSB, its obligation was 
to bring its inconsistent Price Band System into conformity with the Agreement on Agriculture . 
22. Thus, the Panel stated that: 
"We recommend that the Dispute Settlement B ody request Chile to bring its PBS into 
conformity with its obligations under the Agreement on Agriculture ".10 (Underlining 
added). 
23. In its turn, the Appellate Body: 
"… recommends that the DSB request Chile to  bring its price band system, as found, 
in this Report and in the Panel Report as modi fied by this Report, to be inconsistent 
with the Agreement on Agriculture , into conformity with its obligations under that 
Agreement ".11 (Underlining added) 
24. Thus, it is clear that in these – as in the origin al – proceedings the various components of the 
PBS are not being called into questi on in isolation, but rather that the issue before the DSB is – and 
was – the system as a whole, the system as such. 
25. In its First Written Submission, Argentina exam ined the various components of the amended 
PBS in order demonstrate analytically and mathemati cally that, in structure and design, the modified 
system is a measure similar to a variable import levy or a minimum import price, that is to say, a 
measure of the kind that has been required to be converted into ordinary customs duties. It is the 
combination of these components that makes it a measure  inconsistent in its totality with Article 4.2 
of the Agreement on Agriculture . 
                                                      
8 EC – Bed Linen  (Article 21:5 – India) , Appellate Body Report, paragraph 79 (footnotes omitted). 
9 Chile's First Written Submission, paragraph 88. 
10 Chile – Price Band System , Panel Report, paragraph 8.3. 
11 Chile – Price Band System , Appellate Body Report, paragraph 289. WT/DS207/RW 
Page C-8  
 
  26. The same analysis was made by the Appellate B ody in the original proceedings in arriving at 
the conclusion that the original PBS was inconsistent with Article 4.2 of the Agreement on 
Agriculture : 
"We emphasize that we reach our conclusion on the basis of the particular 
configuration and interaction of all these specific features of Chile's price band 
system …   
We, therefore, uphold the Panel's finding, in paragraph 7.47 of the Panel Report, that 
Chile's price band system is a 'border measure' 'similar to' 'variable import levies' and 
'minimum import prices ' within the meaning of footnote 1 and Article 4.2 of the 
Agreement on Agriculture ".12 
27. In the rest of this Section B, Argentina will c onsider Chile's claims and show that Chile has 
failed to refute the arguments and evidence submitted  by Argentina to the effect that the amended 
PBS causes insulation from the international market, is  not transparent or predictable, and is a border 
measure similar to a variable import levy and a minimum import price. Finally, Argentina will show 
that, contrary to what Chile claims, the ame nded PBS has not produced any improvement in the 
conditions of access to the Chilean market. 
2. The amended PBS causes insulation from the international market 
"… [T]oday … the duties or rebates assessed are valid for two months (i.e., six times 
a year), and during that period are completely disconnected from what may occur in 
the reference, or any other, markets … In other words, the duty or rebate, or its non-
applicability, is determined independently  of the commercial transaction prices …"13 
28. Argentina has shown that the amended PBS cau ses insulation from the international market, 
in a manner inconsistent with Article 4.2 of the Agreement on Agriculture .14  
29. Chile maintains that, according to the Appellate  Body, insulation may result from a lack of 
transparency and predictability, but does not constitut e a feature challengeable as such that could, on 
its own, lead to a finding of inconsistency.15  
30. Once again, Chile fails to understand th e findings of the Appellate Body.  
31. According to the Appellate Body, the distortion of the transmission of world market prices is 
a feature challengeable as such. This is shown in various passages of its report where the Appellate 
Body specifically examines the way in which the original PBS insulated the Chilean market from 
world market price developments.16 
32. Moreover, it is especially clear from its conclu sions, where the Appellate Body finds that the 
insulation and lack of transparency and predictab ility are separate and cumulative violations of the 
PBS.  
33. In this connection, in the paragraph already c ited by Argentina, the Appellate Body stated: 
                                                      
12 Chile – Price Band System , Appellate Body Report, paragraphs 261 and 262. 
13 Chile's First Written Submission, paragraphs 180 and 181. 
14 Argentina's First Written Submission, Section C.2. 
15 Chile's First Written Submission, paragraph 100. 
16 Chile – Price Band System , Appellate Body Report, paragraphs 250 and 251, inter alia.   WT/DS207/RW 
 Page C-9 
 
 
  "We emphasize that we 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 developments in a way 
that insulates Chile's market from the tr ansmission of international prices, and 
prevents enhanced market access for im ports of certain agricultural products."17 
34. In short, the insulation from international ma rkets caused by the amended PBS is a feature 
that gives rise to an inconsistency on its own. 
2.1 The amended PBS tends to "overcompensate" for the effect of decreases in international 
prices on the domestic market when the reference prices are set below the price band 
floor18 
35. In an attempt to discredit the evidence submitted by Argentina in support of its claim that the 
amended PBS tends to "overcompensate" for the effect of decreases in international prices on Chile's domestic market when the reference prices are set below the price band floor, Chile argues that the 
reference to the overcompensating effect of th e PBS is wrong and overcompensation cannot, on its 
own, be inconsistent with Article 4.2 of the Agreement on Agriculture .
19  It then adds that these 
references do not form part of the conclusions: 
"The references cited by Argentina, in pa rticular paragraph 260 of the Appellate 
Body's Report, are out of context and do not correspond to the reasoning followed by the Appellate Body, and are hence not part of  its conclusions.  They are actually part 
of the Appellate Body's analysis of whet her the Panel took proper account of the fact 
that the total amount of duties that may be levied as a result of Chile's price band 
system is 'capped' at the level of the tariff rate of 31.5 per cent ad valorem  bound in 
Chile's Schedule."
20 
(footnote: Paragraph 253 of the Appellate Body Report) 
36. Chile's argument is very odd and without foundation.  
37. First of all , contrary to what Chile says, paragra ph 260 of the Appellate Body Report is an 
integral part of its conclusions. This follows fro m its place in that report. In fact, paragraph 260 
summarizes the findings relating to Article 4.2 of the Agreement on Agriculture , and the whole of 
Section VIII.B of the report relating to "Assessment of Chile's Price Band System in the Light of Article 4.2 and Footnote 1" ends no more than two paragraphs after pa ragraph 260, with the 
upholding of the Panel's finding in paragraph 262. 
38. Secondly , Chile appears not to have read paragrap h 261, that is, the paragraph immediately 
following paragraph 260. That pa ragraph begins as follows: 
"We emphasize that we reach our conclusion
 on the basis of the particular 
configuration and interaction of all these  specific features of Chile's price band 
system." (Underlining added) 
                                                      
17 Chile – Price Band System , Appellate Body Report, paragraph 261 (underlining added). 
18 Argentina's First Written S ubmission, Section C.I.2.2. 
19 Chile's First Written Submission, paragraph 165. 
20 Chile's First Written Submission, paragraph 166. WT/DS207/RW 
Page C-10  
 
  39. Clearly, the words "conclusion" and "these specific features" can only refer to paragraph 260. 
If they did not, then the beginning of paragraph 261 would not make sense. Therefore, contrary to 
what Chile maintains, the overcompe nsation constitutes, on its own, a violation of Article 4.2 of the 
Agreement on Agriculture . 
40. Furthermore , Chile seeks to discredit the Argentine argument by trying to explain that after 
the entire panel proceeding and the appeal proceeding – during which Chile had ample opportunity to 
explain the operation of the PBS – the Appella te Body misconstrued how the PBS operated.
21 There 
have not been many instances in the history of the WTO dispute settlement system of a Member 
alleging, as a defence, that the Appellate Body erre d in its analysis. If this  was the case, then Chile 
probably failed to explain the operation of the origin al PBS correctly or simply did not understand its 
own measure.  
41. Chile bases its argument on the fact that the band  floor and ceiling and the reference price are 
expressed at the same market level. As Argentin a will show, the floor and ceiling prices are not FOB 
prices, despite the fact that the law and the decr ee say that they are. They are two figures chosen 
arbitrarily and without the use of any criterion. They could be CIF, FOB or ex-works. It is simply not 
known and there is no way of knowing,  unless Chile were to make more transparent its reasons for 
setting the floor and ceiling of the band at US$128 and US$148 per tonne, respectively.  
42. This is shown by the fact that the FOB price for Argentine bread wheat has been both higher 
and lower than these two prices. One need do no mo re than note the reference prices (based on the 
average FOB prices for bread wheat, Argentine port) established by Chile over the period of 
implementation of the PBS. For example, between 16  of April and 15 June 2004, the reference price 
was US$165 per tonne, and between 16 February an d 15 April 2005 US$108.64 per tonne. Chile must 
have been aware of this since the figures were its own official data (ODEPA).22 
43. In short , Argentina has shown, on the basis of evidence, that the amended PBS tends to 
"overcompensate" for the effect of decreases in in ternational prices on the domestic market when the 
reference prices are set below the price band floor. This  is clear from the analysis made by Argentina 
in Section C.I.2.2 of its First Written Submission, which includes actual examples of the 
overcompensation produced by th e amended PBS. Chile has been unable to refute any of the 
Argentine arguments. 
2.2 The amended PBS does not merely moderate the effect of fluctuations in world market 
prices on Chile's market because it does not ensure that the entry price of imports to 
Chile falls in tandem with falling world market prices 
44. Chile seeks to show that, as a consequence of the PBS, Chilean import prices for wheat and 
wheat flour follow a pattern similar to that of the FOB price and that, therefore, there is no insulation 
from the international market. Chile argues that, be ing established for a "sufficiently long" period of 
time, the specific duties of the am ended PBS allow international price variations to be transmitted to 
the price of wheat: 
"If the objective was to maintain a price level, the alteration would imply a permanent 
change in relative prices in order to prevent domestic market conditions from varying (price level) in the event of a change in external or import prices prior to entry.  
Conversely, if the duties ensure that relativ e prices remain stable, this means that the 
border measure allows external variations to be transmitted to the domestic market, 
                                                     
 
21 Chile's First Written Submission, paragraph 169. 
22 See Exhibit ARG-6.  WT/DS207/RW 
 Page C-11 
 
 
  albeit to a different extent.  That is to sa y, if international prices rise so do domestic 
prices, and if the former decline, so will the latter. 
In Chile today, the mere fact that the duties and rebates, or the non-application 
thereof, are established for a sufficiently long period of time provides certainty that 
any variations in international prices that may occur over this period will be 
transmitted to domestic wheat prices. 
Thus, the conclusion is that, if the floor price is not a minimum price, if the specific 
duties and their method of application do not continuously entail import price corrections and if import prices, as Argentina shows in Exhibits ARG-11 and ARG-12, follow a pattern similar to that of the f.o.b. price of wheat, Chile's wheat import 
duties – even if they do undergo variations  – do not constitute a variable duty within 
the meaning of Article 4.2 of the Agreement on Agriculture."
23 
45. It is worth noting that Chile makes special reference to Exhibits ARG-11 and ARG-12, since 
it is precisely these exhibits that clearly show how Chile's statement that "import prices... follow a pattern similar to that of the f.o.b. price of wheat"
24 is without foundation. 
46. Exhibits ARG-11 and ARG-12 contain a table a nd a chart, respectively, which show what 
happened, in the case of wheat, with the impos ition of specific duties as from 16 December 2004. 
They show how – at the same time as FOB prices,  Argentine port, were falling – the Chilean entry 
price, with the imposition of specific duties, ro se substantially, thereby demonstrating a total 
disconnection from international price developments. 
47. From 1 December 2004 the FOB price of bread wheat, Argentine port, fell steadily, a trend 
which was to be maintained until approximately 4 January 2005. Specifically, the initial FOB price on 
1 December was US$119 per tonne, whereas at the e nd of the trend, on 4 January 2005, the price 
stood at US$109 per tonne. 
48. If we consider the trend in the Chilean entry price as a consequence of the operation of the 
PBS, we observe the exact opposite: the entry price rose. In fact, from 1 December the Chilean entry 
price for Argentine bread wheat was tending to fall wh ich, since the band was not active, reflected the 
falling trend in FOB prices, Argentine port. However, when the band was activated on 
16 December 2004 and specific duties were impos ed, the Chilean entry price rose suddenly from 
US$149.94 per tonne to approximately US$162.93 per tonne. This happened as a result of the 
operation of the amended PBS itself and the imposition of specific duties. 
49. Moreover, on 16 February 2005 Chile established a new reference price below the band floor 
and lower than that in force during the previous two-month period. Therefore specific duties higher 
than during the previous period were imposed. On  the basis of the FOB price for bread wheat, 
Argentine port, corresponding to a shipment arriving in Chile on 15 February, the reference price for 
that date (and the two previous months) was US $114.50 per tonne. The Chilean entry price on that 
date, when specific duties of US$14.30 were imposed, was US$153.81 per tonne.  
50. On the next day, 16 February 2005, Chile est ablished a new reference price at US$108.64 per 
tonne, 5.12 per cent less than the previous figure.  However, the FOB price for Argentine bread wheat 
did not change and, therefore, neither did the CIF value. Nonetheless, when the specific duties 
resulting from the PBS were applied, the Chilean entry price rose from US$153.81 to US$160.01 per tonne.  
                                                     
 
23 Chile's First Written Submission, paragraphs 142 to 144. 
24 Chile's First Written Submission, paragraph 144. WT/DS207/RW 
Page C-12  
 
  51. In conclusion, it is clear from Exhibits AR G-11 and ARG-12 that, contrary to the Chilean 
claims, the import prices for wheat do not follow a pa ttern similar to that of the FOB price of wheat
. 
In particular, on 16 December 2004, the entry price rose whereas the FOB price fell, and on 
16 February 2005, whereas the FOB price remained steady, the entry price increased.  However much 
Chile would have the Panel believe  the opposite, the natural tendency of  the amended PBS is to move 
in the opposite direction to international price tr ends. And it could not be otherwise since the PBS 
would make no sense if that were not its purpose.  
52. If Chile wanted import prices to follow the same  pattern as FOB prices, it need only apply an 
ordinary customs duty . Chile knows this, but Chile does not apply  an ordinary customs duty precisely 
in order to avoid  the effects of ordinary customs duties and be able to insulate the Chilean market 
from international market developments. It is pure logic. 
53. In this connection, it is astonishing that Chile should assert that the duties resulting from the 
PBS are unaffected by changes in world prices: 
"... the duty or rebate, or the non-applica tion thereof, operates in such a way as to 
allow the transmission of international price variations to the domestic market.  That 
is to say, once the duty has been fixed, trad ers can capture the benefits of decreases in 
international prices, because changes in world prices do not affect the duty  that they 
are required to pay."25 (Underlining added) 
54. Chile's description of its amended PBS is simply wrong. The specific duties remain 
unchanged only during the two months stipulated  in Decree 831/2003. At the end of these two 
months, the specific duty will necessarily change because the reference price will have changed. 
Whenever, while situated below the band floor, th e prices on the markets of concern  (Argentine 
bread wheat or Soft Red Winter No. 2, Gulf of Mexico) vary, the specific duty applied will necessarily change. That is to say, as the FOB prices on the two markets of concern fall the specific 
duty will increase .  
55. As Argentina explained in its previous submissi on, this is a simple mathematical conclusion 
that follows from the PBS formula, according to which: 
Specific duty26 =  ( Band floor 
price - Reference price )  *  (  1  +General ad valorem  
tariff in force, 
Customs Tariff ) 
        
 =  ( US$128 - Reference price )  *  (  1  + 6% ) 
 
56. Moreover, this can be seen from the ODEPA data themselves.27 As the reference prices varied 
due to changes in the prices on the markets of concern, the specific duties changed. 
57. Chile attempts to show that because the duties remain the same for two months, international 
prices are transmitted. However, there is no such transmission. The duty established for two months 
has an inherent defect: it is the product of an in itial disconnection which arises on the first day of the 
period (for example, 16 December 2004). To this  initial disconnection there must be added the 
disconnection that inevitably  occurs at the end of these two m onths (for example, 16 February 2005), 
when a new reference price and the resulting specifi c duty are established. This was demonstrated by 
Argentina in Sections C.2.2 and C.2.4 of its submission. 
                                                      
25 Chile's First Written Submission, paragraph 152. 
26 In accordance with Article 14 of Dec. 831/2003. See Exhibit ARG-2. 
27 See Exhibit ARG- 6, in particular the periods 16/Dec/04 – 15/Feb/05 and 16/Feb/05 – 15/Apr/05.  WT/DS207/RW 
 Page C-13 
 
 
  58. It is paradoxical that what Chile refers to as a feature of the amended PBS that helps to 
transmit international price developm ents (i.e., the fact that the duty is unaffected by international 
price changes during the two-month period) is preci sely a feature that insulates the Chilean market 
from international prices.  
59. In fact, the specific duties do not vary for two months because, as Chile accepts without 
discussion, "the duty applies on all import transactions , without the slightest variation and regardless 
of the amount of the transaction."28  
60. As the Appellate Body held with respect to the original PBS, "[t]he Reference Price used in 
the context of the Chilean PBS is clearly disc onnected from the actual transaction value... " 29, and as 
Argentina explained in its submission and Chile confir med, this statement is fully applicable to the 
amended PBS.30 
61. Moreover, in an attempt to demonstrate "the  connection of Chilean wheat prices to the 
international grain market",31 Chile submits a graph (unnumbere d) supposedly derived from the 
values provided by Argentina in Exhibit ARG-11 whic h form the basis of the chart that Argentina 
attached as Exhibit ARG-12.  
62. According to Chile: 
"The graph below shows the trends in Chil ean wheat prices and in f.o.b. prices of 
Argentine bread wheat from January 2004 to  February 2006.  The price curves 
indicate that, first, Chilean wheat prices have  varied and, second, the variation is very 
similar to that of export prices of Argentine wheat, confirming the connection of Chilean wheat prices to the international grain market. 
 
 
                                                     
 
28 Chile's First Written Submission, paragraph 93. 
29 Chile – Price Band System , Appellate Body Report, paragraph 248. 
30 Argentina's First Written Submi ssion, paragraphs 220 to 223. 
31 Chile's First Written Submission, paragraph 154. Domestic and International Prices of Wheat
(US$/tonne)  
100 120 140 160 180 200 220 
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
2004 2005 2006
Bread wheat, f.o.b. Argentine port Wheat, wholesale price WT/DS207/RW 
Page C-14  
 
  This graph is an exact illustration of the points made by Argentina in Exhibit ARG-
11, with the series of f.o.b., c.i.f. and c.i. f.-plus-duties prices, and in Exhibit ARG-12, 
which shows the prices in graph form.  What clearly emerges is that the entry price of 
wheat exhibits the same behaviour as its f.o.b. price, which demonstrates price 
transmission and therefore the connection be tween the Chilean and the international 
market."
32 
63. There are several flaws in Chile's reasoning.  
64. Firstly , contrary to what Chile claims, this graph cannot be "an exact illustration of the points 
made by Argentina in Exhibit ARG-11". The Chilean  graph is based on monthly (apparently average) 
prices, whereas Exhibit ARG-11 is based on daily prices. Therefore, the Chilean graph is a reworking 
(recalculation) of information ostensibly provided by Argentina.  
65. Secondly, Exhibit ARG-12, contrary to what Chile maintains, does not plot all the prices in 
Exhibit ARG-11, but merely reproduces a graph based  on prices calculated for the period extending 
from 1 November 2004 to 29 April 2005, i.e., a pe riod much shorter than the total period of 
implementation of the amended PBS, with in which specific duties were applied. 
66. Therefore, the Chilean graph does not represent only the periods in which the bands were 
activated, or the periods relevant for the analysis , but the trend in FOB prices for Argentine bread 
wheat and the Chilean entry price from December 2003 to February 2006. In fact, as follows from Exhibit ARG-6, specific duties were applied be tween December 2004 and April 2005, due to the 
prices recorded by wheat on the markets of concer n from the entry into force of the amended PBS.
33 
This is the relevant period for observing the beha viour of the amended PBS. As distinct from the 
Chilean graph, Exhibit ARG-12 plots only the period of application of specific duties.  
67. As regards what Chile seeks to show, the evid ence provided by Chile itself demonstrates the 
disconnection between the entry price and the FOB price that arises when the specific duties are 
activated.  
68. A careful study of the graph submitted by Chile reveals that during the period of application 
of specific duties, the entry price follows a trajectory opposite to that of the FOB price in at least three 
of the four periods of concern in which specific duties are applied. 
69. According to the Chilean graph: 
• Between December 2004 a nd January 2005, the FOB price fell while the entry price 
rose; 
• between January and February 2005, the FOB price rose while the entry price 
remained stable; 
• between February and March 2005, the FOB price rose while the entry price fell. 
70. Moreover, in March and April 2005, the entry pr ice rose more than proportionally relative to 
the FOB price, that is to say, increased more steeply. 
71. If, moreover, we consult the chart in Exhibit ARG-12 and the table in Exhibit ARG-11 to see 
what happens to the entry price on 16 December 20 04 and 16 February 2005, we observe that as a 
                                                      
32 Chile's First Written Submission, paragraphs 154 and 155. 
33 Rebates were also applied from December 2003 to August 2004.  WT/DS207/RW 
 Page C-15 
 
 
  consequence of the specific duties resulting from th e amended PBS the Chilean entry price for wheat 
does not vary in the same way as the FOB price for the same product.34 
72. In short, both from the evidence submitted by Chile itself and from that provided by 
Argentina it is clear that, while th e specific duties were being activated during the periods in question 
the Chilean entry price was never "very similar" to the variation of the FOB price as Chile claims and, 
in at least three of the four periods, the entry price varied in the opposite direction  to the FOB price.  
73. To this there should be added the overcompensa tion effectively produced and the fact that the 
amended PBS does not merely moderate the effect of  fluctuations in world market prices on Chile's 
market because it does not ensure that  the entry price of imports to Chile falls in tandem with falling 
world market prices, the cogency of both these arguments having been demonstrated in the 
corresponding sections, charts and tables.35 
2.3 The floor and ceiling of the amended PBS insulate Chile's market from international 
price developments and are not transparent, having been determined once only for the 
entire period extending from 16 December 2003 to 15 December 2014 and having been 
established as from 2007 on the basis of fixed coefficients 
74. Chile's confirmation that the reduction in floor  and ceiling prices was scheduled "irrespective 
of international price levels" is enlightening: 
"The scheduled reduction of the floor and ceiling prices is a scenario under which, 
irrespective of international price levels , the amount of the specific duties will 
increasingly diminish compared to those currently being established, just as the 
probability of duties actually being assessed will increasingly diminish."36 
(Underlining added) 
75. Thus, Chile confirms the Argentine claim to the effect that the amended PBS "…impedes 
even more the transmission of international pri ce developments to the domestic market…since the 
floor and ceiling prices of Chile's price bands no l onger vary with either world market prices or 
historical prices…"37 
76. Chile maintains that given the way in which the bands are established in the amended PBS 
"Chile has … taken due account of the observations made by the Appellate Body".  According to 
Chile: 
"With the entry into force of Law No. 19.89 7, Chile 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, while maintaining the values in effect in 2003 
until 2007, gradually reducing the leve l of protection from 2007 onwards and 
culminating with the application of duties or rebates in 2014. 
Pursuant to this Law, all prices are 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. 
                                                     
 
34 Argentina's First Written S ubmission, Section C.I.2.4. 
35 Argentina's First Written S ubmission, Section C.I.2.2. 
36 Chile's First Written Submission, paragraph 186. 
37 Argentina's First Written S ubmission, paragraph 190. WT/DS207/RW 
Page C-16  
 
  Chile has thus taken due account of the ob servations made by the Appellate Body."
38 
77. At the very least, Chile's argument is hard to fo llow. Chile claims that the Panel accepts that 
because Chile established the band floor and ceiling without the use of any criterion  in fixed form 
from 2003 to 2014, adjusting both parameters by mean s of a fixed coefficient (0.985) the basis for 
calculating which Chile is unable to explain , Chile "has…taken due account of the observations made 
by the Appellate Body". The way  in which Chile established the floor and ceiling of the band is not 
transparent. The fact that the floor and ceiling prices of the band feature in Decree 831/2003 does not 
mean that they were established transparently or justifiably.  
78. Thus, Chile is simply evading the subs tance of the issue raised by Argentina , that is to say, 
that the floor and ceiling of the amended PBS in sulate Chile's market from international price 
developments and are not transparent, having been determined once only for the entire period 
extending from 16 December 2003 to 15 December 2014 and having been established as from 2007 on the basis of fixed coefficients. Chile has not said how it calculated the factor of 0.985 or explained 
the basis for it in the legislation establishing the amended PBS. Moreover, nowhere in its submission 
does Chile address these issues. 
79. The way in which the floor and ceiling are esta blished in the amended PBS has transformed 
the PBS into a more rigid and inflexible system. As Brazil points out: 
"… the 11-year period has the side effect of aggravating the distortion of domestic 
price vis-à-vis international ones. While such a long period may afford some 
predictability, the new PBS is more rigid a nd inflexible, given that, in practice, the 
Chilean market will be insulated from fluc tuations in the world prices for eleven 
years. Should there be a significant downwa rd movement in the international wheat 
prices, the 0.985 factor may not be sufficient to account for the necessary reductions in the lower and upper thresholds of the pri ce bands. Hence, in spite of the application 
of the 0.985 multiplier, one of the main el ements of the PBS (the bands themselves) 
will remain virtually unchanged for more than  a decade, preventing the fluctuation of 
international prices from being tran smitted to the Chilean market."
39 
80. Furthermore, in Section C.I.2.5 Argentina expl ained how the floor and ceiling of the amended 
PBS insulate Chile's market from international pri ce developments and are not transparent. Argentina 
cites those arguments as Chile has not rebu tted any of the claims raised therein. 
2.4 The reference prices insulate Chile's market from international price developments by 
remaining unchanged for two months, by being established on the basis of the average of 
the daily prices recorded on only two predet ermined markets and in being unrelated to 
the transaction price 
81. In paragraph 117 of its submission, Chile argues that the reference prices of the amended PBS 
do not impede the transmission of international pri ce developments to the domestic market since it is 
not "possible to inflate or increase the amount of the specific duties": 
"... as a result of the changes introduced in 2003 all values used are expressed in f.o.b. 
terms, that is, the reference prices are not conve rted to a c.i.f. basis.  Thus, at no stage 
is it possible to inflate or increase the amount of the specific duties, so the 
                                                      
38 Chile's First Written Submission, paragraphs 108 to 110. 
39 Chile – Price Band System …  Recourse to Article 21.5 of the DSU, Third Party Submission by 
Brazil, paragraph 15.  WT/DS207/RW 
 Page C-17 
 
 
  transmission of international price devel opments to the domestic market is not 
impeded as the Appellate Body asserts." 
82. However, Chile appears not to have read Argen tina's arguments in which it is shown that in 
remaining unchanged for two months, in being estab lished on the basis of the average of the daily 
prices recorded on only two predetermined markets and in being unrelated to the transaction price, the 
reference prices insulate Chile's market  from international price developments.40 The corresponding 
Argentine arguments hold true regardless  of whether or not the reference prices are converted to a 
CIF basis. 
83. Also in relation to the changes introduced into the reference pr ices of the amended PBS, in 
paragraph 180 Chile seeks to argue that there cannot  be overcompensation and that "the objective is 
not to maintain a parity price" [ sic], simply because duties are now assessed six times a year rather 
than 52 times a year as in the original PBS: 
"A further point which demonstrates that there cannot be overcompensation and that 
the objective is not to maintain a parity pr ice is that today – unlike under the former 
PBS when duties were assessed once a week (i.e. 52 times a year) – the duties or 
rebates assessed are valid for two months (i .e. six a year), and during that period are 
completely disconnected from what may o ccur in the reference, or any other, 
markets." 
84. The argument speaks for itself: Chile says that now the PBS is not "so" inconsistent as before. 
Now the PBS is inconsistent "only" 6 times a year. There is no basis for this in the WTO Agreements 
or, more particularly, in the DSU or the Agreement on Agriculture .  
85. A measure taken to comply is not "less" incons istent because it is applied on fewer occasions 
than the original measure. There is no basis for making a claim of this kind. 
86. In particular, the last part of the paragraph c ited "... the duties or reba tes assessed are valid for 
two months (i.e. six a year), and during that peri od are completely disconnected from what may occur 
in the reference, or any other, markets", simply ve rifies and confirms what Argentina maintained in its 
First Written Submission, namely, that under the "new " PBS the reference prices used to calculate the 
specific duty for wheat and wheat flour are set 6 tim es a year, that is, with a period of validity of 
2 months  during which the transmission of world market prices is disconnected .41 
87. In its First Written Submission, Argentina offere d evidence of this disconnection, which Chile 
now confirms, illustrating the development of the reference prices and the prices for wheat f.o.b. 
Argentine port and f.o.b. Gulf of Mexico, respec tively, during the period of implementation of the 
amended PBS and clearly showing, for each period, the disconnection produced.42 The reference 
prices insulate Chile's market from international price developments. 
88. In conclusion , as will be clear to the Panel, Chile has also been unable to refute the 
arguments and evidence put forward by Argentina in Section C.I.2.6 in confirmation of the fact that 
the amended PBS causes insulation from the intern ational market, in a manner inconsistent with 
Article 4.2 of the Agreement on Agriculture . 
                                                      
40 Argentina's First Written S ubmission, Section C.I.2.6. 
41 Argentina's First Written S ubmission, paragraph 206. 
42 Argentina's First Written Subm ission, paragraph 208 and Exhibits ARG-15, 16, 17 and 18. WT/DS207/RW 
Page C-18  
 
  3. The amended PBS is neither transparent nor predictable 
89. With respect to the requiremen t that the amended PBS be transparent and predictable, Chile 
completely distorts Argentina's position and makes its own reading of the Appellate Body and Panel 
reports adopted by the DSB. 
90. Chile maintains that: 
"... to allow Argentina's argument that the conclusions of the Appellate Body are to 
be interpreted in a broad and comprehens ive manner would give rise to generic and 
unspecific obligations and create uncertainty for Chile as to what it was required to 
do within the reasonable period of time a nd expose it to censure for failing to take 
measures which it was unaware it was required to adopt."
43 
91. Chile's interpretation of the Argentine position is simply wrong . Nowhere in its submission 
does Argentina maintain that "the conclusions of th e Appellate Body are to be interpreted in a broad 
and comprehensive manner [that] would give rise to generic and unspecific obligations". In fact, Chile 
is unable to cite a single such paragraph in  the Argentine submission because there are none. 
92. In offering the only example that it can find of the alleged Argentine position, Chile misreads 
paragraph 201 of Argentina's First Wr itten Submission, maintaining that: 
"[I]n paragraph 200 of its First Written Submission, Argentina transcribes two 
paragraphs of the Appellate Body repor t (234 and 247) which, in its opinion, 
constitute grounds for claiming that any lack  of transparency leads to the conclusion 
that the PBS is inconsistent with Article 4.2 of the Agreement on Agriculture ."  
(Original footnote: First Written S ubmission by the Argentine Republic, 
paragraph 201).44 
93. Once again, Chile's claim with respect to th e alleged Argentine position is mistaken.  
94. First of all , nowhere in its submission does Argentin a claim that paragraphs 234 and 247 of 
the Appellate Body Report would serve as a basis for alleging that any lack of  transparency leads to 
the conclusion that the PBS is inconsistent with Article 4.2 of the Agreement on Agriculture . Once 
again, Chile is unable to indicate the relevant para graph of Argentina's submission in which this claim 
might be found, because there is no such paragraph. 
95. Secondly , paragraphs 200 and 201 of Argentina's su bmission do not interpret the conclusions 
of the Appellate Body in a broad and co mprehensive manner, as Chile maintains.  
96. In those paragraphs Argentina stated that: 
"200. The Appellate Body noted how the way in which the bands were established in 
the original PBS was inconsistent with Article 4.2 of the Agreement on Agriculture :  
'... This lack of transparency and…predictability are liable to restrict 
the volume of imports... This lack of transparency and predictability will also contribute to distorting the prices of imports by impeding 
                                                     
 
43 Chile's First Written Submission, paragraph 78. 
44 Chile's First Written Submission, paragraph 81.  WT/DS207/RW 
 Page C-19 
 
 
  the transmission of international prices to the domestic market 
(Appellate Body Report, paragraph 234)' 
...  'In addition to the lack of transpar ency and the 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 … is determin ed (emphasis added). (Appellate 
Body Report, paragraph 247)'. 
201. Clearly, by not explaining the origin of the factor of 0.985 or the reasons for 
choosing it, Chile has failed to satisfy th e established transparency requirements. As 
the Appellate Body pointed out, the lack of  transparency preven ts enhanced market 
access for imports of agricultural products , contrary to the object and purpose of 
Article 4 of the Agreement on Agriculture  (footnote: Appellate Body Report, 
paragraph 258)." 
97. Chile is particularly interested in paragra ph 247, in connection with which it notes that: 
"… Argentina omits the phrase 'the refe rence price' from its transcription of 
paragraph 247.  What is the significance of that phrase?  It limits the issue the Appellate Body takes in the following paragr aphs with the lack of transparency and 
predictability to that particular aspect of the PBS in force at that time".
45 
98. Chile appears to overlook the part of the para graph which Chile itself transcribes. Chile itself 
points out that: 
"… paragraph 247 [of the Appellate Body Re port]…begins by stating that 'In addition 
to the lack of transparency and the lack of predictability that are inherent in how 
Chile's price bands are established,... ' necessar ily refers to the conversion to a c.i.f. 
basis, plus import costs, of f.o.b. prices and to the fact that there was no legislation or regulation indicating how to calculate those import costs."
46 
99. That is to say, paragraph 247 begins by referri ng to the lack of transparency and predictability 
of the way in which the price bands (i.e., the fl oor and ceiling) were established, as explained in 
paragraph 246 of the Appellate Body Report. When pa ragraphs 246 and 247 are read in conjunction it 
is clear that in this passage the Appellate Body w as referring to the way in which the price bands (i.e., 
the floor and ceiling) were established. Star ting from paragraph 247, the Appellate Body begins  to 
refer to the lack of transparency and predictability of the reference prices. Bu t in paragraph 246 and at 
the beginning of 247 it refers specifically to the lack  of transparency and predictability in the way in 
which the bands (i.e., the floor and ceiling) are established. 
100. Paragraph 200 of Argentina's Firs t Written Submission forms part of Section C.I.2.5(b) which 
is entitled "The floor and ceiling of the amended PB S insulate the Chilean market from international 
price developments and are non-transparent insofar as from 2007 they will be established on the basis 
of fixed coefficients", that is to say, it refers, inter alia , to the lack of transparency of the floor and 
ceiling of the amended PBS, which are nothing  other than the floor and ceiling of the bands .  
                                                      
45 Chile's First Written Submission, paragraph 85. 
46 Chile's First Written Submission, paragraph 84. WT/DS207/RW 
Page C-20  
 
  101. In paragraphs 199 to 201 Argentina explains wh y the way in which the bands (i.e., the floor 
and ceiling) are established is non-transparent, na mely, because of the failure to explain in the 
legislation either the origin of the method or the r easons for choosing the factor of 0.985 by which the 
floor and ceiling of the band are to be multiplied from 2007.  
102. Thus, there can be no doubt that Argentina is applying the findings of the Appellate Body 
with respect to the transparency and predictability of the floor and ceiling of the original PBS to the 
way in which those parameters are established in the amended PBS.  
103. Finally, the Appellate Body's conclusions have not been interpreted "in a broad and 
comprehensive manner", as Chile would have the Panel believe. Argentina has interpreted those 
conclusions fairly. 
104. As Argentina has already pointed out, what Chile is seeking to do is simply to avoid 
addressing the substance of the issue raised by Argentina , that is to say, that the floor and ceiling of 
the amended PBS insulate Chile's market from international price developments and are non-
transparent, having been determined once only for the entire period extending from 16 December 2003 to 15 December 2014 and havi ng been established as from 2007 on the basis of 
fixed coefficients. As the Panel will have been able  to confirm, Chile has explained neither how the 
factor of 0.985 was calculated nor what basis there is for it in the legislation that established the 
amended PBS.  
105. In relation to the Argentine claim that the ame nded PBS is neither transparent nor predictable, 
in paragraph 114 of its submission Chile acknowledges  that, thanks to the change in price, the 
importer (and hence the exporter) does not know in advance the amount of the specific duties payable: 
"With the entry into force of Law No. 19.8 97, the reference pric e ceased to constitute 
one of the elements needed by importers  to ascertain the amount of duty payable
 
upon import." (Underlining added) 
106. This merely confirms what Argentina previous ly demonstrated in Section C.I.3.2, namely, 
that both in the old and in the new PBS, the exporte r cannot reasonably predict what the amount of the 
specific duties will be. 
107. In paragraph 115, Chile maintains that, given the choice of markets of concern in the 
amended PBS (Argentine bread wheat and Soft Red Wi nter No. 2), the reference prices are now more 
transparent. Chile reasons as follows: 
"Today, the mechanism for calculating the reference price is set forth in the 
Regulations, as are the most relevant mark ets to be considered.  The Regulations 
stipulate that the most relevant markets are ' Argentine bread wheat ' for the period 16 
December to 15 June of the following year and ' Soft Red Winter No. 2 ' wheat for the 
period 16 June to 15 December.  The refe rence price will correspond to the average 
daily prices recorded in those markets (f. o.b., Argentine port and f.o.b., Gulf of 
Mexico port, respectively) over a period of 15 days counted back from the 10th day 
of the month in which the relevant decree is  published.  Chile has therefore taken due 
account of the Appellate Body's observation." 
108. Argentina has explained how the way in which the markets of concern were established is 
non-transparent. Once again, the f act that the decree specifies the markets of concern and says how  WT/DS207/RW 
 Page C-21 
 
 
  the reference prices are to be calculated does not m ean that their establishment is transparent. Chile 
has not explained how or on what basis the markets and quantities of concern were selected.47 
109. Likewise, the fact that the system – in Chile's  words – may have become "more transparent" 
because "…pursuant to this Law (19.897), all prices are set as f.o.b.…"48 (which, as Argentina has 
already explained, is not the case) does not ma ke the amended PBS a measure consistent with 
Article 4.2 of the Agreement on Agriculture . 
110. Moreover, Chile transcribes paragraph 258 of  the Appellate Body Report and states: 
"... Argentina itself recognizes that the lack of transparency is not general, but 
pertains to certain characteristics, and the Appellate Body confirms that only specific characteristics of the PBS are concerned."
49 
111. Let us take a look then at the specific character istics to which the Appellate Body referred in 
its report. 
112. First of all, the Appellate Body noted that the Pa nel, in paragraphs 7.44 and 7.61 of its report, 
had described Chile's price band system as having an "intrinsically unstable, intransparent and 
unpredictable nature …" and "a considerable lack of transparency and unpredictability".50  
113. The Panel's observations and findings in these  paragraphs were not questioned by the 
Appellate Body and were adopted by the DSB.  
114. Now let us see what "specific characteristics" the Panel was referring to in these paragraphs. 
115. The Panel held that "several crucial stages of the operation of the Chilean PBS" were 
characterized by a considerable lack  of transparency and predictability.51 That is more comprehensive 
than the specific features to which Chile refers in  its submission. Among these crucial stages the Panel 
mentions: 
• How the reference price was arrived at; 
• how the PBS values (i.e., the band fl oor and ceiling) were arrived at; 
• how the "usual import costs" added to the f.o.b. prices were calculated. 
 116. The Appellate Body referred to the lack of tr ansparency and predicta bility in the following 
aspects of the PBS: 
• The way in which the price bands are established in Chile (paragraphs 246 and 247); 
• the way in which the reference prices are determined (paragraph 247); 
• the fluctuation of the duties resulting from Chile's price band system (paragraph 259). 
 
117. In conclusion , contrary to what Chile claims in paragraphs 66 and 85 of its submission, the 
Panel and then the Appellate Body did not limit "the issue [taken] with the l ack of transparency and 
                                                     
 
47 Argentina's First Written Submission, Section C.I.2.6.b, paragraph 214 ff. 
48 Chile's First Written Submission, paragraph 109. 
49 Chile's First Written Submission, paragraph  87. 
50 Chile – Price Band System , Appellate Body Report, paragraph 240. 
51 Chile – Price Band System,  Panel Report, paragraph 7.44 (emphasis added). WT/DS207/RW 
Page C-22  
 
  predictability" solely to the aspects in which the PB S was similar to a variable import levy and to the 
reference prices. 
118. What Chile is unwilling to accept, although demonstr ated by the actual reports themselves, is 
that, in having taken issue, on grounds of their l ack of transparency and predictability, with such 
fundamental and central aspects of the PBS as the elements mentioned, the Panel and the Appellate 
Body addressed most, if not all, of the "specific f eatures of the PBS", or at least the fundamental ones. 
There is simply no support for Chile's argument.  
119. In fact, what the Appellate Body recommended is that: 
"… the DSB request Chile to bring its price band system, as found, in this Report and 
in the Panel Report as modified by this Report, to be inconsistent with the Agreement 
on Agriculture , into conformity with its oblig ations under that Agreement."
52 
120. However, there is an even more serious asp ect to Chile's reasoning. According to that 
reasoning, the transparency and predictability requi red by the Appellate Body and the Panel are only 
applicable to certain specific elements of the PBS (not clearly defined by Chile in its submission). If 
the Panel were to accept this argument, the logical consequence would be that transparency and 
predictability would not be required of the rest of the amended PBS  which, according to Chile, was 
not the subject of findings on the part of the Pane l and the Appellate Body. This outcome would not 
be consistent with the spirit of Article 4 of the Agreement on Agriculture .  
121. The standards of transparency and predictability do not apply partially as Chile suggests, but 
are requirements derived from Article 4 of the Agreement on Agriculture  itself with respect to the 
measure taken to comply as a whole. 
122. As Argentina pointed out earlier, throughout its submission Chile appears to "forget" that the 
task of a panel in an Article 21.5 proceeding is not  only to determine the existence of measures taken 
to comply with the recommendations and rulings of the DSB but also the consistency of those 
measures with a covered agreement .  
123. As noted by the Appellate Body in paragraph 258 of its report, the lack of transparency and 
the unpredictability of the PBS are contrary to the object and purpose of Article 4 of the Agreement on 
Agriculture . 
124. Consequently, even in the very unlikely event of some "specific features of the PBS" not 
having been included in the criticism of the system by  the Panel and the Appellate Body for its lack of 
transparency and predictability in  the original proceedings, the amended PBS can be called into 
question in its totality for not being transparent or predictable and the obligations of transparency and 
predictability established by the DSB with respect to Article 4.2 of the Agreement on Agriculture  
apply to it in full. 
125. In Section V.4 of its submission, Chile attempts  to argue that a wheat trader can predict the 
future specific duty for wheat on the basis of the prices foreseen in financial derivatives such as 
futures contracts.53  According to Chile: 
"... what is necessary in order to foresee the amount of the specific duty is a wheat 
trader's own skills in predicting prices and negotiating sales or purchases …"54 
                                                      
52 Chile – Price Band System , Appellate Body Report, paragraph 289. 
53 Chile's First Written Submission, paragraphs 156 to 163.  WT/DS207/RW 
 Page C-23 
 
 
  126. Chile tries to reassure the Panel by maintaini ng that this prediction is not "complex" and 
"a matter of course" for traders: 
"… Although this may appear complex, it is a matter of course for traders and the 
market in general."55 
...  
"It is practically impossible for wheat traders not to know or not to use such 
information in order to conduct their busin esses, as Argentina appears to contend in 
its submission."56 
127. In this connection, it should be recalled that in this dispute the Appellate Body held that: 
"... an exporter is less likely to ship to a market if that exporter does not know and 
cannot reasonably predict what the amount of duties will be."57 
128. For its part, in Section C.I.3.2 of its First Wr itten Submission, Argentina showed that – under 
the amended PBS – it is perfectly possible for an e xporter of wheat and wheat flour not to know and 
not to be able to predict what the amount of du ties payable on arrival at the Chilean customs office 
will be. Therefore, in these circum stances an exporter will be less lik ely to ship wheat or wheat flour 
to the Chilean market. 
129. Even if this were not evidence enough, there ar e further problems involved in not being able 
to predict the amount of the duties and what an exporter may expect.  
130. If an exporter decides to export wheat to Chile in  March 2007, the first thing he has to do, in 
addition to dealing with his own business, is to find  out the dates on the basis of which the reference 
price in effect in March 2007 is going to be established. As stipulated in Article 7 of 
Decree 831/2003, "the reference price for wheat sha ll be the average of the daily prices recorded on 
the markets indicated in Article 8, during a period of 15 days reckoned retrospectively from the 10th of the month in which the respective decree is published".
58  
131. The next step is to ascertain the market of concern for this period, in accordance with the 
provisions of Article 8 of Decree 831/2003. In this example, it is bread wheat, Argentine port. Here 
the exporter will encounter his first problem, since Decree 831/2003 does not say which Argentine 
port is of concern for the purposes of calculating the reference price.  
132. The exporter will not be able to find out th e daily price quoted for bread wheat, "Argentine 
port" as a basis for establishing the market of concern for the first half of the year, since prices vary 
depending on the Argentine port chosen.59 As Argentina shows in Exhibit ARG-4, there are at least 
4 (four) different prices quoted for Argentine bread wheat (Port of Buenos Aires, Port of Bahía 
Blanca, Port of Quequén, and Port of Rosario). 
133. According to Chile, the exporter must ascertain th e future price of bread wheat in (one of) 
these Argentine ports for this period and then calcu late the period average to obtain the presumed 
future  reference price. 
                                                                                                                                                                     
54 Chile's First Written Submission, paragraph 162 (emphasis added).  
55 Chile's First Written Submission, paragraph 158. 
56 Chile's First Written Submission, paragraph 161. 
57 Chile – Price Band System , Appellate Body Report, paragraph 234. 
58 See Exhibit ARG-2. 
59 Argentina's First Written S ubmission, paragraph 219. WT/DS207/RW 
Page C-24  
 
  134. Thus, another of the problems faced by the expor ter in estimating the future amount of duties 
payable is the fact that future prices are precisely that:  future
 and are therefore estimates rather than 
solid data. That is to say, there could be varia tions due to circumstances unknown at the time that 
could cause these future  prices of July 2006 to differ from the prices actually made in the future  
between 27 January and 10 February 2007.  
135. Therefore, as the estimated future referenc e price could differ fro m the reference price 
determined in the future , there could be a difference between the amount of the specific duties 
estimated and those actually established in the fu ture. Consequently, the relationship between the 
specific duty and the transaction value, in the presence of a variation in the amount of the duties, will necessarily
 differ from that which would have existed if there had been no such variation. 
136. Chile cannot maintain that this is the transparen cy and predictability required by Article 4 of 
the Agreement on Agriculture . The amended PBS simply is neither transparent nor predictable, since 
it is not an ordinary customs duty. 
137. In conclusion , as will be clear to the Panel, Chile h as been unable to rebut the arguments and 
evidence submitted by Argentina, thereby confirmi ng that the amended PBS is non-transparent and 
unpredictable, in a manner inconsis tent with Article 4.2 of the Agreement on Agriculture . 
4. The amended PBS is a measure sim ilar to a variable import levy 
"Variable duties directly affect trade relations, altering relative prices (relationship 
between domestic market prices and interna tional market prices), in addition to the 
effects resulting from the application of ordinary duties." 
138. This statement would appear to have been ta ken from Argentina's submission regarding the 
way in which the amended PBS operates. In fact, however, it comes from paragraph 141 of Chile's 
submission. 
139. According to Chile, it is clear that "… specifi c duties cannot constitute a variable levy, as 
their purpose is not to sustain prices – whether entry prices, c.i.f. prices or domestic market prices "60 
(underlining added). Thus, Chile contradi cts the actual provisions of Law 19.897 and 
Decree No. 831/2003 which state:  
"… The amount of such duties and rebates shall be established … in terms which, 
when applied to the price levels atta ined by the products in question on the 
international markets, allow domestic market stability ".61 (Emphasis added) 
140. In its submission Chile refers to paragraph 23 3 of the Appellate Body Report, the relevant 
part of which states that variability is inherent in a measure if the measure incorporates a scheme or 
formula that causes and ensures that levi es change automatically and continuously. 
141. "Forgetting" that Argentina has shown how  the amended PBS meets each of these 
requirements, Chile summarily concludes that: 
"The obvious conclusion to be drawn from the Appellate Body's analysis is that the 
changes introduced by Chile have put an end to the variability of the duties".62 
                                                      
60 Chile's First Written Submission, paragraph 133. 
61 See Law 19897, Art. 1, second paragraph and Decree 831/2003 Art. 1, second paragraph, 
Exhibits ARG-1 and ARG-2, respectively. 
62 Chile's First Written Submission, paragraph 92.  WT/DS207/RW 
 Page C-25 
 
 
  142. As the sole justification for th is conclusion Chile adds that: 
"… Under Law 19.897, however, a specific dut y (or rebate, or neither) is fixed by 
legal directive in the form of a decree issu ed by the Ministry of Finance and remains 
unchanged for two months, during which the duty applies on all import transactions, 
without the slightest variation and regardless of the amount of the transaction, until it 
is changed or cancelled by a more recent administrative act."63 
143. Leaving aside its virtual "confession" that the duties resulting from the PBS are unrelated to 
the transaction value and therefore insulate Chile's market from in ternational price developments, 
Chile bases all its reasoning on the fact that the duties remain unchanged for a period of two months "until…changed or cancelled by a more recent administrative act". 
144. First of all , the phrase "... until … changed or cancelled by a more recent administrative act" 
is somewhat misleading since decrees, under the Chilean legislation, are issued in binding  form and 
have been issued continuously  since the amended PBS first came into force.
64 
145. Secondly , the fact that the specific duties vary not weekly but every two months does not 
mean that those duties are no longer variable levi es. As Argentina maintained in its First Written 
Submission, in the right circumstances,  every two months an exporter is guaranteed  to face a specific 
duty different from that established during the prev ious two-month period. Moreover, in the longer 
term, what the exporter experiences is the continuous variability of the duties.65 
146. Thirdly , Chile appears to disregard the fact that th e time factor, that is to say the period of 
time during which the specific duties remain unchange d, is not one of the necessary and sufficient 
conditions or additional features which, according to  the Appellate Body, characterize variable import 
levies.66 Argentina also notes that, in its submission, it showed how the amended PBS meets each and 
every one of the requirements for the amended PBS to be similar to a variable import levy.67 
147. Later, Chile contends that the specific duties cannot constitute a variable levy as their purpose 
is not to sustain prices and they do not have the ch aracteristic of gradually "adjusting" so as to prevent 
a decline in domestic prices or even to raise them : 
"The above demonstration that the floor price and the regime as a whole are neither 
similar nor equivalent to a minimum import price (and hence are not inconsistent with 
Article 4.2 of the Agreement on Agriculture) therefore clearly shows that specific duties cannot constitute a variable levy, as their purpose is not to sustain prices – whether entry prices, c.i.f. prices or domestic market prices."
68 
"A variable duty may be the kind of duty which is used to sustain a domestic or a 
minimum entry price, as can be deduced from the A ppellate Body's Report , and the 
characteristic of which would be to gradually  'adjust', with greater or lesser regularity, 
so as to prevent a decline in domestic pr ices or even to raise them." (emphasis 
added)69 
                                                      
63 Chile's First Written Submission, paragraph 93. 
64 See Argentina's First Written Submission, paragraphs 263 and 264 and Exhibits ARG-5 and ARG-6. 
65 See Argentina's First Written Submission, paragraphs 266 to 270 and Exhibits ARG-21, ARG-22, 
ARG-23 and ARG-24. 
66 Chile – Price Band System , Appellate Body Report, paragraphs 233 and 234. 
67 Argentina's First Written Submission, Section C.3. 
68 Chile's First Written Submission, paragraph, 133. 
69 Chile's First Written Submission, paragraph, 139. WT/DS207/RW 
Page C-26  
 
  148. Firstly , as Argentina has previously pointed out, it is Law 19.897 itself and Decree 831/2003 
that give it to be understood that the objective of th e amended PBS is to support prices, insofar as they 
state that "[t]he amount of such duties and reba tes shall be established … in terms which, when 
applied to the price levels attained by the pr oducts in question on the international markets, allow 
domestic market stability " (emphasis added).
70  
149. Secondly , the Appellate Body did not establish that "… [a] variable duty may be the kind of 
duty which is used to sustain a domestic or a minimum entry price …".  
150. In this dispute, the Appellate Body has clearly  defined the necessary, sufficient and additional 
features that characterize variable import levies. These features do not include  the sustaining of entry 
prices, c.i.f. prices or domestic market prices or price "adjustment", as Chile maintains. 
151. On the contrary, the Appellate Body found as follows: 
"… at least one feature of 'variable 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 autom atically and continuousl y.  Ordinary customs duties, 
by contrast, are subject to discrete cha nges in applied tariff rates that occur 
independently, and unrelated to such an underlying scheme or formula …"
71 
(emphasis added) 
...  "… [T]he 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' with in the meaning of footnote 1. 'Variable 
import levies' have additional features that undermine the object and purpose of 
Article 4, which is to achieve improve d market access conditions for imports of 
agricultural products by permitting 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 predict what the amount of duties will be . This 
lack of transparency and predictability will also contribute  to distorting the prices of 
imports by impeding the transmission of international prices to the domestic 
market".
72 (footnotes omitted, emphasis added) 
152. Argentina has correctly interpreted the featur es identified by the Appellate Body in this 
dispute and shown how the amended PBS is charac terized by each of them and hence that the 
amended PBS is a measure similar to a variable import levy.73 
153. Chile attempts to call into question Argentin a's demonstration that the amended PBS is 
similar to a variable levy – in paragraphs 134 to 1 37 of its submission – on the basis of a very simple 
                                                      
70 See Law 19897, Art. 1, second paragraph, an d Decree 831/2003 Art. 1, second paragraph, 
Exhibits ARG-1 and ARG-2, respectively. 
71 Chile – Price Band System , Appellate Body Report, paragraph 233. 
72 Chile – Price Band System , Appellate Body Report, paragraph 234. 
73 Argentina's First Written S ubmission, Section C.I.3.  WT/DS207/RW 
 Page C-27 
 
 
  argument, namely, by showing that its MFN tariff had a variability of 67 per cent from 1984. Chile 
asks whether this variability alone could mean that  the duty constitutes a variable levy and adds: 
"The obvious reply is no, which implies that this analysis – like the one regarding the 
variability of duties in Argentina's report (footnote: First Written Submission by Argentina, Section C.I.3), raises two problems – one of methodology and the other of 
interpretation.  In the latter case, as menti oned earlier, the fact of having a duty which 
varies, or has varied, may be a necessary but is not a sufficient condition to affirm that such a duty qualifies as a variable levy.   As regards methodology, the statistics 
calculated are merely measures of dispersion to show the distribution of sample data according to the mean (average).  In other wo rds, they serve to illustrate the statistical 
distribution of a set of values but by no me ans to prove that the duties are variable 
levies, as Argentina seeks to establish."
74 (footnote omitted) 
154. For Argentina, too, the obvious  reply is no, but for totally different reasons which Chile 
seems to ignore: basically because the reduction in Chile's general ad valorem (MFN) tariff was not 
the result of a scheme or formula that caused and ensured that the tariff would change automatically 
and continuously.75 
155. In this respect, in Section C.I.3 of its subm ission, Argentina showed how the amended PBS 
possesses all of the features which, according to the Appellate Body, identify a variable import levy: 
 (a) A formula that causes import duties to vary; 
 (b) a formula that causes import duties to vary automatically ; 
 (c) a formula that causes import duties to vary continuously ; 
 (d) lack of transparency and predictability of the duty level. 
 156. Chile appears not to understand the Argentine argument. The dispersion (standard deviation) 
analysis to which Argen tina refers is used only
 to show that the amended PBS contains a formula that 
causes import duties to vary continuously , i.e., requirement "c" above , and does not constitute the 
basis for all of Argentina's reasoning co ncerning variable levies as Chile claims.76  
157. As Chile points out, the existence of a duty th at varies or has varied, even though a necessary 
condition, is not sufficient for it to be described as a variable levy. It is one feature that must be 
present as a necessary condition, but it is not sufficient.  
158. Therefore, Argentina showed, over the entire  length of Section C.I. 3, how the amended PBS 
fulfils all the conditions set by the Appellate Body including, among other requirements ¸ a formula 
that causes import duties to vary continuously. 
159. In conclusion , as will be clear to the Panel, Chile h as failed to rebut the Argentine allegation 
that the amended PBS is a measure similar to a variable import levy. 
                                                      
74 Chile's First Written Submission, paragraph 137. 
75 Chile – Price Band System,  Appellate Body Report, paragraph 233 "…[A]t least one feature of 
'variable 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 meas ure incorporates a scheme or formula that causes and 
ensures that levies change au tomatically and continuously". 
76 Argentina's First Written Subm ission, paragraph 269, and Exhibits ARG-21 and ARG-22. WT/DS207/RW 
Page C-28  
 
  5. The amended PBS is a measure similar to a minimum import price 
160. Chile begins its plea that the PBS does not constitute a minimum entry price [ sic] by arguing 
that, in paragraphs 99 to 124 of its submission, Ar gentina claims to show that FOB prices are higher 
than CIF prices: 
"Although Argentina's submission seeks to demonstrate the opposite, in the normal 
course of international trade f.o.b. pric es, which are the unit values for exported 
goods at the port of origin, are always lower than c.i.f. prices
, which are the unit 
values for imported goods at the port of destination, for the same trade transaction.  The difference between the f.o.b. price and the c.i.f. price in a trade transaction is that 
the latter also includes at least frei ght and transport insurance charges."
77 (original 
underlining, footnote omitted) 
"As the floor and the reference price are variables expressed at f.o.b. level, the 
purpose of calculating specific duties is obviously not to maintain an entry price; since neither the floor price nor the reference price at any given point in time can be 
higher than, or equal to, the c.i.f. price  for a specified trade transaction."78 
(underlining added) 
161. Firstly , it is astonishing how Chile seeks to distort what Argentina said in its First Written 
Submission. Argentina would prefer to think of it as an  error of interpretation, but this is not easy to 
accept considering the detailed explanations which Ar gentina offered in paragr aphs 99 to 124 of its 
submission and which Chile never refutes. 
162. For example, let us see what Argentina said in those paragraphs: 
"... the CIF price tends to be greater than the FOB price"79; 
"... the chances of the reference price being higher than the CIF price by more than 
US$7.2453 per tonne are minimal basically because of the effective difference in the calculation of the reference price and the CIF. The reference price, as under the old 
PBS, is calculated on an FOB basis. The CI F, as its name implies ("Cost, Insurance, 
Freight") consists of the FOB plus freight and insurance "80; (underlining added) 
"… during all that time the CIF price per tonne of wheat not only was not less than 
the reference price but always higher than the reference price [calculated on an FOB 
basis]"81; 
"... Argentina has shown that, in the case of  wheat, the chances of the CIF price being 
lower than the reference price are minima l and, in the case of wheat flour, almost 
nil."82 
163. Clearly, Argentina tried to demonstrate the exact  opposite of what Chile alleges, namely, that 
the CIF price is naturally  higher than the FOB price.  
                                                      
77 Chile's First Written Submission, paragraph 122. 
78 Chile's First Written Submission, paragraph 126. 
79 Argentina's First Written S ubmission, paragraph 107.  
80 Argentina's First Written Submission, paragraph 10 8. Argentina points out that the FOB price to 
which Chile refers is the reference price. 
81 Argentina's First Written S ubmission, paragraph 110.  
82 Argentina's First Written S ubmission, paragraph 124.  WT/DS207/RW 
 Page C-29 
 
 
  164. Secondly , what Argentina shows in paragraphs 99 to  124 of its submission is that the specific 
duties resulting from the amended PBS tend to elevate the entry price of imports to Chile above the 
price band floor, now US$128 per tonne. For this  purpose it uses the amended PBS formula, 
concluding that for the entry price to be less than  US$128 per tonne – i.e., less than the floor price – 
an improbable  condition must be fulfilled, namely, that th e reference price must be higher than the 
CIF price by more than US$7.2453 per tonne or, what amounts to the same thing, the CIF must be 
lower than the reference price by more than US$7.2453 per tonne.83  
165. Argentina having shown that the chances of this  condition being satisfied are minimal, it is 
very difficult, with the PBS active (that is to say, when specific duties are being applied), for the entry 
price per tonne of wheat to be lower than the ba nd floor. Thus, Argentina has shown that the specific 
duties resulting from the amended PBS tend to elevate the entry price of imports to Chile above the 
price band floor, as the Appellate Body found in rela tion to the original PBS and as confirmed by 
Chile with respect to the amended PBS.84 
166. In fact, the Chilean assertion provides very useful support for Argentina's argument. Chile 
asserts that FOB prices are always  lower than CIF prices: "... in the normal course of international 
trade fob. prices…are always lower than c.i.f. prices "85 (original underlining).  
167. This relieves Argentina of the need to provide  further mathematical proof. As follows from 
the PBS formula, for the amended PBS not to elevate  the entry price of imports to Chile above the 
price band floor the above-mentioned condition must be  satisfied, i.e., the reference price (calculated 
on an FOB basis) must be higher than the CIF price of an individual export transaction by more than US$7.2453 per tonne or, what amounts to the same th ing, the CIF price of that transaction must be 
lower than the reference price by more than US$7.2453 per tonne.  
168. If this condition is not met, the amended PBS will mathematically  elevate the entry price of  
imports to Chile above the price band floor. If, as Chile argues, FOB prices are always lower
 than CIF 
prices, this condition cannot be fulfilled  so that the amended PBS will always  tend to elevate the entry 
price of imports to Chile above the price band floor. 
169. Consequently , Chile's arguments confirm Argentina's claim, namely, that the amended PBS 
constitutes a measure similar to a minimum import price. 
170. In paragraphs 128 to 132 of its First Written Submission, Chile seeks to show that the 
amended PBS is not a minimum import price or does not tend to elevate the entry price above the band floor, because in almost 50 per cent of cases the FOB value plus specific duties was lower than the band floor: 
"Using the same data as those supplied by Argentina (footnote omitted) – for the 
period 1 November 2004 to 29 April 2005 – we can see that the sum of the f.o.b. prices plus the specific duties, over the onl y four-month period in which they were 
applied, is below the f.o.b. floor price for 46 per cent of the 81 days covered by Argentina.  In other words, the evidence s hows that it is impossible to maintain the 
floor price.  The following examples, b ased on the data from Argentina's exhibits, 
serve to illustrate the above. 
                                                     
 
83 Argentina's First Written S ubmission, paragraph 104. 
84 Argentina's First Written S ubmission, paragraph 114. 
85 Chile's First Written Submission, paragraph 122. WT/DS207/RW 
Page C-30  
 
   Example 1
 Example 2  
Date 20 January 2005 10 February 2005 
 f.o.b. value (106) + 
specific duty (7.82) 
= 113.82 f.o.b. value (107) + 
specific duty (14.3) 
= 121.3 
Band floor price 128 128 
UNDERESTIMATION by  
US$14.18/ton  
US$6.7/ton"
86 
 171. First of all , Chile is getting the analysis wrong. According to Chile, the sum of the f.o.b. 
prices plus the specific duties, over the only four-mont h period in which they were applied, was below 
the f.o.b. floor price for 46 per cent of the 81 days  covered by Argentina. However, it makes no sense 
to compare the FOB  price plus the specific duties with the band floor.  
172. The relevant comparison as far as this disput e is concerned is with the behaviour of the entry 
price  of wheat imports to Chile. The Appellate Body held that: 
"… specific duties resulting from Chile's pri ce band system tend... to elevate the entry 
price  of imports to Chile above the lower threshold of the relevant price band …"87 
173. As Argentina repeatedly made clear in the course of its First Written Submission88, the entry 
price of wheat imports to Chile – under the amen ded PBS – is equal to the result of the following 
sum: CIF value plus the amount of total duties in absolute terms. Total duties include ad valorem  
duties (which, under Chile's General Customs Tariff, amount to 6 per cent of the CIF), plus specific 
duties (equal to the band floor price less the refere nce price multiplied by 1 (one) plus the general ad 
valorem  tariff in force as published in the Customs Tariff).89 
174. More graphically90: 
Entry price of 
wheat under the 
amended PBS =  CIF value + Total duties in absolute terms 
 =  CIF value + Ad valorem  duties + 
Specific duty  
 =  CIF value + CIF 
value * 6% + Specific duty 
 
                                                     
 
86 Chile's First Written Submission, paragraph 130. 
87 Chile – Price Band System , Appellate Body Report, paragraph 260. 
88 Argentina's First Written S ubmission, paragraph 100 ff. 
89 According to Brazil, "…the new PBS contributes to distorting the prices of imports even more, 
inasmuch as a new coefficient is adde d to the formula used to calculate the duty level… In the current system, 
the specific duty level is magnified by the introduction of a new unexpected multiplier consisting of 1 plus the 
general ad valorem  duty in force". Chile – Price Band System …  Recourse to Article 21.5 of the DSU, Third 
Party Submission by Brazil, paragraph 16. 
90 Argentina's First Written S ubmission, paragraph 101.  WT/DS207/RW 
 Page C-31 
 
 
  175. Mathematically, this can be expressed as follows91: 
EP = CIF +  6% CIF +  [ (FP – RefP) * (1+6%) ] 
where:  EP  = entry price for wheat imports to Chile under the amended PBS 
RefP = reference price 
FP = floor price of the band in force  CIF = Cost, Insurance, Freight  176. In other words, in paragraphs 128 to 132, Chile "forgets" to include in its analysis at least two 
significant factors that make up the entry price to which the Appellate Body referred: 
 (1) the difference between the FOB price and th e CIF price, that is, insurance and freight; 
 (2) the ad valorem duties (6 per cent of MFN).  177. If Chile had included these two factors in its an alysis, the result would have been different: 
during 100 per cent
 of the time in which specific duties we re being applied between December 2004 
and April 2005, the entry price was above the band floor , in the terms expressed by the Appellate 
Body. This is clear from Exhibits ARG-11 and ARG-12 to which Chile referred.  
178. Therefore, as Argentina showed in Section C. I.2.1 of its submission, under the amended PBS 
the findings of the Appellate Body with respect to th e original PBS are confirmed, that is, the specific 
duties resulting from the amended PBS tend to elevate the entry price of imports to Chile above the 
price band floor.  
179. Secondly , in footnote 72 to paragraph 130 of its submission, Chile states: 
"Strictly speaking, this calculation is based on the data from Table ARG-11 adjusted 
according to those from Table ARG-16.  Acco rding to the official source (SAGPyA), 
some of the data in Table ARG-11 are incorrect." 
180. Chile claims to adjust the data from the tabl e in Exhibit ARG-11 according to those from the 
table in Exhibit ARG-16, on the grounds that data  from the table in Exhibit ARG-11 are incorrect 
"according to the official source". 
181. There is nothing "incorrect" about the table in Exhibit ARG-11. A time adjustment has been 
made to the FOB prices in Exhibit ARG-11 on the basis of the explanation given in footnote 104 to 
Table I of the Argentine submission. As explained in that footnote: 
"ODEPA does not provide daily  FOB prices for bread wheat, Argentine port (only 
monthly prices). The historical FOB price for Argentine bread wheat reported by Argentina's Ministry of Agriculture, Livestock, Fisheries and Food (SAGPyA) is taken instead. In order to make the an alysis as accurate as possible, the price 
indicated in the table for 15 December 2004 corresponds to the Argentine FOB price 
in effect 15 days previously, since that is the approximate time taken by a cargo ship 
to sail from Argentina to Chile, including dockside loading and unloading times …"  
182. Thus, the table in Exhibit ARG-11 reflects the reality that the FOB price reported by 
SAGPyA is the FOB price for a date "X" of shipment  in Argentina. When the consignment arrives in 
                                                     
 
91 Argentina's First Written S ubmission, paragraph 102. WT/DS207/RW 
Page C-32  
 
  Chile, this will be the FOB price for Chilean cu stoms purposes, which may differ from the FOB price 
at that point in the Argentine port.  
183. For example, in Exhibit ARG-16 the FOB price for 1 November 2004 is US$119 per tonne. It 
is clear from Exhibit ARG-11 that this is the FO B price for Chilean customs purposes approximately 
15 days later, on 16 November. In other words, the shipment that left Argentina on 1 November at 
US$119 per tonne FOB price continues to be valued at US$119 per tonne FOB price plus costs in 
order to arrive at the CIF price. Nevertheless,  on 16 November, the FOB price in Argentina was 
US$115 per tonne, as may be seen from Exhibit ARG-16. In other words, there is nothing incorrect about Exhibit ARG-11 as Chile suggests.  
184. On the other hand, in Exhibit ARG-16 Argentina did not make a time adjustment, since the 
purpose of that exhibit is different from that of Exhibit ARG-11. Thus, Exhibit ARG-16 is intended to 
show the disconnection between the FOB price of Argentine bread wheat and the reference price 
established by Chile on the same day , for each day of the period of implementation of the amended 
PBS.  To make things clearer for the Panel, in E xhibit ARG-30 Argentina gives details of the exhibits 
in which a time adjustment has been made. 
185. It is not clear from paragraphs  171 to 182 of Chile's First Written Submission whether Chile 
is seeking to refute Argentina's demonstration of the tendency of the specific duties resulting from the 
amended PBS to elevate the entry price of imports to Chile above  the price band floor 
(i.e., Section C.I.2.1 of the Argentine submission) ; whether it is seeking to refute Argentina's 
demonstration of overcompensation (i.e., Section C.I.2.2 of the Argentine submission); or whether it 
is seeking to refute Argentina's demonstration th at the entry price of imports to Chile, under the 
amended PBS, is higher than it would be if Chile were to apply a minimum import price at price band 
floor level (i.e., Section C.I.2.3 of the Argentine submission).  
186. This pervasive lack of clarity in Chile's Firs t Written Submission is aggravated by the fact 
that in these paragraphs there is no refe rence to the Argentine submission.   
187. Nevertheless, it may be concluded, on the basi s of the observations made at the end of 
paragraph 179 of its submission, that Chile is re ferring to Argentina's dem onstration of the tendency 
of the specific duties resulting from the amended PBS to elevate the entry price of imports to Chile 
above the price band floor (i.e., Section C.I.2.1 of  Argentina's First Written Submission), and of the 
fact that the entry price of imports to Chile – under the amended PBS – is higher than it would be if 
Chile were to apply a minimum import price at price band floor level (i.e., Section C.I.2.3 of 
Argentina's First Written Submission).  
188. In other words, Chile is attempting to rebut two different  Argentine arguments through a 
single argument of its own. 
189. The basis of Chile's reasoning – contained in para graphs 175 to 179 of its submission – is that 
the specific duty resulting from the PBS is less th an the duty that would be required to establish a 
minimum entry price.  
190. Mathematically, this argument can be expressed  as follows, again in Chile's own terms: 
Duty to maintain an import cost, or parity or 
entry price (minimum price)  Specific duty resulting from the PBS 
SD = b * (FOBfloor -  FOBrp)92 > SD = (1+ 0.06) * (FOBfloor – FOBrp) 
 
                                                      
92 Chile's First Written Submission, paragraph 176.  WT/DS207/RW 
 Page C-33 
 
 
  191. This would be so because, according to Chile,  
"if 'b' is larger than the ad valorem  duty, a specific duty calculated solely  on the basis 
of f.o.b. values and Chile's ad valorem  duty [ sic] would unquestionably be lower than 
a duty obtained using import costs"93 (underlining added). 
192. There are several problems with this reasoning.  
193. Firstly , once again, Chile describes its own PBS in correctly. Strictly speaking, the specific 
duty is not calculated "solely" on the basis of [lite rally, does not solely include] f.o.b. values and the 
ad valorem  tariff. In fact, it "includes" nothing. The specific duty is calculated  simply on the basis of 
the difference between the floor price and the re ference price multiplied by 1 plus 0.06, i.e., the 
ad valorem  tariff.94  
194. Secondly , as Argentina previously pointed out, there is no "FOB floor" price in the legislation 
on which the amended PBS is based.95 The PBS legislation merely refers to "floor and ceiling 
values".96 Not even in the definitions of Article 2 of  Decree 831/2003 is there any mention of it being 
a question of FOB values.97 These are merely arbitrary values chos en without the use of any criterion. 
There is no indication of their being either FOB or CIF. 
195. To avoid questions being raised, Chile incl uded the following sentence in Article 4 of 
Decree 831/200398:  
"The floor and ceiling values and the refe rence prices for which the regulations 
provide shall be expressed  in FOB terms in United States dollars." (Emphasis added) 
196. This is not enough to show that FOB values are involved; that would require Chile to produce 
the evidence on which it based its choice of floor and ceiling values. 
197. Thirdly , for the following reasons, Chile gets the definition of the duty established on the 
basis of a minimum import price completely wrong. 
198. In this same dispute, the Panel held that a minimum price scheme operates in relation to the 
actual transaction value  of the imports.99 The Appellate Body incorporated this aspect of minimum 
import prices in its report.100 In its reasoning, Chile calculat es the duty resulting from a minimum 
price on the basis of the differen ce between the band floor and the reference price .101 The reference 
price – which has nothing to do with the transaction va lue – is simply an average price on a market of 
concern. 
199. Then, as also noted by the Appellate Body in this dispute and in accordance with Argentina's 
observations in its First Written Submission102, the establishment of a minimum import price at price 
                                                      
93 Chile's First Written Submission, paragraph 178.  
94 Argentina's First Written S ubmission paragraphs 100 ff. 
95 See Law 19.897, Art. 1 paragraphs 3, 4 and 5, and Decree 831/2003, Arts. 2, 4, 6, 13, 14, Exhibits 
ARG-1 and ARG-2, respectively. 
96 See Law 19.897, Art. 1 paragraphs 3, 4 and 5, and Decree 831/2003, Arts. 2, 4, 6, 13, 14, Exhibits 
ARG-1 and ARG-2, respectively.  
97 See Exhibit ARG- 2. 
98 See Exhibit ARG- 2. 
99 Chile – Price Band System , Panel Report, paragraph 7.36(e). 
100 Chile – Price Band System , Appellate Body Report, paragraph 237. 
101 Chile's First Written Submission, paragraph 176. 
102 Argentina's First Written S ubmission, paragraph 161. WT/DS207/RW 
Page C-34  
 
  band floor level would mean that if the entry price of a particular product (i.e., the CIF price plus 
ad valorem  duties) were lower than that threshol d (US$128 per tonne or the corresponding amount) 
an additional charge equivalent to the difference would be imposed, so that the product in question 
entered the Chilean market at the band fl oor price (currently US$128 per tonne).
103 
200. The formula that follows from this definition is: 
 Duty resulting from 
 minimum import price = floor price – (CIF value + ad valorem  duties) 
  Duty resulting from  minimum import price = floor price – (CIF value * 1.06) 
 
201. The formula outlined by Chile bears no relation either to the definition of minimum import 
price or to that of the charge resulting from the imposition of a minimum import price, as established in this dispute. 
202. Chile has determined a factor "b " that includes a set, both loose and broad, of variable costs 
"such as" the ad valorem  duty, inspection costs, the commission payable to agents handling the 
transaction, and credit interest due.
104 The multiplication of this factor "b" by the difference between a 
floor value and a reference price has no basis in or relation to a minimum import price. 
203. Thus, Chile employs confused reasoning, based on definitions other than those established by 
the Appellate Body.  
204. If Chile had used the formula in the Appellate Body report, it would have arrived at the same 
conclusion as that reached by the Appellate Body with  respect to the original PBS and by Argentina 
with respect to the amended PBS, namely, that th e entry price of imports to Chile, under the amended 
PBS, is higher than it would be if Chile were to apply a minimum import price at price band floor level. In Section C.I.2.3 of its submission, Argen tina demonstrated this with the aid of concrete 
examples and charts based on Chile's own data.
105  
205. In conclusion , as will be clear to the Panel, Chile h as failed to rebut Argentina's claim that 
the amended PBS is a measure similar to a minimum im port price, inconsistent with Article 4.2 of the 
Agreement on Agriculture . 
6. The amended PBS has not produced any impr ovement in the conditions of access to the 
Chilean market 
206. In the first part of Section V.6 of its subm ission – specifically in paragraphs 183 to 185 – 
Chile repeats an argument already familiar at th is stage, namely, that simply because under the 
amended PBS specific duties were allegedly applie d on fewer occasions than they would have been 
under the original PBS there has been an improveme nt in the conditions of access of wheat to the 
Chilean market. The same reasoning is applied to  rebates. Thus, under the amended PBS, since 
16 December 2003, more rebates are said to have been  granted than would have been during the same 
period if the original PBS had been applied so th at, in Chile's view, the favourable conditions for 
imports are more extensive. 
                                                      
103 Chile – Price Band System , Appellate Body Report, paragraph 236. 
104 Chile's First Written Submission, paragraph 175. 
105 Argentina's First Written Submission, para graphs 159 to 173, and Exhibit ARG-10.  WT/DS207/RW 
 Page C-35 
 
 
  207. Chile argues: 
"In conclusion, the period of application of  duties under the new regime was shorter 
by 10 weeks, while that of rebates w as longer by 8 weeks, which represents an 
effective increase in favourable conditions fo r grain imports compared to what might 
have occurred under the mechanism prior to modification."106 
208. Firstly , this amounts to saying that exporters of wh eat and wheat flour to Chile should not be 
concerned about the distorting effects of the amended PBS, since under the amended PBS the 
distorting effects resulting from the application of specific duties occurred "only" 17 times, whereas 
under the original PBS they would have occurred 27 times. Chile claims that this represents an 
improvement in conditions of access. 
209. Once again, it can only be said that the access cond itions continue to be unfavourable despite 
the duties allegedly being applied on fewer occasions than in the case of the original PBS. Chile's 
reasoning has no basis in the WTO Agreements a nd, in particular, not in the DSU or the Agreement 
on Agriculture . A measure taken to comply is not "less" in consistent because the inconsistency occurs 
less frequently than in the case of the original  measure. There is no basis for drawing such a 
conclusion. 
210. Secondly , it is interesting to note the table whic h Chile itself introduces in paragraph 183. 
This table confirms that the amended PBS is very similar to the original PBS. The period between 
16 December 2003 and 13 January 2004, during which the amended PBS was not applied, was 57 weeks long. This means that the PBS was applie d for 52 weeks (out of a total of 109). Following 
the same reasoning, the original PBS would not have  been applied during 55 weeks, that is to say it 
would have been applied during 54.  
211. To sum up, the original PBS would have been applied for 50 per cent of the time, whereas the 
amended PBS was applied for 48 per cent of the time. Clearly, the two systems are very similar and, therefore, the degrees of distortion they cause are also similar. 
212. In Exhibit CHL-7, as evidence which, it claims , supports this reasoning, Chile submits a table 
that summarizes how the application of the original PBS would have compared with the application of 
the amended PBS. Chile begins by failing to comply  with the minimum requirement of indicating the 
source of its data, as Argentina did with all the information it provided.  
213. Moreover, it is impossible to verify whether th e calculations relating to the alleged behaviour 
of the old PBS from 16 December 2003 are consistent  or not. There is no means of knowing what 
were the calculations that led Chile to determine th e reference prices that woul d have been established 
under the original PBS. It is precisely these prices th at form the basis for determining whether the old 
PBS would have been applied or not. Therefore, Exhibit CHL-7 is not based on verifiable evidence and has no foundation. 
214. To sum up, in the table in Exhibit CHL-7 whic h Chile offers as alleged evidence there is no 
indication of the source of the data. Nor is there an y indication of the basis for the calculation of such 
a key variable as the reference prices of the original PBS.  
215. Even if this table were based on evidence, Chile  considers the "new" PBS to be different and 
less distortive because it was applied for 48 per cent of the time whereas the old PBS would have been 
applied for 50 per cent of the time. That do es not seem to be much of a difference.  
                                                     
 
106 Chile's First Written Submission, paragraph 185. WT/DS207/RW 
Page C-36  
 
  216. As if this were not enough, in Chile's opinion,  wheat and wheat flour exporters should rejoice 
because they have faced distortions resulting fro m specific duties for "only" 17 weeks. These are 
Chile's grounds for arguing that the amended PB S has improved conditions of access. Chile's 
argument is without foundation. The ame nded PBS continues to be inconsistent. 
Effect of the scheduled reduction in floor and ceiling prices 
 
217. In paragraphs 186 to 192 of its submission, Chile  seeks to argue that as the floor and ceiling 
prices will be reduced in the future, the amount of the duties will be lower and the probability of their 
being assessed will also diminish: 
"The scheduled reduction of the floor and ceiling prices is a scenario under which, 
irrespective of international price levels , the amount of the specific duties will 
increasingly diminish compared to those currently being established, just as the 
probability of duties actually being assessed will increasingly diminish."
107 
218. Chile's argument is simply wrong . The reality is that neither the amount of the specific duties 
nor the probability of their being assessed is "irrespec tive of international price levels" and indeed the 
opposite is true: the amount of the specific duties and the probability of their being assessed do 
depend on international price levels.  
219. Law 19.897 and Decree 831/2003 refer to precisely that, i.e., the dependence of the amount of 
the specific duties on international price levels.108 
220. Over and above the provisions of the legislati on governing the amended PBS itself, this is 
clear from the following simple example: 
221. According to the "History of application of the amended PBS"109, between 16 December 2004 
and 15 December 2005 the PBS floor price for wh eat was (and is) US$128 per tonne. The reference 
price between 16 December 2004 and 15 February 2005 was established at US$114.50 per tonne. This 
gave a specific duty of US$14.30 per tonne. 
222. In accordance with Art. 6 of Decree 831/2003, between 16 December 2011 and 
15 December 2012 the PBS floor price for wheat will be US$118 per tonne. If the reference price is 
established at US$103.7 per tonne during any two months of that year, the specific duty during that period will be US$14.30 per tonne, the same as es tablished on 16 December 2004. Even if the 
reference price is less than US$103.7 per tonne, th e specific duty will naturally be higher and not 
lower, as Chile argues. 
223. When this reasoning is applied to the example gi ven by Chile in paragraphs 187 and 188 of its 
submission, it becomes clear that the Chilean  example has no foundation. Chile argues: 
"Although this may be self-evident, we sha ll nevertheless use the calculation formula 
to explain matters.  If we take the curren t floor price of US$128/tonne and the floor 
price of US$114/tonne that will apply in 201 4, with an identical reference price
 of, 
say, US$110/tonne, the results are as follows: 
                                                      
107 Chile's First Written Submission, paragraph 186. 
108 See Law 19.897, Art. 1 paragraphs 3, 4 and 5, and Decree 831/2003, Arts. 2, 4, 6, 13, 14, Exhibits 
ARG-1 and ARG-2, respectively: "The amount of such  duties and rebates shall be established … in terms 
which, when applied to the price levels attained by the products in question on the international markets, allow 
domestic market stability " (emphasis added). 
109 Exhibit ARG-6.  WT/DS207/RW 
 Page C-37 
 
 
  SP2006 = 1.06 * (128 – 110) = 19.08 
SP2014 = 1.06 * (114 – 110) =   4.24 
The specific duty in 2014, us ing the same reference price , would be US$4.24/tonne 
compared to the current specific duty, using that same reference price, of US$19.08/tonne.  In other words, the specific duty in 2014 will be 78 per cent lower 
than the duty that would be calculated for this year." (underlining added) 
224. To spot the flaws in this argument it is only necessary to consider the basic assumption, 
namely, that in no less than eight years' time (2014) the reference price will be the same as it is today (2006), or US$110 per tonne, according to the example.  
225. The fact is that there is no evidence for determining today that in eight years' time the 
reference price will be the same. At the very l east, it is a rash assertion. In all probability, the 
reference price will change, as has always happened since the establishment of the amended PBS.  
226. As previously explained, the amount of the spec ific duties will depend on the future levels of 
international or reference prices. With this in mind, we can reformulate Chile's second equation so 
that the reference price changes: 
SP
2014 = 1.06 * (114 – 94.92) = 19.08 
227. It is now "self-evident" that if the reference price is US$94.92 per tonne in 2014, the amount 
of the specific duties will be the same as in 2006 or, in accordance with the Chilean example, 
US$19.08, or 0 per cent (zero per cent) lower than in 2006. 
228. It is therefore clear that the amount of the specific duties and the probability of their being 
assessed depend on international price levels. It is by no means sure that these amounts and the 
probability of their being assessed will increasingly diminish, as Chile argues. The Chilean argument 
is incorrect and without foundation. 
229. In paragraph 191, Chile returns to an argument th at is no longer sustainable at this stage, 
namely, that according to the historical wheat pr ice series the probability of wheat prices standing 
below US$114 per tonne (i.e., the floor price in 2014 ) is 23.9 per cent, as compared with 46.1 per cent 
for the probability of prices lying below US$128 per tonne: 
"Over the period January 1986-March 2006 (per iod of application of the price band 
policy [ sic]), the price of Argentine bread wheat stood 112 times (months) below the 
current floor of 128, i.e. on 46.1 per cen t of the occasions considered.  The price 
stood under 114, namely the floor for 2014, 58 times (months), i.e. on 23.9 per cent of the occasions considered.  In other wo rds, the probability of specific duties being 
applied in the year 2014 becomes lower and lower." 
230. The problems presented by arguments of this kind are set out below. 
231. First of all , as Argentina has already pointed out, th e amended PBS is not "less" inconsistent 
because the inconsistency will arise on fewer occasions in the future than at present. There is no basis 
for making an assertion of this kind. 
232. Secondly , according to Chile's reasoning, there is a more than 46 per cent probability, while 
the floor is situated at US$128 per tonne, of wh eat and wheat flour expor ters experiencing the 
distortions caused by specific duties. That is not encouraging for exporters planning to export wheat WT/DS207/RW 
Page C-38  
 
  and wheat flour to Chile up to December 2007. We r ecall that until then the floor price will remain at 
US$128 per tonne. Therefore, the probability indicated by Chile is not at all encouraging. 
233. Thirdly , Chile indicates neither the source of its information nor the numerical basis for the 
calculations made to arrive at the conclusion reached in this paragraph. Chile simply fails to provide 
any evidence at all. 
234. Fourthly , even if Chile's reasoning had any validit y, Chile's calculations are wrong. Chile 
takes only the lowest future floor price of  all those scheduled under Decree 831/2003, 
i.e., US$114 per tonne, corresponding to 2014. Chile should have incorporated in its calculations a 
weighting that takes into account the time during which the price of Argentine bread wheat lay below 
the future floor prices not considered by Chile: 1 26, 124, 122, 120,  118 and 116 US$ per tonne. As 
these prices are all higher than US$114 per tonne, the percentage should logically be higher than the 
23.9 per cent calculated by Chile. 
235. Argentina reiterates that the way in which the floor and ceiling of the amended PBS are 
established has transformed the PBS into a more rigid and inflexible system.
110 
236. Chile concludes by referring to a process of gradual reduction of border protection of wheat: 
"Both of the above results – that is, th e reduction of duties by 2014 and the lesser 
probability of duty assessment – demonstrate that the current policy has an in-built 
process of gradual reduction of border protection of wheat ."111 (original underlining) 
237. To sum up , Chile wrongly disregards the fact that the level of specific duties resulting from 
the PBS obviously depends on international price leve ls, attempting to argue that in 8 (eight) years 
time the reference price will be the same as it is at  present. Moreover, Chile repeats the argument that 
the amended PBS will be "less" inconsistent in th e future because the inconsistency will arise on 
fewer occasions than at present, while basing its case on calculati ons made without providing the 
source of the evidence and without including most of the relevant period of application of the amended PBS up to 2014.  
238. Moreover, Chile chooses to disregard the fact th at by keeping the floor and ceiling inflexible 
the amended PBS insulates the domestic market fro m international price developments. This is the 
basis for its concluding that the amended PBS ("th e current policy") has an in-built process of gradual 
reduction of border protection of wheat. Chile's c onclusion has no basis in fact or in law. 
                                                     
 
110 As Brazil has pointed out: 
"… the 11-year period has the side effect of aggravating the distortion of domestic prices vis-à-vis 
international ones. While such a long period may afford some predictability, the new PBS is more rigid and inflexible, given that, in practice, the Chilean market will be insulated from fluctuations in the world prices for 
eleven years. Should there be a sign ificant downward movement in the international wheat prices, the 0.985 
factor may not be sufficient to account for the necessary reductions in the lower and upper thresholds of the price bands. Hence, in spite of the application of the 0.985 multiplier, one of the main elements of the PBS (the 
bands themselves) will remain virtually unchanged for more than a decade, preventing the fluctuation of 
international prices from being transmitted to the Chilean market".  Chile – Price Band System …  Recourse to 
Article 21.5 of the DSU, Third Party Submission by Brazil, paragraph 15. 
111 Chile's First Written Submission, paragraph 192.  WT/DS207/RW 
 Page C-39 
 
 
  C. THE  ARGUMENT  RELATING  TO THE  FACTOR  OF 1.56  APPLICABLE  TO WHEAT  
FLOUR  AND  THE  CLAIM  RELATING  TO THE  SECOND  SENTENCE  OF 
ARTICLE II:1( B) OF THE  GATT  1994  FALL  WITHIN  THE  TERMS  OF REFERENCE  OF 
THE  PRESENT  PANEL 
239. In Part III of its First Written Submission, Chile  suggests that Argentina's claims relating to 
the factor of 1.56 applicable to wheat flour and the second sentence of Article II:1(b) of the 
GATT 1994 lie outside the Panel's terms of reference.  
240. In this way, Chile avoids responding to the Arge ntine assertion that the factor of 1.56 used to 
multiply the duties and rebates determined for whea t in order to calculate the duties and rebates 
applicable to wheat flour is not transparent a nd insulates the entry price for wheat flour from 
international price developments to an even greater  extent than that for wheat, this being a specific 
feature of the amended PBS that prevents enhanced access to the Chilean market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture .
112  
241. Similarly, in this way Chile avoids having to argue against the contention that, pursuant to the 
Understanding on the Interpretation of Article II:1(b) of the GATT 1994 , the amended PBS is in 
breach of the second sentence of Article II:1(b) of the GATT 1994, since it was not recorded in the 
appropriate column of Chile's Schedule of concessi ons (No. VII), but is ne vertheless being applied.113 
242. Argentina's argument relating to the factor of 1.56 applicable to wheat flour and Argentina's 
claim relating to the second sentence of Article II: 1(b) of the GATT 1994 lie within the terms of 
reference of the present Panel, and Chile has been unabl e to refute that the factor of 1.56 is a specific 
feature of the amended PBS that prevents enhanced  access to Chile's market, in a manner inconsistent 
with Article 4.2 of the Agreement on Agriculture , and that the amended PBS is in breach of Article 
II:1(b) of the GATT 1994, second sentence.  
243. Below, Argentina will deal separ ately with Chile's claims concerning (i) the factor of 1.56 
applicable to wheat flour and (ii) the second sentence of Article II:1(b) of the GATT 1994, respectively. 
1. Argentina's argument relating to the factor of  1.56 applicable to wheat flour lies within 
the terms of reference of the present Panel 
(a) The questioning of the factor of 1.56 applicable to wheat flour is an argument, not a claim 
244. Chile maintains that Argentina's arguments relati ng to the factor of 1.56 applicable to wheat 
flour lie outside the terms of reference of the present Panel, since they concern "a claim which Argentina could have raised and pursued in the original dispute, but failed to"
114 Chile therefore 
requests that the Panel dismiss the claim raised by Ar gentina relating to the factor of 1.56, given that 
it is not properly before the Panel.115 
245. In support, Chile cites the case US –  Countervailing Measures on Certain EC Products 
(Article 21.5 – EC) , arguing that claims relating to aspects of an original measure which were not 
raised in the original proceedings are inadmissible. According to Chile: 
                                                      
112 Argentina's First Written S ubmission, Section C.I.2.7. 
113 Argentina's First Written Submission, Section C.II. 
114 Chile's First Written Submission, paragraph 62. 
115 Chile's First Written Submission, paragraph 63. WT/DS207/RW 
Page C-40  
 
  "The arguments and precedents mentioned in  the previous section, which highlight 
the conclusions of the Panel in the dispute US – Countervailing Measures on Certain 
EC Products (Article 21.5 - EC) , are reproduced in full, given that that dispute dealt 
precisely with the inadmissibility of entertaining claims relating to aspects not of a 'measure taken to comply' but of the origin al measure, and which were not raised in 
the original proceedings."
116 
246. Chile's argument is mistaken. Chile appears not  to understand the difference between "claims" 
and "arguments".  
247. In fact, Argentina's questioning of the factor of 1.56 is not a claim, it is an argument .  
248. A claim is a claim that the respondent party has violated, or nullified or impaired the benefits 
arising from, an identified provision of a particular agreement. An argument  is adduced by a 
complaining party to demonstrate that the respondi ng party's measure does indeed infringe upon the 
identified provision. Arguments supporting a claim are set out and progressively clarified in the first 
written submissions, the rebuttal subm issions and the panel meetings.  
249. This was made clear by the Appellate Body in Korea — Dairy Products : 
"By ' claim ' we mean a claim that the respondent  party has violated, or nullified or 
impaired the benefits arising from, an identif ied provision of a particular agreement.  
Such a  claim of violation  must, as we have already noted, be distinguished from the 
 arguments adduced by a complaining party to demonstrate that the responding party's 
measure does indeed infringe upon the identified treaty provision. Arguments supporting a claim are set out and progressively clarified in the first written 
submissions, the rebuttal submissions and the first and second panel meetings with 
the parties. In European Communities – Hormones , we emphasized the substantial 
latitude enjoyed by panels in treating the ar guments presented by either of the parties 
and said: 
[…] nothing in the DSU limits the faculty of a panel freely to use 
arguments submitted by any of the parties -- or  to develop its own 
legal reasoning -- to support its own findings and conclusions on the 
matter under its consideration" (footnotes omitted, original emphasis).
117 
250. In the present proceedings, Argentina has raised claims with respect to the inconsistency of 
the amended PBS with the second pa ragraph of Article 4 of the Agreement on Agriculture , the second 
sentence of Article II:1(b) of the GATT 1994 , and paragraph 4 of Article XVI of the Marrakesh 
Agreement Establishing the World Trade Organization . 
251. However, Argentina's questioning of the factor of 1.56, included in the PBS for the purpose of 
assessing the duties applicable to imports of wheat flour, is an additional argument which shows that 
the amended PBS is inconsiste nt with Article 4.2 of the Agreement on Agriculture . There is no 
question of a "claim". 
252. The claim to which the Argentine argument con cerning the factor of 1.56 refers is that 
relating to the inconsistency of the amended PBS with Article 4.2 of the Agreement on Agriculture . 
                                                      
116 Chile's First Written Submission, paragraph 61. 
117 WT/DS98/AB/R, paragraph 139  WT/DS207/RW 
 Page C-41 
 
 
  Chile has not argued that this claim does not lie w ithin the terms of reference of the present Panel. 
Therefore the Panel can rule on the Argentine arguments relating to the factor of 1.56. 
253. Consequently, the cases cited by Chile in its First Written Submission, namely, EC – Bed 
Linen (Article 21.5 – India ) and US - Countervailing Measures on Cert ain EC Products (Article 21.5 
– EC) , are not applicable as regards the factor of 1.56, insofar as these cases concern the admissibility 
in Article 21.5 proceedings of claims  made during the original proceed ings with respect to unchanged 
aspects of the measure to be taken or claims whic h were not made during the original proceedings 
with respect to unchanged aspects of the measure to  be taken, but could have been invoked during 
those proceedings. 
254. Therefore the Panel is fully competent to accept and make free use of the arguments 
submitted by Argentina with respect to the factor of  1.56 in order to show the inconsistency of the 
amended PBS with the second para graph of Article 4 of the Agreement on Agriculture , since it is not a 
question of an independent claim but of an argum ent in support of a claim. Thus, Chile's argument 
that Argentina's claim relating to the factor of 1.56 applicable to wheat flour falls outside the terms of 
reference of the present Pa nel should be dismissed. 
(b) Even if the Panel were to find that the Arge ntine arguments relating to the factor of 1.56 
applicable to wheat flour constitute a new "cla im", those arguments fall within the terms of 
reference of the present Panel 
255. If the Panel were to find that the Argentine argum ents relating to the factor of 1.56 applicable 
to wheat flour constitute a "claim" and not an "a rgument", as Argentina maintains, these arguments 
would fall within the terms of reference of the present Panel. 
256. Argentina has shown that the factor of 1.56 used  to multiply the duties and rebates determined 
for wheat in order to calculate the duties and rebate s applicable to wheat flour is not transparent and 
insulates the entry price for wheat flour from international price devel opments to a greater extent than 
that for wheat, being a specific feature of the am ended PBS that prevents enhanced access to Chile's 
market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture .118 
257. In its First Written Submission, Chile was una ble to rebut the arguments and evidence put 
forward by Argentina. It merely argues that the questioning of the factor of 1.56 is a new claim by Argentina that falls outside the Panel's terms of reference. 
258. However, Argentina's arguments relating to the f actor of 1.56 applicable to wheat flour fall 
within the terms of reference of the present Panel. 
259. In fact, the Argentine arguments relating to th e factor of 1.56 constitute new arguments. This 
is acknowledged by Chile when it observes, in relation to the factor of 1.56: 
"Quite simply no mention is made of it in Argentina's submissions
.  Neither, 
therefore, was it the subject of a ruling by either the original Panel or the Appellate 
Body"119 (original underlining). 
260. Argentina points out that, within the framew ork of the current Article 21.5 proceedings, 
Argentina is entitled to submit new arguments  in order not to undermine the utility of the review 
envisaged under Article 21.5 of the DSU since, if  it were not allowed to do so, the present Panel 
                                                      
118 Argentina's First Written S ubmission, Section C.I.2.7. 
119 Chile's First Written Submission, paragraph 60. WT/DS207/RW 
Page C-42  
 
  would be unable to examine fully the c onsistency of the amended PBS with the Agreement on 
Agriculture .
120 
261. In EC – Bed Linen (Article 21.5 – India) , which Chile cites, the Appellate Body held that: 
"… This implies that an Article 21.5 panel is not confined to examining the 'measures 
taken to comply' from the perspective of the claims, arguments, and factual 
circumstances relating to the measure th at was the subject of the original  
proceedings.  Moreover, the relevant fact s bearing upon the 'measure taken to comply' 
may be different from the facts relevant to  the measure at issue in the original 
proceedings.  It is to be expected, therefor e, that the claims, arguments, and factual 
circumstances relating to the 'measure ta ken to comply' will not, necessarily, be the 
same as those relating to the measure in the original dispute. Indeed, a complainant in 
Article 21.5 proceedings may well raise new  claims, arguments, and factual 
circumstances different from those ra ised in the original proceedings …"121 
(underlining added, footnotes omitted) 
262. Contrary to what Chile says, the fact that th ere was "… no finding of inconsistency (or of 
consistency) forcing Chile  to amend that particular aspect of the PBS …"122 does not prevent the 
present Panel from considering Argentina's new arguments  relating to the factor of 1.56. The factor in 
question forms part of both the new measure itself and its application. It should be borne in mind that 
this factor is a fundamental and essential part of  the amended PBS applicable to imports of wheat 
flour. 
263. Argentina's new arguments concerning the factor of 1.56 will make it easier for the present 
Panel to fulfil its task of considering the amended PB S in its totality. In this connection, the Appellate 
Body has held that: 
"When the issue concerns the consistency of a new measure 'taken to comply' the task 
of a panel in a matter referred to it by th e DSB for an Article 21.5 proceeding is to 
consider that new measure in its totality .  The fulfilment of this task requires that a 
panel consider both the measure itself and the measure's application …"123  
(underlining added) 
264. Below, Argentina refers to Chile's observa tions in paragraph 55 of its First Written 
Submission where it cites the panel report in US – Countervailing Measures on Certain EC Products 
(Article 21.5 – EC) .124  
265. In that paragraph Chile stated that: 
"The Panel Report in US – Countervailing Measures on Certain EC Products 
(Article 21.5 – EC)  stated that accepting the EC's claim (with regard to likelihood of 
injury) would amount to providing it with 'a  second chance to raise a claim that it 
                                                      
120 Canada – Aircraft (Article 21.5 – Brazil) , Appellate Body Report, paragraph 41. 
121 EC – Bed Linen (Article 21.5 – India) , Appellate Body Report, paragraph 79. 
122 Chile's First Written Submission, paragraph 62 (underlining added). 
123 US – Shrimp (Article 21.5 – Malaysia) , paragraph 87 (WT/DS58/AB/RW). 
124 Although this paragraph corresponds to Chile's  arguments relating to Article II:1(b), second 
sentence, of the GATT 1994, in paragraph 61 of its submission – which corresponds to the arguments relating to 
the factor of 1.56 – Chile indicates that it is  reproducing in full the arguments and precedents  mentioned in that 
section, which highlight the conclusions of the Panel in the dispute US – Countervailing Measures on Certain 
EC Products (Article 21.5 – EC).   WT/DS207/RW 
 Page C-43 
 
 
  failed to raise in the original proceedings'.125  The Panel was concerned that to allow 
such a possibility could undermine the prin ciples of fundamental fairness and due 
process, which would raise 'serious issues regarding (the United States') due process rights'.
126  It therefore concluded that the new claims by the EC were not properly 
before the Panel."  
266. The paragraphs that Chile cites from this di spute do not fit Argentina's new arguments with 
respect to the factor of 1.56. These new arguments re late to an aspect of the measure taken to comply 
that has changed with respect to the original measure. This is because under the amended PBS the 
factor of 1.56 is applied on a basis completely different from that on which it was applied under the 
original PBS. 
267. What Argentina is submitting for the Panel's consid eration is the factor of 1.56 which, in the 
amended PBS, is a changed aspect relative to the PBS in its original form, and which constitutes a 
specific feature of the measure taken to comply that  prevents enhanced access to Chile's market, in a 
manner inconsistent with Article 4.2 of the Agreement on Agriculture .127  
268. Therefore, the new arguments relating to the factor of 1.56 can be examined by an 
Article 21.5 panel and fall within the te rms of reference of the present Panel. 
269. In its arguments, Chile "forgets" to cite those paragraphs in which that panel held that an 
Article 21.5 panel can consider new claims concer ning aspects of the measure taken to comply that 
have changed relative to the original measure.  
270. In that case, the affirmative likelihood-of-subsid ization re-determinations of the Section 129 
determination – measure taken to comply – were based on different reasoning and different factual 
circumstances than those in the original sunset review.128  Here the weight given in the re-
determination to the subsidy programmes to which the evidence related was necessarily different than 
in the original sunset review. 
271. Therefore, despite the fact that the USDOC's affirmative likelihood-of-subsidization re-
determination was maintained in the Section 129 determination, it was included in the terms of 
reference of the Article 21.5 panel, inasmuch as the United States had revised the likelihood-of-
subsidization determination by changing the legal and factual basis of the conclusion concerning the 
continuation or repetition of the subs idy. Thus, the new claims relating to the evidence referred to an 
aspect of the measure taken to comply that had changed as compared with the original measure. 
Consequently, the panel arrived at the conclusi on that the USDOC's affirmative likelihood-of-
subsidization re-determination was in cluded in its terms of reference. 
272. In fact, the panel in US – Countervailing Measures on Cert ain EC Products (Article 21.5 – 
EC) held that: 
                                                      
125 US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , Panel Report 
(WT/DS212/RW), paragraph 7.74. 
126 US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , Panel Report 
(WT/DS212/RW), paragraph 7.76. 
127 This is why Argentina is challenging the utility of Exhibits CHL-5 and CHL-6, insofar as they relate 
to the original PBS, that is to say, a measure different from the amended PBS. 
128 In this connection, in paragraph 7.69 of its report, the Panel in US – Countervailing Measures on 
Certain EC Products (Article 21.5 – EC)  considered that: 
"... the affirmative likelihood-of-sub sidization determination in the orig inal sunset reviews rested only 
upon the continuation of the benefit from pre-privatiz ation, non-recurring subsidies, while the affirmative 
likelihood-of-subsidization determination in the UK and Spain Section 129 determinations rested only upon 
subsidy programmes other than pre-privatization non-recurring programmes." WT/DS207/RW 
Page C-44  
 
  "... the relative importance of the evidence concerning non-pre-priv atization subsidies 
and Glynwed's sale of relevant production facilities has changed as a consequence of 
the new basis for the affirm ative likelihood-of-subsidization re-determinations.  In 
Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body explained that an 
Article 21.5 panel should be able to consid er new claims where 'the relevant facts 
bearing upon the "measure taken to comply" may be different from the relevant facts 
relating to the measure at issu e in the original proceedings'.
129  In this dispute, the 
affirmative likelihood-of-subsidization re-determinations are now based on  different 
reasoning and different factual circumstances  than those in the original sunset 
review…Thus, the weight  given in the re-determination to the subsidy programmes to 
which the evidence relates is necessarily different  than in the original sunset review.  
...  In addition, the European Communities c ould not have meaningfully raised the 
treatment of evidence in the origin al proceedings because the basis
 for the affirmative 
likelihood-of-subsidization determination in the original sunset review was different  
than that in the affirmative likelihood-of-subsidization re-determination set out in the 
Section 129 determinations."130  
273. Therefore, despite the fact that the factor of 1.56 was formally  maintained in the amended 
PBS, the Argentine arguments relating to the factor of 1.56 are included in the terms of reference of 
the present Panel inasmuch as Chile has changed the b asis to which that factor is applied and hence 
the result of its application.  
274. If both the basis and the duties resulting from the application of the factor of 1.56 in the 
amended PBS are necessarily different from the basis and the duties resulting from the application of the factor of 1.56 in the original PBS, then the relati ve weight of the factor of 1.56 has also changed in 
the measure taken to comply. 
275. In this respect, it should be recalled that the specific duty or rebate for wheat, which 
constitutes the basis of calculation to which the factor of 1.56 is applied to arrive at the specific duty 
or rebate for wheat flour, is calcul ated from the difference between the floor or ceiling price  and the 
reference price  by multiplying that difference by 1 plus the ad valorem  tariff. Given that Chile has 
changed both the way in which the floor and ceiling prices are calculated
131 and the way in which the 
reference prices are established132, as well as the method of calculating the specific duties133, the basis  
to which the factor of 1.56 is applied and the r esults of its application have necessarily changed. The 
application of the factor of 1.56 in the amended PB S results in a different amount of duties and forms 
part of both the measure itself and its method of application. 
276. In other words, the consequences of applying the factor of 1.56 in the amended PBS are 
different from the consequences of applying it in the original PBS .   
277. In conclusion, just as the panel in US – Countervailing Measures  on Certain EC Products 
(Article 21.5 – EC)  held that the claims relating to the Section 129 affirmative likelihood-of-
subsidization re-determination fe ll within the panel's terms of reference because the basis  for that re-
                                                      
129 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , paragraph. 41 (original 
footnote). 
130 Panel Report on US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , 
paragraphs 7.69 and 7.70 (underlining added). 
131 Argentina's First Written S ubmission, Section B.3.3. 
132 Argentina's First Written S ubmission, Section B.3.4. 
133 Argentina's First Written S ubmission, Section B.3.5.2.  WT/DS207/RW 
 Page C-45 
 
 
  determination was different from that for the affirmat ive determination in the original sunset review, 
the arguments relating to the factor of 1.56 fall with in the terms of reference of the present Panel since 
the basis  on which that factor is calculated is also different  from that in the original PBS. 
278. Thus, the new arguments relating to the factor of 1.56 relate to an aspect of the measure taken 
to comply that has changed with respect to the original measure. Consequently, the Panel should 
conclude that Argentina's arguments concerning the f actor of 1.56 fall within its terms of reference. 
279. In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body held that Article 21.5 
proceedings involve not the original measure but rather a new and different measure which was not 
before the panel and it was natural, therefore, that , as the relevant facts bearing upon the "measure 
taken to comply" were different from the relevant facts relating to the original measure, the claims, 
arguments and factual circumstances pertinent to the "measure taken to comply" would not 
necessarily be the same as those which were  pertinent in the original dispute: 
"... in carrying out its review under Article 21.5 of the DSU, a panel is not 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.  Although th ese 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 rather a new and different measure
 which was not before the 
original panel.  In addition, 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 the review envisage d 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 covered agreem ent of the measures taken to comply', as 
required by Article 21.5 of the DSU."
134 (Underlining added) 
280. As the panel found in EC – Bed Linen (Article 21.5 – India) , in Canada – Aircraft 
(Article 21.5 – Brazil)  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.  Canada objected to claims raised by Brazil against the new 
measure on the grounds that no similar claims had b een raised against the original measure.  Had 
Canada's objection been upheld, Br azil would have been barred from  making claims that could not 
have been raised in the original proceedings .135 The Appellate Body agreed with the panel's 
conclusion.136 
281. In the present dispute the situation is similar. The factor of 1.56 – as a changed aspect of the 
measure taken to comply – was not before the original  panel.  As pointed out above, the relevant facts 
bearing upon the factor of 1.56 are obviously different  from the relevant facts relating to the factor of 
1.56 in the original PBS. It is therefore natura l that Argentina should present arguments and factual 
circumstances pertinent to the factor of 1.56 in the amended PBS that are different from those that 
were pertinent to the factor of 1.56 in the original PBS.  
                                                      
134 WT/DS70/AB/RW, paragraph 41. 
135 WT/DS141/RW, paragraph 6.48. 
136 WT/DS141/AB/RW, paragraph 88. WT/DS207/RW 
Page C-46  
 
  282. In the present Article 21.5 proceedings, Argen tina, like Brazil in Canada – Aircraft, puts 
forward arguments relating to the factor of 1.56 that it did not raise
 in the original dispute. Chile, like 
Canada in that dispute, challenges these arguments claiming that they should have been raised in the 
original proceedings. If the Panel were to uphold th e Chilean challenge, Argen tina, like Brazil in that 
dispute, would not have the opportunity to put fo rward arguments that could not have been raised  in 
the original proceedings, as the factor of 1.56 is  a changed aspect of the measure taken to comply. 
283. Moreover, Chile's due process rights have not been unduly impaired in these proceedings 
since in changing the factual basis on which the fact or of 1.56 would be applied and hence the results 
of applying it Chile could have anticipated137 that new arguments relating to that factor would be 
raised.  
284. In this connection, that panel held that: 
"… The United States itself introduced the i ssue of treatment of evidence by revising 
the entire likelihood-of-subsidization determ ination and by changing the legal basis 
of the affirmative conclusion of like lihood of continuation or recurrence of 
subsidization.  The United States therefore could have anticipated a claim on the 
USDOC's treatment of evidence.  Accordingl y, the Panel concludes that the European 
Communities' claim on evidence falls within this Panel's mandate."138 (Underlining 
added) 
285. Furthermore, Argentina's arguments relating to th e factor of 1.56 were not brought up at a late 
stage of the Article 21.5 proceedings. Thus, due process has not been adversely affected, as shown by the fact that Chile was able to rebut these arguments in its First Written Submission. 
286. In the light of the above, should the Panel c onsider that the arguments put forward by 
Argentina in relation to the factor  of 1.56 constitute a new claim, Argentina respectfully requests that 
the Panel consider the said arguments, since they fall within the terms of reference of the present 
Panel, and find that the factor of 1.56 is a specifi c feature of the amended PBS that impedes enhanced 
access to Chile's market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture .
139 
2. The Argentine claim relating to the second sentence of Article II:1(b) of the GATT 1994 
falls within the Panel's terms of reference 
287. As already pointed out by Argentina140, the amended PBS infringes the second sentence of 
Article II:1(b) of the GATT 1994 inasmuch as it constitut es "other duties or charges" not recorded in 
the appropriate column of Chile's Schedule of concessions (No. VII). 
288. In its First Written Submission, Chile could not – and cannot – refute the arguments put 
forward by Argentina. It merely argued that the Argentine claim in relation to the second sentence of 
paragraph 1(b) of Article II of the GATT 1994 fa lls outside the Panel's terms of reference. 
289. However, the Argentine claim relating to th e second sentence of Article II:1(b) of the 
GATT 1994 falls within the terms of reference of the present Panel.  
                                                      
137 Report by the Panel on U S – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , 
paragraph 7.71. 
138 Report by the Panel on US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , 
paragraph 7.71.  
139 Argentina's First Written S ubmission, Section C.I.2.7. 
140 Argentina's First Written Submission, Section C.II.  WT/DS207/RW 
 Page C-47 
 
 
  290. First of all , Chile itself expressly acknowledges that th is claim was not raised by Argentina 
during the original proceedings .141 Argentina did not submit claims or evidence relating to this 
provision in the original proceedings. This is a new claim  which Argentina is entitled to raise in the 
context of the current Article 21.5 proceedings.  
291. Secondly , the Argentine claim relating to the sec ond sentence of Article II:1(b) of the 
GATT 1994 falls within the Panel's terms of referen ce since it is a new claim with respect to a new 
measure .  
292. In fact, as Chile itself has stated on at least two occasions, the amended PBS is a "new" 
PBS.142  
293. Chile seeks to apply the findings in EC – Bed Linen (Article 21.5 – India) to the present 
case.143  However, in trying to apply this case to th e present dispute Chile makes two mistakes.  In 
EC – Bed Linen (Article 21.5 – India) , the Appellate Body held that India raised the same claim  that it 
had raised in the original proceedings in respect of an unchanged component  of the measure taken to 
comply. Chile has not understood the Appellate Body's  finding in that case. The Appellate Body held 
that: 
"... Here, India did not raise a  new  claim before the Article 21.5 Panel;  rather, India 
reasserted in the Article 21.5 proceedings the  same  claim  that it had raised before 
the  original   panel in respect of a component of the implementation measure which 
was the same  as in the original measure.  This same  claim was dismissed by the 
original panel, and India did not appeal that finding."144 (Underlining added) 
294. In these Article 21.5 proceedings, the situation is completely different. 
295. Firstly , as Chile acknowledges, the Argentine cl aim relating to the second sentence of 
Article II:1(b) of the GATT 1994 is a new claim th at Argentina never raised in the original 
proceedings.145  This is not in dispute.  
296. In addition , Argentina could never have made this claim during the initial stage of the 
present dispute, as Chile maintains146, since the amended PBS is a measure different from the PBS 
which formed the subject of the original proceed ings. As Chile has pointed out, this is a "new" 
PBS.147  
                                                      
141 Chile's First Written Submission, paragraph 48: "…Argentina was unable to prove that it had raised 
(let alone pursued) a claim relating to  this second sentence…Argentina did not  in fact ever raise the claims it 
now wishes to bring". 
142 See Status Reports submitted by Chile WT/DS207/15/Add.1, of 28 October 2003, third paragraph: 
"We repeat that the new  price band system…" and WT/DS207/15/Add.3, of 14 January 2004, second paragraph: 
"…the new  price band system entered into force on  16 December 2003…" (underlining added). 
143 Chile's First Written Submission, paragraph 51. 
144 WT/DS141/AB/RW, paragraph 80. 
145 Chile's First Written Submission, paragraph 48: ". .. Argentina, however, never questioned whether a 
measure contrary to Article 4.2 of the Agreement on Agriculture  could thereby be inconsistent with the second 
sentence of Article II:1(b) of the GATT 1994". See also Chile's First Written Submission, paragraph 56: "In this 
dispute, we find ourselves in the very same situation: a claim which Argentina could have raised and pursued in 
the original dispute, but failed to do so ... " 
146 Chile's First Written Submission, paragraphs 50 and 56. 
147 See Status Reports submitted by Chile WT/DS207/15/Add.1, of 28 October 2003, third paragraph: 
"We repeat that the new  price band system…" and WT/DS207/15/Add.3, of 14 January 2004, second paragraph: 
"…the new  price band system entered into force on  16 December 2003…" (underlining added). WT/DS207/RW 
Page C-48  
 
  297. In EC – Bed Linen (Article 21.5 – India) , the claim raised by India in the Article 21.5 
proceedings had been raised by India during the original proceedings, had not been pursued and was 
dismissed
 by the original panel.  
298. On the other hand, in the present proceedings there has been no previous finding during the 
original proceedings, either by the Panel or by  Appellate Body, "dismissing" the claim which 
Argentina is now raising.148 
299. Later in EC – Bed Linen (Article 21.5 – India) , the Appellate Body noted that India was 
seeking to challenge an aspect of the or iginal measure which had not changed: 
"We conclude, therefore, that, in these Artic le 21.5 proceedings, India has raised the 
 same claim under Article 3.5 relating to 'o ther factors' as it did in the original 
proceedings.  In doing so, India seeks to cha llenge an aspect of the original measure 
which has not changed , and which the European Communities did not have to 
change, in order to comply with the DSB recommendations and rulings to make that 
measure consistent with the Euro pean Communities' WTO obligations."149 
(Underlining added) 
300. In the present case, the Argentine is raising a di fferent claim in respect of the second sentence 
of Article II:1(b) of the GATT 1994.  
301. First of all , this claim relates to the whole of the amended PBS, that is to say, the amended 
PBS in its totality rather than to one aspect  in particular.  
302. Consequently, the PBS being a "new measure", with this new claim Argentina necessarily 
cannot be challenging an aspect  of the original measure which has not changed .  
303. Secondly , as Chile itself acknowledges, the Argentine claim challenges a "n ew" PBS, that is 
to say, a new measure. 
304. In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body held that Article 21.5 
proceedings involve not the original measure but rather a new and different measure which was not 
before the panel and it was natural, therefore, that , as the relevant facts bearing upon the "measure 
taken to comply" were different from the relevant facts relating to the original measure, the claims, 
arguments and factual circumstances pertinent to the "measure taken to comply" would not 
necessarily be the same as those which we re pertinent in the original dispute.150 
305. As the panel found in EC – Bed Linen (Article 21.5 – India) , in Canada – Aircraft 
(Article 21.5 – Brazil) , Canada had implemented the recomme ndation 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.  Canada objected to claims raised by Brazil against the new 
measure on the grounds that no similar claims had b een raised against the original measure.  Had 
Canada's objection been upheld, Br azil would have been barred from  making claims that could not  
                                                      
148 The Appellate Body did not rule on the consistency of the PBS with the second sentence of 
Article II:1(b) of the GATT 1994, but on the inconsistency of the Panel's finding relating to the second sentence 
of Article II:1(b) of the GATT 1994 with its  obligations under Article 11 of the DSU. 
149 WT/DS141/AB/RW, paragraph 87. 
150 Canada – Aircraft (Article 21.5 – Brazil), Appellate Body Report, paragraph 41 (underlining 
added).  WT/DS207/RW 
 Page C-49 
 
 
  have been raised in the original proceedings .151 The Appellate Body agreed with the panel's 
conclusion.152 
306. In the present dispute the situation is similar.  The amended PBS is a new measure that was 
not before the original panel. As pointed out a bove, the relevant facts bearing upon the amended PBS 
are obviously different  from the relevant facts relating to the original PBS. It is therefore natural that 
Argentina should present arguments and factual circum stances pertinent to the amended PBS that are 
different from those that were pertinent to the original PBS.  
307. In the present Article 21.5 proceedi ngs, Argentina, like Brazil in Canada – Aircraft , raises 
claims relating to the second sentence of Article II: 1(b) of the GATT 1994 in respect of the amended 
PBS that it did not raise  in the original dispute. Chile, like Ca nada in that dispute, challenges the 
claims raised by Argentina against the amende d PBS arguing that no claims relating to the second 
sentence of Article II:1(b) of the GATT 1994 were ra ised against the original PBS. If the Panel were 
to uphold the Chilean challenge, Argentina, like Brazil in that dispute, would not have the opportunity 
to raise claims that could not have been raised  in the original proceedings, because the amended PBS 
is a new measure. 
308. In addition , Chile is wrong to cite as a precedent paragraph 96 of the Appellate Body report 
in EC – Bed Linen (Article 21.5 – India) .153 In that paragraph the Appellate Body said that India 
would be being given a second chance to establish so mething which it had claimed but not proved in 
the original proceedings. 
309. In the present Article 21.5 proceedings there w ould be no "second chance" to establish what 
was claimed but not proved in the original proceed ings since, as Chile states and agrees: "Argentina 
did not in fact ever raise the claims it now wishes to bring"154 and, consequently, this is the "first 
chance" to establish a new claim wh ich, as we have argued, Argentin a is entitled to raise. The claim 
relating to the second sentence of Article II:1(b) of the GATT 1994 is a new claim and, therefore, falls 
within the terms of reference of the present Article 21.5 Panel. 
310. In US – Countervailing Measures on Certai n EC Products (Article 21.5 – EC) , cited by Chile 
in paragraph 55 of its First Written Su bmission, the Panel found as follows: 
"The circumstances of the present case illust rate the potential procedural unfairness 
… [T]he United States could only rebut the arguments in the European Communities' 
Second written submission during the sole mee ting with the parties.  Consequently, 
important facts and issues continued to surface quite late into the Article 21.5 
proceedings…"155 
311. In the present case, as Chile acknowledges156, the claim in respect of the second sentence of 
Article II:1(b) of the GATT 1994 did not surface late into the present Article 21 .5 proceedings in such 
a way as to raise "serious issues regarding [Chile's] due process rights". This is shown by the fact that 
Chile was able to put forward arguments agai nst this claim in its First Written Submission.157 
                                                      
151 WT/DS141/RW, paragraph 6.48. 
152 EC – Bed Linen  (Article 21.5 – India ), Appellate Body Report, paragraph 88. 
153 Chile's First Written Submission, paragraph 54. 
154 Chile's First Written Submission, paragraph 48. 
155 Report by the Panel on US –  Countervailing Measures on Certain EC Products (Article 21.5 –  
EC), footnote 294, second paragraph. 
156 Chile's First Written Submission, paragraph 46. 
157 Chile's First Written Submission, paragraph 46 ff. WT/DS207/RW 
Page C-50  
 
  312. In the light of the above, Argentina respectfu lly requests that the Panel rule on the claim 
raised by Argentina concerning the inconsistenc y of the amended PBS with the second sentence of 
Article II:1(b) of the GATT 1994 since, being proper ly before the present Panel, it falls within its 
terms of reference. Argentina therefore respectfully  requests that the Panel find that the amended PBS 
is in breach of the second sentence of Article II:1(b) of the GATT 1994. 
D. CONCLUSIONS 
313. Chile has not implemented the rulings and recommendations of the DSB in this dispute and 
its measure taken to comply, namely, the amended PBS,  is not consistent with its obligations within 
the framework of the WTO. 
314. Through procedural arguments, without legal b asis or valid precedent, Chile seeks to prevent 
the Panel from examining two key aspects of the measu re taken to comply, name ly, the consistency of 
the factor of 1.56, i.e., the very essence of the amended PBS as applied to wheat flour, and the fact 
that Chile did not include the price band system in the corresponding schedule, thereby infringing a 
basic obligation, namely Article II of the GATT 1 994, relating to the consis tency of the internal 
trading system itself.  
315. In addition, without producing evidence or we ll-founded arguments, and without refuting any 
of the arguments put forward by Argentina in its First Written Submission, Chile seeks to argue that 
the amended PBS is transparent and predictabl e and does not insulate Chile's market from 
international market developments.  
316. This is Chile's only basis for arguing that  it has implemented the recommendations and 
rulings of the DSB. 
317. The fact is that Chile should have abolished its inconsistent price band system applied to 
wheat and wheat flour, as it did in the case of edible vegetable oils. This is what the Appellate Body 
established when it held that a finding that Ch ile's PBS as such was a measure prohibited by 
Article 4.2 meant that the duties resulting from the application of that system could no longer be 
levied: 
"... [A] finding that Chile's price band system as such is a measure prohibited by 
Article 4.2 would mean that the duties r esulting 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."
158 
318. By not abolishing the PBS as it applies to wheat and wheat flour – as it should have done 
according to the Appellate Body – Chile has for ced Argentina to resort to the WTO's dispute 
settlement mechanism for a sec ond time. The result is that Chile has evaded its multilateral 
responsibilities by maintaining a border measure other than an ordinary customs duty which it did not 
even include in its Schedule. Thus, three and a ha lf years after the DSB adopted the Appellate Body 
and Panel reports, that is to say, after Chile was required to bring its system into conformity, the 
dispute remains unsettled and Argentina's bene fits under the WTO Agreements are still being 
impaired. 
319. Chile's declared objective in main taining an inconsistent measure in force, despite the express 
recommendations of the WTO, has been to provide unlawful protection for wheat and wheat flour. In its First Written Submission, Argentina included evidence that this protection was acknowledged by 
                                                     
 
158 Chile – Price Band System , Appellate Body Report, paragraph 190 in fine.  WT/DS207/RW 
 Page C-51 
 
 
  the very Chilean officials who were involved in approving the amended PBS.159 In addition, in its 
First Written Submission, Chile acknowledged the existe nce of this protection: "... the current policy 
[sic] has an in-built process of gradual reduction of border protection of wheat " (original underlining). 
This border protection is in addition to that afforded by ordinary customs duties.  
320. For these reasons, Argentina respectfully requests the Panel to reject Chile's arguments in 
their totality and to find that Chile's pri ce band system, as amended in accordance with 
Law No. 19.897 and Supreme Decree No. 831/2003, in itself and in its specific application to imports of wheat and wheat flour: 
– Is inconsistent with Article 4.2 of the Agreement on Agriculture , since it is a border 
measure similar to a variable impor t levy and a minimum import price; 
– is inconsistent with the second sentence of Article II:(1)(b) of the GATT 1994, since 
it constitutes "other duties or charges" not recorded in the corresponding column of 
Chile's Schedule of concessions (No. VII); 
– is in breach of Article XVI.4 of the Marrakesh Agreement Establishing the World 
Trade Organization  since, while it remains in for ce, Chile is not ensuring the 
conformity of its laws, regulations and ad ministrative procedures with its obligations 
under the WTO Agreements. 
321. Consequently, Argentina respectfully request s the Panel to find that Chile has not 
implemented the recommendations and rulings of the DSB and is continuing to infringe its obligations 
within the framework of the WTO. 
 
                                                     
 
159 Argentina's First Written Submission, footnotes 75, 87, 110 and 146.