WORLD TRADE  
ORGANIZATION  WT/GC/W/624 
30 June 2010 
 (10-3557) 
 Original:   English 
  
 
REVIEW OF THE EXEMPTION PROVIDED 
UNDER PARAGRAPH 3 OF GATT 1994 
 
US Response to Communication from Japan
1 
 
 
 The following communication, dated 28 June 2010 is being circulated at the request of the 
Delegation of the United States.  
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Question 1
 
  In light of the fact that the exemption is a serious deviation from the fundamental principles of 
the GATT and that it has been maintained for as long as 15 years, further continuing this exemption 
will harm the consistency of the entire WTO legal fr amework.  Furthermore, its continuation may be 
misused by other Members as an excuse for creating or  maintaining their trade barriers.  What is the 
view of the US on this point? 
 
US response:
 
 
 We note that paragraph 3 of the General Agreement on Tariffs and Trade 1994  ("GATT 
1994") is very much part of the WTO legal framework  and is necessarily consistent with it.  Likewise, 
this paragraph reflects the balance of rights and obligations under the Marrakesh Agreement 
Establishing the World Trade Organization . 
 Question 2
 
  It is assumed that the US Jones Act has the effect of increasing physical distribution costs to 
the users of US domestic maritime transportation,  especially in cases where shipping is the only 
economically reasonable means of tr ansportation.  Moreover, maritime is the only sector that is 
influenced by this peculiar regulation, unlike other modes of transportation such as air, rail and road 
where foreign-made aircraft, rolling stock and trucks can be used without any such restrictions.  This 
means that competitive conditions are seemingly distorted among those transportation modes, and 
therefore, not only does the Jones Act affect the US maritime industry, but also it may even have a 
distorting effect on world trade, contrary to the spirit  of trade liberalization under the WTO.  What is 
the view of the US on these points?  
US response:
 
  The United States believes it is useful to put in perspective the size of the US ocean going 
merchant fleet.  The total carrying capacity of the world's ocean going merchant fleet in 2008 was 
                                                     
 
1 WT/GC/W/616. WT/GC/W/624 
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  1,076,086,532 tons.  Of that total, the US fleet accoun ted for 8,515,521 tons, or less than 1% (0.79%).  
Approximately 97 per cent of US foreign trade is carried on foreign vessels.  These facts do not appear to support an assertion of distorting effects on world trade.  
Question 3
 
 
 With regard to the level of the shipbuilding and maintenance capacity that is essential for US 
national security, the US responded to Japan's questionnaire in 2007 that it had no quantitative 
criteria and that it only had qualitative criteria.  Unless quantitative criteria or other concrete grounds are objectively shown, the US remains able in practice to make unilateral decisions to 
maintain this exemption, since there is a very la rge amount of room for arbitrary decisions on 
whether or not the exemption is necessary.  What is the view of the US on this point?  What actions 
have been taken or will be taken by the US for making these criteria clear and transparent? 
 
US response:
 
 
 Qualitative, not quantitative, assessments are ma de by the US Department of Defense in 
conjunction with the Department of Homeland Securi ty and other national security agencies. As the 
nature of the threats has changed over the years, the assessment of the level of security needed, and the means to achieve that level of security, is cons tantly being examined and refined.  We do not share 
Japan's belief that a quantitative assessment would be useful.  Different challenges require a different 
response; these cannot be meaningfully quantified. 
 
Question 4
 
 With regard to "additional information on the u se, sale lease or repair of relevant vessels 
covered by this exemption" as stipulated in par agraph 3(c), the response by the US to Japan's 
questionnaire on this point in 2007 was that the US di d not have a source for this information.  Since 
the US is required to provide such information annually pursuant to the said paragraph, the US 
should find and ensure the means in order to ob tain the "additional in formation" and make a 
submission of such information, which is also  essential to prevent undermin ing the credibility of the 
GATT and the WTO system.  What actions have been ta ken or will be taken by the US on this point?  
 
Answer
 
  The United States wishes to clarify that it has been providing "additional information" 
identified in paragraph 3(c) of GATT 1994 together with its "detailed statistical notification."  
Paragraph 3(c) states that a Member whose meas ures are covered by the exemption "shall annually 
submit a detailed statistical notif ication consisting of a five-year moving average of actual and 
expected deliveries of relevant vessels as well as additional information  on the use, sale, lease or 
repair of relevant vessels" (italics added).  The United States has annually provided the "detailed 
statistical notification" relating to actual and expected  deliveries.  In addition, as part of the tables 
providing the data underlying that detailed statis tical notification, the United States has submitted 
"additional information" relating to the use or sale of  relevant vessels.  The United States has tried to 
be clear in its most recent communication on where to find that information.   Concerning the "additional information" referred to by Japan, we would point out that the use 
of the vessel is already provided by US communications through the data field showing vessel type, 
such as offshore supply, crew boat, or tug.  For example, the additional information provided by the 
United States on vessel deliveries for the five-year  period through 2008 (WT/L/789) shows in the 
"type" data field that 12 crew boats, 36 offshor e supply vessels, and 20 tugs were delivered and 
ordered from US shipyards during 2 008.  Information on the intended use of other vessels is similarly 
shown by vessel type, such as fishing vessels, crude oil tanker, etc.    WT/GC/W/624 
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 In the same communication, the United States has also provided additional information on the sale or use of vessels delivered and expected to be delivered (ordered) in 2008 through the data fields 
showing vessel type, builder, owner, current manager,  and operator.  In the report for 2008, owner and 
parent company data is updated to reflect any sale or lease transactions that may have taken place 
during the reporting period.  Information on whet her a vessel is leased is provided in the owner 
column data field in the report, generally with th e word "lease" or "leasing" used as part of the name 
of the company.  The most common form of ownership for the vessels shown in the report is through affiliate arrangements with a parent company, rather than leasing.  In addition, information related to 
vessel sale and repair can be found in the informa tion relating to US employment in the shipbuilding 
and repair industries during the period 2003 through  2008.  We do not have data on the value of 
domestic repairs of vessels, but the customs va lue of foreign repairs of vessels amounted to 
$150.926 million in 2008.    
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