WT/DS207/RW 
 Page F-1 
 
 
  ANNEX F 
 
REPLIES BY PARTIES TO QUESTIONS POSED BY THE PANEL 
AND OTHER PARTIES AFTER THE SUBSTANTIVE MEETING OF THE PANEL  
 
Contents Page 
Annex F-1  Replies by Argentina to Questions posed by the Panel  F-2  
Annex F-2  Replies by Argentina to Ques tions posed by the European 
Communities F-71  
Annex F-3 Replies by Chile to Questions posed by the Panel F-77 
Annex F-4 Replies by Chile to Questions posed by Argentina F-116 
 WT/DS207/RW 
Page F-2  
 
  ANNEX F-1 
 
REPLIES BY ARGENTINA TO QU ESTIONS POSED BY THE PANEL 
 
 FOR BOTH PARTIES
 
 
1. Article 21.5 of the DSU provides that: 
 
"Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply  with the recommendations and rulings  
such dispute..." (emphasis added) 
Please identify which are the relevant "measure s taken to comply with the recommendations 
and rulings" at issue in these proceedings.  Do those measures refer to the PBS in its entirety, the amendments introduced to the PBS, particul ar features of the PBS, or something else?  
Please make reference to relevant sections of the Panel and Appellate Body reports in the 
original proceedings to support your answer, if needed. 
 
Answer to Question 1
: 
 
The relevant measures taken to comply with th e recommendations and rulings at issue in these 
proceedings are Law No. 19.897, whose Artic le 1 replaced Article 12 of Law No. 18.5251, and Decree 
No. 831 of the Ministry of Finance (hereinafter Decree 831/2003)2, regulating the application of 
Article 12 of Law No. 18.525, as substituted by Article 1 of Law No. 19.897.  The fact that both Law 19.897 and Decree 831/2003 are measures adopted by Chile to implement the 
recommendations and rulings of the DSB was acknow ledged by Chile in the status reports it 
submitted to the DSB in fulfilment of its  obligations under Art. 21.6 of the DSU.
3     
 Those measures refer to the PBS in its entirety.  
2. Could the parties please comment on whet her their reply to the previous Question has 
any bearing on the issue of whether Argentina's claim under Article II:1(b) of the GATT 1994 
falls within this Panel's terms of reference. 
 
Answer to Question 2
: 
 Argentina's answer to the previous question bear s on the issue of whethe r Argentina's claim under 
Article II:1(b) of the GATT 1994 falls within this  Panel's terms of reference as fas as the amended 
PBS is a new measure recognized like that by Chile itself.
4 
 
                                                      
1 See Exhibit ARG-1. As notified by Chile, Law 19.897 established a "new" price band system which 
entered into force on 16 December 2003 for the products at issue in this dispute, namely, wheat and wheat flour. 
(WT/DSB/M/156, paragraph 16). 
2 See Exhibit ARG-2. 
3 See,  for example, document WT/DS207/15/Add.3 and inter alia First Written Submission by 
Argentina, paras. 18 to 20. 
4 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 F-3 
 
 
  In Canada – Aircraft (Article 21.5 – Brazil),  the Appellate Body held  : 
 
"... 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." 
5 (Underlining added.) 
Thus, Argentina's claim relating to the second sen tence of Article II:1(b) of the GATT 1994 falls 
within the Panel's terms of reference since it is a new claim with respect to a new measure . 
 
3. During the meeting with the Panel, regar ding the issue of whether Argentina's claim 
under the second sentence of Articl e II:1(b) of the GATT 1994 falls within the mandate of this 
Panel, Canada asserted that it "is not aware of an y rule or precedent in the jurisprudence of the 
WTO that would require a Member to make all of its arguments and bring all of its claims at 
one time" (See paragraph 8 of the written versio n of Canada's oral statement).  Assuming 
Members are then free to choose which claims to bring against a specific measure in the original proceedings and which other claims to bring la ter, during Article 21.5 proceedings, would there 
be the risk, as Canada itself suggests, that Me mbers could then tactically decide to "split 
claims" between the original proceedings and th e Article 21.5 proceedings (see paragraph 9 of 
the written version of Canada's oral statement)? 
 
Answer to Question 3
: 
 
Like the Appellate Body held in Canada – Aircraft (Article 21.5 – Brazil)6, Article 21.5 proceedings 
involve, in principle, not the original measure but  rather a new and different measure which was not 
before the panel and it is natural, therefore, that, as the relevant facts bearing upon the "measure taken 
to comply" are different from the relevant facts rela ting to the original measure, the claims, arguments 
and factual circumstances pertinent to the "measu re taken to comply" would not necessarily be the 
same as those which were pertinent in the original dispute.  Therefore, as the relevant facts bearing upon th e "measure taken to comply" are different from the 
relevant facts relating to the original measure in the c ase at issue in this dispute, there is no risk that 
Argentina could have "tactically" decided to "split claims" between the origin al proceedings and the 
Article 21.5 proceedings.  
                                                     
 
5 WT/DS70/AB/RW, paragraph 41. 
6 WT/DS70/AB/RW, paragraph 41. WT/DS207/RW 
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  4. Do the parties consider that the laying do wn of all parameters of the PBS applicable 
until 2014 makes it easier to predict the specific dut ies applicable to imports?  Could a degree of 
uncertainty be associated with the dates of delivery? 
 
Answer to Question 4
: 
 The laying down of some parameters of the amended PBS applicable until 2014 does not  make it 
easier to predict the specific du ties applicable to imports. 
 
First , not all parameters have been layed out until  2014. In particular, the reference prices will 
mandatorily
 change every two months as they have ch anged every two months since the amended 
PBS was established.7 This provides no predictability for exporters.  
 According to Chile, the exporter must ascertain the fu ture price of bread wheat in the relevant market 
of concern in the 15-day future
 period and then calculate that 15-day period average price to obtain 
the presumed future  reference price. 
 Thus, one of the problems faced by the exporter in estimating the future amount of duties payable is 
the fact that future prices are precisely that: future
, and therefore, they are estimates rather than solid 
data. That is to say, there could be variations due to circumstances unknown at the time that could 
cause these future  prices to differ from the prices actually recorded in the future. Consequently, the 
relationship between the specific duty and the transact ion 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.  If in the amended PBS there is any chance of predicting future reference prices, quod non , that chance 
is not different from the possibility that existed with the original PB S. Future prices for wheat existed 
then, as they exist now, and the same problems that Argentina now highlights existed at the time of 
the original proceeding as well. In fact, that w as enough for the Appellate Body to find that the 
original PBS was inconsistent because an exporter was less likely to ship to a market if that exporter 
could not predict what the amount of duties would be.
8 
 
Second,  it is not clear that the amended PBS, included its parameters, will not continue to exist after 
2014. The amended PBS has no end date. As indicated in the legislation amending the original PBS, 
"… In 2014 the President of the Republic shall eval uate the modalities and conditions of application 
of the price band system …".9 So, Chile has not even provided the certainty that the amended PBS 
will be dismantled by middle of next decade. 
 
With respect to the degree of uncertainty related to the delivery dates, Argentina demonstrated how, 
taking into account the specific delivery dates, as a result of the amended PBS an exporter may not 
know and may not reasonably predict what the amount of duties will be. Argentina respectfully refers 
the Panel to paras. 271 to 274 of its First Written Submission.  5. Argentina has noted in paragraph 58 of it s first submission, that the way in which the 
calculation of the specific duties has been ch anged under the amended PBS "leaves the exporter 
worse off, inasmuch as the specific duties now gen erate a cost higher than that generated by the 
previous method of calculation". 
 
                                                     
 
7 First Written Submission by Argentina, para. 256 to 270 and Exhibit ARG-6. 
8 Chile – Price Band System , Report of the Appellate Body, para. 234. 
9 Law 19.897/2003, Art. 1. See Exhibit ARG-1.  WT/DS207/RW 
 Page F-5 
 
 
   (a) Could Argentina clarify whether, in its view, this particular fact per se  would 
make the amended measure inconsistent with the WTO covered agreements.  If so, could Argentina identify the legal basis for that argument. 
 
Answer to Question 5(a)
: 
 
The fact that the way in which the calculation of the specific duties has been changed under the 
amended PBS "leaves the exporter worse off, inasmu ch as the specific duties now generate a cost 
higher than that generated by the previous method of calculation" is a cumulative insulation factor  if 
compared to the original PBS.  
 
This fact is a "specific feature" that contributes to the particular configuration and interaction of all the 
amended PBS specific features described by Argentin a along its submissions and oral statements that 
have the effect of disconnecting Chile's mark et from international price developments.  
 
Argentina finds legal basis for this interpretation in footnote 1 to Article 4.2 of the Agreement on 
Agriculture. Footnote 1 reads in its relevant part:  
"These measures include quantitative import restrictions, variable import levies, 
minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterpri ses, voluntary export restraints, and similar 
border measures other than ordinary customs duties…" 
This cumulative insulation factor (i.e. the fact th at the way in which the calculation of the specific 
duties has been changed under the amended PBS leav es the exporter worse off) contributes to the 
amended PBS effect  of impeding the transmission of interna tional price developments to the domestic 
market in a way similar to that of other categor ies of prohibited measures listed in footnote 1. 
 
In that sense, the Appellate Body found:  
"In our view … Chile's price band system ca n still have the  effect  of impeding the 
transmission of international price developm ents to the domestic market in a way 
similar to that of other categories of prohibited measures listed in footnote 1".
10 
This effect was one of the features the Appellate Body  referred to when finding the original PBS 
inconsistent with Article 4.2. The Appellate Body stated:  
"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 …"11 (underline added) 
 (b) In this respect, can Argentina comment on Chile's statement that it has taken 
the necessary steps to ensure that duties never exceed its tariff rate level bound 
in the WTO (see, for example, paragraph 37 of Chile's first submission).  In the opinion of the Parties, what is at issue in these proceedings, the level of the duties or their alleged variability, or both? 
 
                                                     
 
10 Chile – Price Band System , Report of the Appellate Body, para. 246. 
11 Chile – Price Band System , Report of the Appellate Body, para. 261 (underline added). WT/DS207/RW 
Page F-6  
 
  Answer to Question 5 (b)
: 
 
Chile's comment is familiar to Argentina because it is not the first time that Chile raises this 
argument.12 
 
The fact that Chile has taken the necessary steps to ensure that duties never exceed its tariff rate level 
bound in the WTO is meaningless with relation to whet her the amended PBS is consistent with Chile's 
obligations under the WTO. The Appellate Body h as extensively dealt with this argument and has 
clearly rejected it.13 It is useful to recall that the Appellate Body stated: 
 
… the existence of the tariff binding will not eliminate the distortion in the 
transmission of world market prices to Chile's market in all other cases, where the combination of the duties resulting from Chile's price band system, when added to the applied ad valorem  duty, remains below Chile's bound rate of 31.5 per cent 
ad valorem . 
Moreover, contrary to what Chile argues, Chile's price band system is not necessarily 
less trade-distorting  Nor does it insulate Chile 's domestic market less, than it would, 
if Chile simply imposed duties at the  bound   tariff level of 31.5 per cent …
14 
With respect to the second part of this question ("what  is at issue in these proceedings, the level of the 
duties or their alleged variability, or both?"), there is much more at issue in these proceedings than 
just the variability of the duties.  
 
While the level  of the duties per se  is not inconsistent with Chile's WTO obligations, what is at stake 
in these proceedings is the fact that the amended PB S continues to elevate the entry price of imports 
to Chile above the price band floor; continues to "overcompensate" for the effect of decreases in 
international prices on the domestic market when re ference prices are set below the price band floor; 
continues to make the entry price of Chilean impor ts higher than if Chile applied a minimum import 
price at the level of the price band floor, and continue s to fail to ensure that the entry price of imports 
to Chile falls in tandem with falling world market prices. In addition to th is, the amended PBS is a 
border measure similar to a variab le import levy a minimum import price, is instransparent and 
unpredictable and, on top of that, is not an ordinary customs duty .  
 
At this point Argentina would like to recall that it has not only claimed that the amended PBS is a 
border measure similar to a variable import levy. Argentina has made its strongest effort also to demonstrate that the amended PBS is a border measure similar to a minimum import price.
15  The 
formula developed in Argentina's First Written Submission, Section C.I.2.1 deciphered how the amended PBS works from a mathematical point of view.
16  In fact, due to that formula , the PBS does 
not permit any transmission if that means that the entry price has to fall below the floor price. The 
formula together with the band floor work as a brake  for the decline in the entry price and for any 
transmission of international prices below the level of the floor.17  
 Additionally, Argentina has provided another formula for calculating the import price resulting from the Appellate Body Report, showing what the entry price would be if Chile applied a minimum import 
                                                     
 
12 See for example Chile – Price Band System , Report of the Appellate Body, para. 253. 
13 Chile – Price Band System , Report of the Appellate Body, paras. 254 to 259. 
14 Chile – Price Band System , Report of the Appellate Body, paras. 257 and 258 (footnotes omitted) 
15 Argentina's First Written Submission, para. 99-124, 159-173;  Rebuttal by Argentina, paras. 160-205, 
Oral Statement by Argentina, para. 32-41, 85-90; and Closing Statement by Argentina, para. 21. 
16 First Written Submission by Argentina, paras. 102 to 105 
17 Oral Statement by Argentina paras. 36 to 41  WT/DS207/RW 
 Page F-7 
 
 
  price.18 Chile recognized that that formula was correct.19 Then, Argentina demonstrated that the entry 
price of Chilean imports under the amended PBS is hi gher than it would be if Chile were to apply a 
minimum import price at price band floor level.20  
 So, again, the variability of the duties is not the onl y issue at stake. Argentina is confident that the 
panel will thoroughly address all of Argentina's arguments.  
 
6. During the substantive meeting with the Panel, Argentina stated that "contrary to what 
Chile has asserted in its submissions (footnote omitted), the PBS Law and Regulation give no 
discretion  to Chile to decide whether or not to impose the duties" (see paragraph 80 of the 
written version of Argentina's oral statement, original emphasis).  
(a) Can Argentina elaborate on the relevance of whether the amended PBS allows 
any discretion to Chilean authorities to levy the specific duties or grant the rebates, as appropriate. 
Answer to Question 6
: 
 
The Appellate Body held that the fact that the  measure  itself – as a mechanism –imposes the 
variability  of the duties is one feature of "variable import levies": 
 
"… 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 automatically and continuously .  Ordinary customs duties, by 
contrast, are subject to discrete chang es in applied tariff rates that occur 
independently, and unrelated to such an underlying scheme or formula. …"21 
(Underlining added, emphasis in the original) 
Both Law 19.897 and Decree 831/2003 incorporate "a scheme or formula that causes and ensures that 
levies change automatically and continuously", making it mandatory  for specific duties to be 
established when the reference price is below the band floor.  The relevant part of Law 19.897 states that "specific duties must be established  when the reference 
price is below the floor price of 128 dollars for wheat.  In the case of wheat flour, the duties and 
rebates determined for wheat multiplied by a factor of 1.56 shall be applied " (emphasis added).   
 Article 13 of Decree 831/2003 reads:  "In each Supr eme Decree issued in  accordance with this 
regulation specific duties shall be established ... if the reference price is below the floor price ..." 
(emphasis added).   
 Clearly, expressions of the type " must be established " and " shall be applied " mean that when the 
reference price is below the floor price the app lication of specific duties will be mandatory and 
automatic. Therefore, the PBS is applied automatically, directly and unfailingly. 
 
Thus, the fact that the amended PBS itself –as a mechanism- imposes the va riability of the duties, 
together with the fact that it does not allow any di scretion to Chilean author ities to levy the specific 
                                                     
 
18 First Written Submission by Ar gentina, Section C.I.2.3. 
19 Rebuttal by Chile, para. 162. 
20 First Written Submission by Ar gentina, Section C.I.2.3. 
21 Chile – Price Band System, Report of the Appellate Body, paragraph 233. WT/DS207/RW 
Page F-8  
 
  duties or grant the rebates is one of the character istics that makes the amended PBS be similar to a 
variable import levy.  
7. Do the Parties consider that the price bands, as defined under the amended PBS, are 
used as part of a scheme or formula for the calc ulation of additional duties or rebates (as the 
case may be) at the customs border, prior to the entry of wheat and wheat flour into the Chilean 
customs territory? 
 
Answer to Question 7
: 
 Yes, the price bands (or the floor and ceiling values ) as defined under the amended PBS, are used as 
part of a scheme or formula for the calculation of additional duties or rebates (as the case may be) at the customs border, prior to the entry of wheat a nd wheat flour into the Chilean customs territory. 
 In the case of wheat Article 14 of Decree 831/2003 pr ovides that "the specific duties applied to wheat 
imports … will correspond to the difference between th e floor price and the reference price … 
multiplied by the factor one (1) plus that Cu stoms Tariff's general ad valorem tariff. 
  Specific duty = ( Floor value in force  – Reference price) * ( 1 + ad valorem  tariff  )"
22 
 In the case of wheat flour Article 16 of Decree 831/2003 provides that "In the case of wheat flour the 
duties and rebates determined for wheat, multip lied by the factor of 1,56 will be applied. 
 Specific duty or rebate to  the tariff for wheat flour  =  Specific duty or  rebate to the tariff for wheat *  1,56 
23 
 
In this case, it is clear that as the formula for th e calculation of specific duties to be levied on wheat 
flour imports includes the specific duty for wheat, it th erefore incorporates the floor value used in the 
formula to calculate that duty.  
 These formulas are contained in the Law 19.897 and Decree 831/2003 and that is an incontestable fact.  
 
8. Chile asserts that, under the present PBS, the reference price is not a border price, does 
not correspond to the price of a shipment, nor is it expressed in CIF terms  (see, for example, 
paragraph 118 of its rebuttal submission). 
 
 (a) Notwithstanding the fact that FOB pri ces do not reflect all the costs associated 
with traded wheat and wheat flour, do th e Parties consider that the price of the 
goods (normally reflected in the related co mmercial documents, such as invoices) 
can serve as the starting point to determine the full transaction value?  
 
Answer to Question 8(a)
: 
 
Argentina agrees that the price of the goods (normall y reflected in the related commercial documents, 
such as invoices) can serve as the starting point to  determine the full transaction value. However the 
transaction value of the shipments (reflected in the commercial invoice or otherwise) has no relevance 
                                                      
22 See ARG-2 (emphasis added, unofficial translation) 
23 See ARG-2 (emphasis added, unofficial translation)  WT/DS207/RW 
 Page F-9 
 
 
  or meaning within the amended PBS. Argentina has ex tensively referred to this aspect of the amended 
PBS.24 
 
 (b) Notwithstanding the fact that the reference price is not expressed in CIF terms , 
can the FOB valuation of the "markets of co ncern" be used as a starting point to 
obtain an approximation of the CIF value for reference prices ? 
 
Answer to Question 8(b) : 
 
If the FOB valuation recorded in a certain market of  concern, for a certain quality of concern and for a 
specific point in time were adjusted adding up insurance and freight, the result would a CIF value for 
that market, that  quality of concern and for that  specific point in time. In that case  the FOB valuation 
of the "markets of concern" could be used as a starting point to obtain an approximation of the CIF 
value . 
 
That is the approach followed by Argentina, fo r example, in Exhibits ARG-11, ARG-12, ARG-13, 
ARG-14, ARG-23, ARG-24, ARG-25, and Tables I, II, III and IV of Argentina's First Written Submission.  
 (c) If the Panel were to assume that the PBS does not sustain internal prices, as 
argued by Chile (see paragraphs 109-126 a nd 154 of its first submission), would 
the Parties consider that the FOB, CIF or wholesale prices could be considered 
as "proxies " for certain analytical purposes, for example, in order to study price 
behaviour, while taking fully into account the complexities involved? 
 
Answer to Question 8(c)
: 
 
Argentina agrees that FOB and CIF prices can be considered as "proxies" for certain analytical 
purposes.   However, "wholesale prices" should not be used for any analytical purpose in this dispute. This 
variable is not relevant in this case. Neither th e Panel nor the Appellate Body addressed the notion of 
"wholesale prices" in this dispute. The relevant parameter of comparison is between the FOB price 
and the entry price,  as the Appellate Body established in paragraph 260 of its Report. The wholesale 
price is a new variable incorporated by Chile, ne ver addressed by the Appellate Body nor by 
Argentina.  
Second, in its First Written Submission, paras. 154  and 155, Chile presented a graph stating that it 
revealed that during the period of application, the wheat entry price  had the same behaviour as its 
FOB price and that both prices' variation had "large  similarities" that showed the connection between 
Chile's internal price and the international market. In its Rebuttal, para. 55, after Argentina showed 
that Chile's arguments were baseless, Chile contra dicts itself stating that, in reality, the graph was 
comparing wheat FOB price with wheat wholesale  price. Moreover, Chile curiously maintains that the 
connection required by Argentina cannot be complete : "…it is impossible to claim a complete 
connection…"
25 According to Chile, the reason for this is  that internal market wheat price is 
influenced by wheat internal supply : "The price of wheat – and its fluctuations – on the wholesale 
market is heavily influenced by the domestic wheat supply…"26 In sum, the evidence submitted by 
                                                      
24 First Written Submission by Argentina, paras. 47-49 , 137, 141, 153, 157, 182, 196, 220-223, and 228 
and, Oral Statement by Arge ntina, paras. 67 and 68. 
25 Rebuttal by Chile, para 55. 
26 Rebuttal by Chile, para 55. WT/DS207/RW 
Page F-10  
 
  Chile to convince the Panel that the amended PB S does not cause insulation from the international 
market, is full of self-contradictions.   Moreover, while the relevant variable to analyse is  the entry price as the Appellate Body established, 
inter alia , in paragraph 260 of its Report,  the fact recognized by Chile th at internal market wheat price 
is "heavily" influenced by wheat internal supply, dist orts the very variable Chile purports to 
incorporate to this dispute, in which the influen ce of wheat internal supply has never been addressed. 
 Even if, in spite of the various reasons that Ar gentina provided for not using "wholesale prices" for 
any analytical purpose in this dispute, the Panel found that wholesale prices could be considered for 
analytical purposes, it is difficult for Argentina to describe the evolution of Chilean wholesale prices 
of wheat and wheat flour over the period addressed by the Panel because all the evidence that Chile 
has provided for the period January 2004 to February 2006 is an unsupported graph.  
 First, the graph in para. 154 of Ch ile's first written submission only addresses wheat  wholesale prices. 
Wheat flour  wholesale prices are not addressed in that graph. In fact, wheat flour wholesale price have 
not been addressed before in this dispute at all.    Second, Chile never provided any chart or any furthe r information to clarify the numerical data that 
could be the basis for the wheat "wholesale prices" line plotted in that graph, as Argentina did with all 
of its Exhibits. Argentina has explained all the pr oblems with this graph and the conclusions Chile 
draws from it.
 27 Furthermore, it is not clear what is the source of that graph. Chile states that "The 
sources of the information, both da ily and monthly, are clearly indicated in all cases (SAGPyA and 
ODEPA)"28, but it is clear that in para. 154 of Chile's first written submission th ere is no indication of 
the sources of the information used to produce the graph.  
Furthermore, there are inconsistencies in what Chile apparently is purporting to show. It is not clear 
whether Argentine FOB price is compared against "Chilean wheat prices", "wheat wholesale prices" 
or just against the "entry price":  
• In paragraph 154 Chile states: "The graph below shows the trends in Chilean wheat 
prices  and in f.o.b. prices of Argentine bread wheat …" 
• The legend of the graph reads "wheat wholesale price " 
• In paragraph 155 Chile states: "What clearly emerges is that the entry price of wheat 
exhibits the same behaviour as its f.o.b. price…" 
During the meeting of the Panel with the Par ties on 1 August Chile exposed in a PowerPoint 
presentation what appeared to be the same graph.  Argentina specifically asked, through an oral 
question, if that graph showed the same wheat wholesale prices Chile had included in its graph in 
paragraph 154 of its first submission. Chile's answ er was affirmative. However, Argentina neither 
received an electronic or paper copy of that graph nor of the remaining PowerPoint computer presentation. In fact, Argentina has never seen the numerical basis of that graph
. 
 In spite of all these inconveniences resulting from Chile 's lack of clarity and, what is worse,  
supporting evidence, Argentina made its best effort to describe what it can be observed in that graph.
29  
 
                                                      
27 See Rebuttal by Argentina, para. 61- 66 and Oral Statement by Argentina 30-31. 
28 See Rebuttal by Chile, footnote 25. 
29 Rebuttal by Argentina, paras. 68-70  WT/DS207/RW 
 Page F-11 
 
 
  A careful study of the graph, including a comparis on of the trends of each the "bread wheat FOB 
Argentine port price" (lower line) and the "wh eat wholesale price" (upper line) shows that during 
most of the period both prices moved in different  directions. In fact, both prices showed an opposite  
trajectory during the following periods:  
• February-March 2004 
• March-April 2004 
• May-June 2004 
• June-July 2004 
• July-August 2004 
• August-September 2004 
• September-October 2004 
• December 2004 – January 2005 
• January-February 2005 
• February-March 2005 
• April-May 2005 
• May-June 2005 
• July-August 2005 
• September-October 2005 
• November-December 2005 
 Therefore, Chile statements that "[t]he price cu rves indicate that…the variation [of Chilean wheat 
prices] is very similar to that of export prices of Argentine wheat…"
30 and "the entry price of wheat 
exhibits the same behaviour as its f.o.b. price, which demonstrates price transmission and therefore 
the connection between the Chilean  and the international market"31 are baseless from every point of 
view. 
 
9. Do the Parties consider that the ac tual transaction value of a good is always  unrelated to 
its FOB valuation?  If not, what adjustments should be made to the FOB price to get an 
estimate of the transaction value? 
 
Answer to Question 9 : 
 
From a theoretical point of view, the actual transa ction value of a good has to be related to its FOB 
valuation. If one considers the transaction value as the invoice FOB price, then no adjustments are 
necessary. If one considers the transaction value as th e CIF price one possible adjustment could be to 
turn the invoice FOB price into a CIF price.  
 
10. Do the Parties consider that the actual tr ansaction value of wheat and wheat flour is 
always  unrelated to its FOB valuation?  If not, what adjustments should be made to the FOB 
price to get an estimate of the transa ction value of wheat and wheat flour? 
 
Answer to Question 10 : 
 
The actual transaction value of wheat and wheat flour is related to its FOB va luation. If one considers 
the transaction value as the invoice FOB price, then no adjustments are necessary. If one considers the 
transaction value as the CIF price one possible adjustme nt could be to turn the invoice FOB price into 
                                                      
30 Chile First Written Submission, para. 154. 
31 Chile First Written Submission, para. 155. WT/DS207/RW 
Page F-12  
 
  a CIF price. Argentina has provided several exam ples on how this was done for the purposes of this 
dispute in the case of wheat
32 and in the case of wheat flour.33 
 
11. Can it be said that the reference price as defined under the PBS is used as part of a 
scheme or formula for the calculation of addition al duties or rebates (as the case may be) at the 
customs border, prior to the entry of wheat and wheat flour into the Chilean customs territory? 
 
Answer to Question 11 : 
 
Yes.  
 
In the case of wheat Article 14 of Decree 831/2003 pr ovides that "the specific duties applied to wheat 
imports … will correspond to the difference between th e floor price and the reference price … 
multiplied by the factor one (1) plus that Cu stoms Tariff's general ad valorem tariff. 
 
 Specific duty = (Floor value in force – Reference price ) * ( 1 + ad valorem  tariff  )"34 
 Article 16 of Decree 831/2003 provides that "In the case of wheat flour the duties and rebates determined for wheat, multiplied by the factor of 1,56 will be applied.  Specific duty or rebate to  
the tariff for wheat flour  =  Specific duty or  rebate to the tariff for wheat *  1,56 
35 
 In this case, it is clear that the formula for the cal culation of specific duties to be levied on wheat flour 
imports includes the specific duty for wheat, it theref ore incorporates the Reference Price used in the 
formula to calculate that duty.  
 
These formulas are contained in the Law 19.897 and Decree 831/2003 and that is an incontestable fact.   
12. Article 7 of Chilean Supreme Decree No. 831 provides that the FOB reference price for 
wheat "correspond[s] to the average of the da ily prices recorded in the markets specified in 
Article 8 over a period of 15 days counted retroactively from the 10
th day of the month in which 
the relevant decree is to be published". 
 
 (d) Do the Parties concur that the reference price used to trigger the calculation of 
additional duties (or rebates) changes six times in the course of any 12-month 
period? 
 
                                                      
32 See Argentina's First Written Submission, footnote 104: "… To arrive at the [wheat] CIF value the 
FOB value was multiplied by 1.23, because the CIF value is generally (subject to pe riodic variations) 23 per 
cent higher than the FOB value for wheat, calculating maritime freight from Buenos Aires to Chile at US$24 per tonne and 0.5 per cent for insurance, on the basis of information provided by SAGPyA's Food and Agricultural 
Market Directorate. The calculations leading to the inde x 1.23 are presented in Exhibit ARG-25, taking as a 
basis the FOB prices, Argentine port, reported by ODEPA and carrying out the above-mentioned calculation." See also Exhibit ARG-25. 
33 See Argentina's First Written Submission, footnot e 108: "… The [wheat flour] CIF value is 
calculated from the FOB value, plus land freight and insu rance. Normally, in the case of wheat flour, freight and 
insurance represent 40 per cent of the FOB value. This information was obtained from examples of actual export 
operations provided by the Argentine Federation of the Milling Industry (FAIM) and presented in Exhibit 
ARG-26 …" See also Exhibit ARG-26. 
34 See ARG-2 (emphasis added, unofficial translation). 
35 See ARG-2 (emphasis added, unofficial translation).  WT/DS207/RW 
 Page F-13 
 
 
  Answer to Question 12(d) : 
 
Yes, the reference price used to trigger the calculation of additional duties (or rebates) changes six 
times in the course of any 12-month period.36 
 13. Do the Parties consider that the fixing of reference prices for a period of 60 days 
constitutes a cumulative insulation factor, in view  of the fixing of price bands for a period of 
11 years? 
 
Answer to Question 13
: 
 
Yes. The fixing of reference prices for a period of  60 days constitutes a cumulative insulation factor 
for two main reasons. 
 
First , as Argentina pointed out in its First Writte n Submission, given that under the "old" PBS 
reference prices were adjusted every week in accordance with the lowest FOB price in any external 
"market of concern" during the previous week, the amended PBS disconnects the Chilean market 
from international price developments even more than the original PBS.  Under the "new" PBS the reference prices used to  calculate the specific duty for wheat and wheat 
flour are set 6 times a year,
37 that is, with a period of validity of 2 months  during which the 
transmission of world market prices is disconnected .  
 Consequently, the "new" reference prices, and the "new" PBS that determines them, are not only less 
representative of the world market but also impede the transmission of international price developments to the Chilean market even more  than the original reference prices and PBS.
38 
 
The charts in Exhibits ARG-15 and ARG-17 illustrate  the development of the reference prices and the 
prices of wheat FOB Argentina and FOB Gulf of Me xico, respectively, during the period of validity 
of the amended PBS.  For each period, the disc onnection between the FOB prices and the reference 
prices, after the reference price has been set for two months, is clearly discernible.  The tables that provided the information on which these charts ar e based can be found in Exhibits ARG-16 and 
ARG-18, respectively.  
 It is surprising to note the insulation from intern ational prices that actually occurred during the period 
in which the operation of the PBS led to the applicat ion of specific duties. It can be seen both from the 
chart showing the relationship between the refere nce price and the Argentine port price of bread 
wheat during the period of operation of the am ended PBS (ARG-15) and from that showing the 
relationship between the reference pr ice and the Gulf of Mexico price of Soft Red Winter No. 2 wheat 
(ARG-17) that the disconnection occurs irrespective of  the period of the year with respect to which 
the relationship is considered.  That is to say, th e reference price is disconnected from the FOB prices 
in the markets of concern both when the referenc e price is based on the Argentine FOB price and 
when it is based on the Gulf of Mexico FOB pri ce, although the disconnection between the reference 
price and the Argentine FOB price is even greater wh en the reference price is calculated on the basis 
of the Gulf of Mexico FOB price and vice versa . 
 
                                                     
 
36 See Exhibit ARG-6. 
37 See Exhibit ARG-2 (Supreme Decree No. 831 of the Chilean Ministry of Finance, Articles 5 and 7 
and the "Summary Table for the application of paragraph 2" of the Annex) and Exhibit ARG-6 (History of the 
application of the amended PBS). 
38 This without prejudice to the inconsistencies found by the Appellate Body with respect to the 
reference prices in the original PBS. WT/DS207/RW 
Page F-14  
 
  For example, if we consider the relationship be tween the reference price and the FOB price for 
Argentine bread wheat (Exhibits ARG-15 and ARG- 16), we find disconnections over the entire period 
of validity of the amended PBS, but especially in  February, early April, the end of May and early 
June, July, August, early September, end of Oc tober and mid-December 2004 and end of February, 
March, early April, end of July, end of  August and beginning of September 2005. 
 
Likewise, if we analyse the relationship between the reference price and the FOB price Gulf of 
Mexico (Exhibits ARG-17 and ARG-18), we note disc onnections over the entire period of validity of 
the amended PBS, but especially at the end of Janua ry and beginning of Februa ry, April, end of May 
and early June, July, September, and early October 2004, January, February, March, early April, early 
August, early October and end of November 2005, and January and early February 2006. 
 As a specific example of this insulation (among ma ny others), consider what happened when the 
reference price was set at 108.64 US$/tonne betw een 16 February and 15 April 2005, on the basis of 
the average of the daily prices for wheat FOB Argentine port .  The reference price thus determined 
and fixed for two months did not reflect in absolute terms the increasing trend of those same FOB 
prices for Argentine bread wheat which, during that period, reached 140 US$/tonne,
39 close to the 
band ceiling from which the PBS provides for the gran ting of rebates rather than the levying of 
specific duties, which clearly reveals the enormous arbitrariness in the setting of the reference prices. 
 In the case of wheat flour, the disconnection is even greater.  Thus, as flour is a product of wheat, its 
FOB price is naturally higher since to the cost of the wheat the millers add the cost of milling plus a 
profit margin.  Accordingly, the FOB price of wheat flour is always
 higher than the reference price 
calculated on the basis of wheat, as can be seen simp ly by glancing at the chart in Exhibit ARG-19 
and the table in Exhibit ARG-20.  The substantia l disconnection observed between the FOB price of 
Argentine wheat flour and the reference price on th e basis of which the specific duties are applied 
during the entire period of validity of the amended PBS speaks for itself and shows the distortion 
faced by Argentine exporters of wheat flour when trying to enter the Chilean market.  
 In paragraph 180 of its First Written Submission  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." 
Now the PBS is inconsistent "only" 6 times a y ear. Chile's arguments speak for themselves. In 
particular, the last part of the paragraph cited "...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 occur in 
the reference, or any other, markets", simply verifies and confirms that under the "new" PBS the 
reference prices provide for a pe riod of validity of 2 months  during which the transmission of world 
market prices is completely disconnected .40 
 
Second , as Argentina maintained in its Oral Stat ement, the problem with the amended PBS's 
reference price is that, compared to the original PB S, the insulating consequences are much worse. In 
                                                      
39 See Exhibit ARG-16. 
40 Argentina's First Written S ubmission, paragraph 206.  WT/DS207/RW 
 Page F-15 
 
 
  fact, international price developments of an extense period of the year are not reflected at all by the 
amended PBS.   Below, Argentina has attached th e Chart for the Application of paragraph 2 of Decree 831/2003 
("Cuadro resumen para la aplicación del párrafo  2"), found in the annex of this Decree. 
 
Períodos para el cálculo de 
los precios de referencia Período de 
publicación del decreto Períodos de vigencia de 
los derechos específicos o rebajas Mercado de mayor 
relevancia 
26 nov – 10 dic 27 ene – 10 feb 27 mar – 10 abr 27 may – 10 jun 
27 jul – 10 ago 
26 sep – 10 oct 11-15 diciembre 
11-15 febrero 11-15 abril 11-15 junio 
11-15 agosto 
11-15 octubre 16 dic – 15 feb 
16 feb – 15 abr 16 abr – 15 jun 16 jun – 15 ago 
16 ago – 15 oct 
16 oct – 15 dic Trigo pan argentino 
Trigo pan argentino Trigo pan argentino Soft Red Winter N° 2 
Soft Red Winter N° 2 
Soft Red Winter N° 2  
 
According to Chart 2 of the Annex to the Decr ee 831/2003 (shown above), the relevant prices leading 
to the establishment of the reference price, are t hose recorded between 26 November to 10 December, 
27 January to 10 February, 27 March to 10 April, 27 May to 10 Jun, 27 July to 10 August, and 26 September to 10 October (See first column on the le ft). Those are the relevant time periods for the 
calculation of the reference prices. These groups of  days account for a total of 90 days. Taking into 
account that a year has 365 days, that is less than 25 per cent of the year. More explicitly, 
international price developments r ecorded during 275 days or 75 per cent of the year will never be 
reflected in the reference price. For the amende d PBS the international prices recorded during all 
those 275 days simply do not exist . As regards to the daily prices r ecorded during each day of each of 
the 15-day periods that form the remaining 90 days, they are reflected after they are recorded, with a 
delay ranging from 6 days to two months.
41 
 Thus, the situation now is even worse  than with the original WTO-inconsistent PBS. In fact, although 
completely full of distortive effects, the original  PBS, at least took into account all the 52 weeks of 
each year to establish the weekly reference price. As  it is clear now, for the amended PBS only 13 of 
those weeks (25 per cent of the year) are now relevant.  
 
In short, Chile wants this Pane l to find that the amended PB S reflects international price 
developments, overlooking the fact that the floor and ceiling prices, will never transmit international 
prices. For the other fundamental feature for the assessment of duties, the reference price, prices 
recorded during 275 days of the year cannot be reflected: simply they do not  exist. 
 
14. What significance, if any, do Parties attribute to the fact that the amended PBS provides 
that references prices are established bimonthly in stead of weekly, as was the case previously? 
 
Answer to Question 14
: 
 There are two answers for this question. One is from the point of view of the insulation , which has 
already been addressed in the an swer to question 13 above.  
 
                                                     
 
41 For example, the prices recorded between 27 Ja nuary and 10 February, will be reflected in the 
reference price established for the pe riod 16 February to 15 April. WT/DS207/RW 
Page F-16  
 
  The other one is from the point of view of the variability  of the PBS and the reference prices. In this 
respect, the variability remains, re gardless the fact that references  prices are established bimonthly 
instead of weekly.  In accordance to what the United States stated during the meeting of Panel with third parties, we 
cannot see, nor Chile has identified, a basis for a distinction between a variation once every two 
months rather than once every week.
42 Despite the fact that the variation of the reference price is no 
longer weekly but bimonthly, that va riation is continuous and automatic.  
 Graph I below shows the variation of the reference price since the amended PBS is in force. It can 
clearly be seen that despite Chile's arguments , variability in the reference price remains.
43 The fact 
that the reference price varies bimonthly rather than  weekly has not changed its intrinsic and visible 
variability.  
                                                     
 
42 Oral Statement by the United States, para. 13. 
43 Numeric data supporting this graph can be seen in Exhibit ARG-38. The source is ODEPA (Chile).  WT/DS207/RW 
 Page F-17 
 
 
  GRAPH I 
 
Reference Price vari ability sinc e the amended PBS is in force
(December 2003 - August 2006)
100.00110.00120.00130.00140.00150.00160.00170.00
16/dic/03 - 15/feb/04
16/feb/04 - 15/abr/04
16/abr/04 - 15/jun/04
16/jun/04 - 15/ago/04
16/ago/04 - 15/oct/04
16/oct/04 - 15/dic/04
16/dic/04 - 15/feb/05
16/feb/05 - 15/abr/05
16/abr/05 - 15/jun/05
16/jun/05 - 15/ago/05
16/ago/05 - 15/oct/05
16/oct/05 - 15/dic/05
16/dic/05 - 15/feb/06
16/feb/06 - 15/abr/06
16/abr/06 - 15/jun/06
16/jun/06 - 15/ago/06U$S/Tonne
Source: own elaboration based on ODEPA (Chile)
 
Moreover, in the right circumstances, that is to say , if the reference price is situated below the band 
floor – as happened between December 2004 and Apr il 2005 – every two months an exporter of wheat 
or wheat flour to the Chilean market will face a specific duty different from that established during the 
previous two-month period. This is clear fro m the table and the chart in Exhibits ARG-23  and 
ARG-24, which illustrate the operation of the am ended PBS between 16 December 2004 and 15 April 
2005. Moreover, if we consider what can happen over a longer period of time, what an exporter 
experiences is the continuous variability of the dutie s, resulting from the continuous variation of the 
reference price .  This is apparent from the table and the chart in Exhibits ARG-21 and ARG-22, which 
illustrate the variability of the specific duties that would have resulted if the present amended PBS had 
operated with the average prices re corded between 1986 and the present on the markets of concern to 
Chile.  WT/DS207/RW 
Page F-18  
 
  15. The amended PBS provides that the same reference price still applies to all goods falling 
within the same product category, regardless of the origin of the goods, and regardless of the 
transaction value of the shipment.  Could Parti es please comment on the effects of this feature 
on the transmission of international price developments into the Chilean market. 
 
Answer to Question 15
: 
 
When examining the original PBS refere nce prices, the Appellate Body said:  
 
Furthermore, under Chile's system, the sa me weekly reference price applies to 
imports of  all  goods falling within the sa me product category, regardless of the 
origin of the goods, and regardless of the transaction value of the shipment…Therefore, the way in which Chile's weekly reference prices are 
determined contributes to giving Chile's pri ce band system the effect of impeding the 
transmission of international price developments to Chile's market.
44 
The Appellate Body saw the insulating effects of a measure that among other features  had no relation 
with the transaction value  of the shipments. That feature, according to the Appellate Body, "… 
contribute[d] to … impeding the transmission of inte rnational price developments to Chile's market." 
 The reason is straightforward: as stated in res ponse to question 10 the actual transaction value of 
wheat and wheat flour is related to its FOB valuati on. The particular transaction value of a shipment 
reflects the FOB price of a specific type of product,  from a specific origin and in a specific point in 
time. That is, the transaction value of a shipment  of Soft White Winter Nº2 wheat, departing from 
Canada on 16 August 2006 will be very close (if not equal) to the FOB price of Soft White Winter 
Nº2 in the same Canadian port on that date. In othe r words: the transaction value of a shipment clearly 
reflects the price of the respective good shipped in its  port of shipment for that specific date. Simply 
put: the transaction value is the best "vehicle" from the undistorted transmission of international 
prices. No notion of "Reference Pr ice" can come even close to tr ansmit international prices as real 
transaction values  do. That is why the absence of any relati on to the transaction value in the amended 
PBS impedes the transmission of internationa l price developments to Chile's market. 
 In its Oral Statement Argentina further developed why the fact that the same reference price still 
applies to all goods falling within  the same product category, regardless of the origin of the goods, 
impedes the transmission of international price developments to Chile's market. Regarding the 
insulation consequences deriving from the fact that  the amended PBS reference prices are based on 
only two predetermined markets of concern (i.e. re gardless of the origin of the goods), Argentina 
recalled that bread wheat is sold -at least- in tw o other markets than the ones selected by Chile and 
which are not reflected on the reference price: Chicago and Kansas.
45  
 Regardless, Chile has tried to justify the establishm ent of the reference prices based on FOB prices in 
Argentina and United States, because according to Chile, "[i]n the last six years (2000-2006) 40 per 
cent of Chilean wheat imports came from the Un ited States and 31 per cent from Argentina".
46 It is 
strange that Chile does not provide a reference quoti ng the source of that information. Nevertheless, 
Argentina had access to Chile's own records for the period during which the amended PBS has been 
in force. Those records show that during the tw o complete years since the establishment of the 
amended PBS (i.e. 2004-2005), Canada has always been  a larger exporter of wheat to Chile than the 
United States, either in volume as well as in amount. Exhibit ARG-31 is a printout of ODEPA's 
(Chile's official source) webpage showing Chile's records of wheat imports for 2004 and 2005. As it is 
                                                      
44 Chile – Price Band System , Report of the Appellate Body, paras. 250. 
45 First Written Submission by Argentina, para. 218. 
46 Rebuttal by Chile, para. 72.  WT/DS207/RW 
 Page F-19 
 
 
  clear from the first page of this exhibit, in 200 4 Canada exported around 54 thousand tons of wheat 
while the United States accounted  for almost 40 thousand tons. In 2005, the difference between 
Canada and the United States has been even larg er: Canada accounted for almost 40 thousand tons 
while the United States accounted for around 20 thousand tons.47 It is clear that Canada has been a 
relevant exporter to Chile. However for Chile's PBS, this is meaningless. Although Canada is 
certainly a market of concern for Chile, the ame nded PBS will never reflect Canada's relevance in 
Chilean foreign trade of wheat, nor Canadian prices will be reflected in Chile's internal markets.  
 Therefore, Chile's argument that the amended PBS "reference prices now correspond to f.o.b. prices 
on the two markets of most concern for Chile"
48 is baseless. To put it in the Appellate Body words, it 
is not by any means certain that the reference pric e used under the PBS is representative of the current 
world market price, and it is certainly not representative of prices in all markets of concern.49  
 The logical consequence of this is that the amended PBS will not transmit
 Canadian prices nor the 
prices of wheat being imported from any origin different from Argentina or the Gulf of Mexico. 
Moreover, should Argentina or the United States became less relevant for Chile's foreign trade in the 
future and another Member became more relevant (like it happened w ith Canada during 2004 and 
2005) the amended PBS will prevent the prices of th at new trade partner be transmitted to Chile's 
internal market.  Regarding the fact that the amended PBS provides that the same reference price still applies to all 
goods falling within the same product category or  quality of concern, Chile's amended PBS 
establishes the references prices based on only two of those qualities, namely "Bread Wheat, 
Argentine Port" and "Soft Red Winter". However,  there are many types or qualities involved in the 
international trade of wheat. Indeed, according to  Chile's own records there are at least two other 
qualities or types of wheat relevant for Chile: "Soft White Winter No 2" and "Western White Winter 
No 2". At this respect in Exhibit ARG-33, ODEPA 's prices record for different qualities of wheat 
since 1991 can be observed. In the first and second  columns the FOB prices for the two qualities of 
concern relevant for the amended PBS can be seen. In the third and fourth columns, ODEPA records 
the FOB price for the two other qualities just mentioned: "Soft White Winter No 2" and "Western White Winter No 2". Thus, according to its own reco rds there are at least two other qualities or types 
of wheat relevant for Chile. Theref ore, it is clear that Chile knows th at there are at least two, and 
presumably more, other relevant qualities of concer n and probably Chile knew it at the time the PBS 
was amended.   Furthermore, it is noteworthy that among the -at least - four relevant qualities and markets of concern, 
Chile chose those qualities that since 1991 have been th e lowest priced. In Page  4 of the same Exhibit 
ARG-33 the average of the prices of these four cate gories recorded since 1991 are highlighted at the 
bottom. Clearly, the qualities "Bread Wheat, Argentin e Port" and "Soft Red Winter" have the lowest 
FOB prices. Thus, the gap between the reference pri ce and the floor price is further expanded, more 
duties are levied and the entry price is higher th an if Chile took into account all the qualities of 
concern. Again, it is useful recalling that the Appe llate Body found that "[u]nder Chile's price band 
system, the price used to set the w eekly reference price is the lowest f.o.b. price observed, at the time 
of embarkation, in any foreign 'market of concern' to Chile for 'qualities of products actually liable to 
be imported to Chile'".
50  
 
                                                      
47 In the written version of the Oral Statement by Argentina, para. 54, where it reads "million" it should 
be read "thousand"; where it reads "millions" it should be  read "thousands". Argentina's argument is not altered 
in its substance. 
48 Rebuttal by Chile, para. 72. 
49 Chile – Price Band System,  Report of the Appellate Body, para 249. 
50 Chile – Price Band System,  Report of the Appellate Body, para. 249 (Underlining added). WT/DS207/RW 
Page F-20  
 
  Additionally, Chile does actually import wheat of qualities different from those used for the 
calculation of the reference prices. In Exhibit ARG-34 a selection of import data from the Chamber of Commerce of Santiago de Chile (in Spanish "Camar a de Comercio de Santiago de Chile") for 2004 
and 2005 can be observed. On the first page it can be seen that, for example, in March 2004, Chile 
imported wheat of the type "Soft White". Similarl y, on the second page of the same Exhibit, for 
example, in July 2005, Chile imported wheat of the type "Canadian 3WR". Page 3 of the same Exhibit 
shows imports to Chile of wheat of the type "West ern Red Spring" and "Canadian 1WR". So, not only 
Chile imports wheat of qualities different from thos e taken into account for the establishment of the 
reference prices but also Chile applies to tho se imports reference prices based on the two 
predetermined qualities of concern established by the amended PBS. 
 
Summing up, through the reference prices, the amended PBS will not transmit
 to the Chilean market 
of the prices of other  qualities of wheat than the ones establis hed as "relevant" by the legislation 
enforcing the PBS. By not taking into account all th e relevant markets and qualities of concern for the 
calculation of the reference prices, the amended PBS also insulates Chile's market from international 
price developments. In fact, if an exporter ships any other type or quality of wheat rather than "Bread 
Wheat, Argentine Port" or "Soft Red Winter No. 2" , Chile will apply to that shipment a reference 
price and levy specific duties based on one of tho se two qualities, different from the quality actually 
being imported. It is worth recalling again at this point that the Appellate Body found that the "… 
reference price used under Chile's Price band system is certainly not representative of an average of 
current lowest prices found in all markets of concern".51 
 
16. Do the Parties agree that the specific duti es or rebates under Chile's PBS are calculated 
according to " a formula or scheme " which involves several parameters? 
 
Answer to Question 16 : 
 
Argentina's answer is Yes. The specific duties or  rebates under Chile's PBS are calculated according 
to "a formula or scheme " which involves several parameters.  
 Article 14 of Decree 831/2003 provides that "the specific duties applied to wheat imports…will 
correspond to the difference between the floor price and the reference price… multiplied by the factor 
one (1) plus that Customs Tariff's general ad valorem tariff. 
 
 Specific duty 
 or rebate = (Floor value in force – Reference price) * ( 1 + ad valorem  tariff )"
52 
 
Article 16 of Decree 831/2003 provides that "In the case of wheat flour the duties and rebates 
determined for wheat, multiplied by the factor of 1,56 will be applied".   Specific duty or rebate to  
 the tariff for wheat flour = Specific duty or  rebate to the tariff for wheat *  1,56 
53 
 
These formulas are contained in the Law 19.897 and Decree 831/2003 and that is an incontestable 
fact.   
                                                     
 
51 Chile – Price Band System,  Report of the Appellate Body, para. 249 (Emphasis in the original, 
underlining added). 
52 See ARG-2 (emphasis added, unofficial translation). 
53 See ARG-2 (emphasis added, unofficial translation).  WT/DS207/RW 
 Page F-21 
 
 
  17. Argentina has stated in paragraph 229 of its first submission that "the way in which 
Chile determined the factor 1.56 is not transparent, since in its legislation Chile has neither explained nor justified in any way the basis on which it was established". 
 
 (a) Could Argentina clarify whether in its view this particular fact per se  would 
make the amended measure inconsistent with the WTO covered agreements. 
 
Answer to Question 17(a)
: 
 
The fact that "the way in which Chile determined th e factor 1.56 is not transparent" is a cumulative 
intransparent factor that makes the amended PBS inco nsistent with the WTO c overed agreements. It is 
another specific feature of Chile's price band system that renders the whole system inconsistent with 
Article 4.2 of the Agreement on Agriculture.  
 (b) If so, could Argentina identify the relevant legal basis. 
 
Answer to Question 17(b)
: 
 
The relevant legal basis in the WTO covered agreements not to maintain an intransparent border 
measure is Article 4.2 of the Agreemen t on Agriculture and its footnote 1.  
 
When finding the original PBS inconsistent  with Article 4.2, the Appellate Body, inter alia , held: 
 
"… [W]e place considerable importance on the intransparent … way in which the 
"highest and lowest f.o.b. prices" that have been selected are converted to a c.i.f. basis 
by adding "import costs".  As Chile conced es, no published legislation or regulation 
sets out how these "import costs" are calculated. 
In addition to the lack of transparency … 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 determined…"
54  
The fact that no legislation or regulation set out  how the price bands we re calculated, led the 
Appellate Body to find the lack of transparency to be inherent in how Chile's price bands were 
established. 
 Similarly, the fact that Law 19.897 and Decree 831/2003 do not set out how the factor of 1,56 was calculated leads to the conclusion that the establishmen t of the factor of 1,56 was not transparent.   
 
Therefore, according to the Appellate Body, Chile is  under the legal obligation to explain the basis on 
which the factor 1,56 was determined.   
 (c) Could Argentina elaborate on the reason why the lack of explanation or 
justification as to the exact figure of the factor fixed by Chile would per se  affect 
market access for imports of agricultural products. 
 
Answer to Question 17(c)
: 
 
As pointed out above, the fact that no legislation explained how the price bands were calculated, led 
the Appellate Body to find that the lack of transp arency was inherent in how Chile's price bands were 
established.55  
                                                      
54 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. WT/DS207/RW 
Page F-22  
 
   
The Appellate Body found that the lack of transparen cy contributed to distorting the prices of imports 
by impeding the transmission of international prices to the domestic market:  
"… This lack of transparency … will also contribute to distorting the prices of 
imports by impeding the transmission of international prices to the domestic 
market".
56 
In addition, in assessing the original PBS, the Appellate Body found that: 
 
"… As Argentina stresses, the amount of a duty is not the only concern of Chile's 
trading partners. As Argentina argues, signi ficant for traders, also, are the lack of 
transparency of certain features of Chile's price band system …"57  
The Appellate Body emphasized that it reached its  conclusion regarding the inconsistency with the 
WTO covered agreements   
"… on the basis of the particular configur ation and interaction of all these specific 
features of Chile's price band system ..."
 58 
Consequently, the lack of explanation or justificati on as to the exact figure of the factor fixed by Chile 
leads to a lack of transparency  which, according to the Appellate  Body, affects market access for 
imports of wheat and wheat flour.  18. Citing the original Panel's finding in par agraph 7.36 to the effect that "minimum import 
prices generally  operate in relation to the actual transaction value" (emphasis added), Chile 
claims that the specific duties resulting from th e new PBS are not based on transaction values, 
and therefore they are not "variable import levi es" (see, for example, paragraph 114 of its 
rebuttal submission).  Do the Parti es consider that minimum import prices always  operate in 
relation to actual transaction values?  
Answer to Question 18
: 
 
Argentina has already clarified why the PBS is a border measure similar to a minimum import price.59 
In spite of that, Chile has repeatedly argued th at unlike its PBS, "minimum import price schemes 
generally operate in relation to the actual transaction value of the imports".60 Chile has repeatedly 
emphasized that, because the PBS does not operate in relation to the actual transaction value but to a 
reference price, it is not similar to a minimum import price.   First, Argentina has not argued that the PBS is identical  to a minimum import price. Rather, 
Argentina's argument is that the amended PBS is a border measure similar  to a minimum import 
price. The fact that the PBS does not operate in re lation to the actual transaction value of the imports 
does not mean it is not similar to a minimum import price. Chile's PBS needs not to be identical to 
variable import levies or minimum import prices to be a prohibited measure, provided that the 
amended PBS bears sufficient resemblance to the me asures listed in footnote 1 to Article 4.2 of the 
                                                                                                                                                                    
 
55 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. 
56 Chile – Price Band System, Report of the Appellate Body, para. 234. 
57 Chile – Price Band System, Report of the Appellate Body, para. 258. 
58 Chile – Price Band System, Report of the Appellate Body, para. 261. 
59 Rebuttal by Argentina, Section B.5, Oral Statement by Argentina, paras. 85 to 90. 
60 Rebuttal by Chile, para. 7.  WT/DS207/RW 
 Page F-23 
 
 
  Agreement on Agriculture. Indeed, that same reaso ning was developed by the original Panel and 
upheld by the Appellate Body.61  
 Second, the Panel described "minimum import prices" as follows: "schemes [that] generally
 operate in 
relation to the actual transaction value of the imports".62 The Appellate Body did not reverse that 
finding. The word "generally" implies "usually", but not "always".63 This is an important distinction. 
If the Panel had meant "always", it would have so stated. Therefore, there are some cases where border measures do not operate in relation to the actual transaction value of the imports, but are 
similar to minimum import prices, just like the amended PBS.   
In fact, the original PBS, like the amended PBS, did not have any relation with the actual transaction 
value of the imports. In spite of that, the Panel a nd the Appellate Body in the original proceedings 
found that the old PBS was a border measure simila r to a minimum import price. Indeed, the absence 
of any relation with the transaction value of th e shipments was an aspect of the old PBS that 
contributed to enhance the distorting effects of the old PBS
64 and contributes to enhance the distorting 
effects of the amended PBS as well. 
 
19. In the view of the Parties, what would be the defining characteristic to determine 
whether a system operates as a minimum import price? Would that defining characteristic be the fact that the system operates in relation to the actual transaction value of the imports?  
Would it be the fact that it leads to a certain entry price into the domestic market? 
 
Answer to Question 19
: 
 
The Appellate Body found in this dispute that:   
"The term 'minimum import price' refers generally to the lowest price at which 
imports of a certain product may en ter a Member's domestic market."
65 
Therefore, the term 'minimum import price' refers ge nerally to the lowest price at which imports of a 
certain product may enter a Member's domestic market.   Whether a system operates as
 a minimum import price should be dete rmined by looking at its effects , 
assessing its consequences. This is regardless of whet her the system operates in relation to the actual 
transaction value of the imports or not.66 
 The fact that the system leads to a certain entry pr ice into the domestic market, as the Appellate Body 
implied, may be a defining characteristic to determine whether a system operates as a minimum 
import price. If that system tends  to elevate the entry price of imports to above a certain explicit or 
implicit lowest threshold, it therefore operates as
 a minimum import price. 
 
20. Can Argentina comment on Chile's statemen t in paragraph 143 of its first submission, 
that "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 
                                                      
61 Chile – Price Band System , Report of the Appellate Body, para. 243 and 244. 
62 Chile – Price Band System , Report of the Panel, para. 7.36(e).  Emphasis added. 
63 The definition of " generally ", insofar as relevant, is: "usually, or in most situations". Cambridge 
Advanced Learner's Dictionary in http://dictionary.cambridge.org/. 
64 Chile – Price Band System , Report of the Appellate Body, para. 250. 
65 Chile – Price Band System, Report of the Appellate Body, paragraph 236. 
66 See Argentina's answer to question 18. WT/DS207/RW 
Page F-24  
 
  prices that may occur over this period will be tran smitted to domestic wheat prices".  In Chile's 
view, does this statement imply that this "mere fact" per se  is decisive? 
 
Answer to Question 20
: 
 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 pr ice and that, therefore, there is no insulation from 
the international market. Chile argues that, being est ablished for a "sufficiently long" period of time, 
the specific duties of the modified PBS allow intern ational price variations to be transmitted to the 
price of wheat: 
 
"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 va riations – do not constitute a variable duty 
within the meaning of Article 4.2 of the Agreement on Agriculture."
67 
First , Argentina disagrees with Chile's qualifying the period of two months as "sufficiently long". 
There is no legal basis to assert that two months is sufficient  for a period to be considered long. In 
accordance to what the United States stated during the meeting of Panel with third parties, we cannot 
see, nor Chile has identified, a basis for a distin ction between a variation once every two months 
rather than once every week.68 Indeed, if that period of two months is compared against the period of 
time that remains until 2014, it does not look long at a ll. If one takes into account that the PBS has no 
end date, then that period of two months starts looking short  rather than long. 
 Second , it is worth noting that Chile makes special reference to Exhibits ARG-11 and ARG-12, since 
it is precisely those exhibits that clearly show ho w Chile's statement that "import prices...follow a 
pattern similar to that of the f.o.b. price of wheat"
69 is without foundation. 
 
Exhibits ARG-11 and ARG-12 contain a table and a ch art, respectively, which show what happened, 
in the case of wheat, with the imposition of speci fic 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, rose substantially, thereby demonstrating a total disconnection from 
international price developments. 
 From 1 December 2004 the FOB price of bread wheat, Argentine port, fell steadily, a trend which was 
to be maintained until approximately 4 Janua ry 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. 
 
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 which, si nce the band was not active, reflected the falling 
                                                     
 
67 Chile's First Written Submission, paras. 143 and 144. 
68 Oral Statement by the United States, para. 13. 
69 Chile's First Written Submission, paragraph 144.  WT/DS207/RW 
 Page F-25 
 
 
  trend in FOB prices, Argentine port. However, wh en the band was activated on 16 December 2004 
and specific duties were imposed, the Chilean en try price rose suddenly from US$149.94 per tonne to 
approximately US$162.93 per tonne . This happened as a result of th e operation of the modified PBS 
itself and the imposition of specific duties.  
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-mo nth 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.  
 On the next day, 16 February 2005, Chile establis hed 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 pri ce rose from US$153.81 to US$160.01 per tonne.  
 In conclusion, it is clear from Exhibits ARG-11 a nd ARG-12 that, contrary to the Chilean claims, the 
import prices for wheat do not follow a pattern 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 remain ed steady, the entry price increased.  However much Chile would have 
the Panel believe the contrary, the natural tendency of the modified PBS is to move in the opposite 
direction to international price trends. A nd it could not be otherwise since the PBS would make no 
sense if that were not its purpose.  
 If Chile wanted import prices to follow the same pa ttern as FOB prices, it would only need to apply 
an ordinary customs duty . Chile knows this, but Chile is not applying  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.   
 In this connection, it is astonishing that Chile  asserts 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."70 (Underlining added) 
Chile's description of its modified PBS is simp ly wrong. The specific duties remain unchanged only 
during the two months stipulated in Decree 831/20 03. At the end of these two months, the specific 
duty will necessarily change because the reference pri ce will have changed. Whenever, while situated 
below the band floor, the prices on the markets of  concern  (Argentine bread wheat or Soft Red 
Winter No. 2, Gulf of Mexico) vary, the specific dut y applied will necessarily change. That is to say, 
as the FOB prices on the two markets of concern fall the specific duty will increase .  
 
                                                      
70 Chile's First Written Submission, paragraph 152. WT/DS207/RW 
Page F-26  
 
  As Argentina explained in its First Submission, this  is a simple mathematical conclusion that follows 
from the PBS formula, according to which:  
Specific duty
71 =  ( Band floor 
price - Reference price )  *  (  1  + General ad valorem  
tariff in force, 
Customs Tariff ) 
        
 =  ( US$128 - Reference price )  *  (  1  + 6% ) 
 Moreover, this can be seen from the ODEPA data themselves.
72 As the reference prices varied due to 
changes in the prices on the markets of concern, the specific duties changed. 
 Third, Chile misleadingly states that overcompensati on only occurred in two specific dates: from 
15 to 16 December 2004 and from 15 to 16 February  2005. Afterwards "international prices will 
continue being reflected in the domestic prices".
73  There are many problems with this reasoning.  
 
On the one hand, it must be clear at this stage that international prices are not  reflected in the domestic 
prices due to the amended PBS. As follows from the PBS formula, for the modified PBS not to 
elevate  the entry price of imports to Chile above th e price band floor, an improbable condition must 
be satisfied: the reference price (calculated on a 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 thing, 
the CIF price of that transaction must be lower than the reference price by more than US$7,2453 per 
tonne. In other words, as far as the CIF price of an individual export transaction exceeds the reference 
price, or falls below that price by no more than US$7,2453 per tonne, the entry price of that transaction will be  above the band floor. 
 
Argentina is sure that at least two out of three Members of this Panel remember the notion of the 
break even point  from the original proceeding. In that case, Argentina demonstrated how, after a 
break even point was reached, the duties resulting from the PBS violated Chile's consolidated tariff 
binding, therefore infringing Article II of the GATT 1994. Chile has now established a new break 
even point: the point were the reference price exceeds the CIF price by US$7,2453 per tonne.  
 
Argentina showed how improbable reaching that break even point is.
74 As far as that point is not 
reached, the modified PBS will mathematically elevat e the entry price of imports to Chile above the 
price band floor. Chile explicitly recognized that  FOB prices are always lower than CIF prices.75  As 
the reference price is calculated on a FOB basis, therefore the condition cannot  be fulfilled: the 
modified PBS will always tend to elevate the entr y price of imports to Chile above the price band 
floor. 
 Bearing this formula in mind, it is easy to see that, even if international prices were reflected in the 
domestic prices after the initial overcompensation as Chile states, the amended PBS provides an end 
to any transmission when the entry price approaches th e band floor. Due to the formula, the PBS will 
not allow any transmission of international prices in the case that the entry price falls below the floor 
price . Simply put: the formula, together with the ba nd floor, work as a "brake" for the decline in the 
entry price and for any transmission of international prices below the level of the floor. If a decline in 
international prices cannot be reflected below the price band floor, then it is impossible to argue that 
the amended PBS reflects international prices.  
                                                      
71 In accordance with Article 14 of Dec. 831/2003. See Exhibit ARG-2. 
72 See Exhibit ARG- 6, in particular the periods 16/Dec/04 – 15/Feb/05 and 16/Feb/05 – 15/Apr/05. 
73 Rebuttal by Chile, para. 51. 
74 First Written Submission by Argentina, paras. 109-114. 
75 See Rebuttal by Argentina, paras. 164 to 169.  WT/DS207/RW 
 Page F-27 
 
 
   
On the other hand, the initial overcompensation wh ich, according to Chile, takes place at the 
beginning of the two-month period, inevitably taints th e rest of that period: the level of duties and the 
entry price after that moment will be affected by the original overcompensation. In fact, if 
overcompensation did not occur, the level of duti es and the entry price resulting from the two-month 
period would be lower. Thus, the effects of overcom pensation taint and affect the level of duties and 
entry price resulting from the PBS, which are higher than they would be if overcompensation simply 
did not exist.   Fourth , the situation is not different with what occurre d in the original proceedings. According to the 
original PBS, the specific duties were established for a period of one week.
76 Assuming arguendo  that 
overcompensation only took place at the beginning of that period of one week, it nevertheless affected 
the level of duties and the entry price for the rest  of that period. That was enough for the Appellate 
Body to find that the original PBS overcompe nsated for the decreases in international prices.77 The 
situation with the amended PBS is worse: while in  the original PBS the effects of overcompensation 
tainted the level of duties and the entry price for a week, now that period has been extended to two 
months . The fact is that Chile has not been able to rebut Argentina's arguments regarding the 
overcompensation produced by the ame nded PBS and recognized by Chile itself.78 
 It is paradoxical that what Chile refers to as a f eature of the modified PBS that helps to transmit 
international price developments (i.e., the fact th at the duty is unaffected by international price 
changes during the two-month period) is precisely a feature that insulates the Chilean market from 
international prices. At this point, Argentina woul d kindly refer the Panel to  Argentina's answers to 
questions 13 and 14 above.  
21. During the meeting with the Panel, the EC stated that, in its view, 
 
"it is only when the measures clearly have sufficient similarity to measures coming under the scope of Article 4.2 – th at is features unique to the measures 
listed in the footnote to Article 4.2 are also found in the measures challenged – 
that there is a possible violation of Article 4.2.  The existence of features which are not unique to the measures found under Article 4.2 cannot be sufficient, on 
their own, to render a measure inconsistent with Article 4.2" (see paragraph 9 of 
the written version of the EC's oral statement). 
Could the Parties comment on the EC's statement. Answer to Question 21
: 
 Argentina does not see a legal basis to assert that the features found in the measures challenged have 
to be unique  to the measures listed in the footnote 1 to find  a possible violation of Article 4.2. The EC 
has not made reference to any WTO jurisprudence.  Article 4.2 and footnote 1, in its relevant part, state:  
Members shall not maintain, resort to, or revert to any measures of the kind which 
have been required to be convert ed into ordinary customs duties
1, except as otherwise 
provided for in Article 5 and Annex 5. 
                                                      
76 Chile – Price Band System,  Report of the Appellate Body, paras. 21 to 29. 
77 Chile – Price Band System,  Report of the Appellate Body, para. 260. 
78 First Written Submission by Ar gentina, Section C.I.2.2. WT/DS207/RW 
Page F-28  
 
  ______________ 
1These measures include quantitative import r estrictions, variable import levies, 
minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterpri ses, voluntary export restraints, and similar 
border measures other than ordinary customs duties… 
The Appellate Body found that the category of me asures covered by Article 4.2 and footnote 1 is 
rather broad, including measures of the kind , not restricted only to those specific measures that were 
singled out to be converted into ordinary customs:  
"… giving meaning and effect to the use of  the present perfect tense in the phase 
"have been required" does not suggest that the scope of the phrase "any measures of 
the kind which have been required to be c onverted into ordinary customs duties" must 
be limited only to those measures which were  actually   converted, or were 
 requested  to be converted, into ordinary customs duties by the end of the Uruguay 
Round.  Indeed, in our view, such an inte rpretation would fail to give meaning and 
effect to the word " any" and the phrase " of the kind ", which are descriptive of the 
word "measures" in that provision.  A pl ain reading of these words suggests that the 
drafters intended to cover a broad categor y of measures.  We do not see how proper 
meaning and effect could be accorded to the word "any" and th e phrase "of the kind" 
in Article 4.2 if that provision were read to include only those specific measures that 
were singled out to be converted into ordinary customs duties by negotiating partners 
in the course of the Uruguay Round."
79 
In particular, the word "include" indicates that the list of measures in footnote 1 is illustrative and that 
there may be further measures that may fall under the category of the kind  covered by Article 4.2: 
 
"… the use of the word "include" in the f ootnote indicates that the list of measures is 
illustrative, not exhaustive. And, clearly, th e existence of footnote 1 suggests that 
there will be "measures of the kind which ha ve been required to be converted" that 
were  not  specifically identified during the Uruguay Round negotiations.  Thus, in 
our view, the illustrative nature of this list lends support to our interpretation that the 
measures covered by Article 4.2 are not limited only to those that were  actually  
converted, or were requested to be convert ed, into ordinary customs duties during the 
Uruguay Round.80 
However, it is clear that to be "similar", Chile's amended PBS must have sufficient resemblance or be 
of the same kind as at least one of the specific categories of measures listed in footnote 1. The Appellate Body found:  
"To be 'similar', Chile's price band system—in its specific factual configuration—
must have … sufficient 'resemblance or likeness to', or be 'of the same nature or kind' 
as,  at least one  of the specific categories of measures listed in footnote 1."
81 
(Emphasis in the original) 
The Appellate Body did not assert that to find a possibl e violation of Article 4.2 the features found in 
the measures challenged have to be unique  to the measures listed in the footnote to Article 4.2. All 
that the Appellate Body stated is that, in the case of  the original PBS, it needed to determine whether 
                                                      
79 Chile – Price Band System,  Report of the Appellate Body, para. 208. 
80 Chile – Price Band System,  Report of the Appellate Body, para. 209. 
81 Chile – Price Band System,  Report of the Appellate Body, para. 227.  WT/DS207/RW 
 Page F-29 
 
 
  that measure shared sufficient features with "minimum  import prices" or "variable import levies" to be 
of the same kind, and thus prohibited by Article 4.2:  
"We turn next to the Panel's determination that Chile's price band system is a border 
measure similar  to 'variable import levies' and 'minimum import prices'. We must 
determine whether Chile's price band syst em—in its particular  features—shares 
sufficient features with these two categories of prohibited measures to resemble, or 'be of the same nature or kind' and, thus , also to be prohibited by Article 4.2."
82 
(Emphasis in the original). 
Finally, the Appellate Body found that the PBS could be similar to the categories of prohibited 
measures listed in footnote 1 in terms of its effect : 
 
"… Chile's price band system can still have the  effect  of impeding the transmission 
of international price developments to the dom estic market in a way similar to that of 
other categories of prohibited measures listed in footnote 1 …"83 (Emphasis in the 
original). 
Therefore, Argentina does not see a legal basis to  assert that the features found in the measures 
challenged have to be unique  to the measures listed in the footnote  1 to find a possible violation of 
Article 4.2.  
22. Can the Parties provide a copy of the relevant sections of the documents " Historia de la 
Ley. Compilación de textos of iciales del debate parlamentario " to which Argentina refers 
throughout its first written submission. 
 
Answer to Question 22
: 
 The relevant sections of the documents " Historia de la Ley. Compilación de textos oficiales del debate 
parlamentario " to which Argentina refers throughout its  first written submission are submitted in 
Exhibit ARG-37.  
23. Can the Parties confirm whether Decree No. 401 of 15 June 2006 by the Ministry of 
Finance of Chile is the latest decree issued pursuant to the PBS. 
 
Answer to Question 23
: 
 
Decree No. 401 of 15 June 2006 by the Ministry of Finance of Chile is th e latest decree issued 
pursuant to the PBS. However, according to Decree 831/2003, a new Decree pursuant to the PBS 
applicable to wheat and wheat flour imports is being established on 16th August 2006, the date on 
which these answers are submitted to the Panel.  
24. Could the Parties comment on the "understanding which Chile later repudiated" that 
Argentina refers to in paragraph 11 of its first written submission.  Would such understanding have any relevance in the present case? 
 
Answer to Question 24
: 
 
As Argentina stated in its first written submission,  after the expiring of the reasonable period Chile 
had for the implementation of the recommendations  and rulings of the DSB in December 2003, 
                                                      
82 Chile – Price Band System,  Report of the Appellate Body, para. 239. 
83 Chile – Price Band System,  Report of the Appellate Body, para. 246. WT/DS207/RW 
Page F-30  
 
  bilateral negotiations were begun ear ly in 2004 with a view to achieving the implementation regarding 
to wheat and wheat flour.    Those negotiations led to a mutually agreed settleme nt of the dispute at that very moment.  That 
understanding is not relevant now in the present case. 
 
Argentina mentioned it as background in its First Wr itten Submission to show that Argentina made all 
its efforts in an attempt to reach a mutually agreed  solution of the dispute and not to recur to this 
dispute settlement proceedings for the second time, in conformity with DSU Article 3.7.  FOR ARGENTINA
 
 
25. In the light of Argentina's statement in paragraphs 301 and 302 of its rebuttal 
submission, can Argentina clarify whether the am ended PBS contains specific new features that 
would, in its opinion, violate the second sentence of Article II:1(b) of the GATT 1994 in a way 
that the original PBS did not.  If so, can Arge ntina identify those specific new features of the 
amended PBS that would be in violation of Arti cle II:1(b), and in what manner those features 
differ from the ones in the original PBS. 
 
Answer to Question 25 : 
 The amended PBS is a new measure containing a new scheme or formula for the calculation of 
additional duties at the customs border, prior to th e entry of wheat and wheat flour into the Chilean 
customs territory. The amendments introduced by Chile turned the PBS into a completely new 
measure as Chile has recognized.
84 Chile has changed both the way in which the floor and ceiling 
prices are established and the way in which the re ference prices are calculated, as well as the method 
of calculating the specific duties. Ch ile has also changed the products  subject to the PBS. Argentina 
has extensively developed how the amended PBS contains specific new features that have rendered it 
to be a new and different measure. Argentina woul d kindly refer the Panel to Section B of its First 
Written Submission, paragraphs 18 to 66.  Whether the original PBS through its specific featur es violated the second sentence of Article II.1.b) 
of GATT 1994 was not part of the Appellate Body findings
85, and it was not a claim raised by 
Argentina in the original proceed ings, as the Appellate Body found86 and Chile recognized.87 
 As Argentina stated in paragraphs  301 and 302 of its rebuttal submissi on, the claim with respect to the 
second sentence of Article II.1(b) of the GATT 1994 relates to the whole of the modified PBS. 
 
In this regard, by being a new measure that was not  before the original panel, the relevant facts 
bearing upon the modified PBS are obviously different from the relevant facts relating to the original 
PBS, in that, on the basis of the particular confi guration described above, th e amended PBS is not an 
ordinary customs duty.  
By not being an ordinary customs duty, the amende d PBS constitutes "other duties or charges" in the 
sense of the second sentence of Arti cle II:(1)(b) of the GATT 1994. By not being recorded in the 
corresponding column of Chile's Schedule of Conces sions (No. VII), as it is mandated by paragraph 1 
                                                     
 
84 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). 
85 Chile – Price Band System,  Report of the Appellate Body, para. 288. 
86 Chile – Price Band System,  Report of the Appellate Body, para. 165. 
87 Chile's First Written Submission, paragraph 48.  WT/DS207/RW 
 Page F-31 
 
 
  of the Understanding on the Interpretation of Artic le II:1(b) of the GATT 1994, the amended PBS 
violates the second sentence of that Article.  As Chile explicitly recognized,
88 Argentina did not raise nor pursu ed a claim in relation to that 
provision during the original proceedings. It is indeed  a new claim that Argentina has the right to raise 
in the frame of a proceeding under Article 21.5 of the DSU.  
 It is therefore natural that, in this regard, Arge ntina submitted a claim pertinent to the modified PBS 
that is different from those that were pertinent to the original PBS.   
In Canada – Aircraft (Article 21.5 – Brazil),  the Appellate Body held: 
 
"... 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." 
89 (Underlining added.). 
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 proceedings as in the case of EC – Bed Linen (Article 21.5 – 
India) since, as Chile states and agrees: "Argentina did not  in fact ever raise the claims it now wishes 
to bring".90  Consequently, this is the "first chance"  to establish a new claim which Argentina is 
entitled to raise.   The claim relating to the second sentence of Article  II:1(b) of the GATT 1994 is a new claim with 
respect to a new measure and, therefore, falls within the terms of reference of the present DSU 
Article 21.5 Panel. 
 
26. Referring to its claim under Article II: 1(b) of the GATT 1994, Argentina declared 
during the substantive meeting with the Panel ( see paragraph 115 of the written version of its 
oral statement) that it "could never have raised this same claim during the original proceedings"  Can Argentina explain the reason why it could not have raised its claim under 
Article II:1(b) of the GATT 1994 in the orig inal proceedings?  Is Argentina arguing that the 
original PBS was not inconsistent  with the second sentence of Article II:1(b) of the GATT 1994, 
while the amended PBS is inconsistent?  Is that  circumstance (the fact that it could not have 
raised this particular claim in the original pro ceedings), in Argentina's view, an appropriate test 
to assess whether the claim falls  within the Panel's mandate? 
                                                     
 
88 First Written Submission by Chile, para.  48. 
89 WT/DS70/AB/RW, paragraph 41. 
90 Chile's First Written Submission, paragraph 48. WT/DS207/RW 
Page F-32  
 
   
Answer to Question 26
: 
 
First, it should be undisputed at this stage that the amended PBS is a new measure . In fact, as Chile 
itself has stated on at least two occasions, the modified PBS is a "new" PBS.91 
 
Argentina could never have made this same clai m relating to the same PBS aspects during the initial 
stage of the present dispute, as Chile maintains92, since the modified PBS is a measure different  from 
the PBS which formed the subject of the original proceedings. As Chile has pointed out, this is a 
"new" PBS.  
 
In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body held that Article 21.5 proceedings 
involve not the original measure but rather a ne w 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 "measu re taken to comply" would not necessarily be the 
same as those which were pertinent in the original dispute.93 
 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 been ra ised against the original measure. Had Canada's 
objection been upheld, Brazil would have been barre d from making claims that could not have been 
raised in the original proceedings.
94 The Appellate Body agreed with the panel's conclusion.95 
 
In the present dispute the situation is similar. The modified PBS is a new measure that was not  before 
the original panel. The relevant facts bearing upon  the modified PBS are obviously different from the 
relevant facts relating to the original PBS. It is therefore natural that Argentina should present claims, 
arguments and factual circumstances pertinent to th e modified PBS that are different from those that 
were pertinent to the original PBS.  
In the present Article 21.5 proceedings, Argentina, like Brazil in Canada – Aircraft (Article 21.5 – 
Brazil) , raises claims relating to th e second sentence of Article II:1(b)  of the GATT 1994 in respect of 
the modified PBS that it did not raise
 in the original dispute. Chile, like Canada in that dispute, 
challenges the claims raised by Argentina against th e modified PBS arguing that no claims relating to 
the second sentence of Article II:1(b) of the GATT 1 994 were raised 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 b een raised in the original proceedings, because the 
modified PBS is a new and different measure that was not  before the original panel. 
 Finally, in Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body warned against the 
consequences of undermining the utility of the review envisaged under Article 21.5 of the DSU and 
the ability of a panel to examine fully the "consis tency with a covered agreement of the measures 
                                                     
 
91 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). 
92 Chile's First Written Submission, paragraphs 50 and 56. 
93 Canada – Aircraft (Article 21.5 – Brazil), Appellate Body Report, paragraph 41 (underlining added). 
94 WT/DS141/RW, paragraph 6.48. 
95 EC – Bed Linen  (Article 21:5 – India ), Appellate Body Report, paragraph 88.  WT/DS207/RW 
 Page F-33 
 
 
  taken to comply", as required by Article 21.5 of the DS U, that could result if a Panel were restricted to 
examining the new measure only from the perspective of the claims related to the original measure: 
 
"Indeed, the utility of the review envisaged under Article 21.5 of the DSU would be seriously undermined
 if a panel were restricted to examining the new measure from 
the perspective of the claims, arguments and factual circumstances that related to the 
original measure, because an Article 21.5 panel would then be unable to examine fully the "consistency with a covered agreem ent of the measures taken to comply", as 
required by Article 21.5 of the DSU."
96 
In this case, the consequences against which the Appe llate Body warned would take place if this Panel 
were restricted to examining the new PBS from the perspective of the claims that related to the 
original PBS. Its ability to examine fully the "cons istency with a covered agreement" of the amended 
PBS, as required by Article 21.5 of the DSU would be seriously impaired. 
 
Second, as it was already stated97, whether the original PBS was inconsistent with the second 
sentence of Article II:1(b) of the GATT 1994 was not  part of the Appellate Body findings in the 
original proceedings.  
 
Third, as stated before, Argentina could not have rai sed this particular claim in the original 
proceedings.  
However, even if Argentina could have raised its  Article II:1(b) GATT 1994 claim in the original 
proceedings, quod non , that circumstance is not
 an appropriate test to assess whether the claim falls 
within the Panel's mandate.  A panel is not prohibited from considering arguments and claims on the sole basis that they could  
have been raised during the origin al proceedings with respect to a different original measure. As 
Canada stated in its oral intervention:  
Where the measure is appropriately befo re a panel, and the DSB has made no 
findings or recommendations in respect of such measure or the claims made by the complaining party, a panel may not then rej ect such claims or arguments on the sole 
basis that they could have been raised previously.
98 
First, there is no legal basis in any provision of the DSU to assert that a party cannot raise a claim 
before an Article 21.5 panel because a possibility existed that it could  have raised the same claim 
during the original proceeding when the original  measure was not the measure at issue in the 
compliance proceedings. What is more, Chile has not made reference to any legal provision in support 
of this argument . Argentina shares Brazil's view on this point: 
 
Not surprisingly, Chile does not cite to any treaty text in order to support its 
approach.  In fact, this is because there is nothing in the text of the DSU that 
precludes a complaining Member from bringing a claim that was not brought in the original proceedings. According to the DSU, Article 21.5 proceedings may, in 
principle, involve claims made under an y provision of any covered agreement.
99 
                                                      
96 WT/DS70/AB/RW , Appellate Body Report, paragraph 41. (underlining added). 
97 See Argentina's answer to question 25 above. 
98 Third Party Oral Statement by Canada, para. 6. 
99 Third Party Oral Statem ent by Brazil, para. 18. WT/DS207/RW 
Page F-34  
 
  Second, Argentina cannot recall any WTO jurisprudence  that supports Chile's argument that a party 
cannot raise a claim before an Article 21.5 panel because a possibility existed that it could  have raised 
the same claim during the original proceeding, wh en the original measure was not the measure at 
issue in the compliance proceedings.  
Furthermore, Argentina is not aware of any provisi on in the DSU or WTO jurisprudence that required 
a complaining party to bring all its possible  claims at once in the original proceedings. As Brazil 
stated,   
… Chile's approach [would] add a new and undue burden on the complaining party, 
since it would force it to prosecute every conceivable violation in the original 
proceedings in order to preserve its rights on implementation.
100 
If Chile's argument were accepted, the door would be open to a whole new set of controversial 
procedural claims during DSU Article 21.5 proceedi ngs concerning whether certain claims could have 
possibly been made with respect to the original measur e, even if, as in the present case, the original 
measure was different, in its particular configurat ion and features, to the measure at issue in the 
compliance proceeding.101  
 Finally, in this case, given that the amended PBS is a new and different measure, the claim related to 
Article II:1(b) GATT 1994 is, in any event, differe nt from the Article II:1(b) GATT 1994 claim that 
could eventually have been raised in the orig inal proceedings, as far as it challenges a different 
measure including a whole new configuration and f eatures. Although the EC did not completely agree 
with all of Argentina's arguments, it is telling that  it shared Argentina's a pproach regarding whether 
this claim falls within the Panel's mandate:  
As regard the claim made by Argentina re lating to the second sentence of Article II: 1 
(b) of the GATT, and in the view of the EC , what counts in this context is again the 
fact that the new measure (the revised PBS) has created a new set of regulatory and factual circumstances which imply that the claim is new insofar that it is directed 
against a different set of measures under a diffe rent set of "relevant facts". Therefore, 
the fact that a similar claim may have been  brought against a similar measure in the 
original dispute should be held as irrelevant
.102  
27. Can Argentina also clarify whether the amended PBS contains specific new features that 
would, in its opinion, violate Article XVI:4 of the WTO Agreement in a way that the original PBS did not.  If so, can Argentina identify those specific new features of the amended PBS that would be in violation of Article XVI:4, as well as the manner in which those features differ from 
the ones in the original PBS. 
 
Answer to Question 27
: 
 
The claim with respect to Article XVI:4 of the WT O Agreement relates to the modified PBS in its 
entirety rather than to one aspect or specific new features in particular.  
The amended PBS is a new measure containing a new scheme or formula for the calculation of 
additional duties at the customs border, prior to th e entry of wheat and wheat flour into the Chilean 
customs territory. The amendments introduced by Chile turned the PBS into a completely new 
                                                     
 
100 Third Party Oral Statem ent by Brazil, para. 16. 
101 See Third Party Oral Statement by Canada, para. 9. 
102 Third Party Oral Statement by the European Communities, para. 19 (underline added).  WT/DS207/RW 
 Page F-35 
 
 
  measure as Chile has recognized.103 Chile has changed both the way in which the floor and ceiling 
prices are established and the way in which the re ference prices are calculated, as well as the method 
of calculating the specific duties. Ch ile has also changed the products  subject to the PBS. Argentina 
has extensively developed how the amended PBS contains specific new features that have rendered it 
to be a new and different measure. Argentina woul d kindly refer the Panel to Section B of its First 
Written Submission, paragraphs 18 to 66. 
 Thus, Argentina could never have raised its cl aim of violation of Article XVI:4 of the WTO 
Agreement during the original proceedings as far as the amended PBS is a new measure, different in 
many ways from the original PBS.  
 
There is no legal basis to assert that a WTO Member  cannot raise new claims with respect to new 
measures under Article 21.5 proceedings.  Rather, as Argentina and Chile have already cited, in EC – Bed Linen (Article 21.5 – India) , 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... Indeed, a complainant in Ar ticle 21.5 proceedings may well raise new 
 
claims , arguments, and factual circumstances different from those raised in the 
original proceedings …"104 (underlining added, footnotes omitted)  
28. Assuming that the Panel were to agree with Argentina's claim that the amended 
measure is in breach of Article 4.2 of the Ag reement on Agriculture, could Argentina explain 
why, in its opinion, the Panel would then need to make a separate finding, or should then make 
a separate finding, on whether the same measure also results in a violation of Article II:1(b) of 
the GATT 1994 in order to resolve this dispute.  Could Argentina please refer in its reply to the statement made by the Appellate Body  in paragraph 190 of its report in Chile – Price Band 
System . 
 
Answer to Question 28
: 
 
Argentina is fully convinced that this Panel need s to make a separate finding on whether the amended 
PBS results in a violation of Article II:1(b) of the GATT 1994 in order to resolve this dispute.  
 In US – Anti-Dumping Measures on Oil Country Tubular Goods, after finding that "Mexico ha[d] not 
explained why an additional finding…[was] necessary to resolve the dispute"
105, the Appellate Body 
found that there was not a necessity of such an addi tional finding. It logically follows that in a case 
where a party does explain the necessity of a separat e finding in order to ensure the resolution of a 
dispute a panel is allowed to make such an additional finding.  This finding was perfectly cons istent with the Appellate Body previous finding in Australia – Salmon.  
According to the Appellate Body, the principle of j udicial economy has to be applied keeping in mind 
the aim of the dispute settlement system. This aim is to resolve the matter at issue and "to secure a 
                                                     
 
103 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). 
104 EC – Bed Linen (Article 21.5 – India), Appellate Body Report, paragraph 79. 
105 WT/DS282/AB/R, para. 282 WT/DS207/RW 
Page F-36  
 
  positive solution to a dispute".
106  To provide only a partial  resolution of the matter at issue would be 
false  judicial economy. In particular, the Appellate Body said that a panel: 
 
"… has to  address those claims on which a finding is necessary  in order to enable the 
DSB to make sufficiently precise recomme ndations and rulings so as to allow for 
prompt compliance by a Member with tho se recommendations and rulings 'in order to 
ensure effective resolution of disputes to the benefit of all Members'[according to 
DSU article 21.1]."107 (Underlining added) 
Under the circumstances of the present case , the necessity of a finding to determine whether the PBS 
is inconsistent with Article II:(1)(b) of GATT 1994 is clear. This panel has to address this claim, 
because it is necessary in order to enable the DS B to make sufficiently precise recommendations and 
rulings so as to allow for prompt compliance by Chile and to ensure an effective and positive 
resolution of this dispute.  Argentina completely agrees with the Appellate Body , who stated that a finding that Chile's PBS is 
inconsistent with Article 4.2 of  the Agreement on Agriculture mean s that the duties resulting from the 
application of that PBS cannot longer be le vied because such PBS cannot longer exist.
108 
 It was precisely on the basis of that reas oning that the Appellate Body held that: 
 
"… if we were to find first that Chile's price band system is inconsistent with 
Article 4.2 of the Agreement on Agriculture , we would not need to make a separate 
finding on whether the price band system also results in a violation of Article II:1(b) of the GATT 1994 in order to resolve this dispute."
109 
However, at that time, the Appellate Body could not  forsee that Chile would confidently ignored this 
finding, arguing that nowhere in the Appellate Body Report it is mandated that Chile had to eliminate 
the PBS. Consequently, more than three years and a half after the adoption of the Panel and Appellate 
Body reports by the DSB, the dispute remains unsolved.  Evidently, according to the reading Chile made of th e Appellate Body's finding, it was not as clear to 
Chile as it was for the Appellate Body and for Ar gentina that the PBS was a measure not to be 
maintained. Indeed, Chile did maintain its PBS although it was found to be inconsistent with 
Article 4.2 of the Agreement on Agriculture. 
 It is evident that, under these particular circumstan ces, a finding regarding Argentina's claim about the 
amended PBS inconsistency with the second sentence of Article II:(1)(b) of GATT 1994 results to be 
necessary to make it clear to Chile that the amende d PBS is a measure not to be maintained, and to 
secure, finally, a definitive  solution to the dispute. 
 By virtue of the particular circumstances presen t in the current proceedings, a separate finding 
determining whether the PBS is in consistent with Article II:(1)(b ) of GATT 1994, results to be 
necessary, inter alia , for the following reasons. 
 
First , Argentina has fully proved in these proceedings that the amended PBS is inconsistent with 
Article II:(1)(b) of GATT 1994. However, without a separate finding, Chile would try to maintain its 
PBS with "cosmetic amendments" in flag rant violation with that provision. 
                                                     
 
106 DSU, Article 3.7. 
107 Australia-Salmon, WT/DS18/AB/R, Report of the Appellate Body, para. 223 (underlining added). 
108 Chile – Price Band System , Report of the Appellate Body, paragraph 190. 
109 Chile – Price Band System , Report of the Appellate Body, paragraph 190.  WT/DS207/RW 
 Page F-37 
 
 
   
In spite of the Appellate Body findings, the circumstances of this case demonstrate that for Chile to 
dismantle its amended PBS, a finding of inconsis tency with Article 4.2 may not be enough. Chile 
should have dismantled its PBS app lied to wheat and wheat flour as Chile did with respect to edible 
vegetable oils.  
 
The explicit wording of Article 4.2 of the Agreement on Agriculture mandates that Members "… shall 
not maintain … measures of the kind which have been require d to be converted into ordinary customs 
duties …".110 Thus, according to Article 4.2 of the Agreement on Agriculture , Chile could not 
maintain its PBS after a WTO inconsistency ruling. As the Appellate Body established "… Article 4.2 
was drafted in the present perfect tense to ensure th at measures that were required to be converted as a 
result of the Uruguay Round—but were not converted —could not be maintained, by virtue of that 
Article …".111 Indeed, that interpretation is confirmed by the wording of footnote 1 to the Agreement 
on Agriculture . That footnote gives meaning to Article 4.2 by enumerating examples of measures 
other than ordinary customs duties which, accord ing to the Appellate Body, "…Members must not 
maintain, revert to, or resort to, from the date of the entry into force of the WTO Agreement ".112 
Moreover, the Appellate Body established that the obligation "not [to] maintain" such measures 
underscores the fact that "… Members must not continue to apply  measures covered by Article 4.2 
from the date of entry into force of the WTO Agreement ".113  
 Chile maintained the PBS arguing that nowhere in  the Appellate Body Report it is mandated that 
Chile had to eliminate it. Chile insists in ignori ng an explicit finding of the Appellate Body, who 
stated that a finding that Chile's PBS is inconsistent with Article 4.2 of the Agreement on Agriculture 
means that the duties resulting from the application of that PBS cannot longer be levied because such 
PBS cannot longer exist:   
"… 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."
114 
The Appellate Body went further and established that: 
 
"A plain reading of Article 4.2 and footnot e 1 makes clear that, if Chile's price band 
system falls within any one of the categor ies of measures listed in footnote 1, it is 
among the 'measures of the kind which have  been required to be converted into 
ordinary customs duties', and thus must not be  maintained, resorted to, or reverted to, 
as of the date of entry into force of the  WTO Agreement."115 
It is evident now that it was not clear to Chile as it was for the Appellate Body that if the PBS fell 
within any one of the categories of the measures li sted in footnote 1, it was a measure not to be 
maintained. However, contrary to the Appellate Body's explicit finding, Chile maintained its PBS 
although it fell within one of the categories of measur es listed in footnote 1. The fact that a measure 
prohibited by Article 4.2 of the Agreement on Agriculture  could not be maintained was completely 
ignored by Chile who maintained the PBS with "cosmetic amendments". This is the reason why 
Argentina had to resort to the WTO dispute settleme nt proceedings for the second time. That is why, 
                                                      
110 Emphasis added. 
111 Chile – Price Band System , Report of the Appellate Body, para. 207. 
112 Chile – Price Band System , Report of the Appellate Body, para. 209. 
113 Chile – Price Band System , Report of the Appellate Body, para. 212. (Underlining added). 
114 Chile – Price Band System, Report of the Appellate Body, paragraph 190. 
115 Chile – Price Band System, Report of the Appellate Body, para. 221. WT/DS207/RW 
Page F-38  
 
  under the circumstances of this case , a separate finding of inconsistency with Article II:(1)(b) of 
GATT 1994 is also required. 
 
Second , DSU Article 3.7 provides that "… the first obj ective of the dispute settlement mechanism is 
usually to secure the withdrawal of the measures con cerned if these are found to be inconsistent with 
the provisions of any of the covered agreements".  Given the measures taken to comply by Chile 
preceding Argentina's recourse to DSU Article 21 .5, a separate finding of inconsistency with 
Article II:(1)(b) of GATT 1994 by this Panel will certainly contribute to achieving the 
abovementioned first objective of the dispute settlement mechanism.  
Third , the Appellate Body has established that pane l rulings in compliance proceedings should not 
"lead to a potentially 'never-ending cycle' of disput e settlement proceedings and inordinate delays in 
the implementation…".
116 Despite Argentina's claims and what  the Appellate Body has established, 
experience in this case tells that a finding of inconsistency with Article 4.2 may not lead to a positive 
solution of the dispute by Chile, again, maintaini ng its PBS with "cosmetic amendments". This could 
lead to that potentially "never-ending cycle" of di spute settlement proceedings. It is precisely to avoid 
this result that Argentina respectfully requests th is Panel to address its Article II:(1) (b) of GATT 
1994 claim.  In light of the above reasons and facts and consis tent with what the Appellate Body established in 
Australia – Salmon and US – Anti-Dumping Measures on Oil Country Tubular Goods , Argentina 
respectfully asks the Panel to make a separate finding under Article II:(1)(b) of GATT 1994, and to 
secure by this separate finding an effective and definitive  resolution of this old dispute, preventing a 
never-ending cycle of dispute settlement proceedings.   
29. Referring to the way the amended PBS has worked in practice, Chile has asserted in 
paragraphs 173 and 174 of its rebuttal submission that: 
 
"In 35 (32.1 per cent) of the 109 weeks in which the current system has been in force (16 December 2003 to 13 January 2006) tax rebates have been applied, in 17 (15.6 per cent) specific duties have been applied, and in 57 (52.3 per cent) only the general ad valorem tariff has been applied. 
From 13 January to 15 June 2006 whea t imports were entering Chile subject 
only to the general ad valorem  tariff, extending even further the period of 
improved access conditions." 
Based on the information available, does Argentina agree with Chile's statement?  
 
Answer to Question 29
: 
 
Argentina disagrees. 
 
First, Chile puts forward arguments that, according to Chile  itself, are not part of the present dispute. 
Chile has stated that "… the conditions of access for wheat lie [lay] outside the scope of the present 
dispute …".117 Afterwards it maintained that "[t]he basis of this dispute is not … how often [customs 
duties] are applied."118 
 
                                                      
116 United States-Tax Treatment For "Foreign Sales Corporations"  Second Recourse to Article 21.5 of 
the DSU by the European Communities, Report of the Appellate Body, WT/D S108/AB/RW2, para. 86. 
117 Rebuttal by Chile, para. 163. 
118 Rebuttal by Chile, para. 171 (underline added).  WT/DS207/RW 
 Page F-39 
 
 
  Second, Argentina disagrees with the statement "From 13 January to 15 June 2006 wheat imports 
were entering Chile subject only to the general ad valorem  tariff, extending even further the period of 
improved access conditions ".  
 As Argentina pointed out
119, access conditions continue to be  unfavourable despite the duties 
allegedly being applied on fewer occasions than in the case of the original PBS. Chile's argument 
amounts to saying that exporters of wheat and wheat flour to Chile should not be concerned about the distorting effects of the modified PBS, since under the modified 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 th is represents an improvement in conditions of 
access. There is no
 improvement. Chile's reasoning has no basis in the WTO Agreements and, in 
particular, not in the DSU or the Agreement on Agriculture . A measure taken to comply is not "less" 
inconsistent because the inconsistency occurs on fe wer occasions than in the case of the original 
measure. There is no basis for drawing such a conclusion.  30. In paragraph 77 of its rebuttal submission, Argentina suggests that Chile should explain 
the criteria that led it to fixing the floor and ceiling of the band at US$128 and US$148 per tonne, respectively.  Could Argentina clarify wh ether, in its view, Chile is under a legal 
obligation to advance that explanation and, if so, could Argentina identify the relevant legal basis in the WTO covered agreements. 
 
Answer to Question 30
: 
 
The legal basis in the WTO covered agreements not to maintain an intransparent border measure is 
Article 4.2 of the Agreement on Agriculture and its footnote 1.   
When finding the original PBS inconsistent  with Article 4.2, the Appellate Body, inter alia , held: 
 
"… [W]e place considerable importance on the intransparent  and unpredictable way 
in which the 'highest and lowest f.o.b. pri ces' that have been sel ected are converted to 
a c.i.f. basis by adding 'import costs'.  As  Chile concedes, no published legislation or 
regulation sets out how these "import costs" are calculated. 
In addition to the lack of transparency  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 determined …"
120 
(Emphasis added) 
The fact that no legislation set out how the price bands  were calculated, led the Appellate Body to find 
the lack of transparency to be inherent in how Chile's price bands were established. 
 Similarly, the fact that Law 19.897 and Decree 831/2003 do not set out the criteria that led Chile to fixing the floor and ceiling of the band at US$128 and US$148 per tonne, respectively, lead to the 
conclusion that the establishment of the fl oor and ceiling was not transparent.   
 
Therefore, Chile is under the legal obligation to adva nce the criteria that led it to fixing the floor and 
ceiling of the band at US$128 and US$148 per tonne, respectively.  
                                                     
 
119 Rebuttal by Argentina, para. 208-209. 
120 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. WT/DS207/RW 
Page F-40  
 
  As pointed out above, the fact that no legislation explained how the price bands were calculated, led 
the Appellate Body to find the lack  of transparency to be inherent  in how Chile's price bands were 
established.
121  
 The Appellate Body found that the lack of transparen cy contributed to distorting the prices of imports 
by impeding the transmission of international prices to the domestic market.
122 
 Afterwards, in assessing the original PB S, the Appellate Body found that: 
 
"… As Argentina stresses, the amount of a duty is not the only concern of Chile's 
trading partners. As Argentina argues, signi ficant for traders, also, are the lack of 
transparency of certain features of Chile's price band system …"
123  
The Appellate Body emphasized that it reached its  conclusion regarding the inconsistency with the 
WTO covered agreements   
"… on the basis of the particular configur ation and interaction of all these specific 
features of Chile's price band system ..."
124   
Consequently, the lack of explanation or justification as to the criteria that led Chile to fixing the floor 
and ceiling of the band at US$128 and US$148 per tonne, respectively, leads to a lack of transparency which, according to the Appellate Body, affects per se  market access for imports of wheat and wheat 
flour. 
 
Regarding the transparency requirement derived from Ar ticle 4.2 and footnote 1, the original Panel in 
these proceedings found that:  
"… all the measures listed there are instrume nts which are characterized either by a 
lack of transparency and predictability, or impede transmission of world prices to the 
domestic market, or both".
125 
Moreover, the original Panel also observed: 
 
"… several crucial stages of the operation of the Chilean PBS are characterized by a considerable lack of transparency and pred ictability. For instance, exporters can be 
expected to have difficulties knowing how th e applicable Reference Price is arrived 
at."
126   
Those findings are completely applicable to the amended PBS. 
 Finally, in its analysis of whether the original PBS was a border measure similar to a variable import 
levy and a minimum import price, the original Pa nel in these proceedings found, in a finding not 
reversed by the Appellate Body:  
"… we have already highlighted the feat ures of the Chilean PBS which reveal its 
intrinsically unstable, intransparent  and unpredictable nature, as well as the 
                                                     
 
121 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. 
122 Chile – Price Band System, Report of the Appellate Body, para. 234. 
123 Chile – Price Band System, Report of the Appellate Body, para. 258. 
124 Chile – Price Band System, Report of the Appellate Body, para. 261. 
125 Chile – Price Band System, Report of the Panel, paragraph 7.34. 
126 Chile – Price Band System, Report of the Panel, paragraph 7.44.  WT/DS207/RW 
 Page F-41 
 
 
  insulation of the domestic market from international price competition which it 
achieves ..."127  (Emphasis added) 
Regardless the fact it did not find useful to endor se the characteristics identified by the Panel as being 
of a "fundamental" nature, the Appellate Body  established in paragraph 234 of its Report: 
 
"… [T]his lack of transparency and this lack  of 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 impe ding the transmission of international prices 
to the domestic market." 
31. With regard to the factor 1.56 applicable to wheat flour, Argentina asserted during the 
substantive meeting with the Panel (see par agraph 107 of the written version of its oral 
statement) that, "[t]his was the first chance for Argentina to raise these arguments".  (Original 
emphasis.)  Would that circumstance (the fact th at these Article 21.5 proceedings were the first 
chance for Argentina to raise the argument) consti tute an appropriate test to assess whether the 
issues relating to factor 1.56 fall within this Panel's mandate? 
 
Answer to Question 31
: 
 
The appropriate test to assess whether the issues rela ting to factor 1,56 fall within this Panel's mandate 
is the fact that Argentina's argument in relation to th e factor 1,56 is not a claim: it is an argument.  
 
Chile argues that Argentina's arguments in relation to  the factor of 1,56 applicable to wheat flour are 
not within the terms of reference of this Panel, because it is "a claim which Argentina could have 
raised and pursued in the original dispute, but failed to do so".128  Chile's argument is incorrect. Chile 
seems not to see the difference between "claims" and "arguments". Argentina's argument in relation to 
the factor of 1,56 is not a claim: it is an argument .  
 
As the Appellate Body stated 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 identified provision of a particular agreement".
129 
 In these proceedings Argentina has raised claims wi th respect to the amended PBS inconsistency 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 Agreement establishing the World Trade Organization . The argument in 
relation to the factor of 1,56 supports the claim of  the PBS inconsistency with Article 4.2 of the 
Agreement on Agriculture . It is an additional argument
 showing that the amended PBS causes 
insulation from the international market. A plain reading of the Table of Contents of Argentina's 
Written Submission is enough to understand this simple argumental structure.  
 The factor of 1,56 applied to the duties and rebat es determined for wheat in order to calculate the 
duties and rebates applicable to wheat flour, insulat es the entry price of wheat flour from international 
price developments.
130 Three sub-arguments support this main argument131: (1) wheat flour exporters 
have to pay specific duties which not only bear no relation to the transaction value but also bear no 
relation to the product in question, since they are calculated on the basis of those applied to another 
product, namely, wheat;  (2) the way in which Chile determined the factor 1,56 is not transparent, 
                                                      
127 Chile – Price Band System, Report of the Panel, paragraph 7.61. 
128 First Written Submission by Chile, paragraph 62. 
129 WT/DS98/AB/R, paragraph 139. 
130 First Written Submission by Ar gentina, Section C.I.2.7. 
131 First Written Submission by Argentina, paras. 228 to 234. WT/DS207/RW 
Page F-42  
 
  since in its legislation Chile has neither explaine d nor justified in any way the basis on which it was 
established;  (3) the 1,56 factor is baseless from a te chnical or price-based point of view. Therefore, it 
is an argument that support the claim of inconsis tency of the amended PBS with Article 4.2 of the 
Agreement on Agriculture . 
 
Chile has not argued that the clai m related to Article 4.2 of the Agreement on Agriculture  is not within 
the terms of reference of this Panel. Thus, this  Panel is completely free to accept and analyze 
Argentina's arguments in relation to the factor of 1,56
132 in order to find that the amended PBS is 
inconsistent with Article 4.2 of the Agreement on Agriculture .  
 
In the alternative , if this Panel found the argument in rela tion to the factor of 1,56 constitute a new 
"claim", the fact that these Article 21.5 proceedin gs are the first chance fo r Argentina to raise the 
argument could constitute one of th e appropriate tests to assess whet her the issues relating to factor 
1.56 fall within this Panel's mandate, because the am ended PBS is a new measure, different from the 
original PBS and, therefore, Argentina could not have raised the arguments in relation to that factor in 
the original proceedings. 
 Despite the fact that the factor 1.56 was formally  maintained in the modified PBS, Argentina's 
arguments relating to that factor are included in the terms of reference of the present Panel inasmuch 
as Chile has changed the basis to which that factor is  applied and hence the result of its application.  
 
If both the basis and the duties resulting from the appli cation of the factor 1.56 in the modified PBS 
are necessarily different from the basis and the dutie s resulting from the application of the factor 1.56 
in the original PBS, then the relative weight of th e factor 1.56 has also changed in the measures taken 
to comply.  
In this respect, it should be recalled that the speci fic duty or rebate for wheat, which constitutes the 
basis of calculation to which the f actor 1.56 is applied to arrive at the specific duty or rebate for wheat 
flour, is calculated 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
133 and the way in which the reference prices are 
established134, as well as the method of calculating the specific duties135, the basis  to which the factor 
1.56 is applied and the results of  its application have necessarily changed. The application of the 
factor 1.56 in the modified PBS results in a diffe rent amount of duties and forms part of both the 
measure itself and its method of application.  In other words, the consequences of applying the fa ctor 1.56 in the modified PBS are different from 
the consequences of applying it in the original PBS .   
 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-
determination was different from that for the affirmat ive determination in the original sunset review, 
the arguments relating to the factor 1.56 fall within 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. 
 
                                                      
132 Consequently, it is not applicable to the factor of 1,56 what was said in the cases EC – Bed Linen 
(Article 21.5 – India) and US – Countervailing Measures on Certai n EC Products (Article 21.5 – EC) as those 
cases dealt with the admissibility of entertaining claims and not arguments. 
133 Argentina's First Written S ubmission, Section B.3.3. 
134 Argentina's First Written S ubmission, Section B.3.4. 
135 Argentina's First Written S ubmission, Section B.3.5.2.  WT/DS207/RW 
 Page F-43 
 
 
  Thus, the new arguments relating to the factor 1.56 rela te to an aspect of the measure taken to comply 
that has changed with respect to the original m easure. Consequently, the Panel should conclude that 
Argentina's arguments concerning the factor 1.56 fall within its terms of reference. 
 In Canada – Aircraft (Article 21.5 – Brazil)
 136, the Appellate Body held that Article 21.5 proceedings 
involve not the original measure but rather a ne w 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 "measu re taken to comply" would not necessarily be the 
same as those which were pertinent in the original dispute. 
 
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 been rai sed against the original measure.  Had Canada's 
objection been upheld, Brazil would have been barre d from making claims that could not have been 
raised in the original proceedings .137 The Appellate Body agreed with the panel's conclusion.138 
 In the present dispute the situation is similar. Th e factor 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 1.56 are obviously different
 from the relevant facts relating to the factor 1.56 in the 
original PBS. It is therefore natural that  Argentina should present arguments and factual 
circumstances pertinent to the factor 1.56 in the m odified PBS that are different from those that were 
pertinent to the factor 1.56 in the original PBS.   
In the present Article 21.5 proceedings, Argentina, like Brazil in Canada – Aircraft , puts forward 
arguments relating to the factor 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 the Chilean ch allenge, Argentina, like Brazil in that dispute, 
would not have the opportunity to put forward arguments that could not have been raised  in the 
original proceedings, as the factor 1.56 is a ch anged aspect of the measure taken to comply. 
 
Moreover, Chile's due process rights have not been  unduly impaired in these proceedings since in 
changing the factual basis on which the factor 1.56 w ould be applied and hence the results of applying 
it Chile could have anticipated that new arguments  relating to that factor would be raised.  
 
In this connection, in US – Countervailing Measures on Certai n EC Products (Article 21.5 – EC), the 
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 therefor e 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."
139  
                                                      
136 WT/DS70/AB/RW, paragraph 41. 
137 WT/DS141/RW, paragraph 6.48. 
138 WT/DS141/AB/RW, paragraph 88. 
139 WT/DS212/RW, Report by the Panel, paragraph 7.71. WT/DS207/RW 
Page F-44  
 
  Furthermore, Argentina's arguments relating to the f actor 1.56 were not brought up at a late stage of 
the Article 21.5 proceedings. Thus, due process has no t been adversely affected, as shown by the fact 
that Chile was able to rebut these arguments in its First Written Submission.  In the light of the above, should the Panel consider  that the arguments put forward by Argentina in 
relation to the factor 1.56 constitute a new clai m, Argentina respectfully requests that the Panel 
consider the said arguments, since they fall within th e terms of reference of the present Panel, and find 
that the factor 1.56 is a specific feature of the modified PBS that is impeding enhanced access to 
Chile's market, in a manner incons istent with Article 4.2 of the Agreement on Agriculture .
140 
 32. In paragraphs 196 to 201 of its rebuttal s ubmission, Chile has explained the technical 
reasons for using a factor of 1.56 to assess the duti es or rebates applicable to wheat flour.  Chile 
has stated that the reason for increasing the duty (or rebate) by a certain proportion "is simply 
to maintain a similar nominal level of protectio n for both products".  Chile argues that the 
factor it has used for wheat flour has undergone occasional adjustments to take account of the 
relation between the prices of the two products and since 1996 has been fixed at 1.56.  Chile set 
the value at 1.56 taking into consideration the information available at that time, which "indicated that between January 1986 and December 1995 (the period of application of the band at that time), the average ratio of the price of flour to the price of wheat was 1.566".  Can 
Argentina comment on Chile's assertions in this regard, as well as on the evidence submitted as 
Exhibits CHL-9, CHL-10 and CHL-11. 
 
Answer to Question 32
: 
 
As Argentina has already stated, it is telling that Chile  has not argued in its submissions that the factor 
of 1,56 does not distort the transmission of intern ational prices. Indeed, Argentina showed how, for 
many reasons, the factor of 1,56 insulates the entr y price for wheat flour from international price 
developments:  First, wheat flour exporters have to pay specifi c duties which not only bear no relation to the 
transaction value but also bear no relation to the pr oduct in question, since they are calculated on the 
basis of those applied to another product, namely, wheat.  
 
Second, Chile's only justification for its application is  that the factor has been fixed at 1,56 since 1996 
because "between January 1986 and December 1995, th e average ratio of the price of flour to the 
price of wheat was 1,566". Therefore, as Chile re cognizes, the factor was "built into" the Chilean 
legislation and it has remained "unchanged" ever since.  
 
In an effort to give any validity to its argument,  Chile submitted Exhibits CHL-9 (Table of wholesale 
prices for wheat and wheat flour), CHL-10 (Graph of  wholesale prices for wheat and wheat flour) and 
CHL-11 (Graph showing the relation between the price of wheat flour and the price of wheat) that show that the average ratio of the price of flour to the price of wheat was 1.566 between January 1986 
and December 1995.  
 
Those Exhibits reflect a price relation that was, at least, eight years old at the time of the entry into 
force of the amended PBS. Moreover, the delay w ith regard to any meaningful price relation has 
reached a decade at the time of these compliance proceedings.   
                                                     
 
140 Argentina's First Written S ubmission, Section C.I.2.7.  WT/DS207/RW 
 Page F-45 
 
 
  On the other hand, as it has been already stated141, in the case of Argentina, if the FOB prices of bread 
wheat and wheat flour142 since the amended PBS came into force  are taken into account, the average 
price ratio is 1.3, as it has been shown in Exhibit ARG-29.    Moreover, in paragraphs 196 to 201 Chile has not explained the "technical" reasons for using a factor 
of 1,56. In fact, Chile explicitly acknowledged that  the reason for establishing the factor at 1,56 "…is 
simply to maintain a similar nominal level of protection for [wheat and wheat flour]".
143 Clearly, this 
is not a technical explanation. If Chile had provide d the technical explanation given by the Chilean 
Executive it should be clear that the technical ratio is 1,3. In 1993, the Message of the Chilean Executive relating to the amendment of Article 12 of Law 18.525 stated:  "… It is proposed to 
establish specific duties and rebates on the  impor tation of flour and calculate their amount by 
multiplying the duties and rebates determin ed for wheat by the coefficient 1.3 which is the technical 
production ratio …"
144 (Emphasis added) 
 Even if the reason for the establishment of the fact or was the technical production ratio, the factor 
should not have "undergone occasional adjustments to take into account the relation between the 
prices of the two products". Technical ratios are not  adjusted due to any price relation because they 
are just that: technical.  Thus, in addition to not having any relation to the tr ansaction value, to the product in question, and to 
the technical production ratio between wheat and wheat flour, Chile applies a factor that is different 
from the price relation in, at least, one of Chile's mark ets of concern and, at the time of the entry into 
force of the amended PBS, reflected a price relation th at was, at least, eight years old, and at the time 
of these compliance proceeding the delay with regard  to any meaningful price relation has reached a 
decade. This is how Chile purports to just ify the application of the factor of 1,56. 
 
Therefore, the factor of 1.56 used to multiply the duties and rebates determined  for wheat in order to 
calculate the duties and rebates applicable to wheat  flour is not transparent and insulates the entry 
price for wheat flour from international price developm ents to an even greater extent than that for 
wheat, this being another specific feature of the am ended PBS that prevents enhanced access to the 
Chilean market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture . 
 33. In paragraph 232 of its first submission, Argentina states that the factor applied to 
determine the specific duties of wheat flour was the "technical ratio established by Chile in Law 
19.193 which, in 1997, extended the specific duties and tariff rebates of the price band for wheat 
to wheat flour".  Chile has argued in footnote 38 of its first submission that Argentina's statement includes factual errors.  Could Argentina please comment on Chile's argument, 
taking also into account Chile's Exhibit CHL-5.  
Answer to Question 33
: 
 
On the basis of the history of the Chilean legislati on, it might be speculated that the application of a 
factor to the specific duties established for wheat in  order to determine the specific duties applicable 
to wheat flour could be based on a price rela tionship derived from a technical production ratio 
between wheat and wheat flour.  Flour being a produc t of wheat, its price is naturally higher since to 
the cost of the wheat the millers add the cost of m illing plus a profit margin.  This relationship is valid 
                                                      
141 First Written Submission by Argentina, para. 231. 
142 Both are products whose markets are considered to be of concern to Chile in establishing the 
reference prices of the amended PBS. 
143 Rebuttal by Chile, para. 197. 
144 "History of the Law. Compilation of official texts of the parliamentary debate. Law 19.193 ".  
Library of the National Congress.  Santiago, Chile, 1997. See Exhibit ARG-37, page 19. WT/DS207/RW 
Page F-46  
 
  at international level.  In the case of Argentina,  if the FOB prices of bread wheat and wheat flour
145 
since the amended PBS came into force are take n into account, the average price ratio is 1.3.146  That 
is, the price of wheat flour is approximately 30 per cent higher than that of wheat.   Moreover, this was the technical ratio proposed by  the Chilean Executive at the moment of passing 
the bill for the approval of Law 19.193 which, in 1993, extended the specific duties and tariff rebates 
of the price band for wheat to wheat flour. At that  time, the Message of the Chilean Executive relating 
to the amendment of Article 12 of Law 18.525 stated:  "… It is proposed to establish specific duties 
and rebates on the importation of flour and calculate their amount by multiplying the duties and 
rebates determined for wheat by the coefficient 1.3 which is the technical production ratio …"
147 
(Emphasis added) 
 Notwithstanding the above, the factor was fixed in 1,41 and that is what Chile shows in Exhibit CHL-5 containing Law No. 19.193.  
However, successive amendments incorporated in th e legislation led to an increase in this figure. 
Thus, Chile decided to raise the coefficient from 1.41 to 1.56 without any justification, thereby 
distorting –to an ever greater extent-  the entry price for Chilean wheat flour imports.   As noted by a Chilean legislator during the deba te on the bill – later Law 19.446 – extending the 
system for setting the duties and rebates for wheat flour:  
 
"Has any justification been given for in creasing the factor from 1.41 to 1.56?  
Absolutely none … The Executive has s ubmitted a measure without providing any 
data that might  support … the raising of the factor from 1.41 to 1.56 …"
148 
Thus, in addition to not having any relation to the tr ansaction value, to the product in question, and to 
the technical production ratio between wheat and wheat flour, Chile applies a factor that is different 
from the price relation in, at least, one of Chile's mark ets of concern and, at the time of the entry into 
force of the amended PBS, reflected a price relation th at was, at least, eight years old, and at the time 
of these compliance proceeding the delay with regard  to any meaningful price relation has reached a 
decade. This is how Chile purports to just ify the application of the factor of 1,56. 
 
Therefore, the factor of 1.56 used to multiply the duties and rebates determined  for wheat in order to 
calculate the duties and rebates applicable to wheat  flour is not transparent and insulates the entry 
price for wheat flour from international price developm ents to an even greater extent than that for 
wheat, this being another specific feature of the am ended PBS that prevents enhanced access to the 
Chilean market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture . 
 
34. Argentina has stated in paragraph 199 of it s first submission that the way in which Chile 
determined the 0.985 adjustment factor for the band floor and ceiling prices was not 
transparent, that Chile did not explain how this  factor was calculated, nor what basis there was 
for this factor in the legislation that established the amended PBS.  
                                                     
 
145 Both are products whose markets are considered to be of concern to Chile in establishing the 
reference prices of the amended PBS. 
146 See Exhibit ARG-29. 
147 "History of the Law. Compilation of official texts of the parliamentary debate. Law 19.193 ".  
Library of the National Congress.  Santiago, Chile, 1997. See Exhibit ARG-37, page 19. 
148 Senator Piñera, 24 January 1996. In "History of the Law. Compilation of official texts of the 
parliamentary debate. Law 19.446 ". Library of the National Congress. Santiago, Chile, 1997. See Exhibit 
ARG-37, page 14.  WT/DS207/RW 
 Page F-47 
 
 
   (a) Could Argentina clarify whether in its view this particular fact per se  would 
make the amended measure inconsistent with the WTO covered agreements. 
 
Answer to Question 34(a) : 
 The fact that "the way in which the factor 0.985 w as determined is not transparent.  Chile has not 
explained how it was calculated, or what basis there may be for this factor in the legislation that 
established the amended PBS" is a cumulative intr ansparent factor that makes the amended PBS 
inconsistent with the WTO covered agreements. It is another specific feature of Chile's amended PBS 
that renders the whole system inconsistent w ith Article 4.2 of the Agreement on Agriculture. 
 
 (b) If so, could Argentina identify the relevant legal basis. 
 
Answer to Question 34(b) :
 
 
The relevant legal basis in the WTO covered agreements not to maintain an intransparent border 
measure is Article 4.2 of the Agreemen t on Agriculture and its footnote 1.  
 When finding the original PBS inconsistent  with Article 4.2, the Appellate Body, inter alia , held: 
 
"… [W]e place considerable importance on the intransparent … way in which the 
"highest and lowest f.o.b. prices" that have been selected are converted to a c.i.f. basis 
by adding 'import costs'.  As Chile con cedes, no published legislation or regulation 
sets out how these "import costs" are calculated. 
In addition to the lack of transparency … 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 determined …"
149  
The fact that no legislation set out how the price bands  were calculated, led the Appellate Body to find 
the lack of transparency to be inherent in how Chile's price bands were established. 
 Similarly, the fact that Law 19.897 and Decree 831/2003 do not set out how the way in which the factor 0.985 was determined lead to the conclusion that the establishment of the factor 0.985 was not 
transparent.   
 Therefore, Chile is under the lega l obligation to explain the way in which it determined the 0.985 
adjustment factor for the band floor and ceiling prices.   (c) Could Argentina elaborate on whether such lack of explanation by Chile would 
per se  affect market access for imports of agricultural products. 
 
Answer to Question 34(c)
: 
 
As pointed out above, the fact that no legislation explained how the price bands were calculated, led 
the Appellate Body to find the lack  of transparency to be inherent  in how Chile's price bands were 
established.150 
 The Appellate Body found that the lack of transparen cy contributed to distorting the prices of imports 
by impeding the transmission of international prices to the domestic market.
151 
                                                      
149 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. 
150 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. WT/DS207/RW 
Page F-48  
 
   
Afterwards, in assessing the original PB S, the Appellate Body found that: 
 
"… As Argentina stresses, the amount of a duty is not the only concern of Chile's trading partners. As Argentina argues, signi ficant for traders, also, are the lack of 
transparency of certain features of Chile's price band system …"
152  
The Appellate Body emphasized that it reached its  conclusion regarding the inconsistency with the 
WTO covered agreements   
"… on the basis of the particular configur ation and interaction of all these specific 
features of Chile's price band system ..."
 153   
Regarding the context of the terms in footnote 1, the original Panel in these proceedings found that: 
 
"… all the measures listed there are instrume nts which are characterized either by a 
lack of transparency and predictability, or impede transmission of world prices to the 
domestic market, or both."154 
Moreover, the original Panel also observed: 
 
"… several crucial stages of the operation of the Chilean PBS are characterized by a considerable lack of transparency and pred ictability. For instance, exporters can be 
expected to have difficulties knowing how th e applicable Reference Price is arrived 
at."
155   
Those findings are completely applicable to the amended PBS. 
 Finally, in its analysis of whether the original PBS was a border measure similar to a variable import levy and a minimum import price, the original Pa nel in these proceedings found, in a finding not 
reversed by the Appellate Body: 
 
"… we have already highlighted the feat ures of the Chilean PBS which reveal its 
intrinsically unstable, intransparent  and unpredictable nature, as well as the 
insulation of the domestic market from international price competition which it achieves ..."
156  (Emphasis added). 
Regardless the fact it did not find useful to endor se the characteristics identified by the Panel as being 
of a "fundamental" nature, the Appellate Body  established in paragraph 234 of its Report: 
 
"… [T]his lack of transparency and this lack  of 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 impe ding the transmission of international prices 
to the domestic market". 
                                                                                                                                                                     
151 Chile – Price Band System, Report of the Appellate Body, para. 234. 
152 Chile – Price Band System, Report of the Appellate Body, para. 258. 
153 Chile – Price Band System, Report of the Appellate Body, para. 261. 
154 Chile – Price Band System, Report of the Panel, paragraph 7.34. 
155 Chile – Price Band System, Report of the Panel, paragraph 7.44. 
156 Chile – Price Band System, Report of the Panel, paragraph 7.61.  WT/DS207/RW 
 Page F-49 
 
 
  Moreover, in paragraph 258 of its Report the Appe llate Body held that "… significant for traders, 
also, are the lack of transparency of certa in features of Chile's price band system …" 
 As the Appellate Body held with respect to the original PBS
157 and Argentina maintains with respect 
to the amended PBS:  "… we reach our conclu sion [regarding the inconsistency with the WTO 
covered agreements] on the basis of the particular configuration and interac tion of all these specific 
features  of Chile's price band system …" (underlining added) 
 Consequently, the lack of explanation or justificati on as to the exact figure of the factor fixed by Chile 
leads to a lack of transparency  which, according to the Appellate  Body, affects market access for 
imports of wheat and wheat flour. 
 
35. Could Argentina comment on Chile's argument  in paragraph 103 of its first submission, 
that "a simple glance at the charts presented by  Argentina" shows how the specific duties have 
remained constant for the duration of Law No. 19.897 and its Regulations, leading it to conclude 
that it is impossible to main tain a minimum import price. 
 
Answer to Question 35
: 
 
Chile's argument in paragraph 103 of Chile's fi rst submission is completely unsubstantiated. 
Argentina fully disagrees with that statement. 
 
Paragraph 103 is within of Section 2 of part IV of Chile's first submission. Section 2 title reads 
"Appellate Body Analysis And Law 19.897 And Its Regulations". In this Section Chile gives its 
interpretation on the Appellate Body  findings and how the legislati on enforcing the amended PBS has 
allegedly addressed those findings. In particular, pa ra. 103 is within subsection (b) "Minimum Import 
Prices". Section (b) includes only three paragraphs: 101, 102 and 103.  
 In para. 101 Chile provides the Appellate Body's alleged definition of minimum import prices and 
variable import levies:  
According to the Appellate Body, minimum import prices are not very different from 
variable levies, except that their mode of operation is less complicated.  The main 
difference between the two is that vari able levies are 'generally based on the 
difference between the governmentally dete rmined threshold and the lowest world 
market offer price for the product concer ned, while minimum import price schemes 
generally operate in relation to the actual transaction value of the imports". (footnote 
omitted). 
In para. 102 Chile appears to provide the alleged definition of "variability": 
 
Thus, variability is the difference between  the governmentally determined threshold 
and the actual transaction value, which will differ from one transaction to another and 
will hence change the duty without any legislative or administrative action. 
That is Chile's whole basis to  conclude in para. 103 that: 
 
A simple glance at the charts presented by  Argentina shows how the specific duties 
remained constant and made it impossible to maintain a minimum import price for the duration of Law 19.897 and its Regulations. 
                                                     
 
157 Chile – Price Band System, Report of the Appellate Body, para. 261. WT/DS207/RW 
Page F-50  
 
  That's all. No more explanations. No more comments. End of Section IV.2.b. End of the story. 
 Chile's line of argumentation speaks for itself. Ch ile's conclusion in para. 103 is not based on 
evidence. It is not even reasoned. Although Chile re fers to the "charts presented by Argentina", there 
is no single Chart identified or cited by Chile in para. 103 or in the section in which para. 103 is 
located. In fact, there is not even one
 reference to any  Chart presented by Argentina under whole 
Section "Appellate Body Analysis And Law 19. 897 And Its Regulations". Chile's "glance" at 
Argentina's charts must have been so "simple" th at Chile probably supposed it did not need to provide 
further explanations. This is how Chile purports to convince this Pane l that the amended PBS is not a 
border measure similar to a minimum import price. 
 
Argentina was required by the Panel to make comme nts on Chile's assertion. The lack of clarity and 
objectivity of Chile's argument makes it difficult to comment on. Chile states that "…it impossible to maintain a minimum import price for the duratio n of Law 19.897 and its Regulations". Argentina 
would kindly refer the Panel to the sections of its  submissions and oral statements where Argentina 
clarified why the amended PBS is a border measur e similar to a minimum import price, including 
references to the graphs, charts, statistics a nd mathematic formulas Chile failed to identify.
158 
 
36. Argentina has quoted, in paragraph 272 of  its first submission, paragraph 234 of the 
Appellate Body's report in Chile – Price Band System , stating that "an exporter is less likely to 
ship to a market if that exporter does not kno w and cannot reasonably predict what the amount 
of duties will be".  Does Argentina consider that an exporter would not know better and 
reasonably predict what the amount of duties will be when the formula to calculate those duties 
is published, fixed and capped at 31.5 per cent, even if specific figures in the formula are set by the importing country without providing a justification? 
 
Answer to Question 36
: 
 
The fact that the formula used to  calculate the amount of duties is published, fixed and capped at 31.5 
per cent is not relevant to whether an exporter might know better and reasonably predict what the 
amount of duties will be in the future.  
The source of the lack of transparency and pr edictability of the amount of the duties and the 
inconsistency related to it, as Argen tina has explained, lays elsewhere. 
 Argentina's argument is that "the lack of transparen cy and the lack of predictability of the duty level 
that result from the amended PBS are additional f eatures that undermine the object and purpose of 
Article 4 of the Agreement on Agriculture".
159 This is because 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, as it is the case with the amended PBS.160  
 The Appellate Body found the original PB S inconsistent with Article 4.2 of the Agreement on 
Agriculture because, inter alia , the lack of transparency and the lack  of predictability of the duty level 
was an additional feature that undermined the ob jective of achieving improved access conditions for 
imports of agricultural products.
161 Thus, the issue was not whether the formula to calculate those 
duties was published, fixed and capped at 31.5 per cent, but whether the duty level  resulting from the 
amended PBS was transparent or predictable, which, in the case of the PBS, it was not. 
                                                      
158 Argentina's First Written Submission, para. 99-124 , 159-173;  Rebuttal by Argentina, paras. 160-
205, Oral Statement by Argentina, para. 32-41, 85-90; and Closing Statement by Argentina, para. 21 
159 First Written Submission by Argentina, para. 271 and ss. 
160 Rebuttal by Argentina, para. 128 and ss., Oral Statement by Argentina, para. 76 and ss. 
161 Chile – Price Band System , Report of the Appellate Body, para. 234.  WT/DS207/RW 
 Page F-51 
 
 
   
Argentina has extensively explained why the le vel of duties resulting from the amended PBS is 
neither transparent nor predictable as well.162 
 The fact that the formula is published does not elim inate the distortion in the transmission of world 
market prices to Chile's market, nor it makes the PBS more transparent or predictable. The formula is 
a means to the lack of transparen cy and predictability in the level of duties, which still remain. When 
the Appellate Body made its assessment about whet her the original PBS was similar to a variable 
import levy it said:  
… [T]he presence of a formula causing auto matic and continuous variability of duties 
is a  necessary  … condition for a particular measure to be a "variable import levy" 
within the meaning of footnote 1.
163   
For the Appellate Body the "presence" of a formul a causing automatic and continuous variability of 
duties was a  necessary condition for a particular me asure to be a "variable import levy" within the 
meaning of footnote 1. The Appellate Body did not specified whether that "presence" had to be 
"published". Thus, the fact that the formula used to  calculate the amount of duties is published is not 
relevant to whether an exporter might know better and reasonably pr edict what the amount of duties  
will be in the future.  Although the formula is fixed, the relevant issue is  that the reference prices and specific duties are not 
fixed . They are variable and they are fundamental co mponents of that formula. In particular, the 
specific duties are liable to vary every two months as far as the reference price, when varying, falls 
below the floor price. In the amended PBS it is guaranteed  that, if the required conditions are met, an 
exporter will mandatorily face a different duty every two months.164 In fact, contrary to what Chile 
has asserted in its submissions165, the PBS Law and Regulation give no discretion to Chile to decide 
whether or not to impose the duties: if the refe rence prices fall below the band floor, specific duties 
will be levied. The lack of transparency and predic tability are inherent to the amended PBS, because 
of the reasons Argentina has described in the an swer to this question and along its submissions.166 
 With regard to the fact that the duty level is cappe d at 31.5 per cent, the Appellate Body stated that 
"… the existence of [a] tariff binding will not eliminate the distortion in the transmission of world 
market prices to Chile's market…where the comb ination of the duties resulting from Chile's price 
band system, when added to the applied ad valorem duty rate, remains below Chile's bound rate of 
31,5 per cent ad valorem ".
167 In this regard, the lack of transparen cy and predictability in the level of 
duties, even below Chile's bound rate of 31,5 per cent, still remains. The Appellate Body, accordingly 
observed: 
 
"This argument by Chile compels us to consider whether Chile's price band system ceases to be similar to a 'variable import levy' because it is subject to a cap.  In doing so, we find nothing in Article 4.2 to suggest that a measure prohibited by that provision would be rendered consistent with  it if applied with a cap.  Before the 
conclusion of the Uruguay Round, a measure could be recognized as a 'variable 
                                                     
 
162 First Written Submission by Argentina, para. 271 an d ss., Rebuttal by Argentina, para. 89 and ss, 
138 and ss. 
163 Chile – Price Band System , Report of the Appellate Body, para. 234. 
164 Rebuttal by Argentina, para. 145. 
165 First Written Submission by Chile, para. 93 and Rebuttal by Chile para. 101 and 120. 
166 First Written Submission by Argentina, para. 271 an d ss., Rebuttal by Argentina, para. 89 and ss, 
138 and ss. 
167 Chile – Price Band System , Report of the Appellate Body, para. 257. WT/DS207/RW 
Page F-52  
 
  import levy' even if the products to which the measure applied were subject to tariff 
bindings.  And, there is nothing in the text of Article 4.2 to indicate that a measure, which was recognized as a 'variable import levy' before the Uruguay Round, is exempt from the requirements of Article 4.2 simply because tariffs on some, or all, of the products to which that measure now applies were bound as a result of the 
Uruguay Round."
168 
The presence or absence of a cap to the tariff binding is not essential in determining whether or not 
Chile's PBS is similar to a measure prohibited by Arti cle 4.2 or if the level of the duties is transparent 
or predictable. That argument advanced by Chile  could not persuade the Appellate Body during the 
original proceeding. Argentina would kindly refer the Panel to the further analysis the Appellate Body 
developed with respect to this issue in paras. 255 to 259 to its Report. 
 
37. In paragraph 23 of its report in Chile – Price Band System , the Appellate Body stated 
that "[while t]here is no Chilean legislation or  regulation, which specifies the international 
'markets of concern' to be used to calculat e the applicable reference prices" it seemed, 
nevertheless, "that the markets and qualities cho sen [were] intended to be representative of 
products actually 'liable' to be imported to Chile ."  Argentina notes as much in paragraph 39 of 
its first written submission.  Does Argentina co nsider that the markets and the qualities chosen 
in the amended PBS to calculate the reference prices are likewise intended to be representative of products actually "liable" to be imported in to Chile?  If not, in what respect does the fact 
that markets and qualities are now explicitly indi cated make it less likely than before that they 
would be intended to be representative?  
Answer to Question 37
: 
 
The markets and the qualities cho sen in the amended PBS to cal culate the reference prices are not  
representative of products actually "liable" to be  imported into Chile. The fact that markets and 
qualities are now explicitly indicated has only clarify th at, by not taking into account all the relevant 
markets and qualities of concern for the calculati on of the reference prices, the amended PBS 
insulates Chile's market from in ternational price developments. 
 In its First Written Submission, in its Rebuttal a nd its Oral Statement, Argentina pointed out the 
problems with the markets and the qualities chosen in the amended PBS to calculate the reference 
prices.   The fact that the amended PBS provides that the sa me reference price still applies to all goods falling 
within the same product category, regardless of the origin of the goods, and regardless of the 
transaction value of the shipment, means that the Chilean market is disconn ected from international 
price developments, as referred by Argentina in  its answer to question N° 15. Argentina has 
demonstrated that the amended PBS reference prices, by the way they are established, are neither transparent nor predictable and insulate the Chilean  market from international price developments.  
 Regarding the fact that the amended PBS provides that the same reference price still applies to all 
goods falling within the same product category, re gardless of its origin, Argentina has already 
highlighted that, contrary to what the Appellate Body established,
169 Chile did not explain how the 
qualities and markets of concern were selected. As in the case of the PBS in its original form, there is 
no legislation or regulation governing the amended PBS that specifies how or on what basis the "markets of concern" and "qualities of concern" are selected.  Therefore, the reference price selection 
process has not been transparent. 
                                                     
 
168 Chile – Price Band System , Report of the Appellate Body, para. 254 (footnotes omitted) 
169 Chile – Price Band System,  Report of the Appellate Body, para 249.  WT/DS207/RW 
 Page F-53 
 
 
   
The disconnection of the amended PBS reference pr ices from the international price developments 
also derives from the fact that Chile's amended PBS establishes the references prices based on only 
two qualities of concern , namely "Bread Wheat, Argentine Port" and "Soft Red Winter". However, as 
it was already stated, there are many types or qualitie s involved in the international trade of wheat. As 
Argentina has shown from Chile's own records170, there are at least two other qualities or types of 
wheat relevant for Chile ("Soft White Winter No 2" and "Western White Winter No 2").   What is worse is that among the -at least- four relevant qualities and markets of concern shown by Argentina on the basis of Chile's own records, Chile chose those qualities that since 1991 have been 
the lowest priced
. Thus, the gap between the reference price and the floor price is further expanded, 
more duties are levied and the entry price is higher than if Chile took into account all the qualities of concern, disconnecting also in this way the amende d PBS reference prices from the international price 
developments.   
Even if that was not enough, Argentina has also shown
171 that Chile does actually import wheat of 
qualities different from those used for the calculation of the reference prices. Thus, not only Chile 
imports wheat of qualities different from those ta ken into account for the establishment of the 
reference prices but also Chile applies to tho se imports reference prices based on the two 
predetermined qualities of concern established by the amended PBS.  
On the other hand, the reference prices also insu late the Chilean market from international price 
developments as a result of their being established on  the basis of the average of the daily prices 
recorded on only two predetermined markets
. That predetermination of the markets prevents Chile 
from ensuring that the reference prices are re presentative of actual world market prices. 
 
Regarding the insulation consequen ces deriving from the fact that the amended PBS reference prices 
are based on only two predetermined markets of con cern, Argentina has already recalled that bread 
wheat is sold -at least- in two other markets th an the ones selected by Chile and which are not 
reflected on the reference price: Chicago and Kansas.172 Thus, the fact that the legislation specifies 
that only two markets are to be regarded as being of  concern for the determination of reference prices 
disconnects Chile's domestic market from international price developments. 
 
Argentina has already pointed out the problems relate d to the selection of the daily price quoted for 
"Bread Wheat, Argentine Port " as the basis for establishing the market of concern for the first half of 
the year is not transparent either, since the prices vary with the choice of Ar gentine port. Moreover, as 
Argentina has demonstrated in Exhibit ARG-32, the quotation " Bread Wheat, Argentine Port " (or its 
translation to Spanish "Trigo Pan Puerto Argentino") is not published by SAGPyA on a daily basis.173 
Chile did not provide evidence of the quotation " Bread Wheat, Argentine Port ", under that specific 
denomination, being published by SAGPyA on a da ily basis, which is the only basis on which the 
15-day reference prices can be calculated .174 
 
                                                      
170 Exhibit ARG-33. 
171 Exhibit ARG-34. 
172 First Written Submission by Argentina, para. 218. 
173 See SAGPyA's web page: http://www.sagpy a.mecon.gov.ar/scripts/0-2/fobtodo.asp 
174 The only evidence submitted by Chile arguing that SAGPyA publishes the quotation " Bread Wheat, 
Argentine Port " (FOB Puertos Argentinos), CHL-12 and CHL-14, shows FOB prices on a monthly basis. 
Argentina stresses again that the refe rence price is calculated on the averag e of a 15-day period. Therefore, only 
quotations on a daily basis, as the ones submitted by Argentina in Exhibit ARG-32, are useful for that 
calculation. WT/DS207/RW 
Page F-54  
 
  Therefore, unless Argentina had initiated this disput e, wheat and wheat flour exporters from all over 
the world would have not
 known where to look for the future reference price. No matter what 
"abilities" and market knowledge the exporters had175, it would have been very difficult for them to 
establish the future amount of duties resulting from the difference between an  intransparent future 
reference price and the floor price. In fact, wheat and wheat flour exporters will not find the quotation 
"Bread Wheat, Argentine Port " ("Trigo Pan Puerto Argentino") on a daily basis because it is not 
published by SAGPyA on that basis . 
 Regarding the problems with the source for the establishment of the reference prices for the second 
semester (Soft Red Winter No.2 wheat), Chile gave an ex-post  clarification stating that it uses the 
information from the Chicago Board of Trade (http://www.cbot.com).
176 In this case, as Argentina has 
already pointed out, the information is not publicly av ailable; it is paid information. It is an extra 
charge exporters face for accessing the Chilean market.177  
 Summing up, through the reference prices, the amen ded PBS impedes the transmission to the Chilean 
market of the prices of other qualities of wheat. By  not taking into account all the relevant markets 
and qualities of concern for the calculation of the re ference prices, the amended PBS also insulates 
Chile's market from international price developments. In fact, if an exporter ships any other type or 
quality of wheat rather than "Bread Wheat, Argentine Port" or "Soft Red Winter No. 2", Chile will apply to that shipment a referenc e price and levy specific duties based on one of those two qualities, 
different from the quality actually being imported.  
 
It is worth recalling at this point what the Appellate Body found:  
"… the reference price used under Chile's Price band system is certainly not 
representative of an average of current lowest prices found in all
 markets of 
concern."178  
38. With respect to the previous Question, can Argentina comment on the relevance of its 
assertion during the substantive meeting with th e Panel, regarding the fact that the amended 
PBS would not reflect Canada's relevance in Chilean foreign trade of wheat, nor would 
Canadian prices be reflected in Chile's internal markets. 
 
Answer to Question 38 : 
 
Regarding the fact that the amended PBS would not  reflect Canada's relevance in Chilean foreign 
trade of wheat, nor would Canadian prices be refl ected in Chile's internal  markets, as Argentina 
asserted during the substantive meeting with the Panel,  that is another proof that the amended PBS is 
certainly not representative of prices found in all markets of concern and of the current world market 
price.179 
 Chile has tried to justify the establishment of the reference prices based on FOB prices in Argentina 
and United States, because according to Chile, "[ i]n the last six years (2000-2006) 40 per cent of 
Chilean wheat imports came from the United States and 31 per cent from Argentina"
180, Argentina has 
                                                      
175 First Written Submission by Chile, para. 162. 
176 Rebuttal by Chile, para. 73. 
177 See http://www.esignal.com/cbot/pricing/default.asp . Esignal.com is a sub page (link) of 
CBOT.com where pricing information is provided. 
178 Chile – Price Band System,  Report of the Appellate Body, para. 249 (Emphasis in the original, 
underlining added). 
179 Chile – Price Band System,  Report of the Appellate Body, para. 249. 
180 Rebuttal by Chile, para. 72.  WT/DS207/RW 
 Page F-55 
 
 
  demonstrated that, according to Chile's official source, for the period during which the amended PBS 
has been in force181, Canada  has always been a larger exporter of wheat to Chile than the United 
States, either in volume as well as in amount.   In Exhibit ARG-31, first page, it is possible to observe that in 2004 Canada exported around 
54 thousand tons of wheat while the United States accounted for almost 40 thousand tons. The second 
page of the same Exhibit shows wheat imports to Chile for 2005, where the difference between 
Canada and the United States is even larger: Canada  accounted for almost 40 thousand tons while the 
United States accounted for around 20 thousand tons.
182  
 
Thus, it is clear that Canada has been a relevant ex porter to Chile. However for Chile's PBS, this is 
meaningless. Although Canada is certainly a mark et of concern for Chile, the amended PBS will 
never reflect Canada's relevance in Chilean fore ign trade of wheat, nor Canadian prices will be 
reflected in Chile's internal markets.   
Therefore, Chile's argument that the amended PBS "reference prices now correspond to f.o.b. prices 
on the two markets of most concern for Chile"
183 is baseless.  
 To put it in the Appellate Body words, it is not by  any means certain that the reference price used 
under the PBS is representative of the current world market price, and it is certainly not representative 
of prices in all markets of concern.
184 
 
39. Argentina has noted in paragraphs 41 and 219 of its first submission and then in 
paragraphs 131 and 132 of its rebuttal, that und er the amended PBS there is no indication of 
which Argentine port is of concern for the purposes of calculating the reference price.  Could Argentina clarify whether, in its view, Chile is  under a legal obligation to identify such ports 
and, if so, could Argentina identify the rele vant legal basis in the WTO covered agreements. 
 
Answer to Question 39
: 
 
Chile's obligation is to provide a transparent and predictable border measure. The relevant legal basis 
in the WTO covered agreements not to maintain an  intransparent and unpredictable border measure is 
Article 4.2 of the Agreement on Agriculture and its footnote 1.  
 When finding the original PBS inconsistent  with Article 4.2, the Appellate Body, inter alia , held: 
 
"… [W]e place considerable importance on the intransparent … way in which the 
"highest and lowest f.o.b. prices" that have been selected are converted to a c.i.f. basis 
by adding 'import costs'.  As Chile con cedes, no published legislation or regulation 
sets out how these "import costs" are calculated. 
In addition to the lack of transparency … inherent in how Chile's price bands are 
established, we see similar shortcomings in the way the other essential element of Chile's price band system—the reference price—is determined …"
185  
                                                      
181 Exhibit ARG-31. 
182 In the written version of the Oral Statement by Argentina, para. 54, where it reads "million" it 
should be read "thousand"; where it reads "millions" it should be read "thousands". Argentina's argument is not 
altered in its substance. 
183 Rebuttal by Chile, para. 72. 
184 Chile – Price Band System,  Report of the Appellate Body, para 249. 
185 Chile – Price Band System, Report of the Appellate Body, paras 246 in fine and 247. WT/DS207/RW 
Page F-56  
 
  The fact that no legislation set out how the price bands  were calculated, led the Appellate Body to find 
the lack of transparency to be inherent in how Chile's price bands were established. 
 Similarly, the fact that Law 19.897 and Decree 831/2003 do not set out which Argentine port is of concern for the purposes of calculating the reference price lead to the conclusion that the calculation 
of the reference prices is not transparent.  
 Therefore, Chile is under the legal obligation to i ndicate which Argentine port is of concern for the 
purposes of calculating the reference price.  
Further to Law N° 19.897, Decree N° 831/2003 states in its Article 7 that the reference price for 
wheat will correspond to the averag e daily prices recorded in the most relevant markets  over a period 
of 15 calendar days counted backwards from the tenth day of the month in which the decree is published. In its turn, Article 8 establish the most relevant markets for wheat in Chile and provide 
that, during the application period extending from 16 December to 15 June of the following year, the 
most relevant market will be that for Argentine bread wheat  and the prices will correspond to the 
daily prices quoted for that product f.o.b. Argentine port .  
 Argentina has already pointed out the problems  with the sources for the reference price.  
 Chile stated that for the first semester "the sour ce of information is the Department of Agriculture, 
Livestock, Fisheries and Food (http://www.sagpya.mecon.gov.ar/) of the Ministry of the Economy, 
which regularly publishes figures for bread wheat, Argentine port  (so-called Official Fob Price ) in the 
form of an average for various ports".
186  
 However, Argentina has already shown in Exhi bit ARG-32 that the quotation "Bread Wheat, 
Argentine Port" is not published by SAGPyA on a daily basis.
187 Chile did not provide evidence of the 
quotation " Bread Wheat, Argentine Port ", under that specific denomination, being published by 
SAGPyA on a daily basis, which is the only basis on which the 15-day reference prices can be 
calculated .188 
 Therefore, unless Argentina had initiated this disput e, wheat and wheat flour exporters from all over 
the world would have not
 known where to look for the future reference price. No matter what 
"abilities" and market knowledge the exporters had189, it would have been very difficult for them to 
establish the future amount of duties resulting from the difference between an  intransparent future 
reference price and the floor price. Now, it is clear  that SAGPyA does not publish what Chile affirms. 
In fact, wheat and wheat flour exporters will not find the quotation " Bread Wheat, Argentine Port " 
("Trigo Pan Puerto Argentino") on a daily basis b ecause it is not published by SAGPyA on that basis . 
 In fact, the legislation enforcing the amended PB S is intransparent and inaccurate and leads to 
confusion. Thus, the fact that that under the am ended PBS there is no indication of which Argentine 
port is of concern for the purposes of calculating the reference price is another cumulative factor that 
makes the amended PBS inconsistent with Ar ticle 4.2 of the Agreement on Agriculture. 
 
                                                     
 
186 Rebuttal by Chile, para. 73. 
187 See SAGPyA's web page: http://www.sagpy a.mecon.gov.ar/scripts/0-2/fobtodo.asp 
188 The only evidence submitted by Chile arguing that SAGPyA publishes the quotation " Bread Wheat, 
Argentine Port " (FOB Puertos Argentinos), CHL-12 and CHL-14, shows FOB prices on a monthly basis. 
Argentina stresses again that the refe rence price is calculated on the averag e of a 15-day period. Therefore, only 
quotations on a daily basis, as the ones submitted by Argentina in Exhibit ARG-32, are useful for that calculation. 
189 First Written Submission by Chile, para. 162.  WT/DS207/RW 
 Page F-57 
 
 
  As the Appellate Body found with respect to the or iginal PBS and Argentina maintains with respect to 
the amended PBS,   
"… 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 predictab ility are liable to restrict the volume of 
imports… [A]n exporter is less likely to sh ip 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 cont ribute to distorting the prices of imports 
by impeding the transmission of international prices to the domestic market."
190 
40. Argentina has noted in paragraph 66 of its first submission that "[s]o far the bimonthly 
decrees [under the amended PBS] appear not to i ndicate the reference price calculated for each 
period".  Could Argentina clarify whether, in its view, this particular fact per se  would make the 
amended measure inconsistent with the WTO c overed agreements and, if so, could Argentina 
identify the relevant legal basis. 
 
Answer to Question 40 : 
 
The particular fact that the bimonthly decrees appear  not to indicate the reference price calculated for 
each period is another cumulative factor that makes the amended PBS inconsistent with the WTO covered agreements.  
 
The legal basis in the WTO covered agreements not  to maintain a border measure intransparent and 
unpredictable is Article 4.2 of the Agreement on Agriculture and its footnote 1.   Regarding the context of the terms in footnote 1, the original Panel in these proceedings found that: 
 
"… all the measures listed there are instrume nts which are characterized either by a 
lack of transparency and predictability, or impede transmission of world prices to the 
domestic market, or both."
191 
Moreover, the original Panel also observed: 
 
"… several crucial stages of the operation of the Chilean PBS are characterized by a 
considerable lack of transparency and pred ictability. For instance, exporters can be 
expected to have difficulties knowing how th e applicable Reference Price is arrived 
at."192   
Those findings are completely applicable to the amended PBS. 
 
Finally, in its analysis of whether the original PBS was a border measure similar to a variable import levy and a minimum import price, the original Pa nel in these proceedings found, in a finding not 
reversed by the Appellate Body:  
"… we have already highlighted the feat ures of the Chilean PBS which reveal its 
intrinsically unstable, intransparent  and unpredictable nature, as well as the 
                                                     
 
190 Chile – Price Band System, Report of the Appellate Body, para. 234. (Footnote omitted). 
191 Chile – Price Band System, Report of the Panel, paragraph 7.34. 
192 Chile – Price Band System, Report of the Panel, paragraph 7.44. WT/DS207/RW 
Page F-58  
 
  insulation of the domestic market from international price competition which it 
achieves ..."
193  (Emphasis added) 
Regardless the fact it did not find useful to endor se the characteristics identified by the Panel as being 
of a "fundamental" nature, the Appellate Body  established in paragraph 234 of its Report: 
 
"… [T]his lack of transparency and this lack  of 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 impe ding the transmission of international prices 
to the domestic market." 
Moreover, in paragraph 258 of its  Report the Appellate Body held: 
 
"… significant for traders, also, are the l ack of transparency of certain features of 
Chile's price band system …" 
As the Appellate Body held with respect to the original PBS
194 and Argentina maintains with respect 
to the amended PBS:  
 
"… we reach our conclusion [regarding th e inconsistency with the WTO covered 
agreements] on the basis of the particular configuration and interaction of all these 
specific features  of Chile's price band system …" (Underlining added) 
41. Argentina has noted in paragraph 183 of its first submission that "the amended PBS 
does not ensure that the price of wheat flour impo rts falls in tandem with the falling prices of 
wheat flour on the world market".  Argentin a has added  in paragraph 187 of its first 
submission that, "[b]y not fully reflecting falls in  world prices in domestic prices and impeding 
the transmission of international price develo pments to the Chilean market..." the amended 
PBS is inconsistent with Article 4.2 of the Agreement on Agriculture.  Could Argentina clarify whether, in its view, there is a legal obligation under the WTO covered agreements that a 
measure such as Chile's PBS should:  (i) ensure that entry prices of imports rise or fall in 
tandem with rising or falling world market prices;   (ii) fully reflect any increases or falls in 
world prices in domestic prices; and, (iii) ensure the transmission of international price 
developments to the relevant domestic market.  If so, could Argentina identify the relevant legal 
basis for such obligation. 
 
Answer to Question 41
: 
 
The legal basis for such an obligation is Article 4 of the Agreement on Agriculture , which is the main 
provision of Part III of that Agreement and, as its  title indicates, deals with "Market Access". The 
provision that more specifically address the obligation reproduced in the Panel's question 41 is 
Article 4.2. 
 Article 4.2 states in its relevant part:  
Members shall not maintain, resort to, or revert to any measures of the kind which have been required to be convert ed into ordinary customs duties
1, except as otherwise 
provided for in Article 5 and Annex 5. 
______________ 
                                                      
193 Chile – Price Band System, Report of the Panel, paragraph 7.61. 
194 Chile – Price Band System, Report of the Appellate Body, para. 261.  WT/DS207/RW 
 Page F-59 
 
 
  1These measures include quantitative import r estrictions, variable import levies, 
minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterpri ses, voluntary export restraints, and similar 
border measures other than ordinary customs duties… 
Footnote 1 together with Article 4.2 provide that, by not being ordinary customs duties, quantitative 
import restrictions, variable import levies, minimum import prices, discretionary import licensing, 
non-tariff measures maintained through state-trad ing enterprises, voluntary export restraints, and 
similar border measures other than ordinary customs duties, shall not be maintained, resorted to, or 
reverted to.   
In other words, all the measur es listed in footnote (including similar  border measures) are inconsistent 
with Article 4.2 because they are not ordinary cust oms duties and cannot be maintained, resorted to, 
or reverted to.  The Appellate Body stated that those measures ha ve also in common that they disconnect domestic 
prices from international price developments, and thus impede the transmission of world market 
prices to the domestic market:  
"… we note that  all  of the border measures listed in footnote 1 have in common the 
object and effect of restricting the volumes, and distorting the prices, of imports of agricultural products in ways different from the ways that ordinary customs duties do.  
Moreover,  all  of these measures have in common al so that they disconnect domestic 
prices from international price developments , and thus impede the transmission of 
world market prices  to the domestic market."195 (Underlining added) 
If the measures listed in footnote 1 impede the transmission of world market prices to the domestic 
market and by being maintained, resorted to or reve rted to, violate Article 4.2, therefore Article 4.2 
includes the legal obligation that a border meas ure (such as Chile's PBS) should ensure the 
transmission of international price devel opments to the relevant domestic market. 
 The Appellate Body also found that:  
"Variable import levies" have additiona l features that undermine the object and 
purpose of Article 4, which is to achieve improved market access conditions for 
imports of agricultural products by perm itting only the application of ordinary 
customs duties.  These additional features include  a lack of transparency and a lack of 
predictability in the level of duties that w ill result from such measures … This lack of 
transparency and predictability will also cont ribute to distorting the prices of imports 
by impeding the transmission of international prices to the domestic market
.196 
(footnotes omitted, underlining added) 
If variable import levies, by lacking transparen cy and predictability, impede the transmission 
international prices to the domestic market, and by being maintained, resorted to or reverted to, 
violate Article 4.2, therefore Article 4.2 includes the legal obligation that a border measure (such as 
Chile's PBS) should ensure the transmission of  international prices to the domestic market. 
 
                                                      
195 Chile – Price Band System,  Report of the Appellate Body, para. 227. 
196 Chile – Price Band System,  Report of the Appellate Body, para. 233. WT/DS207/RW 
Page F-60  
 
  The Appellate Body went further and found: 
 
In our view—even though Chile's price bands  are set in relation to world prices from 
a past five-year period—Chile's price band system can still have the effect  of 
impeding the transmission of international price developments
 to the domestic market 
in a way similar to that of other cat egories of prohibited measures listed in 
footnote 1.197 
If the measures listed in footnote 1 have the effect of impeding the transmission of international price 
developments to the domestic market and by being maintained, resorted to or reverted to, violate 
Article 4.2, therefore Article 4.2 includes the lega l obligation that a border measure (such as Chile's 
PBS) should ensure the transmission of internatio nal price developments to the relevant domestic 
market.  Furthermore, the Appellate Body highlighted several characteristics of the original PBS that had the 
effect of impeding the transmission of intern ational price development to Chile's market: 
 
"… Therefore, the way in which Chile's weekly reference prices are determined 
contributes to giving Chile's price band system the effect of impeding the 
transmission of international price developments to Chile's market .198  
… continuing with our hypothesis, even if  we were to assume that one of the two 
parameters––Chile's annual pri ce band thresholds––does  not  distort the transmission 
of world market prices to Chile's market, it would nevertheless remain that the other 
parameter––Chile's weekly reference pri ces––is liable to distort—if not disconnect—
that transmission  by virtue of the way it is determined on a weekly basis.  
Consequently, even in such a hypothetical  case, the duties resulting from Chile's price 
band system, which are equal to the differ ence between these two parameters, would  
not  transmit world market price developments to Chile's market  in the same way as 
'ordinary customs duties'."199 
In the end, just one paragraph after the above quoted, the Appellate Body concluded that the way 
Chile's original PBS was designed (including the part icular features identifie d) and its overall nature 
 
"… [were] sufficiently 'similar' to the features of both of those two categories of 
prohibited measures to make Chile's price band system—in its particular features—a 
'similar border measure' within the mean ing of footnote 1 to Article 4.2." 
The features identified by the Appellate Body in pa ras. 250 and 251 cited above led to the conclusion 
that Chile's price band system – in its particular  features – was "similar border measure" within the 
meaning of footnote 1 to Article 4.2. Argentina reca lls that the Appellate Body said that all of the 
border measures listed in footnote 1 "… have in common also that they disconnect domestic prices 
from international price developments, and thus impede the transmission of world market prices  to the 
domestic market."200 Therefore, Article 4.2 includes the legal obligation that a border measure (such 
as Chile's PBS) should ensure the transmission of international pri ce developments to the relevant 
domestic market.  
                                                     
 
197 Chile – Price Band System,  Report of the Appellate Body, para. 246. 
198 Chile – Price Band System,  Report of the Appellate Body, para. 250. 
199 Chile – Price Band System,  Report of the Appellate Body, para. 251. 
200 Chile – Price Band System,  Report of the Appellate Body, para. 227.  WT/DS207/RW 
 Page F-61 
 
 
  Article 4.2 of the Agreement on Agriculture also includes the legal obligation that a border measure 
(such as Chile's PBS) should ensure that entry pri ces of imports rise or fall in tandem with rising or 
falling world market prices and reflect falls in wo rld prices in domestic prices. In this regard, the 
Appellate Body said:  
Therefore, contrary to what Chile contends, Chile's price band system does not 
simply ensure a reasonable margin of fluc tuation of domestic prices. In our view, 
"such reasonable margin of fluctuation" w ould mean that duties resulting from Chile's 
price band system would ensure that declines in world prices would not be  fully  
reflected in domestic prices.  However, when international prices  fall
, and when the 
weekly reference prices are below the lower thresholds of Chile's price bands, the 
total duties applied to particular shipment s will, in many cases, result in an overall 
entry price of that shipment that  rises  rather than  falls.  Therefore, Chile's price 
band system does not merely moderate the e ffect 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 —albeit to a lesser extent than 
the decrease in those prices.  Nor does it tend only to "compensate" for these price declines. Instead, specific duties resulting from Chile's price band system tend to 
"overcompensate" for them, and to elevate the entry price of imports to Chile above 
the lower threshold of the relevant price ba nd.  In these circumstances, the entry price 
of such imports to Chile under Chile's pri ce band system is even higher than if Chile 
simply applied a minimum import price at the level of the lower threshold of a 
Chilean price band.  Therefore, we disagree with Chile that its price band system simply "moderates the effect of fluctuations  in international prices on Chile's market". 
Chile's price band system tends to "overcom pensate" for the effect of decreases in 
international prices on the domestic market when weekly reference prices are set 
below the lower threshold of the relevant price band—up to the level at which Chile's 
tariff binding imposes a limit on the amount of duties that can be levied.
201 (emphasis 
in the original; footnotes omitted; underlining added) 
In sum, in the cited paragraph, the Appellate Bo dy found that, due to the original PBS, when 
international prices fell, the total duties applied to particular shipments would, in many cases, result in 
an overall entry price of that shipment that rose rath er than fell. In addition,  the Appellate Body found 
that the original PBS did not ensure that the entry price of imports to Chile fell in tandem with falling 
world market prices. Those findings (among others) led to the conclusion that Chile's original PBS 
was 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 : 
 
We emphasize that we reach our conclu sion 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. 
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 
                                                     
 
201 Chile – Price Band System,  Report of the Appellate Body, para. 260. WT/DS207/RW 
Page F-62  
 
  'minimum import prices'" within the meani ng of footnote 1 and Article 4.2 of the 
 Agreement on Agriculture.
202 (Underlining added) 
Thus, the fact that due to the original PBS when international prices fell, th e total duties applied to 
particular shipments would, in many cases, result in an overall entry price of that shipment that rose 
rather than fell, and the fact that the original PB S did not ensure that the entry price of imports to 
Chile fell in tandem with falling world market prices , led to the conclusion that Chile's original PBS 
was 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. Therefore, this provision 
includes the legal obligation that a border measure (such as Chile's PBS) should ensure that entry 
prices of imports rise or fall in tandem with rising or falling world market prices and reflect falls in 
world prices in domestic prices.  
 
42. In paragraph 92 of its first submission, Ar gentina reads paragraph 260 of the Appellate 
Body's report in Chile – Price Band System , as stating that under the previous PBS "the duties 
resulting from the System ensured that falls in world prices were not fully reflected in domestic 
prices" (original emphasis).  Please contrast this  reading with the Appellate Body's statement in 
the same paragraph that a "reasonable margin of  fluctuation of domestic prices... would mean 
that duties resulting from Chile's [PBS] would en sure that declines in world prices would not be 
fully reflected in domestic prices". 
 
Answer to Question 42
: 
 
Argentina's main argument in relation to this poi nt is that the amended PBS disconnects the Chilean 
market from international price developments in a way that insulates the Ch ilean market from the 
transmission of international prices203, in a manner similar to the original PBS. 
 
Appellate Body's statement that a "reasonable marg in of fluctuation of domestic prices... would mean 
that duties resulting from Chile's [PBS] would ensu re that declines in world prices would not be 
fully reflected in domestic prices" means that a "moder at[ion of] the effect of fluctuations in world 
market prices on Chile's market"204 might be reasonable. However, when that statement is read in the 
context of the rest of paragraph 260, it is clear th at the specific duties resulting from the Chilean price 
band system tended to elevate the entry price of Chilean imports above the price band floor; that the 
Chilean price band system tended to "overcompensate"  for the effect of decreases in international 
prices on the domestic market when weekly referenc e prices are set below the price band floor; that 
the entry price of Chilean imports under Chile's pr ice band system was even higher than if Chile 
simply applied a minimum import price at the level of the price band floor; and that the PBS did not ensure that the entry price of imports to Chile fell in tandem with falling world market prices. In that 
context, that "reasonable margin of fluctuation" an d that reflection of "declines in world prices … in 
domestic prices" did not exist at all
. 
 Argentina has demonstrated that the amended PBS continues  to elevate the entry price of imports to 
Chile above the price band floor; continues  to "overcompensate" for the effect of decreases in 
international prices on the domestic market when re ference prices are set below the price band floor; 
continues  to make the entry price of Chilean imports higher than if Chile applied a minimum import 
price at the level of the price band floor, and continues  failing to ensure that the entry price of imports 
to Chile falls in tandem with falling world market pr ices. On top of that Argentina has demonstrated 
                                                     
 
202 Chile – Price Band System,  Report of the Appellate Body, para. 261-262. 
203 See for example, Argentina's First Written Submi ssion, paras. 95 and 98 and Argentina's Oral 
Statement paras. 121-122. 
204 Chile – Price Band System,  Report of the Appellate Body, para. 260.  WT/DS207/RW 
 Page F-63 
 
 
  why the amended PBS is a border measure similar to a minimum import price or a variable import 
levy.   In this respect, it is clear that Chile's amended PBS does not merely moderate  the effect of 
fluctuations in world market prices on Chile's market. In fact,  that "reasonable margin of fluctuation" 
and that reflection of "declines in world prices … in domestic prices" the A ppellate Body referred to 
does not exist at all
 in the amended PBS either. 
 
43. Does Argentina consider that the fixing of price bands for a period of 11 years 
constitutes a factor of insulation, despite the scheduled reduction of the band's floor and ceiling 
by way of the application of the 0.985 adjust ment factor?  How would Argentina define 
"insulation" versus  "stability", in view of Chile's explan ations in paragraphs 183 to 192 of its 
first submission, regarding "gradual" market access improvement? 
 
Answer to Question 43 : 
 
The fixing of price bands for a period of 11 years does constitute a factor of insulation, despite the 
scheduled reduction of the band's floor and ceiling by  way of the application of the 0.985 adjustment 
factor because, as it was explained in Argentina's answer  to question 34 (c), due to the factor of 0.985 
the band floor and ceiling prices vary without any relation  to world market or historical prices.  
Neither do they vary as a function of the transact ion value, a characteristic shared by the entire 
PBS.205  
 Thus, the floor and ceiling prices, two fundamental el ements (together with the reference prices) for 
establishing the level of the specific duties applicab le to wheat and wheat fl our, will decrease, as from 
December 2007, in a fixed, automatic and autonomous  manner. That is to say, the way in which the 
floor and ceiling prices are to be adjusted bears no relation to international price developments.  
 Even if this relation were based on an assumed decl ine in the international prices of wheat after 2007, 
it is surprising how Chile could, in 2003, predic t the course of those prices over a period beginning 
four (4) years later and allegedly ending eleven (11) years after the establishment of the amended 
PBS. 
 
The fixing of price bands for a period of 11 years has transformed the PBS into a more rigid and inflexible system. Indeed, the 11-year period has th e side effect of aggravating the distortion of 
domestic price vis-à-vis international ones.   
In practice, the Chilean market will be insulated fro m fluctuations in the world prices for eleven years 
or even more, taking into account th at the amended PBS has no end date.  
 As Brazil stated, "… Should there be a significan t 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 
                                                     
 
205 Note that the Appellate Body held that even if it were assumed that one feature of Chile's price band 
system was not similar to the features of "variable import levies" and "minimum import prices" because the 
thresholds of Chile's price bands varied in relation to—albeit historic—world market prices rather than domestic target prices, this would not change its overall assessment  of Chile's price band system (Report of the Appellate 
Body, paragraph 251). WT/DS207/RW 
Page F-64  
 
  decade, preventing the fluctuation of internati onal prices from being transmitted to the Chilean 
market."
206 
 Chile's explanations in paragra phs 183 to 192 of its first submi ssion regarding "gradual" market 
access improvement are baseless. As Argentina has al ready pointed out, there are several errors in 
those explanations: 
 First , what Chile argues that "… the period of applic ation of duties under the new regime was shorter 
by 10 weeks, while that of rebates was longer by 8 weeks, which represents an effective increase in 
favourable conditions for grain imports compared to what might have occurred under the mechanism 
prior to modification", amounts to saying that exporte rs of wheat and wheat flour to Chile should not 
be concerned about the distorting effects of the modified PBS, since under the modified 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. That cannot obviously represent an improvement in conditions of access. Wheat and wheat  flour exporters are not  rejoiced because they 
have faced distortions resulting from specific duties for "only" 17 weeks. These are Chile's grounds 
for arguing that the modified PBS has improved c onditions of access. Chile's argument is without 
foundation.   Access conditions continue to be unfavourable despite the duties allegedly  being applied on fewer 
occasions than in the case of the original PBS. Ch ile's reasoning has no basis in the WTO Agreements 
and, in particular, not in the DSU or the Agreement on Agriculture . A measure taken to comply is not 
"less" inconsistent because the inconsistency occurs less frequently than in the case of the original 
measure. There is no basis for drawing such a conclusion. 
 
Second , as Argentina has already stated in its Rebuttal,  it is interesting to note the table which Chile 
itself introduces in paragraph 183, which confirms that the modified PBS is very similar to the 
original PBS. The period between 16 December 2003 and 13 January 2004, during which the modified PBS was not applied, was 57 weeks long. This means that the PBS was applied for 52 weeks 
(out of a total of 109). Following the same reasoni ng, the original PBS would not have been applied 
during 55 weeks, that is to say it would have been  applied during 54. Thus, the original PBS would 
have been applied for 50 per cent of the time, wh ereas the modified 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. 
 
Third, regarding Chile's argument that "[T]he 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"
207, Argentina has already st ated that that argument 
is simply wrong. The reality is that neither the amount of the specific duties nor the probability of 
their being assessed is "irrespective of international price levels" a nd indeed the opposite is true: the 
amount of the specific duties and the probability of their being assessed do depend on international 
price levels.  
 
Both Law 19.897 and Decree 831/2003 refer to precisel y that, i.e., the dependence of the amount of 
the specific duties on international price levels in the following terms: "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." (Underlining 
added) 
                                                      
206 Chile – Price Band System …  Recourse to Article 21.5 of the DSU, Third Party Submission by 
Brazil, paragraph 15. 
207 Chile's First Written Submission, paragraph 186.  WT/DS207/RW 
 Page F-65 
 
 
   
In addition, as Argentina showed in its Rebuttal , th is is also clear from the following simple example: 
 According to the "History of application of the modified PBS"
208, between 16 December 2004 and 
15 December 2005 the PBS floor price for wheat wa s (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.  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 t onne. If the reference pr ice is established at 
US$103.7 per tonne during any two mont hs of that year, the specific duty during that period will be 
US$14.30 per tonne, the same as established on 16 Dece mber 2004. Even if the reference price is less 
than US$103.7 per tonne, the specific duty will natu rally be higher and not lower, as Chile argues. 
 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, being only necessary to 
consider its basic assumption, namely, that in no less than eight years' time (2014) the reference price will be the same as it is today (2006), according to Chile's example. The fact is that there is no 
evidence for determining today that in eight years' ti me the reference price will be the same. What is 
more probable is that the reference price will cha nge, as has always happened  since the establishment 
of the modified PBS. 
 
Thus, the amount of the specific duties and the probability of their being assessed will 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. 
 
In paragraph 191, Chile returns to the untenable ar gument that according to the historical wheat price 
series the probability of wheat prices standing be low 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. Argentina has already stated the problems presented by arguments of this kind:
209 
 
First of all and again, the modified PBS is not "less" inc onsistent because the inconsistency will arise 
on fewer occasions in the future than at present. Th ere is no basis for making an assertion of this kind. 
 
Second , 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 wheat and wheat fl our exporters experiencing the distortions caused 
by specific duties. That is not encouraging for exporters planning to export wheat and wheat flour to 
Chile up to December 2007. Argentina recalls that until then the floor price will remain at US$128 per 
tonne. Therefore, the probability indicated by Chile is not at all encouraging.  Third , 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. 
 
Fourth , even if Chile's reasoning had any validity, Ch ile's calculations are wrong. Chile takes only 
the lowest future floor price of all those sche duled under Decree 831/2003, i.e., US$114 per tonne, 
corresponding to 2014. Chile should have incorporated in its calculations a weighting that takes into 
account the time during which the price of Argentine bread wheat lay below the future floor prices not 
considered by Chile: 126, 124, 122, 120, 118 and 116 US$ per tonne. As those prices are all higher 
                                                     
 
208 Exhibit ARG-6. 
209 Rebuttal by Argentina, paras. 231 to 238. WT/DS207/RW 
Page F-66  
 
  than US$114 per tonne, the percentage should logically  be higher than the 23.9 per cent calculated by 
Chile.  Argentina reiterates that the way in which the floor  and ceiling of the modified PBS are established 
has transformed the PBS into a more rigid and inflexible system.
210 
 
Chile concludes in paragraph 192 by referring to a process of gradual reduction of border protection 
of wheat, stating that "[B]oth of the above results – that is, the reduction of duties by 2014 and the 
lesser probability of duty assessment – demonstrate th at the current policy has an in-built process of 
gradual reduction of border protection of wheat".211 (original underlining) 
 
To sum up , Chile wrongly disregards the fact that the level of specific duties resulting from the PBS 
obviously depends on international pr ice levels, 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 modified PBS will be "less" inconsistent in the future because the inconsistency will arise on fewer 
occasions than at present, while basing its case on ca lculations made without providing the source of 
the evidence and without including most of the relevant period of application of the modified PBS up to 2014.   Moreover, Chile chooses to disregard the fact that  by keeping the floor and ceiling inflexible the 
modified PBS insulates the domestic market from in ternational price developments. This is the basis 
for its concluding that the modified PBS ("the 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. 
 In view of the above comments on Chile's explan ations in paragraphs 183 to 192 of its first 
submission, Argentina refers now to th e definition of the terms "insulation" versus  "stability".  
 
The definition of " insulation ", insofar as relevant, is: "protection of something from outside 
influences". The definition of " stability ", insofar as relevant, is: "whe n something is not likely to 
move or change".
212 
 Taking into account the definitions cited above and the fact that both Law 19.897 and Decree 
831/2003 make it mandatory for specific duties to  be established "… in terms which … allow 
domestic market stability
", the purpose of the amended PBS seems to be even worse than that alleged 
by Argentina. The amended PBS not only insulates or "protect Chilean market from international 
price developments" but what is worse, seeks not to allow domestic market prices "to move or change", despite international price developments. 
 
Therefore, it appears that the measures taken to comply refute by themselves Chile's argument 
regarding "gradual" market access improvement. 
                                                     
 
210 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. 
211 Chile's First Written Submission, paragraph 192. 
212 Both definitions from Cambridge Advanced Learner's Dictionary in 
http://dictionary.cambridge.org/.  WT/DS207/RW 
 Page F-67 
 
 
   
44. Argentina has stated in paragraph 241 of its first submission that "variability is 
inherent in the amended PBS since it incorporates a plan or formula that causes and ensures the automatic and continuous modification of the levies and, moreover, lacks the required 
transparency and predictability, in a manne r inconsistent with Article 4.2 of the Agreement on 
Agriculture ".  Could Argentina clarify whether, in its view, "variability of duties" and "lack of 
transparency and predictability" are two differen t and separate factors, or rather variability of 
duties will necessarily be linked to a lack  of transparency and predictability. 
 
Answer to Question 44
: 
 The Appellate Body stated that: 
 
"… 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 automatically and con tinuously.  Ordinary customs duties, by 
contrast, are subject to discrete chang es in applied tariff rates that occur 
independently, and unrelated to such an underlying scheme or formula. …"
213  
In addition the Appellate Body observed: 
 
"… [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 tran sparency 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 r estrict 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 cont ribute to distorting the prices of imports 
by impeding the transmission of international prices to the domestic market."
214 
From these statements by the Appellate Body it follows that: 
  (a) The presence of a formula causing automatic  and continuous vari ability of duties is a 
necessary condition for a particular measure to  be a "variable import levy" within the 
meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture ; and, moreover,  
  (b) the lack of transparency and the lack of predictability in the level of duties that will 
result from the application of variable import levies are additional  features that 
undermine the object and purpose of Article 4 of the Agreement on Agriculture , 
which is to achieve improved market acces s conditions for imports of agricultural 
products by permitting the application of ordinary customs duties only.  
 Therefore, the Appellate Body has clearly define d the necessary and the additional features of the 
variable import levies: the presence of a form ula causing automatic and continuous variability and
 the 
                                                      
213 Chile – Price Band System, Report of the Appellate Body, paragraph 233. 
214 Chile – Price Band System, Report of the Appellate Body, paragraph 234. WT/DS207/RW 
Page F-68  
 
  lack of transparency and predictability in the leve l of duties that will result from such measures. It 
results then that "variability of duties" and "lack of  transparency and predictability" are two different 
and separate factors. Argentina has shown how the amended PBS fulfils all the requisites and includes 
the features referenced by the Appellate Body to be characterized as a variable import levy.
215 
 45. Could Argentina elaborate on the claim it has presented under paragraph 4 of Article XVI of the WTO Agreement.  Could Argent ina formally identify the measure that would 
be relevant in order for the Panel to be ab le to make findings regarding this claim. 
 
Answer to Question 45
: 
 
Article XVI:4 of the WTO Agreement establishes that  "[E]ach Member shall en sure the conformity of 
its laws, regulations and administrative procedures with its obligations as provided in the annexed 
Agreements". (Emphasis added)  
 Thus, the relevant measures for the Panel to be ab le to make findings regarding Argentina's claim 
under paragraph 4 of Article XVI of the WTO Agre ement, are both Law 19.897 and Decree 831/2003 
enforcing the amended PBS. As Chile itself states, Decree 831/2003 is the regulations  of 
Law 19.897.
216 
 Insofar as the amended PBS enforced by Law 19. 897 and Decree 831/2003 infringes both Article 4.2 
of the Agreement on Agriculture and the second sentence of Article II:1(b) of the GATT 1994, Chile 
has not ensured the conformity of its Law 19.897 and Decree 831/2003 with its obligations under the 
covered Agreements. 
 In the case United States – 1916 Anti-Dumping Act , the Panel established that: 
 
"… if a provision of an 'annexed Agreement' is breached, a violation of Article XVI:4 
immediately occurs.  GATT 1994 is one of  the 'annexed Agreements' within the 
meaning of Article XVI:4.  Since we found that provisions of Article VI of the GATT 1994 has been breached, we conclude th at, by violating this provision, the 
United States violates Article XVI:4 of the WTO Agreement".
217 
Thus, being the amended PBS incons istent with Article 4.2 of the Agreement on Agriculture  and the 
second sentence of Article II:1(b) of the GATT 1994, Chile violates Article XVI:4 of the WTO 
Agreement since, while the amended PBS remains in fo rce, Chile is not ensuring the conformity of its 
Law 19.897 and Decree 831/2003 with its obligations under the WTO Agreements.  
46. Can Argentina describe the evolution of Chilean wholesale prices of wheat and wheat 
flour over the period January 2004 to February 2006?  (See paragraph 154 of Chile's first 
submission.)  
Answer to Question 46
: 
 
As stated in Argentina's Answer to question 8(c) above, "wholesale prices" should not be used for any 
analytical purpose in this dispute. This variable is  not relevant in this case. Neither the Panel nor the 
Appellate Body addressed the notion of "wholesale prices"  in this dispute. The relevant parameter of 
comparison is between the FOB price and the entry price,  as the Appellate Body established in 
                                                      
215 First Written Submission by Argentina, paras. 236 to 283. Rebuttal by Argentina, paras. 138 to 159. 
216 See, for example, First Written Submission by Chile, paras. 31 and 32. 
217 WT/DS162/R, Report of the Panel, paragraph 6.287.  WT/DS207/RW 
 Page F-69 
 
 
  paragraph 260 of its Report,  Chile incorporates a new variable ne ver addressed by the Appellate Body 
nor by Argentina: the wholesale price . 
 Even if, in spite of the various reasons that, in its  answer to question 8 (c) above, Argentina provided 
for not using "wholesale prices" for any analytical  purpose in this dispute the Panel found that 
wholesale prices could be considered, it is difficult fo r Argentina to describe th e evolution of Chilean 
wholesale prices of wheat and wheat flour over the period addressed by the Panel because all the evidence that Chile has provided for the period Ja nuary 2004 to February 2006 is un unsupported 
graph.   
First , the graph in para. 154 of Chile's  first written submission only addresses wheat  wholesale prices. 
Wheat flour  wholesale prices are not addressed in that graph. In fact, wheat flour wholesale have not 
been addressed in this dispute at all (at least not by Chile, Argentina the Appellate Body or the Panel).   
 Second , Chile never provided any chart or any further information that could clarify the numerical 
data that could be the basis for the wheat "wholesal e prices" line plotted in that graph, as Argentina 
did with all of its Exhibits. Argentina has expl ained all the problems with this graph and the 
conclusions Chile draws from it.
 218 Furthermore, it is not clear what is the source of that graph. Chile 
states that "The sources of the information, both da ily and monthly, are clearly indicated in all cases 
(SAGPyA and ODEPA)"219, but it is clear that in para. 154 of Chile's first written submission there is 
no indication of the sources of the information used to produce the graph. 
 
Furthermore, there are inconsistencies in what Chile apparently is purporting to show. It is not clear 
whether Argentine FOB price is compared against "Chilean wheat prices", "wheat wholesale prices" 
or just against the "entry price":  
• In paragraph 154 Chile states: "The graph below shows the trends in Chilean wheat 
prices  and in f.o.b. prices of Argentine bread wheat…" 
• The legend of the graph reads "wheat wholesale price " 
• In paragraph 155 Chile states: "What clearly emerges is that the entry price of wheat 
exhibits the same behaviour as its f.o.b. price…" 
During the meeting of this Panel with the parties,  Chile exposed in a PowerPoint presentation what 
appeared to be the same graph. Argentina specifically asked, through an oral question, if that graph 
showed the same wheat wholesale prices Chile had in cluded in its graph in paragraph 154 of its first 
submission. Chile's answer was affirmative. Ho wever, in spite of Chile's announces during the 
audience, Argentina neither received an electronic or  paper copy of that graph nor was provided with 
the remaining PowerPoint computer presentation. In fact, Argentina has never seen the numerical 
basis of that graph . 
 
In spite of all these inconveniences resulting from Chile 's lack of clarity and, what is worse,  
supporting evidence, Argentina made its best effort  to describe what it can be observed in that 
graph.220  
 A careful study of the graph, including a comparis on of the trends of each the "bread wheat FOB 
Argentine port price" (lower line) and the "wheat  wholesale price" (upper line), reveals that during 
                                                     
 
218 See Rebuttal by Argentina, para. 61- 66 and Oral Statement by Argentina 30-31. 
219 See Rebuttal by Chile, footnote 25. 
220 Rebuttal by Argentina, paras. 68-70. WT/DS207/RW 
Page F-70  
 
  most of the period both prices moved in different  directions. In fact, both prices showed an opposite  
trajectory during the following periods:  
• February-March 2004 
• March-April 2004 
• May-June 2004 
• June-July 2004 
• July-August 2004 
• August-September 2004 
• September-October 2004 
• December 2004-January 2005 
• January-February 2005 
• February-March 2005 
• April-May 2005 
• May-June 2005 
• July-August 2005 
• September-October 2005 
• November-December 2005 
 Therefore, Chile statements that "[t]he price cu rves indicate that…the variation [of Chilean wheat 
prices] is very similar to that of export prices of Argentine wheat …"
221 and "the entry price of wheat 
exhibits the same behaviour as its f.o.b. price, which demonstrates price transmission and therefore 
the connection between the Chilean  and the international market"222 are baseless from every point of 
view. 
                                                      
221 Chile First Written Submission, para. 154. 
222 Chile First Written Submission, para. 155.  WT/DS207/RW 
 Page F-71 
 
 
  ANNEX F-2 
 
REPLIES BY ARGENTINA TO QUESTIONS POSED 
BY THE EUROPEAN COMMUNITIES  
  
Argentina thanks the EC for its contribution to the further clarification of the substantive obligations 
derived from Article 4 of the Agreement on Agriculture.   
102. Argentina argues that the Price Band System  (PBS) is not predicta ble, because traders 
cannot predict future developments of commodity markets, and hence cannot calculate what the 
PBS duties will be in the future.     (a) The EC notes that a WTO Member may:  
(i) increase an applied duty within a bound rate without notice (Article X 
GATT only requires prompt publication); and, 
 (ii) impose anti-dumping duties or apply a provisional safeguard measure in 
certain circumstances without notice being provided to economic operators. 
 
 Assuming, as Argentina argues, that  traders cannot predict future price 
developments (despite e.g. the existen ce of futures markets etc) but, accepting 
that all the other elements of the functioning of the PBS are made public, what makes the PBS less predictable
 than the examples of governmental action given 
in (i) and (ii) above?  
 
Answer to Question 102(a) : 
 
Argentina's argument is that "the lack of transparen cy and the lack of predictability of the duty level  
that result from the amended PBS are additional f eatures that undermine the object and purpose of 
Article 4 of the Agreement on Agriculture".1 This is because 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, as the case is with the amended PBS.2 The Appellate Body found the original PBS inconsistent 
because, inter alia , the lack of transparency and the lack of predictability of the duty level  was an 
additional feature undermined the objective of achieving improved access conditions for imports of 
agricultural products.3  
 With regard to the EC question, the Appellate Body stated, "… the existence of [a] tariff binding will 
not eliminate the distortion in the transmission of world market prices to Chile's market … where the 
combination of the duties resulting from Chile's price band system, when added to the applied 
ad valorem duty rate, remains below Chile's bound rate of 31,5 per cent ad valorem ".
4 
 
                                                      
1 First Written Submission by Argentina, para. 271 and ss. (underline added). 
2 Rebuttal by Argentina, para. 128 and ss., Oral Statement by Argentina, para. 76 and ss. 
3 Chile – Price Band System , Report of the Appellate Body, para. 234. 
4 Chile – Price Band System , Report of the Appellate Body, para. 257. WT/DS207/RW 
Page F-72  
 
  Argentina has extensively explained why the le vel of duties resulting from the amended PBS is 
neither transparent nor predictable.
5 In particular, the answer to the EC question in relation to point (i) 
was provided in Argentina's Oral Statement, para 70 and ss.  In particular, it is obvious that applied duties can change and no one can guarantee otherwise. That is 
what happens with any ordinary customs duty. Ho wever, unlike the amended PBS, ordinary customs 
duties are expressed in the form of ad valorem  or specific duties rates, are not similar to variable 
import levies or minimum import prices, do not incl ude a formula that causes import duties to vary 
automatically and continuously and, on top of that , they are transparent and predictable. The presence 
or absence of a cap to the tariff binding is not essen tial in determining whether or not Chile's PBS is 
similar to a measure prohibited by Article 4.2. Th at argument could not pers uade the Appellate Body 
during the original proceeding.  In the case of the amended PBS, what is guaranteed  is that, due to the PBS, if the required conditions 
are met, an exporter will mandatorily face a different duty every two months.
6 In fact, contrary to 
what Chile has asserted in its submissions7, the PBS Law and Regulation give no discretion  to Chile 
to decide whether or not to impose the duties: if th e reference prices fall below the band floor, specific 
duties will be levied. In fact, the lack of transparency and predictability are inherent  to the amended 
PBS, because of the reasons  Argentina has described.  
 With respect to point (ii) of EC's questions, it is strange that the EC tries to compare the amended PBS 
with anti-dumping duties when Article II:2 GATT 1994 explicitly provides that anti-dumping duties 
are not
 ordinary customs duties. In that sense, the Appellate Body said: 
 
As context for this phrase in Article 4.2 of the  Agreement on Agriculture, we observe that Article II:2 of the GATT 1994 sets out examples of measures that do  not  qualify 
as either "ordinary customs duties" or "o ther duties or charges".  These measures 
include charges equivalent to internal taxes, anti-dumping and countervailing duties, and fees or other charges commensurate with the cost of services rendered.  They too may be based on the value and/or vol ume of imports, and yet Article II:2 
distinguishes them from "ordinary customs duties" by providing that "[n]othing in [Article II] shall prevent any Member from imposing" them "at any time on the 
importation of any product".
8 
 (b) Again, assuming that traders cannot predict future price developments, and 
that, for commodity products, the actual  price which an operator sells for is 
determined by international markets, how can a trader predict the monetary 
equivalent of an ad valorem  tariff ?  To take an example, with an ad valorem  
tariff of 30%, if international prices are at $100 the tariff will be $30, if they are 
at $150 the tariff will be $45 and if they a re at $50 the tariff will be $15.  Recall 
also that commodity prices can fluctuate substantially in periods significantly 
shorter than 2 months.  Can Argentina explain why the fixed specific duties of the PBS are less predictable
 than the monetary equivalents of ad valorem  tariffs? 
 
                                                      
5 First Written Submission by Argentina, para. 271 an d ss., Rebuttal by Argentina, para. 89 and ss, 138 
and ss. 
6 Rebuttal by Argentina, para. 145. 
7 First Written Submission by Chile, para. 93 and Rebuttal by Chile para. 101 and 120. 
8 Chile – Price Band System , Report of the Appellate Body, para. 276.  WT/DS207/RW 
 Page F-73 
 
 
  Answer to Question 102(b) : 
 
One of the differences betw een the amended PBS and an ad valorem duty is that, as stated before, in 
the case of the amended PBS, what is guaranteed  is that, due to the PBS, if the required conditions are 
met, an exporter will mandatorily face a different duty every two months.9  
 
The lack of predictability of the amended PBS is not similar to the predictability ad-valorem duties 
can offer. This is because ad valorem duties do not change as a result of a pr e-established mathematic 
formula inherent to those measures that guarantees the duties will vary when international prices in 
relevant markets fall, as a consequence of a floor  and a ceiling price, reference prices based on 
predetermined markets and qualities of concern, a fact or of 1,56 and a coefficient of 0,985. Therefore, 
ad-valorem duties are more predictable.  Specific duties are not "fixed" as the EC states. They  are variable, and are liable to vary every two 
months as far as the reference price is below the floor  price. If there's any predictability related to the 
specific duties, quod non , that predictability is short lived, because it will end after 60 days. In 
accordance to what the United States stated during the meeting of Panel with third parties, we cannot 
see, nor Chile has identified, a basis for a distin ction between a variation once every two months 
rather than once every week.
10  
 As regards for the monetary equivalent the EC points out, as Argentina already pointed out, the 
amount levied by ordinary specific duties does not vary when international prices change. In those 
cases, what varies is the amount of the duty in relative terms (percentage ) with respect to the 
international price but, usually, the absolute amount  does not change. In the case of the amended PBS, 
following the decline of the reference prices below the price band floor, the amount of the duty varies 
in relative and absolute
 terms.11 
 
103. In para. 273 of the Appellate Body report in the original dispute, the Appellate Body 
states:  
Surely Members will ordinarily take into  account the interests of domestic 
consumers and domestic producers in setting their applied  tariff rates at a 
certain level.  In doing so, they will doubt less take into account factors such as 
world market prices and domestic price developments.  These are exogenous  
factors,  as the Panel used that term .  According to the Panel, duties that are 
calculated on the basis of such exogenous  factors are not ordinary customs 
duties.  This would imply that such duties be prohibited  under Article II:1(b) of 
the GATT unless recorded in the "other duties or charges" column of a 
Member's Schedule.  We see no legal basis for such a conclusion.253 
Footnote 253 reads: We stated in  Argentina – Textiles and Apparel , supra ,[  ], para. 46, that "a tariff 
binding in a Member's Schedule provides an upper limit on the amount of duty that may be imposed, and a Member is permitted to apply a rate of duty that is 
less than that provided for in its Schedule."  Thus, the fact that the "cap" 
(recorded in the ordinary customs duty" column of a schedule) is a specific or an ad valorem  duty does not mean that a Member will not apply a tariff at a lower 
rate, or that the rate it applies will not be based on what the Panel calls 
                                                     
 
9 Rebuttal by Argentina, para. 145. 
10 Oral Statement by the United States, para. 13. 
11 Oral Statement by Argentina, para 60. WT/DS207/RW 
Page F-74  
 
  "exogenous " factors.  Indeed, as we noted above, it is difficult to conceive that a 
Member would ever make changes to its applied tariff rate except based on  
exogenous factors such as the interests of  domestic consumers or producers.  
[underlining added] 
 (a) If a Member may change its tariff on the basis of developments in world 
markets, and that tariff is considered an "ordinary customs duty", why is it that, 
when a tariff is changed on the basis of a formula which reflects developments in world markets, it is not an "ordinary customs duty" ? (Argentina argues that it is a "similar border measure other than [an] ordinary customs dut[y]" in the sense of footnote 1 to Article 4.2.) 
 
Answer to Question 103(a)
: 
 
First, the object of these proceedings are not the resulting duties, but the underlying measure, the amended PBS.  
 
Second, contrary to what the EC state, the fact that a Member may change its tariff on the basis of 
developments in world markets does not mean that that tariff is an "ordinary customs duty". Although 
the Appellate Body said that the duties resulting from the original PBS took the same form as 
"ordinary customs duties", it underlined that it was not saying that they were  ordinary customs duties 
and that it was not trying to qualify them as "ord inary customs duties" or as "any other duties or 
charges"
12 
 Indeed, the Appellate Body said that "… the fact th at the duties that result from the application of 
Chile's price band system take the same form as 'ordinary customs duties' does not imply that the 
underlying measure is consiste nt with Article 4.2 of the Agreement on Agriculture "
13 
 
Third, it is obvious that Members can and will do ubtless take into account factors such as world 
market prices and domestic price developments. However, the Appellate Body clearly stated that "[o]rdinary customs duties…are subject to discret e changes in applied tariff rates that occur 
independently, and unrelated to…a n underlying scheme or formula".
14 There is no doubt that the 
amended PBS is related to a scheme or formula that cau ses the variation of the resulting duties. 
Furthermore, according to the Appellate Body15, in order to be an ordinary customs duty, the amended 
PBS should be expressed in the form of ad valorem  or specific rates. However, A plain reading of 
Law 19.897 and Decree 831/200316, the legislation enforcing the amended PBS, shows that this 
measure is not expressed in the form  of " ad valorem  or specific rates". There is no ad valorem or 
specific rate expressed in those measures. To the contrary , the amended PBS is a complex mechanism 
that, as a border measure, has no resemblance with an ordinary customs duty.  
 
 (b) In Argentina – Textiles and Apparel  the Appellate Body held that the DIEM 
system applied by Argentina was consiste nt with Article II.1(b) GATT (provided 
kept within the relevant binding), and thus an "ordinary customs duty". The DIEM system consisted of the calculation of specific duties derived from 
"representative international prices" which were "adjusted from time to time".   
 
                                                     
 
12 Chile – Price Band System , Report of the Appellate Body, footnote 254. 
13 Chile – Price Band System , Report of the Appellate Body, para. 279. 
14 Chile – Price Band System , Report of the Appellate Body, para. 233. 
15 Chile – Price Band System , Report of the Appellate Body, para. 277. 
16 See ARG-1 and ARG-2.  WT/DS207/RW 
 Page F-75 
 
 
    With the exception of the fact that the DIEM system representative prices were 
re-calculated from "time to time" and the PBS duties are re-calculated according to a known schedule, can Argentina identify any material differences between the DIEM system and the PBS that leads to the conclusion that one is an "ordinary customs duty" and the other is not ? 
 
Answer to Question 103(b)
: 
 
It is remarkable that the case the EC recalls s upports Argentina's and not Chile's arguments in these 
proceedings. 
 
First, the EC errs when stating that In Argentina – Textiles and Apparel  the Appellate Body held that 
the DIEM system applied by Argentina was consistent  with Article II.1(b) GATT. Contrarily, the 
Appellate Body finding in that case was that the DI EM regime was inconsistent with Argentina's 
obligations under the WTO: 
 
Argentina has acted inconsistently  with its obligations under Article II:1(b), first 
sentence, of the GATT 1994, because the DIEM regime, by its structure and design, results, with respect to a certain range of import prices in any relevant tariff category 
to which it applies, in the levying of customs duties in excess of the bound rate of 35 per cent ad valorem in Argentina's Schedule
17 
Second, the issue of whether the DIEM by itself, the underlying measure was or was not an ordinary 
customs duty was not  addressed by the Appellate Body. That issue was not decided by the Appellate 
Body18 and was not even an issue raised in appeal.19 
 Third, EC's interpretation of the Appellate Body's fi nding is simply wrong. Contrarily to what the EC 
imply, the Appellate Body did not conclude that the Argentine  DIEM regime was an ordinary customs 
duty, even if kept within the relevant binding.  Along its report, the Appellate Body was careful to  never refer to the DIEM regime as an ordinary
 
custom duty. Rather, when referring to the duties resulting from the DIEM regime, it called them just 
"customs duties", without the word "ordinary". This is very clear, inter alia , from its conclusions: 
 
For the reasons set out in this Report, the Appellate Body …modifies the Panel's findings in paragraphs 6.31 and 6.32 of the Panel Report by concluding that the 
application of a type of duty different from the type provided for in a Member's Schedule is inconsistent with  Article II:1(b), first sentence, of the GATT 1994 to the 
extent that it results in ordinary
 customs duties being levied in excess of those 
provided for in that Member's Schedule.   In this case, Argentina has acted 
inconsistently with its obligations under Ar ticle II:1(b), first sentence, of the GATT 
1994, because the DIEM regime, by its structur e and design, results, with respect to a 
certain range of import prices in any relevant  tariff category to which it applies, in the 
levying of customs duties  in excess of the bound rate of 35 per cent ad valorem in 
Argentina's Schedule (emphasis and underline added)20 
As can be seen from the cited finding, the Appellate  Body only referred to "ordinary" customs duties 
when addressing Member's obligation not to apply a type of duty different from the type provided for 
                                                      
17 Argentina – Textiles and Apparel , Report of the Appellate Body, para. 87 (a) (underline added). 
18 See Argentina – Textiles and Apparel , Report of the Appellate Body, para. 87. 
19 Argentina – Textiles and Apparel , Report of the Appellate Body, para. 38. 
20 Argentina – Textiles and Apparel , Report of the Appellate Body, para. 87. WT/DS207/RW 
Page F-76  
 
  in a Member's Schedule to the extent that it results  in ordinary customs duties being levied in excess 
of those provided for in that Schedule, in viol ation of Article II:1(b), first sentence, of the 
GATT 1994. However, when addressing the DIEM regime resulting duties, the Appellate Body 
referred to them just as "customs duties".
21  
 
The result is that this finding supports Argentin a's arguments in these proceedings. Probably, in 
Argentina – Textiles and Apparel  the Appellate Body saw the implications of finding the DIEM 
regime resulting duties as "ordinary" customs duti es, and refrained from making such a finding taking 
into account the issue was not under appeal.   
                                                     
 
21 See also Argentina – Textiles and Apparel , Report of the Appellate Body, para. 55.