WT/DS207/RW 
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  ANNEX B 
 
THIRD PARTY SUBMISSION BY BRAZIL 
(12 MAY 2006) 
 
 
INTRODUCTION 
 
 As stated during the original Panel and the Appe llate review stages, Brazil's interest in this 
dispute focuses on the operation of the Price Band System (PBS), its implications on the flow of 
commerce and its legality vis-à-vis  the multilateral trading rules. Th e impact of such a measure and 
the fact that other products (wheat, wheat flour a nd sugar) are still subject to it motivated Brazil to 
submit once again its views on the case before this Panel.1 
 2. Chile claims that the adoption of Law nr. 19. 897/2003 and of Decree nr. 831/2003 enacted by 
the Minister of Finance brought its Price Band Syst em into conformity with its obligations under 
Article 4.2 of the Agreement on Agriculture, as recommended by the DSB.
2 While this is true in 
respect of edible vegetable oils – and Argentina recognizes it3 -, the same cannot be said of other 
products still within the scope of the Chilean BPS,  namely wheat and wheat flour, which were the 
object of the original Panel, though the PBS also affects sugar. Indeed, in Brazil's opinion, compliance 
with the DSB recommendations and rulings would have  been achieved in regard to those two products 
had Chile dealt with them in the same way it did wi th edible vegetable oils, simply by extinguishing 
the Price Band System.   3. Argentina argues that the Chilean Price Band Sy stem is inconsistent, as such and as applied, 
with Article 4.2 of the Agreement on Agri culture; Article II:1(b) of the GATT 1994 and 
Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization. Brazil will 
center its analysis on the consistency of said mechanism with Article 4.2 of the Agreement on 
Agriculture and Article II:1(b) of the GATT 1994. This  focus, however, should not prejudge any view 
Brazil may have on the other claim made by Argent ina, relating to Article XVI:4 of the Marrakesh 
Agreement Establishing the World Trade Organization.  THE APPELLATE BODY'S CONCLUSIONS  
 
4. The Appellate Body's findings and conclusions in the original dispute could not be clearer. In 
regard to Article 4.2 of the Agreem ent on Agriculture, the Appellate Body: 
 
• upheld the Panel's finding, in paragraphs 7.47 and 7.65 of the Panel Report, that 
Chile's price band system is a border measure similar to variable import levies and minimum import prices; 
 
• upheld the Panel's finding, in paragraphs 7. 102 and 8.1(a) of the Panel Report, that 
Chile's price band system is  inconsistent with Article  4.2 of the Agreement on 
Agriculture.
4 
 
                                                      
1 In spite of the fact that Chile's price band system al so applies to sugar, in its request for establishment 
of this Panel (WT/DS207/18) and throughout the original proceedings, Argentina mentioned two of the products 
subject to the PBS only (w heat and wheat flour).  
2 See para. 4 of Chile's first written submission. 
3 See para. 8 of Argentina' s first written submission. 
4 See para. 288 of the Appellate Body Report. WT/DS207/RW 
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  5. In order to assess the consistency of Chile's Price Band System with the aforesaid article, the 
Panel and the Appellate Body examined the definiti on of "similarity". They also found necessary to 
identify the categories with which the system should be  compared, deciding to resort to the same ones 
that were identified by Argentina: "variable impor t levies" and "minimum import prices", within the 
meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture. 
 
6. With a view to determining whether the PB S would fall under the first category of measures, 
"variable import levies", the Appellate Body went  on to confirm that, whereas the presence of a 
formula causing automatic and continuous va riability of the duties is a necessary
 condition for a 
particular measure to be a "variable import levy ", this variability is "by no means a sufficient  
condition for a particular measure to be a variable import levy"5, as meant by footnote 1. "The lack of 
transparency and predictability will also contribute to distorting the prices of imports by impeding the 
transmission of international prices to the domestic market".6  
 7. Similarly, this same standard, lack of tran sparency and predictability, was applied by the 
Appellate Body in examining whether the PBS could be characterized as a "minimum import price". 
The Appellate Body considered "minimum import pri ce" as referring generally to the lowest price at 
which imports of a certain product may enter a Member's domestic market.
7 
  8. The Panel and the Appellate Body understood "lack of transparency and predictability" to 
mean that "no published legislation or regulation in Chile sets out which international markets are 
used for the calculation of the PBS values and refere nce price, or how the "usual import costs" which 
are added to the f.o.b. prices are calculated". Exporter s, in this case, could "be expected to encounter 
serious difficulties in their commercial planning effort s in a system where weekly variations in duties 
are based on factors unknown. […] Such lack of pred ictability must affect the competitive conditions 
of imports vis-à-vis  domestic production".
8  
 
9. Therefore, considering that the formul a contained in that system resulted in:  
 
• automatic and continuous variability of the duties and; 
•  lack of transparency and predictability  in the level of duties resulting from the 
application of such measures, 
 
the Panel and the Appellate Body co ncluded that the original Chilean Price Band System was a border 
measure similar to a variable import levy and a minimum import price, other than ordinary customs duties, within the meaning of footnote 1 to Article  4.2 of the Agreement on Agriculture falling under 
the prohibited categories of measures listed therein. The Chilean PBS was, thus, a measure of the kind which has been required to be converted into ordinary customs duties.  And, "by maintaining a measure which should have been converted, Chile h as acted inconsistently with Article 4.2 of the 
Agreement on Agriculture".
9  
 
THE NEW CHILEAN PRICE BAND SYSTEM 
 
10. In order to comply with the DSB recomme ndations and rulings, Ch ile ceased to apply the 
price band system to edible vegetable oils. As to wheat and wheat flour, it adopted Law 
nr. 19.897/2003 and Decree nr. 831/2003, which wo uld have purportedly implemented those rulings 
by means of: 
                                                      
5 See para. 234 of the Appellate Body Report. 
6 Id. ib . 
7 See para. 236 of the Appellate Body Report. 
8 See para. 7.44 of the Panel Report. 
9 See para. 7.102 of the Panel Report.  WT/DS207/RW 
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• eliminating the "variability" inherent in the measures10 and 
• providing the PBS with transparency and predictability. 
 11. As regards "variability", Chile argues that unde r the new PBS the specific duty, rebate or their 
non-application are now established for a two-month period, without varying every week in 
accordance with the reference price, as was the case before. During this two-month period, the 
specific duty is applicable to every import transa ction, with no variation and "regardless of the 
transaction price".
11 Furthermore, today, the specific duties, rebate or their non-application are 
determined by a decree of the Minister of Finance, whereas in the previous system there was no need 
for a legislative or an authority act to set out said duties, since they would be established and vary in 
an automatic and continuous manner.12  
 
12. Chile contends that the twelve-month automa tically and continuously variable specific duty 
was substituted by a specific duty that is established by decree or an act of an authority (therefore 
supposedly no longer automatic), which remains fi xed for periods of two months. By purportedly 
eliminating the automatic and continuous nature of the specific duties and changing the period of 
validity of i) the reference price, from one week to two months13, and ii) the bands, from one to eleven 
years, Chile claims to have eliminated the va riability aspect of the BPS, as well its lack of 
transparency.   13. Even assuming, for the sake of argument, th at the system is more transparent after Law 
nr. 19.897/2003 and Decree nr. 831/2003, transparency alone is not sufficient to render the PBS 
consistent with the multilateral trading rules.  
 14. With respect to the lack of  predictability, Chile contends th at the 11-year bands and the two-
month specific duties may provide the e xporter with the necessary predictability  of the level of 
specific duty to be paid, considering that the duties,  rebates or their non-application are established for 
a span long enough to afford security to the exporter.
14  
 15. This is only partially true. First, because the 11-year period has the side effect of aggravating 
the distortion of domestic price vis-à-vis  international ones. While such a long period may afford 
some predictability, the new PBS is more rigid 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 
significant 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 SBP (the bands themselves) will remain virtually unchanged fo r more than a decade, preventing the fluctuation 
of international prices from being transmitted to the Chilean market.  
 
16. Second, the new PBS contributes to distorting the prices of imports even more, inasmuch as a 
new coefficient is added to the formula used to calcu late the duty level. Under the previous system, if 
the weekly reference price fell be low the lower threshold of the price band, a specific duty equal to 
the difference between the reference price and the lower threshold would be levied.
15 In the current 
system, the specific duty level is magnified by  the introduction of a new unexpected multiplier 
consisting of 1 plus the general ad valorem  duty in force.  
                                                      
10 See para. 92 of Chile's first written submission 
11 Ibid.,  para. 93  
12 Ibid., para. 92 
13 See para. 21 of the Appellate Body Report and para. 39 of Chile's first written submission. 
14 See para. 143 of Chile's first written submission .  
15 See para. 29 (b) iii of the Appellate Body Report.  WT/DS207/RW 
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17. As Argentina correctly points out,  
"el esquema de las bandas, con un piso y un techo en relación a un precio de referencia, sumado a un derecho específi co, según la diferencia entre aquellos 
parámetros, se ha mantenido inalterado. Es decir, siguen existiendo los parámetros de 
piso y techo y la figura de los precios de referencia".
16 
18. Brazil is of the view that the changes introduced in the system by Law nr. 19.897/2003 and 
Decree nr. 831/2003 were cosmetic ones. They are insufficient to render the Chilean Price Band 
System consistent with multilateral trading rules, since the fundamental elements of the mechanism 
remained unchanged. The current design of the PBS aggravates the already existing disconnection 
between domestic from international price developments, thus impedi ng more rigidly the transmission 
of world market prices to the domestic market.   19. The revised PBS still resorts to measur es expressly prohibited by the Uruguay Round 
Agreements as contained in Article 4.2 footnote 1 of the Agreement on Agriculture. If the system 
operated until 2003 as a border measure similar to a variable levy modified weekly, now it behaves as 
a border measure similar to a variable levy revised every two months. The reference price (defined on a weekly or two-month basis), fixed by the Minister  of Finance, continues to be a border measure to 
some extent similar to a minimum import price acting as a substitute for the transaction value contained in the invoice. 
 
20. The PBS, under its current structure, results in controlling prices of imports in order to meet 
or converge to a target price that isolates the domes tic market from actual international prices.  Its 
effect is to create the type of barrier that Ar ticle 4.2 of the Agreement on Agriculture sought to 
eliminate. 
 
21. Were the Panel to confirm the insufficiency of  the measures taken by Chile to comply with 
the DSB rulings, then it would be finding that the Ch ilean Price Band System continues to operate as 
border measure similar to a variable levy that relies on reference prices which are not allowed under 
Article 4.2 footnote 1 of the Agreement on Agricu lture and that the present reference prices still 
constitute a border measure similar to minimum import prices, as set out in said article. Therefore, 
Chile would be maintaining measures of the kind  which had been required to be converted into 
ordinary customs duties at the end of the Uruguay Round.  And, again, by maintaining a measure 
which should have been converted, it would be in breach of Article 4.2 of the foregoing Agreement. 
 22. With a view to implementing the DSB decisi ons thoroughly, Chile could have treated wheat 
and wheat flour as it did with edible vegetable oils , putting an end once and for all to the applicability 
of the price band system to those products.
17  
 
ARGENTINA'S CLAIM UNDER ARTICL E II:1(B) OF THE GATT 1994 
 
23. Regarding Argentina's claim with respect to Article II:1(b) of the GATT 1994, Brazil stresses 
that the conclusion reached by the Appellate Body – to the effect that such a claim was not properly 
before the original Panel – should not prevent Ar gentina from presenting it before this Article 21.5 
Panel. As Argentina recalled,   
                                                     
 
16 See para. 36 of Argentina's first written submission 
17 Brazil notes that the same parameters (price bands, reference prices and the multiplier [1+ ad 
valorem  tariff in force]) are also applicable to sugar.  WT/DS207/RW 
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  "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 re lated to the measure that was the subject 
of the original proceedings. (…) Indeed, the utility of the review envisaged under 
Article 21.5 of the DSU would be seriously u ndermined if a panel were restricted to 
examining the new measure from the perspective of the claims, arguments and factual 
circumstances that related to the origin al measure, because an Article 21.5 panel 
would then be unable to examine fully the 'consistency with a covered agreement of 
the measures taken to comply', as required by Article 21.5 of the DSU".18 
24. In analysing Argentina's "claim" under Ar ticle II of the GATT 1994, the Appellate Body 
ruled on a formal matter, i.e., the difference between  making a general reference to an article in the 
Panel request and actually developing a claim under th at article. The situation would be different had 
the Appellate Body considered the measure itself vis-à-vis  the above-mentioned article.  
 25. Considering that neither findi ng nor conclusion were reached wi th respect to the substance of 
Article II:1(b) itself, Brazil sees no reason why Argentina should be prevented from including that 
claim in its request for the establishment of Article 21.5 Panel and elaborating it as appropriate before 
this Panel.   26. Moreover, Brazil is of the opinion that if th is Panel finds that the Chilean Price Band System 
remains inconsistent with Article 4.2 of the Agre ement on Agriculture, then it would also conclude 
that such a measure constitutes "oth er duties or charges", within the meaning of Article II:1(b) of the 
GATT 1994, and should have been scheduled under the column for "other  duties or charges" 
governed by the second sentence of Article II:1(b).  
CONCLUSION 
 
27. Brazil respectfully submits that the Panel fi nd the Chilean Price Band System continues to be 
in breach of Article 4.2 of the Agreement on Agricu lture and is inconsistent with the second sentence 
of Article II:1(b) of the GATT 1994.  
                                                     
 
18 See para. 41 of the Appellate Body Report on Canada – Aircraft  (Article 21.5 – Brazil) .