RESTRICTED
WORLD TRADE WT/CTE/W/53
30July1997
ORGANIZATION(97-3248)
Committee onTrade andEnvironment
GATT/WTO DISPUTE SETTLEMENT PRACTICE RELATING TOARTICLE XX,
PARAGRAPHS (b),(d)AND (g)OFGATT
Note bytheSecretariat
I. INTRODUCTION
1. ThisNote hasbeen prepared inresponse toarequest from theCommittee onTrade and
Environment forfactual background information onGATT/WTO dispute settlement practice relating
totheapplication ofArticle XXtoenvironmental measures. TheNote focuses onparagraphs (b),
(d)and(g)ofArticle XXoftheGeneral Agreement, which arethethree exceptions usually referred
toinso-called "environmental" disputes, thelatter termbeing understood inabroad sense, soasto
cover disputes relating totheprotection oftheenvironment assuch, butalsototheprotection ofhuman
health. Ithighlights themostimportant aspects ofrelevant panel reports, butisnotmeant tointerpret
them.
2. Under theGATT, sixpanel proceedings involving anexamination ofenvironmental measures
orhuman health-related measures under Article XXwerecompleted; outofthesixreports, threehave
remained unadopted.1Sofar,onesuchproceeding hasbeen completed under theWTO Dispute
Settlement Understanding.2Abriefdescription oftherelevant factsofeachcaseisprovided inAnnex 1.
3. Thepertinent textofArticle XXofGATT 1994 reads asfollows:
"Subject totherequirement thatsuchmeasures arenotapplied inamanner which would
constitute ameans ofarbitrary discrimination between countries where thesame conditions
prevail, oradisguised restriction oninternational trade, nothing inthisAgreement shallbe
construed toprevent theadoption orenforcement byanycontracting party ofmeasures:
"(b) necessary toprotect human, animal orplant lifeorhealth; ...
"(d) necessary tosecure compliance withlawsorregulations which arenotinconsistent
withtheprovisions ofthisAgreement, including ...;...
1"United States -Prohibition ofImports ofTuna andTuna Products from Canada", adopted on
22February1982,BISD29S/108(hereinafterTuna1982);"Canada-MeasuresAffectingExportsofUnprocessed
Herring andSalmon", adopted on22March 1988, BISD 35S/98 (hereinafter Salmon/Herring );"Thailand -
Restrictions onImportation ofandInternal Taxes onCigarettes", adopted on7November 1990, BISD 36S/200
(hereinafter Cigarettes ),"United States -Restrictions onImports ofTuna", circulated on3September 1991,
notadopted, BISD 39S/155 (hereinafter Tuna I);"United States -Restrictions onImports ofTuna", circulated
on16June1994, notadopted, DS29/R, (hereinafter Tuna II);"United States -Taxes onAutomobiles", circulated
on11October 1994, notadopted, DS31/R (hereinafter Auto Taxes ).
2"United States -Standards forReformulated andConventional Gasoline", Appellate Body Report andPanel
Report, adopted on20May 1996, WT/DS2/9 (hereinafter Gasoline ).WT/CTE/W/53
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"(g) relating totheconservation ofexhaustible natural resources ifsuchmeasures aremade
effective inconjunction withrestrictions ondomestic production ofconsumption; ..."
4. Itisimportant tounderline attheoutset thatnoneofthesepanels questioned theenvironmental
policy choices underlying themeasures atissue. IntheGasoline case,forinstance, thePanel underlined
that:
"itwasnotitstasktoexamine generally thedesirability ornecessity oftheenvironmental
objectives oftheClean AirActortheGasoline Rule. Itsexamination wasconfined tothose
aspects oftheGasoline Rulethathadbeenraised bythecomplainants under specific provisions
oftheGeneral Agreement. Under theGeneral Agreement, WTO Members were freetoset
theirownenvironmental objectives, buttheywerebound toimplement theseobjectives through
measures consistent withitsprovisions, notably those ontherelative treatment ofdomestic
andimported products".3
II. APPLICATION OFARTICLE XX
A. Relation Between Article XXandOther Provisions ofGATT
5. Dispute settlement practice hasdetermined thatArticle XXisalimited andconditional exception
from obligations under other provisions oftheGeneral Agreement, and,asopposed tothepositive
provisions oftheGeneral Agreement, doesnotestablish obligations initself.4Itfollows that(a)Panels
examine Article XXonlyifithasexpressly beeninvoked byaparty tothedispute5,(b)Panels have
interpreted Article XXnarrowly6,and(c)theparty invoking Article XXbears theburden ofproof
(forthislastpoint, seefollowing section).
6. Panels generally proceed toexamine Article XXoncetheyhavefound aviolation under the
substantive obligations oftheGeneral Agreement. Thisprinciple wasestablished intheSection 337
case, where thePanel concluded:
"Article XX(d) applies onlytomeasures inconsistent withanother provision oftheGeneral
Agreement, andthat,consequently, theapplication ofSection 337hastobeexamined first
3Gasoline ,Panel Report, paragraph 7.1.SeealsoTuna I,paragraphs 6.1-4 andTuna II,paragraphs 5.42-43.
4"United States -Section 337oftheTariff Actof1930", adopted on7November 1989, BISD 36S/345,
paragraph 5.9,andTuna I,paragraph 5.22.
5ThePanel report on"United States -Imports ofSugar from Nicaragua" (adopted on13March 1984,
BISD 31S/67, paragraph 4.4)noted that"theUnited States hadnotinvoked anyoftheexceptions provided for
intheGeneral Agreement permitting discriminatory quantitative restrictions contrary toArticle XIII. ThePanel
thereforedidnotexaminewhetherthereductioninNicaragua'squotacouldbejustifiedunderanysuchprovision".
Seealso"EEC -Regulation onImports ofParts andComponents", adopted on16May 1990, BISD 37S/132,
paragraph 5.11.
6TheTuna IIPanel Report recorded that"thelong-standing practice ofpanels has...been tointerpret this
provision [Article XX]narrowly, inamanner thatpreserves thebasic objectives andprinciples oftheGeneral
Agreemen t[referenceismadetothePanelReportson"Canada-AdministrationoftheForeignInvestmentReview
Act", adopted on7February 1984, BISD 30S/140, paragraph 5.20, and"United States -Section 337oftheTariff
Actof1930", adopted on7November 1989, BISD 36S/345, paragraph 5.27], DS29/R, paragraphs 5.26 and
5.38. SeealsotheAppellate Body'sdiscussion onthescope ofArticle XX(paragraph 13below).WT/CTE/W/53
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inthelightofArticle III:4. Ifanyinconsistencies withArticle III:4were found, thePanel
would thenexamine whether theycould bejustified under Article XX(d)".7
7. Inpractice, aparty toadispute canargue thatthecontested measure iscompatible withthe
substantive obligations oftheGATT, and,inthealternative, thatitiscovered under Article XX.Hence,
thefactthataparty invokes Article XXdoesnotconstitute "ipsofactoanadmission thatthemeasures
inquestion would otherwise beinconsistent withtheGeneral Agreement. Indeed, theefficient operation
ofthedispute settlement process required thatsucharguments inthealternative bepossible".8
B. Burden ofproof
8. Panels havetraditionally considered that,sinceArticle XXisanexception, itisuptotheparty
invoking ittodemonstrate thatthemeasure atissuemeets therequirements laiddown inthatprovision.
Practically, thepartymustdemonstrate thatthemeasure (a)fallsunder atleastoneofthetenexceptions -
paragraphs (a)to(j)-listed under Article XX,and(b)satisfies therequirements ofthepreamble, i.e.is
notapplied inamanner which would constitute "ameans ofarbitrary orunjustifiable discrimination
between countries where thesameconditions prevail", andisnot"adisguised restriction oninternational
trade".
9. IntheGasoline case, thePanel confirmed thisprinciple bystating that"astheparty invoking
anexception theUnited States boretheburden ofproof indemonstrating thattheinconsistent measures
camewithin itsscope".9Inthesamecase,theAppellate Body stated that"[t]he burden ofdemonstrating
thatameasure provisionally justified asbeing within oneoftheexceptions setoutintheindividual
paragraphs ofArticle XXdoesnot,initsapplication, constitute abuse ofsuchexception under the
chapeau, restsonthepartyinvoking theexception. Thatis,ofnecessity, aheavier taskthanthatinvolved
inshowing thatanexception, ...,encompasses themeasure atissue".10
7"United States -Section 337oftheTariff Actof1930", adopted on7November 1989, BISD 36S/345,
paragraph 5.9. Inanisolated case, thePanel started byexamining theapplication ofArticle XX,considering
that"ifArticle XX(d) applied, thenanexamination ofthequestion oftheconsistency ofthe[measure] withthe
other GATT provisions cited above would notberequired" ("United States -Imports ofCertain Automotive
Spring Assemblies", BISD 30S/107, paragraph 50,adopted on26May1983, ontheunderstanding thatitwould
not"foreclose future examination oftheuseofSection 337todealwithpatent infringement cases from thepoint
ofview ofconsistency withArticles IIIandXXoftheGeneral Agreement" (C/M/168, p.10);thisexamination
wascarried outbytheSection 337Panel).
8Tuna I,paragraph 5.22. SeealsotheGasoline case, where theUnited States argued that"theGasoline
Rulefellwithin thescope ofArticle XXwhether ornotitwasinconsistent withother provisions oftheGeneral
Agreement. Notallmeasures described byArticle XXwereinconsistent withtheGeneral Agreement. However,
ifthePanel accepted thattheGasoline Rule wasconsistent withother provisions oftheGeneral Agreement, in
particularArticleIII,itdidnotneedtodecidewhetherthemeasuresatissuealsofellunderArticleXX.ArticleXX
guaranteed inanyevent thatthese measures were notinconsistent withtheGeneral Agreement" (WT/DS2/9,
Panel Report paragraph 3.37). Thisargument wasnotcontested bythecomplaining parties, andthePanel did
notaddress itinitsfindings.
9Gasoline ,Panel Report paragraphs 6.20, 6.31and6.35. Seealso"Canada -Administration oftheForeign
Investment Review Act", adopted on7February 1984, BISD 30S/140, paragraph 5.20, and"United States -
Section 337oftheTariff Actof1930", adopted on7November 1989, BISD 36S/345, paragraph 5.9.
10Gasoline ,Appellate Body Report, p.22-23. Note alsotheAppellate Body'sfindings ontheburden of
proof inthecase"United States -Measures Affecting Imports ofWoven Wool Shirts andBlouses From India",
WT/DS33/AB/R, adopted on23May 1997.WT/CTE/W/53
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III. THE PREAMBLE OFARTICLE XX
A. Function andScope ofthePreamble11
10. Under theGATT, onlythefirsttwopanels addressing Article XXmade findings under the
preamble (seebelow paragraphs 14-15). Thisisexplained bythefactthat,afterwards, panels developed
thepractice toexamine firstwhether themeasure atissue fellunder oneofthetenexceptions listed
inArticle XX. However, untiltheAppellate Body report intheGasoline case, nomeasure passed
thisfirststep,andasaresult panels considered thatthere wasnoneedtoproceed tothechapeau.
11. Astowhatrequired justification under thechapeau, thePanel Report on"United States -Imports
ofCertain Automotive Spring Assemblies" noted that"thePreamble ofArticle XXmade itclearthat
itwastheapplication ofthemeasure andnotthemeasure itself thatneeded tobeexamined".12This
finding wasconfirmed bytheAppellate Body intheGasoline case:"[t]he chapeau byitsexpress terms
addresses, notsomuch thequestioned measure oritsspecific contents assuch, butrather themanner
inwhich thatmeasure isapplied".13
12. Inthesame case, theAppellate Body considered thepurpose andobject ofthepreamble of
Article XX. Referring tothenegotiating history ofthatprovision, which indicates thatthepreamble
wasmeant "toprevent abuse oftheexceptions ofArticle [XX]"14,theAppellate Body noted:
"[t]he chapeau isanimated bytheprinciple thatwhile theexceptions ofArticle XXmaybe
invoked asamatter oflegalright, theyshould notbesoapplied astofrustrate ordefeat the
legalobligations oftheholder oftherightunder thesubstantive rulesoftheGeneral Agreement .
Ifthose exceptions arenottobeabused ormisused, inother words, themeasures falling within
theparticular exceptions mustbeapplied reasonably, withdueregard bothtothelegalduties
oftheparty claiming theexception andthelegalrights oftheother parties concerned".15
13. TheAppellate Body alsoexamined thescope ofArticle XX,i.e.whether Article XXcanbe
invoked asanexception toallsubstantive obligations under theGATT, oronlytosome ofthem. It
ruled infavour oftheformer approach, noting that:
"[t]he exceptions listed inArticle XX...relate toalloftheobligations under theGeneral
Agreement:thenationaltreatmentobligationandthemost-favoured-nationobligation,ofcourse,
butothers aswell. Effect ismore easily given tothewords "nothing inthisAgreement", and
Article XXasawhole including itschapeau more easily integrated intotheremainder ofthe
General Agreement ,ifthechapeau istaken tomean thatthestandards itsetsforthareapplicable
toallofthesituations inwhich anallegation ofaviolation ofasubstantive obligation hasbeen
made andoneoftheexceptions contained inArticle XXhasinturnbeenclaimed".16
11Also referred toas"chapeau" or"introductory paragraph".
12Adopted on26May 1983, BISD 30S/107, paragraph 56.
13Gasoline ,Appellate Body Report, p.22.
14Quoted inAnalytical Index: Guide toGATT LawandPractice, Vol. I,p.564(1995).
15Gasoline ,Appellate Body Report, p.22.
16Ibidem ,p.24.WT/CTE/W/53
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B. "AnArbitrary orUnjustifiable Discrimination Between Countries Where theSame Conditions
Prevail, oraDisguised Restriction onInternational Trade"
14. Under theGATT, theconcept of"arbitrary orunjustifiable discrimination between countries
where thesameconditions prevail" wasexamined intwodisputes. The1982Panel on"United States -
Prohibition ofImports ofTuna andTuna Products fromCanada" examined whether aUSprohibition
onimports oftunaandtunaproducts from Canada fellunder Article XX(d) andnoted that:
"[t]he United States action ...hadbeentaken exclusively against imports oftunaandtuna
products from Canada, butsimilar actions hadbeentaken against imports from Costa Rica,
Ecuador, Mexico andPeruandthenforsimilar reasons. ThePanel feltthatthediscrimination
ofCanada inthiscasemight notnecessarily havebeenarbitrary orunjustifiable".17
Inthereport on"United States -Imports ofCertain Automotive Spring Assemblies", thePanel found
thatthemeasure under examination was"notapplied inamanner which would constitute ameans of
arbitrary orunjustifiable discrimination against countries where thesame conditions prevail" because
it"was directed against imports ofcertain automotive spring assemblies produced inviolation ofa
valid United States patent from allforeign sources, andnotjustfrom Canada".18
15. Inthetwoaforementioned cases, theconcept of"disguised restriction oninternational trade"
wasgiven averyliteral interpretation, thetwopanels putting emphasis onthepublicity ofthemeasure.
InTuna 1982,thePanel feltthat"theUnited States 'saction should notbeconsidered tobeadisguised
restriction oninternational trade, noting thattheUnited States 'sprohibition ofimports oftunaand
tunaproducts from Canada hadbeentaken asatrade measure andpublicly announced assuch".19
Inthesecond case, thePanel considered that:
"[n]otice oftheexclusion order [i.e.themeasure atissue] waspublished intheFederal Register
andtheorder wasenforced bytheUnited States Customs attheborder. ThePanel alsonoted
thattheITCproceedings inthisparticular casewere directed against theimportation of
automotive spring assemblies produced inviolation ofavalid United States patent andthat,
before anexclusion order could beissued under Section 337,boththevalidity ofapatent and
itsinfringement byaforeign manufacturer hadtobeclearly established. Furthermore, the
exclusion order would notprohibit theimportation ofautomotive spring assemblies produced
byanyproducer outside theUnited States whohadalicense ...toproduce these goods.
Consequently, thePanel found thattheexclusion order hadnotbeenapplied inamanner which
constituted adisguised restriction oninternational trade".20
Thisinterpretation wasnotconfirmed bytheAppellate Body.
17Adopted on22February 1982, BISD 29S/91, paragraph 4.8.
18Adopted on26May 1983, BISD 30S/107, paragraph 55.
19Tuna 1982,paragraph 4.8. AttheCouncil meeting where thereport wasadopted, therepresentative of
Canada saidthat"Canada didnotconsider itsufficient foratrade measure tobepublicly announced assuch
forittobeconsidered nottobeadisguised restriction oninternational trade within themeaning ofArticle XX
oftheGeneralAgreemen t"(quotedinAnalyticalIndex:GuidetoGATTLawandPractice,Vol.I,p.565(1995)).
20"UnitedStates-ImportsofCertainAutomotiveSpringAssemblies",adoptedon26May1983,BISD30S/107,
paragraph 56.WT/CTE/W/53
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16. IntheGasoline case, theAppellate Body didnotattempt todefine theconcepts of"arbitrary
discrimination", "unjustifiable discrimination" or"disguised restriction", butdecided tolookatthem
inthelightoftheirobject andpurpose:
""[a]rbitrary discrimination", "unjustifiable discrimination" and"disguised restriction" on
international trademay,accordingly, bereadside-by-side; theyimpart meaning tooneanother.
Itiscleartousthat"disguised restriction" includes disguised discrimination ininternational
trade. Itisequally clear thatconcealed orunannounced restriction ordiscrimination in
international trade doesnotexhaust themeaning of"disguised restriction". Weconsider that
"disguised restriction", whatever elseitcovers, mayproperly bereadasembracing restrictions
amounting toarbitrary orunjustifiable discrimination ininternational trade taken under the
guise ofameasure formally within theterms ofanexception listed inArticle XX. Putina
somewhat different manner, thekinds ofconsiderations pertinent indeciding whether the
application ofaparticular measure amounts to"arbitrary orunjustifiable discrimination", may
alsobetakenintoaccountindeterminingthepresenceofa"disguisedrestriction"oninternational
trade. Thefundamental theme istobefound inthepurpose andobject ofavoiding abuse or
illegitimate useoftheexceptions tosubstantive rules available inArticle XX".21[emphasis
added]
Inthatcase, theAppellate Body rejected thearguments presented bytheUnited States tojustify less
favourable treatment offoreign producers. TheUnited States wasreproached fortwoomissions: (a)not
having adequately explored means toallow foreign producers tobenefit from thesame treatment as
domestic producers; (b)ignoring thecosts resulting forforeign producers from theimposition of
amore stringent standard, while these costs hadbeenpurposely avoided fordomestic producers.
According totheAppellate Body:
"these twoomissions gowellbeyond what wasnecessary forthePanel todetermine thata
violation ofArticle III:4hadoccurred inthefirstplace. Theresulting discrimination must
have been foreseen, andwasnotmerely inadvertent orunavoidable. Inthelight ofthe
foregoing, ourconclusion isthatthebaseline establishment rulesintheGasoline Rule, intheir
application, constitute "unjustifiable discrimination" anda"disguised restriction oninternational
trade".22
17. Animportant question iswhether therequirement toavoid "arbitrary orunjustifiable
discrimination between countries where thesame conditions prevail, oradisguised restriction on
international trade" contained inthechapeau ofArticle XXoverlaps withthemost-favoured-nation
treatment andthenational treatment, ascontained inArticle IandArticle IIIrespectively, orwhether
ithastobeunderstood asadifferent, suigeneris ,typeofnon-discrimination. TheAppellate Body
favoured thesecond approach intheGasoline case:
"[t]he enterprise ofapplying Article XXwould clearly beanunprofitable oneifitinvolved
nomore thanapplying thestandard usedinfinding thatthebaseline establishment rules [the
measures atissue] wereinconsistent withArticle III:4. Thatwould alsobetrueifthefinding
were oneofinconsistency withsome other substantive ruleoftheGeneral Agreement .The
provisions ofthechapeau cannot logically refertothesame standard(s) bywhich aviolation
ofasubstantive rulehasbeendetermined tohaveoccurred. Toproceed down thatpathwould
bebothtoempty thechapeau ofitscontents andtodeprive theexceptions inparagraphs (a)
21Gasoline ,Appellate Body Report, p.25.
22Ibidem ,p.28-29.WT/CTE/W/53
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to(j)ofmeaning. Such recourse would alsoconfuse thequestion ofwhether inconsistency
withasubstantive rulesexisted, withthefurther andseparate question arising under thechapeau
ofArticle XXastowhether thatinconsistency wasnevertheless justified. Oneofthecorollaries
ofthe"general ruleofinterpretation" intheVienna Convention isthatinterpretation mustgive
meaning andeffect toalltheterms ofatreaty. Aninterpreter isnotfreetoadopt areading
thatwould result inreducing whole clauses orparagraphs ofatreaty toredundancy or
inutility".23
IV. PARAGRAPH (b)OFARTICLE XX
A. Burden ofProof
18. Asnoted above (seeparagraphs 8-9),thepartyinvoking Article XXbears theburden ofproving
thatthecontested measure meets therequirements contained inthatprovision. Under paragraph (b),
Panel practice hasdetermined thatthisdemonstration includes thefollowing elements:
"(1) thatthepolicy inrespect ofthemeasures forwhich theprovision wasinvoked fellwithin
therange ofpolicies designed toprotect human, animal orplant lifeorhealth;
"(2) thattheinconsistentmeasuresforwhichtheexceptionwasbeinginvokedwerenecessary
tofulfil thepolicy objective; and
"(3) thatthemeasures wereapplied inconformity withtherequirements oftheintroductory
clause ofArticle XX".24
B. ThePolicy GoalofProtecting Human, Animal andPlant LifeorHealth
19. Inthecase"Thailand -Restrictions onImportation ofandInternal Taxes onCigarettes", the
PanelfoundthatmeasuresbyThailandprohibitingimportsofcigaretteswereinconsistentwithArticleXI.
Thailand argued thattheimport banfellunder Article XX(b) because thegovernment hadadopted
measures tocontrol smoking which would onlybeeffective ifcigarettes imports wereprohibited and
because UScigarettes contained additives which made them more harmful thanThaicigarettes. An
expert fromtheWorld Health Organization (WHO) washeard bythePanel. Regarding thescope of
paragraph (b),thePanel accepted, inagreement withtheparties tothedispute andtheexpert from
theWHO, that:
"smoking constituted aserious risktohuman health andthatconsequently measures designed
toreduce theconsumption ofcigarettes fellwithin thescope ofArticle XX(b). ThePanel noted
thatthisprovision clearly allowed contracting parties togivepriority tohuman health over
trade liberalization; however, forameasure tobecovered byArticle XX(b) ithadtobe
"necessary"".25
23Ibidem ,p.23.
24Ibidem ,Panel Report, paragraph 6.20. SeealsoTuna II,paragraph 5.29.
25Adopted on7November 1990, BISD 37S/200, paragraph 73.WT/CTE/W/53
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20. InthetwoTunadisputes,thePanelandthepartiesaccepted-implicitlyinthefirstcase,explicitly
inthesecond one-thattheprotection ofdolphin lifeorhealth wasapolicy thatcould fallunder
Article XX(b).26IntheGasoline case, thePanel andtheparties agreed that:
"thepolicy toreduce airpollution resulting from theconsumption ofgasoline wasapolicy
within therange ofthose concerning theprotection ofhuman, animal andplant lifeorhealth
mentioned inArticle XX(b)".27
C. Measure Requiring Justification Under Article XX(b)
21. According topanel practice, themeasure requiring justification under Article XX(b) isnot
thepolicy goal(theprotection oftheenvironment orofpublic health, forinstance), buttheinconsistency
withtheGeneral Agreement which hasbeenpreviously determined bythePanel. InTuna I,thePanel
found that:
"[t]he conditions setoutinArticle XX(b) which limitresort tothisexception, namely thatthe
measure taken must be"necessary" andnot"constitute ameans ofarbitrary orunjustifiable
discrimination oradisguised restriction oninternational trade" refer tothetrade measure
requiring justification under Article XX(b), nothowever tothelifeorhealth standard chosen
bythecontracting party".28
22. After finding thattheimported gasoline wastreated lessfavourably thandomestic gasoline,
theGasoline Panel examined whether theaspect oftheGasoline Rulefound inconsistent withtheGeneral
Agreement wasnecessary toachieve thestated policy objectives under Article XX(b).
"The Panel noted thatitwasnotthenecessity ofthepolicy goalthatwastobeexamined, but
whether ornotitwasnecessary thatimported gasoline beeffectively prevented frombenefitting
from asfavourable sales conditions aswere afforded byanindividual baseline tiedtothe
producer ofaproduct. ItwasthetaskofthePanel toaddress whether these inconsistent
measures were necessary toachieve thepolicy goalunder Article XX(b). Itwastherefore
notthetaskofthePanel toexamine thenecessity oftheenvironmental objectives oftheGasoline
Rule, orofparts oftheRulethatthePanel didnotspecifically findtobeinconsistent with
theGeneral Agreement."29
Note,however,thefindingsmadeinthisregardbytheAppellateBodyunderparagraph(g)ofArticleXX
(seebelow, paragraph 38).
D. TheConcept ofNecessity
23. Theexamination ofwhether ornotameasure is"necessary" under paragraph (b),commonly
referred toasthe"necessity test", hasproved tobeacrucial stepinpanel practice. Sofar,noPanel
called toapply thatparagraph accepted thenecessity ofameasure otherwise inconsistent withother
provisions oftheGATT. TheCigarettes report provided thefirstapplication ofArticle XX(b), and
setthebenchmark forsubsequent cases. Inthatcase, thePanel concluded that:
26Tuna I,andTuna II,paragraph 5.30.
27Gasoline ,Panel Report, paragraph 6.21.
28Tuna I,paragraph 5.27.
29Gasoline ,Panel Report, paragraph 6.22.WT/CTE/W/53
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"theimport restrictions imposed byThailand could beconsidered tobe"necessary" interms
ofArticle XX(b) only ifthere were noalternative measure consistent withtheGeneral
Agreement, orlessinconsistent withit,which Thailand could reasonably beexpected toemploy
toachieve itshealth policy objectives".30
ThePanel borrowed the"least-trade restrictive" requirement from aprevious panel report31,which
hadapplied itinrelation withArticle XX(d), withthefollowing justification:
"[t]he Panel could seenoreason whyunder Article XXthemeaning oftheterm"necessary"
under paragraph (d)should notbethesame asinparagraph (b).Inbothparagraphs thesame
termwasusedandthesame objective intended: toallow contracting parties toimpose trade
restrictive measures inconsistent withtheGeneral Agreement topursue overriding public policy
goals totheextent thatsuchinconsistencies were unavoidable. Thefactthatparagraph (d)
applies toinconsistencies resulting from theenforcement ofGATT-consistent laws and
regulations while paragraph (b)applies tothose resulting fromhealth-related policies therefore
didnotjustify adifferent interpretation oftheterm"necessary".32
24. IntheCigarettes case, thePanel concluded thattheimport restrictions werenot"necessary"
within themeaning ofparagraph (b)because Thailand could implement otherpolicy measures consistent
withtheGeneral Agreement toreach thesame public health objective. Forinstance, Thailand could
regulate thequality ofcigarettes through strict, non-discriminatory labelling andingredient disclosure
regulations, coupled withabanonunhealthy substances; similarly, Thailand could control thequantity
ofcigarettes consumed inthecountry bybanning advertisements ofcigarettes. These measures, applied
onbothimported anddomestic cigarettes, would beconsistent withtheGeneral Agreement, inparticular
withArticle III(National Treatment). Considering theWHO resolutions onsmoking thathadbeen
made available toit,thePanel alsonoted thatthehealth measures they recommended were
non-discriminatory andconcerned all,notjustimported cigarettes.33
25. InTunaI,thePanel considered that,evenifanextrajurisdictional application ofArticle XX(b)
werepermitted,theUnitedStateswouldnothavemet,incasu,thenecessityrequirementfortworeasons.
First, theUnited States hadnotdemonstrated tothePanel that"ithadexhausted alloptions reasonably
available toittopursue dolphin protection objectives through measures consistent withtheGeneral
Agreement,inparticularthroughthenegotiationofinternationalcooperativearrangements,whichwould
seemtobedesirable inviewofthefactthatdolphins roam thewaters ofmany states andthehighsea".
Second, bylinking themaximum incidental dolphin taking ratewhich Mexico hadtomeetduring a
particular period tothetaking rateactually recorded forUnited States fishermen during thesameperiod,
30Cigarettes ,paragraph 75.
31ThePanel Report on"United States -Section 337oftheTariff Actof1930" stated that"acontracting
party cannot justify ameasure inconsistent withother GATT provisions as"necessary" interms ofArticle XX(d)
ifanalternative measure which could reasonably beexpected toemploy andwhich isnotinconsistent withother
GATT provisions isavailable toit.Bythesame token, incases where ameasure consistent withother GATT
provisionsisnotreasonablyavailable,acontractingpartyisboundtouse,amongthemeasuresreasonablyavailable
toit,thatwhich entails theleast degree ofinconsistency with other GATT provisions" (adopted on
7November 1989, BISD 36S/345, paragraph 5.26).
32Cigarettes ,paragraph 74.
33Ibidem ,paragraphs 77-81.WT/CTE/W/53
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theUnited States limited trade onthebasis ofunpredictable conditions thatcould notberegarded as
necessary toprotect thehealth andlifeofdolphins.34
26. IntheGasoline case, thePanel examined whether there were consistent orlessinconsistent
measures reasonably available totheUnited States topursue itspolicy objectives, whereby imported
gasoline would beafforded asfavourable salesconditions asdomestic gasoline:
"[t]he Panel didnotconsider thatthemanner inwhich imported gasoline waseffectively
prevented from benefitting from asfavourable salesconditions aswereafforded todomestic
gasoline byanindividual baseline tiedtotheproducer ofaproduct wasnecessary toachieve
thestated goals oftheGasoline Rule. IntheviewofthePanel, baseline establishment methods
could beapplied toentities dealing inimported gasoline inawaythatgranted treatment to
imported gasoline thatwasconsistent orlessinconsistent withtheGeneral Agreement".35
ThePanel reviewed various options which itconsidered tobereasonably available totheUnited States
while being consistent orlessinconsistent withtheGeneral Agreement. Therefore, thePanel concluded
thattheUnited States "hadfailed todemonstrate thenecessity oftheGasoline Rule'sinconsistency
withArticle III:4" inthiscase.36
C. Jurisdictional Application ofArticle XX(b)
27. Thequestion toknow whether Article XX(b) canbeinvoked toprotect thelifeorhealth of
animals outside thejurisdiction ofthecountry invoking itwasexamined inthetwoTunapanel reports,
bothofthemremaining unadopted. Thereasoning followed bythetwoPanels differs onseveral points.
(a) Negotiating history
28. InTuna I,thePanel, considering thatthetextofArticle XX(b) doesnotclearly answer the
question ofthelocation oftheliving things tobeprotected, resorted tothedrafting history ofthat
provision andnoted thefollowing:
"[t]he proposal forArticle XX(b) dated from theDraft Charter oftheInternational Trade
Organization (ITO) proposed bytheUnited States, which stated inArticle 32,"Nothing in
Chapter IV[oncommercial policy] ofthisCharter shallbeconstrued toprevent theadoption
orenforcement byanyMember ofmeasures: ...(b)necessary toprotect human, animal or
plantlifeorhealth". IntheNewYork Draft oftheITOCharter, thepreamble hadbeenrevised
toreadasitdoesatpresent, andexception (b)read: "Forthepurpose ofprotecting human,
animal orplant lifeorhealth, ifcorresponding domestic safeguards under similar conditions
existintheimporting country". Thisadded proviso reflected concerns regarding theabuse
ofsanitary regulations byimporting countries. Later, Commission AoftheSecond Session
ofthePreparatory Committee inGeneva agreed todropthisproviso asunnecessary [footnote
referring toEPCT/A/PV/30/7-15]. Thus, therecord indicates thattheconcerns ofthedrafters
ofArticle XX(b) focused ontheuseofsanitary measures tosafeguard lifeorhealth ofhumans,
animals orplants within thejurisdiction oftheimporting country".37
34Tuna I,paragraph 5.28.
35Gasoline ,Panel Report, paragraph 6.25.
36Ibidem ,paragraphs 6.25 to6.28.
37Tuna I,paragraphs 5.25-26.WT/CTE/W/53
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29. InTuna II,thePanel observed that"thetextofArticle XX(b) doesnotspelloutanylimitation
onthelocation oftheliving things tobeprotected". Referring tovarious observations made inrelation
tothejurisdictional application ofArticle XX(g) (seebelow paragraphs 51-58), thePanel considered
them tobeequally valid fortheapplication ofArticle XX(b). Regarding thenegotiating history of
theprovision, itreached adifferent conclusion thanTuna Ibynoting that:
"thestatements anddrafting changes made during thenegotiation oftheHavana Charter and
theGeneral Agreement didnotclearly support anyparticular contention oftheparties with
respect tothelocation oftheliving thing tobeprotected under Article XX(b). ThePanel did
notseetheneedtosettle theissueargued bytheparties astowhether theintent ofthedrafters
wastorestrict measures justifiable under Article XXtosanitary measures. ThePanel therefore
found thatthepolicy toprotect thelifeandhealth ofdolphins intheeastern tropical
Pacific Ocean, which theUnited States pursued within itsjurisdiction overitsnationals and
vessels, fellwithin therange ofpolicies covered byArticle XX(b)".38
(b) Theconcept ofnecessity andtheextrajurisdictional application ofArticle XX(b)
30. InTuna I,thePanel, referring theCigarettes case, recalled thatArticle XX(b) wasintended
toallow countries toimpose trade restrictive measures inconsistent withtheGeneral Agreement to
pursue overriding public policy goals totheextent thatsuchinconsistencies were unavoidable. On
thisbasis, thePanel considered that:
"ifthebroad interpretation ofArticle XX(b) suggested bytheUnited States were accepted,
eachcontracting party could unilaterally determine thelifeorhealth protection policies from
which other contracting parties could notdeviate without jeopardizing theirrights under the
General Agreement. TheGeneral Agreement would thennolonger constitute amultilateral
framework fortrade among allcontracting parties butwould provide legal security onlyin
respect oftrade between alimited number ofcontracting parties withidentical internal
regulations".39
31. InTuna II,thePanel considered thatneither theintermediary northeprimary nation embargo
could possibly, bythemselves, further theUnited States objectives ofprotecting thelifeandhealth
ofdolphins. Their desired effect wascontingent upon exporting countries changing theirpolices and
practices. ThisledthePanel toexamine whether measures "necessary toprotect thelifeandhealth
ofanimals could include measures taken soastoforce other countries tochange theirpolicies within
theirownjurisdiction, andrequiring suchchanges inorder tobeeffective". ThePanel concluded that
measures taken soastoforce other countries tochange theirpolicies, andthatareeffective onlyif
suchchanges occurred, could notbeconsidered "necessary" within themeaning ofArticle XX(b).
Thisconclusion wasjustified asfollows:
"IfArticle XX(b) were interpreted topermit contracting parties todeviate from thebasic
obligations oftheGeneral Agreement bytaking trade measures toimplement policies within
theirownjurisdiction, including policies toprotect living things, theobjectives oftheGeneral
Agreement would bemaintained. Ifhowever Article XX(b) were interpreted topermit
contracting parties toimpose trade embargoes soastoforce other countries tochange their
policies within theirjurisdiction, including policies toprotect living things, andwhich required
38Tuna II,paragraphs 5.31 to5.33.
39Tuna I,paragraph 5.27.WT/CTE/W/53
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suchchanges tobeeffective, theobjectives oftheGeneral Agreement would beseriously
impaired".40
V. PARAGRAPH (g)OFARTICLE XX
A. Burden ofProof
32. Under Article XX(g), panel practice hasdetermined thattheparty bearing theburden ofproof
must demonstrate thefollowing elements:
"(1) thatthepolicy inrespect ofthemeasures forwhich theprovision wasinvoked fellwithin
therange ofpolicies related totheconservation ofexhaustible natural resources;
"(2) thatthemeasures forwhich theexception wasbeing invoked -thatistheparticular
trade measures inconsistent with theGeneral Agreement -were related tothe
conservation ofexhaustible natural resources;
"(3) thatthemeasures forwhich theexception wasbeing invoked weremade effective in
conjunction withrestrictions ondomestic production orconsumption; and
"(4) thatthemeasures wereapplied inconformity withtherequirements oftheintroductory
clause ofArticle XX".41
B. Policy GoalofConserving Exhaustible Natural Resources
33. Inthe1982 Tuna Panel Report, thePanel "noted thatbothparties considered tunastocks,
including albacore tuna, tobeanexhaustible natural resource inneedofconservation management".42
IntheSalmon/Herring case, thePanel agreed withtheparties thatsalmon andherring stocks are
"exhaustible natural resources".43InTuna I,theparties andthePanel seem tohaveimplicitly agreed
thatdolphins areanexhaustible natural resource, whereas inTunaIItheparties disagreed astowhether
dolphins should beconsidered asan"exhaustible natural resource". Inthelattercase,thePanel, "noting
thatdolphin stocks could potentially beexhausted, andthatthebasisofapolicy toconserve them did
notdepend onwhether atpresent theirstocks weredepleted, accepted thatapolicy toconserve dolphins
wasapolicy toconserve anexhaustible natural resource".44
34. InAutoTaxes ,thePanel considered whether theCAFE regulation wasapolicy toconserve
anexhaustible natural resource. ThePanel, "noting thatgasoline wasproduced from petroleum, an
exhaustible natural resource, found thatapolicy toconserve gasoline waswithin therange ofpolicies
mentioned inArticle XX(g)".45
40Tuna II,paragraphs 5.37 to5.39.
41Gasoline ,Panel Report, paragraph 6.35. SeealsoTuna II,paragraph 5.12.
42Tuna 1982,BISD 29S/91, paragraph 4.9.
43Salmon/Herring ,paragraph 4.4.
44Tuna II,paragraph 5.13.
45Auto Taxes ,paragraph 5.57.WT/CTE/W/53
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35. IntheGasoline case,theUnited States argued thatclean airwasanexhaustible natural resource
since itcould beexhausted bypollutants suchasthose emitted through theconsumption ofgasoline.
Venezuela disagreed, considering thatclean airwasa"condition" ofairthatwasrenewable rather than
aresource thatwasexhaustible. ThePanel agreed withtheformer:
"IntheviewofthePanel, clean airwasaresource (ithadvalue) anditwasnatural. Itcould
bedepleted. Thefactthatthedepleted resource wasdefined withrespect toitsqualities was
not,forthePanel, decisive. Likewise, thefactthataresource wasrenewable could notbe
anobjection. Apastpanel hadaccepted thatrenewable stocks ofsalmon could constitute an
exhaustible natural resource [footnote referring to"Canada -Measures Affecting Exports of
Unprocessed Herring andSalmon", adopted on22March 1988, BISD 35S/98]. Accordingly,
thePanel found thatapolicy toreduce thedepletion ofclean airwasapolicy toconserve a
natural resource within themeaning ofArticle XX(g)".46
C. Measure Requiring Justification Under Article XX(g)
36. InTuna I,thePanel noted that"theconditions setoutinArticle XX(g) which limitresort to
thisexception, namely thatthemeasures taken mustberelated totheconservation ofexhaustible natural
resources, andthattheydonot"constitute ameans ofarbitrary orunjustifiable discrimination ...or
adisguised restriction oninternational trade" refertothetrade measure requiring justification under
Article XX(g), nothowever totheconservation policies adopted bythecontracting party".47
37. InAutoTaxes ,thePanel "recalled thatthemeasure requiring justification under Article XX(g)
wasnottheMotor Vehicle Information andCostSaving Actingeneral, northeestablishment ofthe
CAFE fuelconsumption standard assuch. Themeasure atissuewasthediscrimination against foreign
carsandpartsresulting from theCAFE regulations providing forthecalculation ofthefleetaverage
fuelconsumption".48
38. Thepractice toexamine under Article XXtheinconsistencies found under other GATT
provision(s) was,however, modified bytheAppellate Body intheGasoline case. Inthatdispute, the
Panel, following pastpractice, hadconsidered "whether theprecise aspects oftheGasoline Rulethat
ithadfound toviolate Article III-thelessfavourable baseline establishments methods thatadversely
affected theconditions ofcompetition forimported gasoline -wereprimarily aimed attheconservation
ofnatural resources".49TheAppellate Body disagreed andfound that:
"[o]ne problem ...isthatthePanel asked itself whether the"less favourable treatment" of
imported gasoline was"primarily aimed at"theconservation ofnatural resources, rather than
whether the"measure", i.e.thebaseline establishment rules, were "primarily aimed at"
conservation ofclean air.Inourview, thePanel herewasinerror inreferring toitslegal
conclusion onArticle III:4instead ofthemeasure inissue. Theresult ofthisanalysis isto
turnArticle XXonitshead. Obviously, there hadtobeafinding thatthemeasure provided
"less favourable treatment" under Article III:4 before thePanel examined the"General
Exception" contained inArticle XX. That, however, isaconclusion oflaw. Thechapeau
46Gasoline ,Panel Report, paragraph 6.37.
47Tuna I,paragraph 5.32.
48Auto Taxes ,paragraph 5.59.
49Gasoline ,Panel Report, paragraph 6.40.WT/CTE/W/53
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ofArticle XXmakes itclear thatitisthe"measures" which aretobeexamined under
Article XX(g), andnotthelegalfinding of"less favourable treatment".50
D. "Relating to..."
(a) GATT dispute settlement practice
39. Thefirstapplication ofthe"relating to"concept wasmade intheSalmon/Herring case. After
agreeing thatsalmon andherring wereexhaustible natural resources andthatharvest limitations imposed
byCanada wererestrictions ondomestic production, thePanel examined whether theexport prohibitions
maintained byCanada oncertain unprocessed salmon andherring were"relating to"theconservation
ofsalmon andherring stocks:
"Article XX(g) doesnotstatehowthetrade measures aretoberelated totheconservation
andhowtheyhavetobeconjoined withtheproduction restrictions. Thisraises thequestion
ofwhether anyrelationship withconservation andanyconjunction withproduction restrictions
aresufficient foratrademeasure tofallunder Article XX(g) orwhether aparticular relationship
andconjunction arerequired".51
ThePanel decided toexamine themeaning of"relating to"inthelight ofthecontext inwhich
Article XX(g) appears intheGeneral Agreement andofthepurpose ofthatprovision. Itnoted that:
"some ofthesubparagraphs ofArticle XXstatethatthemeasure must be"necessary" or
"essential" totheachievement ofthepolicy purpose setoutintheprovision
(cf.subparagraphs (a),(b),(d)and(j))while subparagraph (g)refers onlytomeasures "relating
to"theconservation ofexhaustible natural resources. Thissuggests thatArticle XX(g) does
notonlycovermeasuresthatarenecessaryoressentialfortheconservationofexhaustiblenatural
resources butawider range ofmeasures. However, asthepreamble ofArticle XXindicates,
thepurpose ofincluding Article XX(g) intheGeneral Agreement wasnottowiden thescope
formeasures serving trade policy purposes butmerely toensure thatthecommitments under
theGeneral Agreement donothinder thepursuit ofpolicies aimed attheconservation of
exhaustible natural resources. ThePanel concluded forthesereasons that,while atrademeasure
didnothavetobenecessary oressential totheconservation ofanexhaustible natural resource,
ithadtobeprimarily aimed attheconservation ofanexhaustible natural resource tobe
considered as"relating to"conservation within themeaning ofArticle XX(g)".52[emphasis
added]
ThePanelthenproceededtoexaminewhethertheexportprohibitionsonunprocessedsalmonandherring
were primarily aimed attheconservation ofsalmon andherring stocks andrendering effective the
restrictions ontheharvesting ofsalmon andherring. ThePanel considered thevarious characteristics
ofthemeasures maintained byCanada, andnoted inparticular thatunlike foreign processors and
consumers, domestic processors andconsumers canpurchase these unprocessed fishwithout limit.
Itthenconcluded that"these prohibitions could notbedeemed tobeprimarily aimed attheconservation
50Gasoline ,Appellate Body Report, p.16.Inthisdispute, theUnited States limited itsappeal tothePanel 's
findings under Article XX(g).
51Salmon/Herring ,paragraph 4.5.
52Ibidem ,paragraph 4.6.WT/CTE/W/53
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ofsalmon andherring stocks andatrendering effective therestrictions ontheharvesting ofthesefish."
Theexport prohibitions were therefore notjustified under Article XX(g).53
40. The"primarily aimed at"testwassubsequently applied inTuna I,Tuna II(forthiscase, see
below paragraph 60),AutoTaxes ,andGasoline. InTuna I,thePanel made thefollowing finding
regarding theterms "relating to":
"[t]he Panel didnotconsider thattheUnited States measures, evenifArticle XX(g) could be
applied extrajurisdictionally, would meet theconditions setoutinthatprovision. ...[T]he
United States linked themaximum incidental dolphin-taking ratewhich Mexico hadtomeet
during aparticular period inorder tobeabletoexport tunatotheUnited States tothetaking
rateactually recorded forUnited States fishermen during thesame period. Consequently, the
Mexican authorities could notknow whether, atagiven pointoftime,theirconservation policies
conformed totheUnited States conservation standards. ThePanel considered thatalimitation
ontradebased onsuchunpredictable conditions could notberegarded asbeing primarily aimed
attheconservation ofdolphins".54
41. InAutoTaxes ,thePanel examined successively theseparate foreign fleetaccounting andthe
fleetaveraging. Itfound, based ontheevidence submitted, that:
"separate foreign fleetaccounting primarily served toinhibit imports ofsmall cars. Thisdid
notcontribute directly tofuelconservation intheUnited States. Indeed, itwaslikely tomake
itmore costly, andtherefore more difficult, fordomestic manufacturers tomeettheCAFE
standard andtheoverall goalofconserving fuel. ThePanel wasoftheviewthatameasure
thatdidnotfurther theobjectives ofconservation ofanexhaustible resource could notbedeemed
tobeprimarily aimed atsuchconservation andtherefore found thatthemeasure found tobe
inconsistent withArticle III:4wasnotjustified byArticle XX(g)".55
Inexamining thefleetaveraging system, thePanel recalled that:
"therequirement under Article XX(g), unlike those related totheprotection ofpublic morals
orhuman, animal orplant lifeandhealth (Articles XX(a) and(b)),orthose relating to
compliance with laws orregulations notinconsistent with theGeneral Agreement
(Article XX(d)), didnotrequire thatthemeasure benecessary. Subject totherequirements
oftheintroductory clause ofArticle XX,thefactthatother lesstrade restrictive measures,
suchasfueltax,could beusedequally andmore effectively toencourage fuelefficiency did
notimply thatthemeasure could notbejustified under Article XX(g)".56
ThePanel didnotmake afinding ontheconsistency ofafleetaveraging system withArticle XX(g).
Itnoted, however, thefollowing:
"theinconsistencyoftheCAFEregulationwithArticleIII:4arosefromthefactthatthetreatment
ofimported products wasdependent onfactors notdirectly relating totheproducts asproducts:
averaging wasapplied toaparticular mixofproducts determined bytheownership andcontrol
53Ibidem ,paragraph 4.7.
54Tuna I,paragraph 5.33.
55Auto Taxes ,paragraph 5.60.
56Ibidem ,paragraph 5.63.WT/CTE/W/53
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relationships ofproducer/importers. Theissue before thePanel wastherefore whether the
application ofthisformofaveraging toimported carswasprimarily aimed atrendering effective
conservation requirements imposed ondomestic production. ThePanel observed thatifthere
werenorequirement placed onimported cars,theobjectives oftheCAFE programme would
beprejudiced,asimportedlargecarswouldnotbesubjecttoanyrestrictiononfuelconsumption.
Thus theapplication offleetaveraging toimported carsinasimilar manner toitsapplication
todomestic carsclearly served thepurpose offuelconservation, andserved torender effective
theconservation measure. Inthese respects, fleetaveraging mettwoofthekeyrequirements
ofArticle XX(g)".57
(b) TheGasoline Case
42. IntheGasoline case,thePanel hadconcluded that"thelessfavourable baseline establishments
methods atissue ...werenotprimarily aimed attheconservation ofnatural resources", inparticular
because thePanel hadseen"nodirect connection between lessfavourable treatment ofimported gasoline
thatwaschemically identical todomestic gasoline, andtheUSobjective ofimproving airquality in
theUnited States".58
43. Referringtothe"Generalruleofinterpretation"containedinArticle31oftheViennaConvention
ontheLawofTreaties59,which, according totheAppellate Body, applies pursuant toArticle 3.2of
theDSU, theAppellate Body noted thatArticle XXusesdifferent terms in"enumerating thevarious
categories ofgovernmental acts,lawsorregulations which WTO Members maycarryoutorpromulgate
inpursuit ofdiffering legitimate statepolicies orinterests outside therealm oftrade liberalization".
Itdeduced therefrom that"[i]tdoesnotseem reasonable tosuppose thattheWTO Members intended
torequire, inrespect ofeachandevery category, thesame kindordegree ofconnection orrelationship
between themeasure under appraisal andthestateinterest orpolicy sought tobepromoted orrealized".60
44. FollowingArticle31oftheViennaConvention,theAppellateBodyconsideredthatArticleXX(g)
hadtobereadincontext andinthelightoftheobject andpurpose oftheGeneral Agreement :
"[t]he context ofArticle XX(g) includes theprovisions oftherestoftheGeneral Agreement ,
including inparticular Articles I,IIIandXI;conversely, thecontext ofArticles IandIIIand
XIincludes Article XX. Accordingly, thephrase "relating totheconservation ofexhaustible
natural resources" maynotbereadsoexpansively asseriously tosubvert thepurpose andobject
ofArticle III:4. NormayArticle III:4begiven sobroad areach aseffectively toemasculate
Article XX(g) andthepolicies andinterests itembodies. Therelationship between the
affirmative commitments setoutin,e.g.,Articles I,IIIandXI,andthepolicies andinterests
embodied inthe"General Exceptions" listed inArticle XX,canbegiven meaning within the
framework oftheGeneral Agreement anditsobject andpurpose byatreaty interpreter only
onacase-to-case basis, bycareful scrutiny ofthefactual andlegalcontext inagiven dispute,
without disregarding thewords actually usedbytheWTO Members themselves toexpress
theirintent andpurpose".61
57Ibidem ,paragraphs 5.63-66.
58Gasoline ,Panel Report, paragraph 6.40.
59SeeAnnex 2.
60Appellate Body Report, p.17-18.
61Gasoline ,Appellate Body Report, p.18.WT/CTE/W/53
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45. TheAppellate Body noted that"thephrase "primarily aimed at"isnotitself treaty language
andwasnotdesigned asasimple litmus testforinclusion orexclusion from Article XX(g)", butdid
notconsider itwasnecessary toexamine thatpoint further since, intheappeal proceeding, theparties
andthirdparties tothedispute hadaccepted the"primarily aimed at"testasdeveloped byprevious
panel report. Inthisparticular case,theAppellate Body found, contrary tothePanel, thatthebaseline
establishment ruleswere"primarily aimed at"theconservation ofnatural resources; according tothe
Appellate Body, thebaseline establishment rulescould notbedivorced fromother partsoftheGasoline
Rule, buthadtobeconsidered intheglobal context oftheGasoline Ruletowhich theywererelated.
Thisrelationshipwas"notnegatedbytheinconsistency,foundbythePanel,ofthebaselineestablishment
rules withtheterms ofArticle III:4" (seeabove paragraph 38).62
E. "InConjunction withRestrictions onDomestic Production orConsumption"
46. Inthe1982Report on"United States -Prohibition ofImports ofTuna andTuna Products from
Canada", thePanel concluded thatitwasnotnecessary tointerpret theterms "relating to"and"in
conjunction with" sinceithadfound thattheparty invoking Article XX(g) didnotmaintain restrictions
onthedomestic production orconsumption oftuna.63
47. IntheSalmon/Herring case,thePanel decided toexamine the"relating to"concept inthelight
ofthecontext andpurpose ofArticle XX(g). Itfound thatameasure hadtobeprimarily aimed at
theconservation ofanexhaustible natural resource tobeconsidered as"relating to"conservation (see
above paragraph 39).ThePanel thenwentontoexamine theterms "inconjunction with" andconsidered
thatthese terms
"hadtobeinterpreted inawaythatensures thatthescope ofpossible actions under thatprovision
corresponds tothepurpose forwhich itwasincluded intheGeneral Agreement. Atrade
measure could therefore ...onlybeconsidered tobemade effective "inconjunction with"
production restrictions ifitwasprimarily aimed atrendering effective these restrictions".64
48. InTuna I,thePanel recalled thefindings oftheSalmon/Herring Panel andnoted:
"[a]country caneffectively control theproduction orconsumption ofanexhaustible natural
resource onlytotheextent theproduction orconsumption isunder itsjurisdiction. Thissuggests
thatArticle XX(g) wasintended topermit contracting parties totaketrademeasures primarily
aimed atrendering effective restrictions onproduction orconsumption within theirjurisdiction".
"The Panel further noted thatArticle XX(g) allows eachcontracting party toadopt itsown
conservation policies. Theconditions setoutinArticle XX(g) which limit resort tothis
exception, namely thatthemeasures taken mustberelated totheconservation ofexhaustible
naturalresources,andthattheynot"constituteameansofarbitraryorunjustifiablediscrimination
...oradisguised restriction oninternational trade" refer tothetrade measure requiring
justification under Article XX(g), nothowever totheconservation policies adopted bythe
contracting party. ThePanel considered thatiftheextrajurisdictional interpretation of
Article XX(g) ...were accepted, each contracting party could unilaterally determine the
conservationpoliciesfromwhichothercontractingpartiescouldnotdeviatewithoutjeopardizing
theirrights under theGeneral Agreement. Theconsiderations thatledthePanel toreject an
extrajurisdictional application ofArticle XX(b) therefore apply alsotoArticle XX(g)".65
62Ibidem ,p.16-19.
63Adopted on22February 1982, BISD 29S/91.
64Salmon/Herring ,paragraph 4.6.
65Tuna I,paragraphs 5.31-5.32.WT/CTE/W/53
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49. ForTuna II,seebelow paragraph 60,andforAutoTaxes seeabove paragraph 41.
50. IntheGasoline case, thePanel found thatthelessfavourable baseline establishment methods
atissuewerenot"relating to"theconservation ofclean air,andthusdidnotfeelitnecessary toexamine
whetherthebaselineestablishmentruleswere"madeeffectiveinconjunctionwithrestrictionsondomestic
production orconsumption". TheAppellate Body, having reversed thefindings ofthePanel onthe
former point (seeabove paragraphs 42-45), examined thelatter. Itsfindings modified thepractice
established sofarbyPanels. TheAppellate Body considered that:
"theclause "ifsuchmeasures aremade effective inconjunction withrestrictions ondomestic
production orconsumption" isappropriately readasarequirement thatthemeasures concerned
impose restrictions, notjustinrespect ofimported gasoline butalsowithrespect todomestic
gasoline. Theclause isarequirement ofeven-handedness intheimposition ofrestrictions,
inthename ofconservation, upon theproduction orconsumption ofexhaustible natural
resources.
"There is,ofcourse, notextual basisforrequiring identical treatment ofdomestic andimported
products. Indeed, where there isidentity oftreatment -constituting real,notmerely formal,
equality oftreatment -itisdifficult toseehowinconsistency withArticle III:4would have
arisen inthefirstplace. Ontheother hand, ifnorestrictions ondomestically-produced like
products areimposed atall,andalllimitations areplaced upon imported products alone,the
measure cannot beaccepted asprimarily oreven substantially designed forimplementing
conservationist goals [footnote omitted]. Themeasure would simply benaked discrimination
forprotecting locally-produced goods.
"Inthepresent appeal, thebaseline establishment rules affect bothdomestic gasoline and
imported gasoline, providing for-generally speaking -individual baselines fordomestic refiners
andblenders andstatutory baselines forimporters. Thus, restrictions ontheconsumption or
depletion ofclean airbyregulating thedomestic production of"dirty" gasoline areestablished
jointlywithcorrespondingrestrictionswithrespecttoimportedgasoline.Thatimportedgasoline
hasbeendetermined tohave beenaccorded "less favourable treatment" thanthedomestic
gasoline interms ofArticle III:4, isnotmaterial forpurposes ofanalysis under Article XX(g).
Itmight alsobenoted thatthesecond clause ofArticle XX(g) speaks disjunctively of"domestic
production orconsumption.
"Wedonotbelieve, finally, thattheclause "ifmade effective inconjunction withrestrictions
ondomestic production orconsumption" wasintended toestablish anempirical "effects test"
fortheavailability oftheArticle XX(g) exception. Inthefirstplace, theproblem ofdetermining
causation, well-known inbothdomestic andinternational law,isalways adifficult one. In
thesecond place, inthefieldofconservation ofexhaustible natural resources, asubstantial
period oftime, perhaps years, may have toelapse before theeffects attributable to
implementation ofagiven measure maybeobservable. Thelegal characterization ofsuch
ameasure isnotreasonably made contingent upon occurrence ofsubsequent events. Weare
not,however, suggesting thatconsideration ofthepredictable effects ofameasure isnever
relevant. Inaparticular case,should itbecome clearthatrealistically, aspecific measure cannot
inanypossible situation haveanypositive effect onconservation goals, itwould veryprobably
bebecause thatmeasure wasnotdesigned asaconservation regulation tobegin with. Inother
words, itwould nothavebeen"primarily aimed at"conservation ofnatural resources atall".66
66Gasoline ,Appellate Body Report, p.20-22.WT/CTE/W/53
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F. Jurisdictional Application ofArticle XX(g)
51. Thejurisdictional application ofArticle XX(g) wasexamined inthetwoTuna panel reports,
bothofthem remaining unadopted. Thereasoning followed bythetwopanels differs.
(a) Thedistinction between territory andjurisdiction
52. InTuna II,thePanel examined indetail theterritorial application ofArticle XX(g) andmade
adistinction between territory andjurisdiction which doesnotappear inTuna I.Theanalysis focused
onthefollowing points.
53. Considering thetextofArticle XX(g), thePanel observed that:
"itdoesnotspelloutanylimitation onthelocation oftheexhaustible natural resources tobe
conserved. ...Thenature andprecise scope ofthepolicy areaintheArticle, theconservation
ofexhaustible natural resources, isnotspelled outorspecifically conditioned bythetextof
theArticle, inparticular withrespect tothelocation oftheexhaustible natural resource tobe
conserved. ThePanel noted thattwoprevious panels haveconsidered Article XX(g) tobe
applicable topolicies related tomigratory species offish,andhadmade nodistinction between
fishcaught within oroutside theterritorial jurisdiction ofthecontracting party thathadinvoked
thisprovision [reference ismade totheSalmon/Herring caseandthe1982 Tuna case]".67
54. ThePanel alsoconsidered thecontext inwhich Article XX(g) isfound andobserved:
"measures providing different treatment toproducts ofdifferent origins could inprinciple be
taken under other paragraphs ofArticle XXandother Articles oftheGeneral Agreement with
respect tothings located, oractions occurring, outside theterritorial jurisdiction oftheparty
taking themeasure. Anexample wastheprovision inArticle XX(e) relating toproducts of
prison labour. Itcould nottherefore besaidthattheGeneral Agreement proscribed inan
absolute manner measures thatrelated tothings oractions outside theterritorial jurisdiction
oftheparty taking themeasure".68
55. Referring togeneral international law,thePanel observed:
"states arenotinprinciple barred fromregulating theconduct oftheirnationals withrespect
topersons, animals, plants andnatural resources outside oftheirterritory. Norarestates barred,
inprinciple, from regulating theconduct ofvessels having theirnationality, oranypersons
onthese vessels, withrespect topersons, animals, plants andnatural resources outside their
territory. Astatemayinparticular regulate theconduct ofitsfishermen, orofvessels having
itsnationality oranyfishermen onvessels, withrespect tofishlocated inthehighseas".69
56. ThePanel found thatbilateral orplurilateral environmental andtrade treaties, referred toby
theparties tosupport theirarguments onthelocation ofexhaustible natural resources, werenotrelevant
asaprimary means ofinterpretation oftheGeneral Agreement under thegeneral ruleofinterpretation
ofArticle 31oftheVienna Convention ontheLawofTreaties. ThePanel argued insupport ofthat
67Tuna II,paragraph 5.15.
68Ibidem ,paragraph 5.16.
69Ibidem ,paragraph 5.17.WT/CTE/W/53
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conclusion that(i)those treaties were notconcluded among thecontracting parties totheGeneral
Agreement andtheydidnotapply totheinterpretation oftheGeneral Agreement ortheapplication
ofitsprovisions; (ii)practice under those treaties "could notbetaken aspractice under theGeneral
Agreement, andtherefore could notaffect theinterpretation ofit".70
57. ThePanel alsoconsidered thatthose treaties were notrelevant asasupplementary means of
interpretation oftheGeneral Agreement pursuant toArticle 32oftheVienna Convention:
"...those citedtreaties thatwereconcluded prior totheconclusion oftheGeneral Agreement
wereoflittleassistance ininterpreting thetextofArticle XX(g), since itappeared tothePanel
onthebasisofthematerial presented toitthatnodirect references weremade tothese treaties
inthetextoftheGeneral Agreement, theHavana Charter, orinthepreparatory work tothese
instruments. ThePanel alsofound thatthestatements anddrafting changes made during the
negotiationoftheHavanaCharterandtheGeneralAgreementcitedbythepartiesdidnotprovide
clearsupport foranyparticular contention oftheparties onthequestion ofthelocation ofthe
exhaustible natural resource inArticle XX(g)".
58. Inviewoftheaforementioned considerations, thePanel
"could seenovalidreason supporting theconclusion thattheprovisions ofArticle XX(g) apply
onlytopolicies related totheconservation ofexhaustible natural resources located within the
territory ofthecontracting party invoking theprovision. ThePanel consequently found that
thepolicy toconserve dolphins intheeastern tropical Pacific Ocean, which theUnited States
pursued within itsjurisdiction overitsnationals andvessels, fellwithin therange ofpolicies
covered byArticle XX(g)".71
(b) Theconcept of"relating to"andtheextrajurisdictional application ofArticle XX(g)
59. InTuna I,thePanel rejected anextrajurisdictional application ofArticle XX(g) forthesame
reasons itrejected anextrajurisdictional application ofArticle XX(b) (seeabove paragraph 30).
60. InTuna II,thePanel, recalling theconclusion reached intheSalmon/Herring case, decided
toexamine whether theembargoes imposed bytheUnited States could beconsidered tobeprimarily
aimed attheconservation ofanexhaustible natural resource andprimarily aimed atrendering effective
restrictions ondomestic production orconsumption. ThePanel examined inparticular therelationship
oftheUnited States measures withtheexpressed goalofdolphin conservation. Itnoted inparticular
thatboththeintermediary andtheprimary nation embargoes could notbythemselves conserve dolphins,
butcould achieve theirconservation objectives onlyiftheywerefollowed bychanges inpolicies and
practices inothercountries. Theywerethentaken "soastoforceothercountries tochange theirpolicies
withrespect topersons andthings within theirownjurisdiction, since theembargoes required such
changes inorder tohaveanyeffect ontheconservation ofdolphins". ThePanel thennoted that
Article XX(g) does notprovide aclear answer astowhether "measures primarily aimed atthe
conservation ofexhaustible natural resources, orprimarily aimed atrendering effective domestic
restrictions ontheirproduction orconsumption, could include measures taken soastoforce other
countries tochange theirpolicies withrespect topersons andthings within theirownjurisdictions,
andrequiring suchchanges inorder tobeeffective". Examining paragraph (g)inthelightoftheobject
70Ibidem ,paragraph 5.19.
71Ibidem ,paragraph 5.20.WT/CTE/W/53
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andpurpose oftheGeneral Agreement, andrecalling thatthelong-standing practice ofpanels hasbeen
tointerpret Article XXnarrowly, thePanel found:
"[i]f...Article XXwere interpreted topermit contracting parties totaketrade measures so
astoforce other contracting parties tochange theirpolicies within theirjurisdiction, including
theirconservation policies, thebalance ofrights andobligations among contracting parties,
inparticular theright ofaccess tomarkets, would beseriously impaired. Under suchan
interpretation theGeneral Agreement could nolonger serve asamultilateral framework for
trade among contracting parties.
"ThePanel concluded thatmeasures taken soastoforceothercountries tochange theirpolicies,
andthatwere effective onlyifsuchchanges occurred, could notbeprimarily aimed either
attheconservation ofanexhaustible natural resource, oratrendering effective restrictions
ondomestic production orconsumption, inthemeaning ofArticle XX(g)".72
VI. PARAGRAPH (d)OFARTICLE XX
A. Burden ofProof
61. TheGasoline Panel noted thatthepartyinvoking paragraph (d)hadtodemonstrate thefollowing
elements:
"(1) thatthemeasures forwhich theexception wasbeing invoked -thatis,theparticular
trademeasures inconsistent withtheGeneral Agreement -secure compliance withlaws
orregulations themselves notinconsistent withtheGeneral Agreement;
"(2) thattheinconsistentmeasuresforwhichtheexceptionwasbeinginvokedwerenecessary
tosecure compliance withthose lawsorregulations; and
"(3) thatthemeasures wereapplied inconformity withtherequirements oftheintroductory
clause ofArticle XX".73
B. "Not Inconsistent With ..."
62. InTuna I,thePanel examined whether theintermediary nations embargo wasjustified under
paragraph (d)andnoted:
"Article XX(d) requires thatthe"laws andregulations" withwhich compliance isbeing secured
bethemselves "notinconsistent" withtheGeneral Agreement. ThePanel noted thatthe
United States hadargued thatthe"intermediary nations" embargo wasnecessary tosupport
thedirect embargo because countries whose exports weresubject tosuchanembargo should
notbeabletonullify theembargo 'seffect byexporting totheUnited States indirectly through
thirdcountries. ThePanel found that,given itsfinding thatthedirect embargo wasinconsistent
withtheGeneral Agreement, the"intermediary nations" embargo andtheprovisions ofthe
MMPA under which itisimposed could notbejustified under Article XX(d) asameasure
72Tuna II,paragraphs 5.21-5.27.
73Gasoline ,Panel Report, paragraph 6.31.WT/CTE/W/53
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tosecure compliance with"laws orregulations notinconsistent withtheprovisions ofthis
Agreement"."74
63. Asimilar reasoning wasfollowed inTuna II,where thePanel, "recalling itsfinding thatthe
measures taken under theprimary nation embargo wereinconsistent withArticle XI:1oftheGeneral
Agreement, concluded thattheprimary nation embargo could not,bytheexplicit terms ofArticle XX(d),
serve asabasis forthejustification oftheintermediary nation embargo".75
64. InAutoTaxes ,thePanel
"recalled itsfinding thattheCAFE measure wasnotacharge under Article III:2, buta
requirement under Article III:4enforceable bypenalty payments. Thefundamental issuebefore
thePanel, andtheobject ofitsfinding under Article III:4, wasthustheconsistency ofthe
underlying CAFE requirement withtheGeneral Agreement, notthatofthepenalty payments
assuch. Even iftheissue oftheconsistency ofthepenalty payments assuchwereexamined
bythePanel, suchpayments could notbejustified under Article XX(d) since, contrary tothe
requirements ofthatprovision, theunderlying measure (theCAFE requirement) wasitself
inconsistent withtheGeneral Agreement. Accordingly, thePanel found thatthose aspects
oftheCAFE regulation found inconsistent withArticle III:4could notbejustified under
Article XX(d)".76
65. IntheGasolinecase,thePanelexaminedwhethertheaspectofthebaselineestablishmentmethods
found inconsistent withtheGeneral Agreement secured compliance withalaworregulation not
inconsistent withtheGeneral Agreement. ThePanel observed that:
"assuming thatasystem ofbaselines byitselfwereconsistent withArticle III:4, theUSscheme
might constitute, forthepurposes ofArticle XX(d), alaworregulation "notinconsistent" with
theGeneral Agreement. However, thePanel found thatmaintenance ofdiscrimination between
importedanddomesticgasolinecontrarytoArticleIII:4underthebaselineestablishmentmethods
didnot"secure compliance" withthebaseline system. These methods werenotanenforcement
mechanism. They weresimply rulesfordetermining theindividual baselines. Assuch, they
were notthetypeofmeasures withwhich Article XX(d) wasconcerned".77
Note,however,thefindingsmadeinthisregardbytheAppellateBodyunderparagraph(g)ofArticleXX
(seeabove, paragraph 38).
74Tuna I,paragraph 5.40.
75Tuna II,paragraph 5.41.
76Auto Taxes ,paragraph 5.67.
77Gasoline ,Panel Report, paragraphs 6.32-33.WT/CTE/W/53
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ANNEX 1
Main Facts1
I. "UNITED STATES -PROHIBITION OFIMPORTS OFTUNA AND TUNA PRODUCTS
FROM CANADA", adopted on22February 1982, BISD 29S/91
1. Animport prohibition wasintroduced bytheUnited States afterCanada hadseized 19fishing
vessels andarrested USfishermen fishing foralbacore tuna, without authorization fromtheCanadian
government, inwaters considered byCanada tobeunder itsjurisdiction. TheUnited States didnot
recognize thisjurisdiction andintroduced animport prohibition asaretaliation under theFishery
Conservation andManagement Act.
2. ThePanel found thattheimport prohibition wascontrary toArticle XI:1, andnotjustified
neither under Article XI:2, norunder Article XX(g) oftheGeneral Agreement.
II. "CANADA -MEASURES AFFECTING EXPORTS OFUNPROCESSED HERRING AND
SALMON", adopted on22March 1988, BISD 35S/98
3. Underthe1976CanadianFisheriesAct,Canadamaintainedregulationsprohibitingtheexportation
orsaleforexport ofcertain unprocessed herring andsalmon. TheUnited States complained thatthese
measures wereinconsistent withGATT Article XI.Canada argued thatthese export restrictions were
partofasystem offishery resource management destined atpreserving fishstocks, andtherefore were
justified under Article XX(g).
4. ThePanel found thatthemeasures maintained byCanada werecontrary GATT Article XI:1
andnotjustified neither byArticle XI:2(b) norbyArticle XX(g).
III. "THAILAND -RESTRICTIONS ONIMPORTATION OFAND INTERNAL TAXES ON
CIGARETTES", adopted on7November 1990, BISD 37S/200
5. Underthe1966TobaccoAct,Thailandprohibitedtheimportationofcigarettesandothertobacco
preparations, butauthorized thesaleofdomestic cigarettes; moreover, cigarettes weresubject toan
excise tax,abusiness taxandamunicipal tax.TheUnited States complained thattheimport restrictions
wereinconsistentwithGATTArticleXI:1,andconsideredthattheywerenotjustifiedbyArticleXI:2(c),
norbyArticle XX(b). TheUnited States alsorequested thePanel tofindthattheinternal taxes were
inconsistent withGATT Article III:2. Thailand argued, interalia,thattheimport restrictions were
justifiedunderArticleXX(b)becausethegovernmenthadadoptedmeasureswhichcouldonlybeeffective
ifcigarettesimportswereprohibitedandbecausechemicalsandotheradditivescontainedinUScigarettes
might make them more harmful thanThaicigarettes.
6. ThePanel found thattheimport restrictions wasinconsistent withArticle XI:1andnotjustified
under Article X1:2(c). Itfurther concluded thattheimport restrictions werenot"necessary" within
themeaning ofArticle XX(b). Theinternal taxes were found tobeconsistent withArticle III:2.
1Thefactshighlighted herearethose relevant forthepurpose ofthisNote.WT/CTE/W/53
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IV. "UNITED STATES -RESTRICTIONS ONIMPORTS OFTUNA", notadopted, circulated
on3September 1991, BISD 39S/155
7. TheMarine Mammal Protection Act(MMPA) required ageneral prohibition of"taking"
(harassment, hunting, capture, killing orattempt thereof) andimportation intotheUnited States of
marine mammals, except withexplicit authorization. Itgoverned inparticular thetaking ofmarine
mammals incidental toharvesting yellowfin tunaintheEastern Tropical Pacific Ocean (ETP), anarea
where dolphins areknown toswim above schools oftuna. Under theMMPA, theimportation of
commercial fishorproducts from fishwhich havebeencaught withcommercial fishing technology
which results intheincidental killorincidental serious injury ofocean mammals inexcess ofUS
standards wereprohibited. Inparticular, theimportation ofyellowfin tunaharvested withpurse-seine
netsintheETPwasprohibited (primary nation embargo ),unless thecompetent USauthorities establish
that(i)thegovernment oftheharvesting country hasaprogramme regulating taking ofmarine mammals
thatiscomparable tothatoftheUnited States, and(ii)theaverage rateofincidental taking ofmarine
mammals byvessels oftheharvesting nation iscomparable totheaverage rateofsuchtaking byUS
vessels. Theaverage incidental taking rate(interms ofdolphins killed eachtimeinthepurse-seine
netsareset)forthatcountry 'stunafleetmustnotexceed 1.25times theaverage taking rateofUnited
States vessels inthesameperiod. Imports oftunafromcountries purchasing tunafromacountry subject
totheprimary nation embargo arealsoprohibited (intermediary nation embargo ).
8. Mexico claimed thattheimport prohibition onyellowfin tunaandtunaproducts wasinconsistent
withArticles XI,XIIIandIIIofGATT. TheUnited States requested thePanel tofindthatthedirect
embargo wasconsistent withArticle IIIand,inthealternative, wascovered byArticles XX(b) and
XX(g). TheUnited States alsoargued thattheintermediary nation embargo wasconsistent with
Article IIIand,inthealternative, wasjustified byArticle XX,paragraphs (b),(d)and(g).
9. ThePanel found thattheimport prohibition under thedirect andtheintermediary embargoes
didnotconstituteinternalregulationswithinthemeaningofArticleIII,wasinconsistentwithArticleXI:1
andwasnotjustified byArticle XXparagraphs (b)and(g).Moreover, theintermediary embargo was
notjustified under Article XX(d).
V. "UNITED STATES -RESTRICTIONS ONIMPORTS OFTUNA", notadopted, circulated
on16June1994, DS29/R
10. TheEEC andNetherlands complained thatboththeprimary andtheintermediary nation
embargoes, enforced pursuant totheMMPA (seeabove paragraph 7),didnotfallunder Article III,
were inconsistent withArticle XI:1andwere notcovered byanyoftheexceptions ofArticle XX.
TheUnited States considered thattheintermediary nation embargo wasconsistent withGATT since
itwascovered byArticle XX,paragraphs (g),(b)and(d),andthattheprimary nation embargo did
notnullify orimpair anybenefits accruing totheEECortheNetherlands sinceitdidnotapply tothese
countries.
11. ThePanel found thatneither theprimary northeintermediary nation embargo wascovered
under Article III,thatbothwere contrary toArticle XI:1 andnotcovered bytheexceptions in
Article XX(b),(g)or(d)oftheGATT.WT/CTE/W/53
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VI. "UNITED STATES -TAXES ONAUTOMOBILES", notadopted, circulated on
11October 1994, DS31/R
12. Three USmeasures onautomobiles wereunder examination: theluxury taxonautomobiles
("luxury tax"), thegasguzzler taxonautomobiles ("gas guzzler"), andtheCorporate Average Fuel
Economy regulation ("CAFE"). TheEuropean Community complained thatthese measures were
inconsistent withGATT Article IIIandcould notbejustified under Article XX(g) or(d). The
United States considered thatthese measures were consistent withtheGeneral Agreement.
13. ThePanel found thatboththeluxury tax-which applied tocarssoldforover$30,000 -and
thegasguzzler tax-which applied tothesaleofautomobiles attaining lessthan22.5miles pergallon
(mpg) -were consistent withArticle III:2ofGATT.
14. TheCAFE regulation required theaverage fueleconomy forpassenger carsmanufactured in
theUnited States orsoldbyanyimporter nottofallbelow 27.5mpg. Companies thatarebothimporters
anddomestic manufacturers mustcalculate average fueleconomy separately forimported passenger
automobiles andforthose manufactured domestically. ThePanel found theCAFE regulation tobe
inconsistent withGATT Article III:4because theseparate foreign fleetaccounting discriminated against
foreign carsandthefleetaveraging differentiated between imported anddomestic carsonthebasis
offactors relating tocontrol orownership ofproducers orimporters, rather thanonthebasisoffactors
directly related totheproducts assuch. Similarly, thePanel found thattheseparate foreign fleet
accounting wasnotjustified under Article XX(g); itdidnotmake afinding ontheconsistency ofthe
fleetaveraging method withArticle XX(g). ThePanel found thattheCAFE regulation could notbe
justified under Article XX(d).
VII. "UNITED STATES -STANDARDS FOR REFORMULATED AND CONVENTIONAL
GASOLINE", adopted on20May1996, WT/DS2/9 (Appellate Body Report andPanel Report)
15. Following a1990amendment totheClean AirAct,theEnvironmental Protection Agency (EPA)
promulgated theGasoline Ruleonthecomposition andemissions effects ofgasoline, inorder toreduce
airpollution intheUnited States. From 1January 1995, theGasoline Rulepermitted onlygasoline
ofaspecified cleanliness ("reformulated gasoline") tobesoldtoconsumers inthemostpolluted areas
ofthecountry. Intherestofthecountry, onlygasoline nodirtier thanthatsoldinthebaseyearof
1990("conventional gasoline") could besold. TheGasoline Ruleapplied toallUSrefiners, blenders
andimporters ofgasoline. Itrequired anydomestic refiner which wasinoperation foratleast6months
in1990, toestablish anindividual refinery baseline, which represented thequality ofgasoline produced
bythatrefiner in1990. EPAalsoestablished astatutory baseline, intended toreflect average US1990
gasoline quality. Thestatutory baseline wasassigned tothose refiners whowerenotaoperation for
atleastsixmonths in1990, andtoimporters andblenders ofgasoline. Compliance withthebaselines
wasmeasured onanaverage annual basis.
16. Venezuela andBrazil claimed thattheGasoline Rule wasinconsistent, inter alia,with
GATT Article III,andwasnotcovered byArticle XX. TheUnited States argued thattheGasoline
Rulewasconsistent withArticle III,and,inanyevent, wasjustified under theexceptions contained
inGATT Article XX,paragraphs (b),(g)and(d).
17. ThePanel found thattheGasoline Rulewasinconsistent withArticle III,andcould notbe
justified under paragraphs (b),(d)or(g).Onappeal ofthePanel'sfindings onArticle XX(g), the
Appellate Body found thatthebaseline establishment rulescontained intheGasoline Rulefellwithin
theterms ofArticle XX(g), butfailed tomeettherequirements ofthechapeau ofArticle XX.WT/CTE/W/53
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ANNEX 2
Excerpts from theVienna Convention ontheLawofTreaties
Article 31
General ruleofinterpretation
1. Atreaty shallbeinterpreted ingoodfaithinaccordance withtheordinary meaning tobegiven
totheterms ofthetreaty intheircontext andinthelightofitsobject andpurpose.
2. Thecontext forthepurpose oftheinterpretation ofatreaty shallcomprise, inaddition tothe
text,including itspreamble andannexes:
(a) anyagreement relating tothetreaty which wasmade between alltheparties in
connection withtheconclusion ofthetreaty;
(b) anyinstrument which wasmade byoneormore parties inconnection with the
conclusion ofthetreaty andaccepted bytheother parties asaninstrument related to
thetreaty.
3. There shallbetaken intoaccount, together withthecontext:
(a) anysubsequent agreement between theparties regarding theinterpretation ofthetreaty
ortheapplication ofitsprovisions;
(b) anysubsequent practice intheapplication ofthetreaty which establishes theagreement
oftheparties regarding itsinterpretation;
(c) anyrelevant rulesofinternational lawapplicable intherelations between theparties.
4. Aspecial meaning shallbegiven toatermifitisestablished thattheparties sointended.
Article 32
Supplementary means ofinterpretation
Recourse maybehadtosupplementary means ofinterpretation, including thepreparatory work of
thetreaty andthecircumstances ofitsconclusion, inorder toconfirm themeaning resulting fromthe
application ofarticle 31,ortodetermine themeaning when theinterpretation according toarticle 31:
(a) leaves themeaning ambiguous orobscure; or
(b) leads toaresult which ismanifestly absurd orunreasonable.