RESTRICTED
WORLD TRADE WT/REG/W/17
31October 1997
ORGANIZATION(97-4774)
Committee onRegional Trade Agreements
SYSTEMIC ISSUES RELATED TO"OTHER REGULATIONS OFCOMMERCE"
Background Note bytheSecretariat
1. AttheThirteenth Session oftheCommittee onRegional Trade Agreements, theSecretariat
wasrequested toprepare background documentation toassist theCommittee initsconsideration of
systemic issues related totheconcept of"other regulations ofcommerce".
2. Thisnotedeals withthedrafting history ofArticle XXIV oftheGATT 1947 andofthe
Understanding ontheInterpretation ofArticle XXIV oftheGATT 1994, withrespect tothatconcept.
Subsequent Secretariat 'snotes onother aspects related to"other regulations ofcommerce" willbe
circulated asaddenda tothisdocument.
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Drafting History ofLegal Texts
3. Regulations ofcommerce isanexpression which hasbeenusedintheGATT legaltextsonly
inconnection withregional trade agreements (RTAs).1
Article XXIV oftheGATT 1947
4. Article38ofthefirstdraftCharteroftheInternationalTradeOrganizationoftheUnitedNations,2
which dealtwithinteraliacustoms unions, already referred toother regulations ofcommerce (ORCs).3
Thissame language wasmaintained throughout thevarious versions which ledtothefinaltextof
Article XXIV oftheGATT 1947, where theexpression appears three times, inparagraphs 5and8
ofArticle XXIV:4
(a) Paragraph 5(a)requires that,inthecaseofacustoms union, orofacorresponding
interim agreement, theduties andORCs imposed attheinstitution oftheunion with
1Acomparable expression, trade regulations ,is,however, found inArticle IXoftheGATT.
2Thisfirstdraft Charter, based mainly onaproposal bytheUnited States, wasprepared atthemeeting of
thePreparatory Committee oftheUnited Nations Conference onTrade andEmployment inLondon inOctober-
November 1946. (UN document E/PC/T/33.)
3Inaddition toORCs andduties (ortariffs), athird category ofmeasures ("margins ofpreference") was
temporarily added attheSecond Session ofthePreparatory Committee (Geneva, summer 1947), butwasleft
outfrom thefinal textoftheHavana Charter.
4Initsdefinition of"acustoms territory" intheGATT, paragraph 2ofArticle XXIV alsocontains areference
toORCs.WT/REG/W/17
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respect tothirdparties "shall notonthewhole behigher ormore restrictive thanthe
general incidence" ofthose previously "applicable intheconstituent territories".
(b) Paragraph 5(b)requires that, inthecaseofafree-trade area(FTA), orofa
corresponding interim agreement, theduties andORCs "maintained ineachifthe
constituent territories andapplicable" attheFTAformation withrespect tothirdparties
"shall notbehigher ormore restrictive than" those previously "existing inthesame
constituent territories".
(c) Paragraph 8(a)(ii) provides thateachmember ofacustoms union should apply tothird
parties "substantially thesame" duties andORCs.
5. Theexpressionotherrestrictiveregulationsofcommerce(ORRCs )wasalsopresentinallversions
ofthetextwhich became sub-paragraphs 8(a)(i) and(b)ofArticle XXIV:
(a) Paragraph 8(a)(i) provides that,within acustoms union, duties andORRCs should
beeliminated withrespect to"substantially all"intra-trade or,atleast, withrespect
to"substantially all"intra-trade inoriginating products.
(b) Paragraph 8(b)provides that, inafree-trade area, duties andORRCs should be
eliminated withrespect to"substantially all"intra-trade inoriginating products.
6. Theexceptions permitted tothegeneral rule,characterized bythe"except, where necessary"
language contained inbothsub-paragraphs, were, however, added onlyinHavana (with theexceptions
referring totherelevant Articles oftheHavana Charter).5Thedrafting history doesnotindicate why
Articles XI-XV andXXwereincluded inthelistofexceptions while others, inparticular Article XIX,
were notincluded.
7. On24March 1948, theCONTRACTING PARTIES signed aSpecial Protocol amending
Article XXIV oftheGATT inlightofthefinalversion ofArticles 42to44oftheHavana Charter.
Thepresent textisessentially thesameasthetextagreed tointhisSpecial Protocol. During subsequent
reviews ofthetextoftheGATT, nothing directly related tothese issues wasdiscussed.
Understanding ontheInterpretation ofArticle XXIV ofGATT 1994
8. During theUruguay Round, Article XXIV wasfirstconsidered within theNegotiating Group
onGATT Articles, where delegations benefitted from twonotes bytheSecretariat offering abrief
description ofthedrafting history ofArticle XXIV, along withanaccount ofsalient problems that
hadarisen withrespect totheArticle 'sinterpretation andapplication.6Areview oftheterms "duties
andother regulations ofcommerce" inArticle XXIV:5 and"duties andother restrictive regulations
ofcommerce" inArticle XXIV:8 wasconsidered bytheNegotiating Group.
9. Inasummary review oftheliterature onthetradeeffects ofRTAs,7theSecretariat highlighted
thefactthat,ingeneral, literature onpreference regimes hadconcentrated onaspects thatwereamenable
5Forbothcustoms unions andfree-trade areas, paragraph 8acknowledges thepossibility ofmaintaining duties
andORRCs "permitted under Articles XI,XII,XIII, XIV, XVandXX", where necessary.
6Documents MTN.GNG/NG7/W/13, of11August 1987 andMTN.GNG/NG7/W/13/Add.1, of10August
1988.
7Document MTN.GNG/NG7/W/54.WT/REG/W/17
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toquantitative analysis (mainly tariffs onmerchandise imports), butthatthisliterature leftaside the
institutional andother elements ofsucharrangements. Various proposals weretabled toaddress some
oftheseelements, tackling inparticular therelationship between Article XXIV provisions andemerging
rules negotiated inother contexts (e.g., rules oforigin andstandards).
10. ANotebytheChairman, dated 21May1990, reflected thestateofdiscussions onArticle XXIV.
Itincluded asuggested definition oftheterm "duties andother regulations ofcommerce" in
Article XXIV:5, ascovering "allborder measures taken inconnection withimportation orexportation
which haveadifferential impact onimported products ascompared todomestic products". Indiscussing
thislanguage, thequestion wasraised whether theterm"border measures" included health andsafety
standards; thereference totheterm"exportation" wasalsoquestioned; anddeletion ofthephrase "which
haveadifferential impact onimported products ascompared todomestic products" wassuggested on
thegrounds thatitraised difficult issues related tothenational treatment principle.
11. Adraftdecision onArticle XXIV, based oninformal consultations ofNegotiating Group I
andcirculated on24September 1990, contained sections onORCs andORRCs. Thedraftproposed
anewdefinition oftheterm"duties andother regulations ofcommerce" under Article XXIV:5, as
covering "allduties andcharges andmeasures imposed onorinconnection withimportation or
exportation"; italsoincluded arecognition that"theoverall assessment oftheincidence ofthose other
regulationsofcommerceforwhichquantificationandaggregationaredifficult"might"involveacase-by-
caseexamination".
12. Thatdraftdecision alsocontained aparagraph addressing concerns related totheexclusion
ofArticle XIXsafeguard actions from thepermitted exceptions under Article XXIV:8, asfollows:
"Itisrecognized thatwhen anArticle XIXaction istaken byamember ofacustoms union orfree-trade
area, orbythecustoms union onbehalf ofamember, itneednotbeapplied toother members ofthe
customs union orfree-trade area. However, when taking suchaction itshould bedemonstrated that
theserious injury giving risetotheinvocation ofArticle XIXiscaused byimports fromnon-members;
anyinjury deriving fromimports fromother members ofthecustoms union orfree-trade areacannot
betaken intoaccount injustifying theArticle XIXaction." Thelanguage inthefirstsentence was
found toopermissive bydelegations which heldtheviewthatArticle XIXaction should notbeapplied
toother members ofthecustoms union andthattheabsence ofanyreference toArticle XIXin
paragraph 8supported thisview. Itwasalsosuggested thattheabsence ofareference toArticle XIX
inArticle XXIV:8 could beexplained bythetemporary nature ofanArticle XIXaction.8
13. Informal consultations during thecourse ofOctober 1990ledtoarevised draftdecision,9which
didnotinclude anydefinition oftheterm"duties andother regulations ofcommerce". Thepartof
theearlier draftdecision related totheoverall assessment ofORCs 'incidence wasreworded intothe
language which isnowcontained inparagraph 2oftheUnderstanding ontheInterpretation of
Article XXIV oftheGATT 1994(theUnderstanding). Thetextwhich hadbeengeared toward clarifying
therelationship between Article XXIV:8 andArticle XIXwasdeleted, although some oftheconcerns
withsafeguard actions were translated intofootnote 1oftheAgreement onSafeguards.
8Regarding theArticle XXIV:8 obligation toeliminate duties andother restrictive regulations ofcommerce,
theSecretariat 'sNote of10August 1988 stated: "Itcannot beassumed thatthefailure toinclude Article XIX
inthelistofexceptions contained inArticle XXIV:8 wasanoversight onthepartofthedrafters oftheGeneral
Agreement, butrather thatthiswasadeliberate omission."
9Therevised draft decision, dated 18October 1990, wasattached totheNote ontheMeeting of1,15and
19October 1990, Negotiating Group onGATT Articles (document MTN.GNG/NG7/22).WT/REG/W/17
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14. Under thetitle"Article XXIV:5", paragraph 2oftheUnderstanding refers toother regulations
ofcommerce ,reading: "Itisrecognized thatforthepurpose oftheoverall assessment oftheincidence
ofotherregulations ofcommerce forwhich quantification andaggregation aredifficult, theexamination
ofindividual measures, regulations, products covered andtrade flows affected mayberequired".