WORLD TRADE WT/DS56/R
25November 1997
ORGANIZATION(97-5138)
Original: English
Argentina -Measures Affecting Imports ofFootwear,
Textiles, Apparel andOther Items
Report ofthePanel
Thereport ofthePanel onArgentina -Measures Affecting Imports ofFootwear, Textiles, Apparel
andOther Items isbeing circulated toallMembers, pursuant totheDSU. Thereport isbeing circulated
asanunrestricted document from 25November 1997 pursuant totheProcedures fortheCirculation
andDerestriction ofWTO Documents (WT/L/160/Rev.1). Members arereminded thatinaccordance
withtheDSUonlyparties tothedispute mayappeal apanel report, anappeal shallbelimited toissues
oflawcovered inthepanel report andlegalinterpretations developed bythepanel, andthatthereshall
benoexpartecommunications withthepanel orAppellate Body concerning matters under consideration
bythepanel orAppellate Body.
NotebytheSecretariat: ThisPanel Report shallbeadopted bytheDispute Settlement Body (DSB) within 60daysafterthedateofitscirculation
unless aparty tothedispute decides toappeal ortheDSBdecides byconsensus nottoadopt thereport. IfthePanel Report isappealed
totheAppellate Body, itshallnotbeconsidered foradoption bytheDSBuntilafterthecompletion oftheappeal. Information onthecurrent
status ofthePanel Report isavailable from theWTO Secretariat.WT/DS56/R
Pagei
TABLE OFCONTENTS
I. INTRODUCTION ..........................................1
II. FACTUAL ASPECTS ........................................3
A. ARGENTINA 'SIMPORT REGIME FOR TEXTILES, APPAREL AND
FOOTWEAR ........................................3
B. MINIMUM SPECIFIC IMPORT DUTIES ("DIEM") ...............3
1. STATED PURPOSE AND FUNCTIONING OFTHE MINIMUM
SPECIFIC IMPORT DUTIES ..........................3
2. MINIMUM SPECIFIC IMPORT DUTIES ONTEXTILES AND
APPAREL ......................................4
3. MINIMUM SPECIFIC DUTIES ONFOOTWEAR .............5
C. STATISTICAL TAX ....................................5
III. CLAIMS AND MAIN ARGUMENTS .............................7
A. REQUESTS FOR PRELIMINARY RULINGS BYTHE PANEL ........8
1. REQUESTOFARGENTINAFORASPECIALPRELIMINARYRULING
REGARDINGTHEINCLUSIONOFTHEMEASURESONFOOTWEAR
INTHESUBMISSIONS OFTHEUNITED STATES ............8
(a) Potentiality ofareintroduction oftheDIEM onimports of
footwear ..................................8
(b) Similarities ofthiscasewithprevious cases ...........10
(c) Effect ofprecedent oftherequest oftheUnited States .....14
2. REQUEST BYARGENTINA FOR ARULING OFTHE PANEL
REGARDING THESUBMISSION OFCERTAIN EVIDENCE BYTHE
UNITED STATES .................................16
B. VIOLATIONOFARTICLEIIINRELATIONTOTHEIMPLEMENTATION
OFARGENTINA 'SSCHEDULE LXIV .......................17
1. INTRODUCTION .................................17
2. GENERAL REMARKS ONTHE NOTION OF"PREDICTABILITY"
OFTARIFFS ....................................17
3. IMPOSITION OFSPECIFIC DUTIES INSTEAD OFADVALOREM
DUTIES .......................................19
4. VIOLATIONASARESULTOFTHEPOTENTIALITYOFEXCEEDING
THEBOUND RATE OFDUTY ........................25
5. IMPOSITIONOFDUTIESEFFECTIVELYEXCEEDINGTHEBOUND
RATE ........................................32
(a) USexamples based ontheArgentine methodology forthe
application ofDIEM ..........................32
(b) Obligation fortheArgentine customs toassess thefullamount
ofduties ..................................34
(c) Dataregarding theincome forArgentina fromlevying duties
above thebound rate..........................35
(d) Arguments regarding theusebytheUnited States oftables
prepared byArgentina .........................36
(e) Evidence ofviolation onanaverage basis .............37
(f) Theuseofnetv.gross weight ....................39
(g) Evidence based onimports from theECandtherestofthe
world ...................................42
(h) Examples ofindividual transactions .................43WT/DS56/R
Pageii
6. BURDEN OFPROOF ..............................49
(a) Principles applicable totheburden ofproof ............49
(b) Application inthepresent case....................50
7. DIRECT EFFECT OFTHEWTO AGREEMENT INTHEARGENTINE
LEGAL ORDER AND ROLE OFTHECHALLENGE PROCEDURE ..53
(a) Direct effect oftheWTO Agreement intheArgentine legal
order ....................................53
(b) Thechallenge procedure (recurso deimpugnación ).......55
C. THE STATISTICAL TAX ................................63
1. VIOLATION OFARTICLE VIII ........................63
(a) Advalorem taxv.fixed tax......................63
(b) Services andcosts covered bythetax...............65
(c) Inclusion ofthetaxinArgentina 'sSchedule ...........67
2. IMFCOMMITMENTS AND CROSS-CONDITIONALITIES ........68
(a) Mandatory nature ofthestatistical taxunder Argentina 's
agreement withtheIMF ........................68
(b) Relevance ofthedeclarations annexed totheWTO Agreement
andoftheWTO agreement withtheIMF .............69
(c) Scope ofArticle XV..........................71
D. ARTICLE 7ATC ......................................73
IV. THIRD PARTIES SUBMISSIONS ................................75
A. THE EUROPEAN COMMUNITIES ..........................75
B. HUNGARY .........................................80
C. INDIA .............................................81
V. INTERIM REVIEW .........................................82
VI. FINDINGS ...............................................83
A. PRELIMINARY OBJECTION BYARGENTINA .................83
B. ARTICLE IIOFGATT ..................................86
1. THETYPE OFDUTIES USED .........................88
2. THE APPLICATION BYARGENTINA OFSPECIFIC MINIMUM
DUTIES ......................................91
(a) Burden ofproof andnature oftheevidence required ......91
(b) Minimum specific duties necessarily leadtobreaches of
Argentina ’sbindings ..........................93
(c) Evidence based onaverage calculations ..............95
(d) Evidence based onspecific transactions ..............96
3. THEDOMESTIC CHALLENGE PROCEDURE ...............100
C. THE STATISTICAL TAX ................................101
1. ARTICLE VIIIOFGATT ............................102
2. EFFECT OF INCLUDING STATISTICAL TAX INTARIFF
SCHEDULE ....................................103
D. ARTICLE 7OFTHE ATC ...............................104
VII. CONCLUSIONS ...........................................105WT/DS56/R
Page1
I. INTRODUCTION
1.1 On4October 1996, theUnited States requested Argentina toholdconsultations pursuant to
Article 4oftheUnderstanding onRules andProcedures Governing theSettlement ofDisputes ("DSU"),
Article XXII:1 oftheGeneral Agreement onTariffs andTrade 1994 ("GATT 1994"), Article 14of
theAgreement onTechnical Barriers toTrade ("TBT Agreement"), Article 19oftheAgreement on
Implementation ofArticle VIIoftheGATT 1994 ("Customs Valuation Agreement"), andArticle 7
oftheAgreementonTextilesandClothing("ATC"),regardingcertainmeasuresmaintainedbyArgentina
affecting imports offootwear, textiles, apparel andother items, namely, measures imposing specific
duties onvarious footwear, textiles andapparel inexcess ofthebound rateof35percentadvalorem
provided inArgentina 'sSchedule LXIV; astatistical taxofthree percentadvalorem onimports of
allsources otherthanMERCOSUR countries; andmeasures imposing, interalia,labelling requirements
related toaffidavits ofproduct components (WT/DS56/1).
1.2 Pursuant toArticle 4.11DSU, Hungary requested tobejoined inthese consultations on
21October 1996 (WT/DS56/2). TheEuropean Communities ("EC") made asimilar request on
25October1996(WT/DS56/3).Inseparatecommunicationsdated6November1996,Argentinaaccepted
therequest ofHungary andtherequest oftheECtojointheconsultations which theUnited States
hadrequested (WT/DS56/4).
1.3 During theconsultations, amutually agreed solution wasreached between theUnited States
andArgentina regarding Argentina 'slabelling requirements. However, theparties failed toreach a
mutually satisfactory solution ontheother aspects raised during theconsultations.
1.4 On9January1997,theUnitedStatesrequestedtheDisputeSettlementBody("DSB")toestablish
apanel (WT/DS56/5). TheUnited States claimed thatArgentina 'smeasures were"inconsistent with
theobligations ofArgentina under Articles II,VII,VIIIandXoftheGATT 1994; Articles 1through
8oftheAgreement onImplementation ofArticle VIIoftheGATT 1994; andArticle 7oftheAgreement
onTextiles andClothing".
1.5 On25February 1997, theDSBestablished apanel pursuant totherequest made bytheUnited
States, inaccordance withArticle 6DSU. Indocument WT/DS56/6, theSecretariat reported thatthe
parties hadagreed thatthePanel would havethestandard terms ofreference asfollows:
"toexamine, inthelightoftherelevant provisions ofthecovered agreements cited
bytheUnited States indocument WT/DS56/5, thematter referred totheDSBbythe
United States inthatdocument andtomake suchfindings aswillassist theDSBin
making therecommendations oringiving therulings provided forinthoseagreements".
1.6 Thesame document WT/DS56/6 reported theconstitution ofthePanel on4April 1997 with
thefollowing composition:
Chairman: Mr.Peter Palecka
Members: Ms.Heather Forton
Mr.Peter May
1.7 TheEC,Hungary andIndia reserved theirrights toparticipate inthePanel proceedings as
thirdparties, andallpresented arguments tothePanel.WT/DS56/R
Page2
1.8 ThePanel metwiththeparties on17-18 June1997and23July1997. Itmetwiththirdparties
on17June1997. ThePanel issued itsinterim report totheparties on30September 1997. Bothparties
requested thepanel toreview parts oftheinterim report. None ofthem requested thepanel tohold
anadditional meeting.WT/DS56/R
Page3
II. FACTUAL ASPECTS
A. ARGENTINA 'SIMPORT REGIME FOR TEXTILES, APPAREL AND FOOTWEAR
2.1 ThegreatmajorityofArgentina'simporttariffsarefixedinadvaloremterms.Regardingtextiles,
clothing andfootwear, Argentina maintained aregime ofminimum specific import duties asfrom1993.
Thisregime wasapplied through resoluciónes (resolutions) anddecretos (decrees) having fixedterms.
2.2 Argentina approved theresults oftheUruguay Round through LawNo.24.425, promulgated
on23December 1994. These results included abound rateofdutyof35percentadvalorem with
respect totextiles, apparel andfootwear imported intoArgentina. Inparallel, Argentina continued
toapply asystem ofminimum specific import duties inthefootwear, textile andapparel sectors.
Regarding footwear, theminimum specific dutywasrevoked in1997. Provisional safeguard measures
were applied inthatsector on25February 1997.
2.3 Concurrently, since 1989, Argentina applied ataxonimported products intended tofinance
statistical services toimporters, exporters andthegeneral public.
2.4 ThePanel procedure concerned theArgentine measures adopted inorder toapply theabove-
mentioned regime, asestablished andmaintained interaliathrough thelaws, decrees andresolutions
referred tobelow. Thelatest measures adopted atthetimeoftherequest fortheestablishment ofthe
Panel(9January1997)were,fortextilesandapparel,ResolutionNo.22/97of7January1997,extending
thevalidity oftheminimum specific import duties forthose sectors until31August 1997,1forfootwear
Resolution No.23/97 of7January 1997, extending thevalidity oftheminimum specific import duties
forthatsector until31August 19972and,withrespect tothestatistical services tax,Presidential Decree
No.389/95 of22March 1995. On25February 1997, thedateofestablishment ofthePanel bythe
DSB,theminimumspecificimportdutiesforthetariffheadingscontainedinHarmonizedSystem("HS")
Chapter 64(footwear) andlisted inAnnex IXtoDecree No.998/95, asamended, hadbeenrepealed
byResolutionNo.225/97,dated14February1997.Furthertotheinitiationofasafeguardinvestigation,
provisional safeguard measures intheformofminimum specific import duties became applicable on
25February 1997 tocertain imports offootwear inapplication ofResolution No.226/97.3
B. MINIMUM SPECIFIC IMPORT DUTIES ("DIEM")
1. STATEDPURPOSEANDFUNCTIONINGOFTHEMINIMUMSPECIFICIMPORTDUTIES
2.5 Thestated purpose oftheminimum specific import duties, alsoreferred toas"DIEM",4was
tocounteract injury allegedly suffered byArgentine manufacturers asaresult ofimports oftextiles,
apparel andfootwear atprices lower thantheproduction costsinthecountries oforigin orlower than
international prices.5
2.6 Thesystemoperatedasfollows:foreachrelevantHStarifflineoftextiles,apparelsandfootwear,
Argentina calculated anaverage import price.Once ithaddetermined theaverage import price for
aparticular category, Argentina multiplied thatprice bythebound rateof35percent, resulting in
aspecific minimum dutyforallproducts inthatcategory. Upon theimportation ofcovered textiles,
apparel orfootwear, depending onthecustoms value ofthegoods concerned, Argentina applied either
thespecific minimum dutyapplicable tothose items ortheadvalorem rate,whichever washigher.
1Boletín Oficial delaRepública Argentina ,No.28.561 of10January 1997.
2Ibid.
3Boletín Oficial delaRepública Argentina ,No.28.592 of24February 1997.
4ForDerechos deImportación Específicos Mínimos (minimum specific import duties)
5See,e.g., preambles ofResolutions No.811/93 (textiles andapparel) andNo.1696/93 (footwear).WT/DS56/R
Page4
2. MINIMUM SPECIFIC IMPORT DUTIES ONTEXTILES AND APPAREL
2.7 Minimum specific import duties wereoriginally applied byArgentina toapproximately 200
categories oftextiles andapparel byResolution No.811/93 oftheArgentine Ministry ofEconomy,
andPublic Works andServices of29July1993.6Article 3oftheResolution provided thatthespecific
import duties established byArticle 1weretooperate asaminimum ofthecorresponding advalorem
import duty. Thecategories ofproducts towhich theminimum specific duties applied were listed,
together withtheduties, inAnnex ItotheResolution. Theminimum specific import duties established
bytheResolution were toremain valid until31January 1995, withthepossibility ofasingle, non-
renewable extension ofsixmonths.
2.8 Asaresult oftheUruguay Round ofmultilateral trade negotiations, Argentina included in
itsSchedule ofConcessions (Schedule LXIV) amaximum dutyrateof35percentadvalorem .7This
bound ratebecame effective on1January 1995. Itwasgenerally applicable toimports, withcertain
specified exceptions forproducts subject toadifferent levelofbinding.
2.9 After theentry intoforce oftheUruguay Round results, Argentina continued toapply the
minimum specific import duties. Presidential Decree No.2275/94 of23December 1994 extended
theapplication ofthese specific duties until31December 1995 andexpanded thenumber ofaffected
categories ofmerchandise.8Pursuant toArticle 15andAnnex XIItotheDecree, minimum specific
import duties applied tocategories oftextiles andapparel (HSChapters 51to63)andfootwear (HS
Chapter 64).
2.10 Presidential Decree No.2275/94 wasmodified, on22September 1995, bytworesolutions
oftheArgentine Ministry ofEconomy andPublic Works andServices. Resolution No.304/95 applied
totextiles andapparel andmodified thespecific duties applicable. Itincreased therateoftheformerly
established specific duties foranumber oftextiles andapparel tariff lines. Resolution No.305/95
applied tofootwear.
2.11 Theapplication oftheminimum specific import duties ontextiles andapparel wasextended
until31December 1996byArticle 9ofPresidential Decree No.998/95 of28December 1995.9This
Decree wasamended through Resolution No.299/96 oftheMinistry ofEconomy andPublic Works
andServices of20February 1996, which, interalia,modified thespecific duties applicable toimports
ofnylon carpeting, towels andundergarments.
2.12 Asof1January 1997, theMinistry ofEconomy andPublic Works andServices extended the
application oftheminimum specific import duties until31August 1997through Resolution No.22/97.10
2.13 Theminimum specific import duties ontextile andapparel products werefinally modified by
Resolution No.597/97 oftheMinistry ofEconomy andPublic Works andServices of14May1997.11
ThisResolution modified Annex IXtoDecree No.998/95 foraseries oftariff positions. Forsome
ofthese, minimum specific duties wereprogressively reduced. TheResolution called forreductions
totakeplace onfivedates between 1June1997 and1April 1998.
6Boletín Oficial delaRepública Argentina ,No.27.692 of2August 1993.
7SeeArgentina'sSchedul eLXIV, FinalActEmbodyi ngtheResultsoftheUruguay Round ofMultilateralTradeNegot iations
done atMarrakesh on15April 1994. Members 'schedules ofconcessions arehereafter referred toastheir"Schedules".
8Boletín Oficial delaRepública Argentina ,No.28.050 of30December 1994.
9Boletín Official delaRepública Argentina ,No.28.301 of29December 1995.
10Boletín Oficial delaRepública Argentina ,No.28.561 of10January 1997.
11Boletín Oficial delaRepública Argentina ,No.28.650 of20May 1997.WT/DS56/R
Page5
3. MINIMUM SPECIFIC DUTIES ONFOOTWEAR
2.14 Measures similar tothespecific duties applicable totextiles andapparel wereapplied toimports
offootwear. Through Resolution No.1696/93 of28December 1993,12theArgentine Ministry of
Economy andPublic Works andServices instituted minimum specific import duties oncertain categories
ofathletic shoes. Article 5oftheResolution provided thatthespecific import duties established by
Article 4weretooperate asaminimum ofthecorresponding advalorem import duty. Article 6provided
thattheResolution wastoapply until31December 1994, withthepossibility ofasingle, non-renewable
extension ofsixmonths. Asfortheminimum specific import duties ontextiles andapparel, thespecific
import duties onfootwear were tobelevied onlyintheevent thattheyresulted inthepayment ofa
higher tariff thantherelevant advalorem duty.13Resolution No.1696/93 applied onlytoproducts
fromcountries outside theSouthern Common Market (MERCOSUR) ortheLatin American Integration
Association (LAIA).14
2.15 Theminimum specific import duties onfootwear were maintained aftertheentry intoforce
oftheUruguay Round results. Asfortextiles andapparel, Presidential Decree No.2275/94 of23
December 1994 extended theapplication ofthespecific duties onfootwear until31December 1995.
Their application wasfurther extended until31December 1996 byArticle 9ofPresidential Decree
No.998/95. Resolution No.305/95 of22September 1995 increased thespecific duties forcertain
categories offootwear andamended thelistoffootwear tariff linestowhich theminimum specific
import duties were applicable.
2.16 Through Resolution No.103/96 of6September 1996, Argentina 'sMinistry ofEconomy and
Public Works andServices amended thelevelofspecific duties applied oncertain footwear categories.
Reductions intherateofdutywere tooccur infourphases through January 1998.
2.17 Thespecific duties onfootwear HScategories assetforthinDecree No.998/95 asamended
byResolution No.103/96 were renewed byResolution No.23/97 until31August 1997.15
2.18 On14February 1997, theArgentine Ministry ofEconomy andPublic Works andServices
adopted Resolution No.225/97, revoking allminimum specific import duties onfootwear. Thesame
day,theMinistryofEconomyandPublicWorksandServices,throughResolutionNo.226/97,16initiated
asafeguard investigation andimposed provisional safeguard measures. On21February 1997, Argentina
notifiedtheCommitteeonSafeguardsoftheWorldTradeOrganizationoftheinitiationofaninvestigation
andthereasonsforitaswellasofitsintentiontoadoptprovisionalsafeguardmeasures.17Theprovisional
safeguard duties became effective on25February 1997.
C. STATISTICAL TAX
2.19 Thestatistical taxatissue inthiscasewasregulated byArticles 762to766oftheArgentine
Customs Code (Law No.22.415). In1961, ataxintended tofinance astatistical service hadbeen
imposed through Decree No.6123/61. Inapplication ofLawNo.23.664, adopted in1989andrelating
toArticles 762to766oftheArgentine Customs Code,18Argentina imposed, until1994, athree per
centadvalorem taxwhich related tothecollection ofstatistical information bytheArgentine customs
service regarding imports andexports. Through Presidential Decree No.2277/94 adopted on
12Boletín Official delaRepública Argentina ,No.27.797 of30December 1993.
13SeeResolution No.1696/93, Article 5.
14Ibid., Article 7.
15Boletín Oficial delaRepública Argentina No.28.561 of10January 1997.
16Boletín Oficial delaRepública Argentina ,No.28.592 of24February 1997.
17Document G/SG/N/6/ARG/1, G/SG/N/7/ARG/1, 25February 1997.
18Boletín Oficial delaRepública Argentina ,No.26.652 of12June 1989.WT/DS56/R
Page6
23December 199419pursuant toArticle 764oftheCustoms Code, thetaxwasreduced tozeropercent
inorder (a)"toremove allthose factors thatmaycomplicate theprocess ofeconomic integration and
openness";20(b)"toeliminate those factors thatcanmake difficult thefreecirculation ofgoods";21
and(c)"toneutralize theeffect onforeign tradethatthestatistical tax[...]inforce in[Argentina] may
cause".22On22March 1995, Presidential Decree No.389/95 setthelevelofthestatistical taxatthree
percent. Thestatistical taxwasapplied toimport transactions withaview toproviding ageneral
statistical service. According toArticle 762oftheArgentine Customs Code, thetaxwastobeapplied
onanadvalorem basis. Thetaxdidnotapply togoods exported toanydestination insuspensive or
definitive form forconsumption. Itapplied toallimports except forarticles subject toatemporary
import regime, articles originating inMERCOSUR Member States, imported goods subject tothe
MERCOSUR common external tariffrateofzeropercent, selected imported capital goods, goods related
todataprocessingandtelecommunicationsandcertainothercategoriesundertheCommonNomenclature
ofMERCOSUR. TheMinistry ofEconomy andPublic Works andServices wasauthorized byDecree
No.389/95 toestablish theappropriate exceptions inevery case.
2.20 Thepurpose ofArgentina 'simport taxwastorecover thecostofthestatistical service rendered
inrespect ofArgentine import andexport transactions. Thefirstparagraph ofthepreamble ofthe
Decree stated that"itwasnecessary toprovide forthenecessary taxcollection tocontribute tothe
financing ofcustoms activities related totheregistration, computing anddataprocessing ofexport and
import information, inorder torelyupon Foreign Trade statistics inrapid andflexible form".23This
service wasnotprovided toimporters onanindividual basis, i.e.tothespecific importer concerned
bytherelevant transaction onwhich thestatistical taxwaslevied, butbenefited foreign tradeoperators
ingeneral andforeign trade asanactivity initself. Theservice consisted intherecording oftrade
information,subsequentprocessingandpublication,anddistributiontothepublicingeneral.Argentina's
customs administration registered theinformation relating toprices, quantities, description, quality
andclassification ofthegoods inthedesegregated form required forpurposes ofcontrol, valuation
andassessment ofthetaxes. Thisinformation wasstandardized andtransmitted totheNational Statistical
andCensusInstitute24ofArgentinaforpurposesofanalysisandsubsequentprocessing,andacompilation
oftheinformation waspublished. Atthesame time, thebasic datawere alsotransmitted tothe
Departments ofAgriculture, Mining, Fuel, Tourism, Transport andIndustry andTrade, foranalysis
andprocessing. Thisexercise resulted inpublications andstatistical material which wasmade available
toforeign trade operators.
2.21 Thetaxwasbound inArgentina 'sSchedule LXIV under theheading "other duties andcharges"
atthree percentadvalorem .
19Boletín Oficial delaRepública Argentina ,No.28.050 of30December 1994.
20Decree No.2277/94 firstpreambular paragraph. Theoriginal inSpanish reads "remover todos aquellos factores que
puedan dificultar dicho proceso deapertura eintegración económica ".
21Ibid., third preambular paragraph. Theoriginal inSpanish reads: "eliminarse todos aquellos factores quepueden
dificultar lalibre circulacion debienes ".
22Ibid., fourth preambular paragraph. Theoriginal inSpanish reads "neutralizar losefectos que,enelcomercio exterior,
puede producir latasadeestadística [...]vigente en[Argentina] ".
23Decree No.389/95, firstpreambular paragraph. Theoriginal inSpanish reads "prever larecaudación necesaria para
contribuir alfinanciamiento delasactividades aduaneras vinculadas conlaregistración, computo ysistematización dela
información deimportación yexportación, conelfindecontar conestadísticas deComercio Exterior enforma ágilyrápida ".
24Instituto Nacional deEstadísticas yCensos (INDEC).WT/DS56/R
Page7
III. CLAIMS AND MAIN ARGUMENTS
3.1 TheUnited States asked thePanel tofindthat:
(a) Decree No.998/95, Resolution No.299/96, andResolution No.22/97, which
imposed specific duties ontextiles andapparel violated Articles II:1(a) and
II:1(b) GATT 1994 andArticle 7ATC;
(b) Decree No.389/95, which applied ataxonimports, violated Article VIIIGATT 1994
andArticle 7ATC; and
(c) Decree No.2275/94, Resolution No.305/95, Decree No.998/95, Resolution No.
103/96, andResolution No.23/97, which applied specific duties onfootwear until
February 1997, violated Articles II:1(a) andII:1(b) GATT 1994.
TheUnited States alsorequested thatthePanel include within itsreview "other measures which impose
specific duties onvarious textile, apparel andfootwear items inexcess ofthebound rateof35per
centadvalorem provided inArgentina 'sSchedule LXIV".25
3.2 Pursuant toArticle 3.8DSU, theUnited States further requested thePanel toconclude that
themeasures identified in(a)and(b)above nullified orimpaired benefits accruing totheUnited States
under theWTO Agreement andthemeasures identified in(c)nullified orimpaired suchbenefits as
well.
3.3 TheUnited States requested thatthePanel recommend thatArgentina bring itsmeasures into
conformity withitsobligations under GATT 1994 andtheATC.
3.4 Argentina asked thePanel tofindthat:
(a) Asaspecial preliminary ruling, there werenogrounds forittoconsider thequestion
raised bytheUnited States inconnection withtheapplication ofminimum specific
import duties toimports offootwear astheduties inquestion hadbeeneliminated before
thePanel wasestablished;
(b) Theapplication ofthespecific duties inforce, totheextent thattheydidnotexceed
the"advalorem equivalent" ofArgentina 'sbound rateof35percentunder theWTO
Agreement, wasnotinconsistent withArgentina 'sobligations under Articles II:l(a)
andII:1(b) GATT 1994 andArticle 7ATC;
(c) Thestatistical taxapplied byArgentina wasconsistent withArticle VIIIGATT 1994.
3.5 Onthebasisoftheabove, Argentina requested thePanel toreject theclaim bytheUnited States
thatthemeasures adopted byArgentina nullified orimpaired benefits accruing totheUnited States.
25WT/DS56/5.WT/DS56/R
Page8
A. REQUESTS FOR PRELIMINARY RULINGS BYTHE PANEL
1. REQUEST OFARGENTINA FOR ASPECIAL PRELIMINARY RULING REGARDING
THE INCLUSION OFTHE MEASURES ONFOOTWEAR INTHE SUBMISSIONS OF
THE UNITED STATES
3.6 Argentina requested thePanel toissueaspecial preliminary ruling totheeffect thattherewere
nogrounds forthePanel toexamine theclaims oftheUnited States regarding analleged violation
ofArticle IIasaresult oftheapplication ofminimum specific import duties onimports offootwear.
According toArgentina, theUnited States hadasked thePanel tofindthatameasure wasinconsistent
inspiteofthefactthatitwasnolonger ineffect atthetimewhen thePanel wasestablished. Argentina
asked thatitsrequest beexamined bythePanel before proceeding toaddress thequestion ofsubstance
asrequested bytheUnited States andcontinuing withtheexamination ofthecase.
(a) Potentiality ofareintroduction oftheDIEM onimports offootwear
3.7 TheUnited States argued thatArgentina ’srevocation ofthefootwear specific duties during
thedispute settlement process should notprevent thePanel fromdetermining thatthemeasures imposing
themwerecontrary toArticle IIGATT 1994. Previous panels hadreviewed theconsistency withthe
GATT ofmeasures nolonger ineffect.26Such review wasespecially appropriate inthiscasegiven
thatArgentina mayimpose thefootwear specific duties again inthefuture.27Thelikelihood that
Argentina would restore itsfootwear specific duties wasindeed considerable. Argentina hadrepeatedly
renewed them inthepast,evenafterhaving received repeated objections from itstrading partners.
Argentina alsomayrestore thefootwear minimum specific import duties when theprovisional measures
thatreplaced them would haveexpired.
3.8 TheUnited States added that,alternatively, Argentina might reinstate thefootwear specific
duties should asubsequent panel rulethatits"safeguard" measures were improper. There were
significant reasons tobelieve thatsucharesult would occur. TheArgentine "safeguard" rested on
aweakfoundation. TheArgentine Ministry ofEconomy andPublic Works andServices, initstechnical
report preceding theimposition ofsafeguard relief, hadfound that"critical circumstances would only
haveoccurred iftheMinimum Specific Duties hadbeeneliminated".28Thus, Argentina hadtriggered
thecritical circumstances thatwereaprerequisite toimposing provisional safeguard relief byremoving
itsownpurportedly WTO-consistent duties. Notsurprisingly, theMinistry ofEconomy andPublic
Works andServices further found that"injury might beattributable lesstocurrent imports thanto
consumption trends andindustrial reorganization, which wasmajor".29Inreaching thisconclusion,
theMinistry hadnoted thatimportation offootwear haddeclined by9percentin1994, by24per
centin1995andby21percentinthefirstsixmonths of1996.30Moreover, anArgentine administrative
26TheUnited States referred tothePanel Reports onUnited States -Measures Affecting Imports ofWoven Wool Shirts
andBlouses fromIndia,adopted on23May1997, WT/DS33/R, para. 8.1;andEEC-Measures onAnimal Feed Proteins ,
adopted on14March 1978, BISD 25S/49.
27TheUnited States referred tothePanel Report onUnited States -Prohibition onImports ofTuna andTuna Products
fromCanada ,adopted on22February 1982, BISD 29S/91, para. 4.3,where thepanel found thatanalysing ameasure that
hadbeen disinvoked wasproper where there wasathreat ofrecurring action.
28TheUnited States referred to:Argentina Ministry ofEconomy andPublic Works andServices -National Commission
forExternal Trade: Preliminary Analysis ofEvidence oftheExistence ofSerious Injury and/or Threat ofSerious Injury
toDomestic Industry Owing totheIncrease inImports ofFootwear, inResponse totheApplication forSafeguard Measures,
CNCE Docket No.75/96. Annexed toActNo.266, atpara. 12.
29Ibid., para. 9.
30Ibid., para. 8.WT/DS56/R
Page9
lawjudge hadfound Argentina ’sprovisional safeguard duties onfootwear tobeimproper andhad
suspended theiroperation.31
3.9 TheUnitedStatesequallyrecalledthattheEC’sthirdpartysubmissionalsodetailedthenumerous
inadequacies intheArgentine safeguard investigation. While theUnited States didnotseekanyfinding
bythePanel ontheparticular issues inthesafeguards investigation, these factswererelevant forthe
purpose ofdemonstrating thepossibility thatArgentina could reinstate thefootwear specific duties.
3.10 Argentina argued thatthePanel hadtobeguided bythefollowing considerations: theminimum
specific import duties applied byArgentina pursuant toResolution No.1696/93 oncertain items of
footwear hadbeenexplicitly revoked byResolution No.225/97 of14February 1997. TheWTO had
beenofficially notified oftherevocation.32Thus, theUSclaim pertained totheillegality ofameasure
which hadbeenrevoked priortotheestablishment ofthisPanel andtheadoption ofitsterms ofreference.
3.11 Argentina contended thattheUnited States 'arguments related tothelikelihood thatArgentina
would restore itsspecific dutyregime onimports offootwear represented aneffort tosustain facts
through areasoning based onaseries ofspeculations. Asafeguard investigation wasunder way.No
definitive measures hadbeenadopted. There hadbeennochallenge under theDSUnorhadanypanel
issued recommendations onthematter. Finally, ifArgentina 'sintention hadbeentoreintroduce the
specific import duties onfootwear, itwould havesuspended them rather thanrevoking them.
3.12 Argentina further argued thatthedecision toeliminate theDIEM applied tofootwear imports
hadbeentaken inviewofthefactthat,inOctober 1996, thedomestic industry hadformally requested
theapplication ofasafeguard measure. Thedomestic industry alsohadprovided proof anddocumentary
evidence oftheexistence ofinjury caused byincreased imports andtheexistence ofcritical
circumstances, inaccordance withtherequirements ofDecree No.1059/96 establishing theRegulations
concerning theWTO Agreement onSafeguards.33TheNational Foreign Trade Commission hadmade
apreliminary determination ofinjury based ontheabsence ofminimum specific import duties. The
Argentine Government haddecided toopenaninvestigation and,atthesame time, apply aprovisional
measure because critical circumstance existed andcould havecaused damage totheindustry which
could nothavebeenrepaired. Theminimum specific import duties hadbeeneliminated because it
wasillogical toapply safeguard measures inaccordance withtheprovisions oftheWTO Agreement
andatthesame timemaintain theprevious minimum specific import duties.
3.13 Argentina stated thattheinvestigation concerning theapplication ofasafeguard measure with
respect tofootwear wasfollowing itscourse. TheNational Commission forForeign Trade hadproduced
itsreport oninjury which would benotified totheWTO inaccordance withtheAgreement on
Safeguards. Atthesametime, theprovisional safeguard measure hadhaditseffects partially suspended
byaprecautionary measure ordered byajudge. Consequently, itwashighly unlikely thattherevoked
measure would bereinstated assuggested bytheUnited States.
3.14 Finally, Argentina replied thattheorder oftheadministrative judge towhich theUnited States
referred, relating totheprovisional safeguard measure forfootwear, wasprecautionary, applied to
aspecific case, wascurrently being appealed andhadnoergaomnes effect. There wasnothing
whatsoever tosuggest thattheDIEM might bereintroduced, evenifadefinitive safeguard measure
wasnotapplied ortheprecautionary measure ordered byajudge wasconfirmed bythecourt ofappeal.
Thus, theconditions mentioned bytheUnited States itselftojustify theanalysis oftheDIEM onfootwear
31TheUnited States referred tocaseNo.8.447/97 FILA (Argentina) S.A.etal.v.TheNational State-Ministry ofEconomy
andPublic Works andUtilities -Decree No.226/97 -About theProceedings (suspensive order ofthejudiciary dated
4June 1997).
32Seedocuments WT/L/204, 25February 1997 andWT/L/204 Add.1, 18March 1997.
33Boletín Oficial delaRepública Argentina ,No.28.485 of24September 1996.WT/DS56/R
Page10
bythePanel didnotexist. Itwould notbepossible toreinstate theminimum specific import measures
fortheveryreason given bytheUnited States: ifthecourt ofappeal were toreject theprovisional
measure, itwould make itabsolutely clearfortheArgentine Government andforallindividuals that
anyattempt toreintroduce thespecific duties would beautomatically challenged incourts.
3.15 According totheUnited States ,areview oftheArgentine measures imposing footwear specific
duties applied untilFebruary 1997 alsowasappropriate because oftheirclose factual connection to
thespecific duties ontextiles andapparel atissue. Thefootwear duties werepartofabroader regime
ofminimum specific import duties. Themeasures imposing thefootwear aswellasthetextile and
apparel specific duties applied parallel provisions. Insome instances, thefootwear specific duties and
thetextile andapparel specific duties hadbeenimposed through thesame measure.34Moreover, the
rationale forallofthespecific duties wasthesame35,andthesame GATT provisions applied toall.
Accordingly, theUnited States requested thePanel tofindthatArgentina ’sspecific duties onfootwear
violated Article IIbefore theywere revoked.
3.16 Argentina argued thattheUnited States insisted ondefining theregime applied toimports
oftextiles andfootwear asa"common legalregime". Suchacommon legalregime didnotexist, since
themeasures wereprepared onthebasis ofdifferentiated analyses andformed partofdifferent legal
instruments, eachonedeveloped according tothecharacteristics ofthemarket concerned. Even the
measures applied, i.e.theDIEM, hadtobeadjusted totheneeds ofeachtariff heading involved.
3.17 TheUnited States claimed thatArgentina hadnotattempted torebut theconnection established
bytheUnited States andtheECbetween thefootwear specific duties andthealmost identical duties
established under thesafeguard procedures.
3.18 Argentina replied thatithadclearly shown thatthesetwomeasures werecompletely different
andseparate fromeachother. Theapplication ofaprovisional safeguard measure wasnottheresult
ofanurgent needtogiveameasure atitleinreplacement oftheDIEM. Even ifthishadbeenthe
case, Argentina would havebeenlegally entitled todoso.Inanycase, from alegalpoint ofview,
itwasneitherpossiblenorreasonabletoestablishaconnectionbetweenameasureappliedunderArticleII
ofGATT 1994 andameasure applied under Article XIX, which wasbydefinition anexception to
Article II.
3.19 ForArgentina, thecontinuous mention bytheUnited States ofthesafeguard measure wasa
wayofintroducing through thebackdoorasubject which hadnotbeenresolved andwasnotrelevant
tothecontext ofthisPanel. Although ithadnotgonetotheEC'sextreme ofasking thePanel torule
onthesubject, theUnited States wasstraying dangerously neartotheedgebygiving itsopinion as
tothelegality ofthesafeguard measure while atthesametimerecognizing thatthemeasure inquestion
wasnotthesubject ofthisproceeding, thustaking thesame contradictory approach astheEC.
3.20 Argentina contended thatiftheUnited States hadreasons toquestion theprovisional safeguard
measure applied byArgentina, itmaydosointheappropriate Committee, andhadindeed already
doneso.IftheUnited States feltthatanydefinitive measure thatmaybeadopted would bequestionable,
itmaydiscuss itintheappropriate forum.
(b) Similarities ofthiscasewithprevious cases
3.21 Argentina argued thatitsrequest thatthePanel determine thatthere werenogrounds forit
toexamine theissue inquestion didnotrepresent anewpractice intheGATT/WTO system. There
34TheUnited States referred toArgentina 'sPresidential Decrees No.2275/94 andNo.998/95.
35TheUnited States referred toaletter oftheNational Director ofIndustry Affairs explaining theArgentine minimum
specific import duties.WT/DS56/R
Page11
werenumerous precedents inGATT 194736andintheWTO dispute settlement system37inwhich a
party hadasked thepanel toruleonwhether ornotanargument withrespect toallorcertain specific
elements ofaclaim should beexamined before considering thesubstance ofthematter. Inthecase
ofUnited States -Denial ofMost-Favoured-Nation Treatment astoNon-Rubber Footwear fromBrazil ,
therequest submitted byBrazil hadledtoaruling bythepanel which hadpreceded itsconclusions,
resolving thepreliminary objection thathadbeenraised.38Initsreport onUnited States -Measure
Affecting Imports ofWoven Wool Shirts andBlouses fromIndia,theAppellate Body haddetermined
that:
"Previous GATT 1947andWTO panels havefrequently addressed onlythose issues thatsuch
panels considered necessary fortheresolution ofthematter between theparties, andhave
declined todecide other issues".
Further on,thereport stated that:
"Given theexplicit aimofdispute settlement thatpermeates theDSU, wedonotconsider that
Article 3.2oftheDSU ismeant toencourage either panels ortheAppellate Body to"make
law"byclarifying existing provisions oftheWTO Agreement outside thecontext ofresolving
aparticular dispute. Apanel needonlyaddress those claims which mustbeaddressed inorder
toresolve thematter inissue inthedispute".39
3.22 Asregards theprecedents mentioned bytheUnited States insupport ofitsposition,40Argentina
contendedthattheyreferredtosituationsthatwerecompletelydifferentfromtheoneunderconsideration.
Inthefirstcase, United States -Measures Affecting Imports ofWoven Wool Shirts andBlouses from
India,thechallenged measure wasstillineffect during thedispute. Infact,ithadremained inforce
untilthereport wascirculated. Thepresent casewascompletely different inthattheminimum specific
import duties hadalready beenrevoked when thePanel hadbeenestablished anditsterms ofreference
adopted. Asregards thecaseUnited States -Prohibition onImports ofTuna andTuna Products from
Canada ,41while theUnited States revoked theprohibition, notonlydidthere remain inforce alaw
permitting thereintroduction ofthemeasure, buttheUnited States alsohadinformed Canada thatit
might beobliged todoso.Finally, inEEC-Measures onAnimal Feed Proteins42,bothparties to
thedispute knew from thetimethepanel hadbeenestablished thatthemeasure wastemporary, and
indeed raised noobjection totheestablishment ofthepanel, knowing itwould issue itsconclusions
when themeasure wasnolonger inforce.
3.23 Argentina noted thatthereport ofthepanel onUnited States -Standards forReformulated
andConventional Gasoline hadestablished that:
"ThePanel observed thatithasnotbeenusual practice ofapanel established under theGeneral
Agreement toruleonmeasures that,atthetimethePanel'sterms ofreference were fixed,
werenotandwould notbecome effective. Inthe1978 Animal Feed Protein case, thePanel
36Argentina referred tothePanel Reports onUnited States -Measures Affecting Alcoholic andMaltBeverages ,adopted
on19June 1992, BISD 39S/206 andUnited States -Denial ofMost-Favoured-Nation Treatment astoNon-Rubber Footwear
from Brazil ,adopted on19June 1992, BISD 39S/128.
37Argentina referred tothePanel Reports onJapan -Taxes onAlcoholic Beverages ,adopted on1November 1996,
WT/DS8/R, WT/DS/10/R, WT/DS/11/R, andBrazil -Measures Affecting Desiccated Coconut ,adopted on20March 1997
WT/DS22/R.
38BISD 39/S128, para. 3.1andpara. 6.2.
39Appellate Body Report onUnited States -Measure Affecting Imports ofWoven Wool Shirts andBlouses fromIndia,
Op.Cit., pp.18-19.
40Seeinter alia,footnotes 26and27,para. 3.7above.
41Adopted on22February 1982, BISD 29S/91.
42Adopted on14March 1978, BISD 25S/49.WT/DS56/R
Page12
ruled onadiscontinued measure, butonethathadterminated afteragreement onthePanel's
terms ofreference. Inthe1980 Chile Apples case, thePanel ruled onameasure terminated
before agreement onthePanel'sterms ofreference, however, theterms ofreference inthat
casespecifically included theterminated measure and,itbeing aseasonal measure, there
remained theprospect ofitsreintroduction. Inthepresent casethePanel'sterms ofreference
wereestablished afterthe75percentrulehadceased tohaveanyeffect, andtherulehadnot
beenspecifically mentioned intheterms ofreference. ThePanel further noted thatthere was
noindication bytheparties thatthe75percentrulewasameasure that,although currently
notinforce, waslikely toberenewed [...].ThePanel didnottherefore proceed toexamine
thisaspect oftheGasoline Ruleunder Article I:1oftheGeneral Agreement".43
3.24 Argentina stressed thatinthecaseunder consideration, therewasnoevidence whatsoever that
theminimum specific import duties onfootwear would bereintroduced. Onthecontrary, itwasclear
fromResolution No.225/97 thatthemeasures hadbeenrevoked andnottemporarily suspended. Even
if,hypothetically,itwasconsideredtoweighupthe'probabilitythatthemeasurewouldbereintroduced',
theapplication forinitiation ofthesafeguard investigation intheframework oftherelevant Agreement
hadputsuchapossibility torest.
3.25 TheUnited States reaffirmed thatinseveral instances previous panels hadexamined measures
thatwerenolonger ineffect, including thepanel reports onUnited States -Measures Affecting Imports
ofWoven Wool Shirts andBlouses fromIndia,EEC-Measures onAnimal FeedProteins ,andUnited
States -Prohibition onImports ofTunaandTunaProducts fromCanada citedbyArgentina. Argentina
attempted todistinguish between these decisions byarguing, forexample, thatthefootwear specific
duties wereoutside thepurview ofthisPanel because, unlike previous matters, themeasures hadbeen
revoked priortoformation ofthePanel. Thispoint ofdifferentiation ignored thefactthatthefootwear
specific duties wereineffect during thefourrounds ofconsultations heldbetween theparties inthis
dispute, andtheywereineffect atthetimetheUnited States made itsfirstpanel request. Themeasures
were revoked onlyafterArgentina delayed formation ofthisPanel foronemonth.
3.26 Argentina contended that,asthemeasures atissue hadbeenrevoked before thecomposition
ofthePanel, thefactthattheminimum specific import duties onfootwear hadbeendiscussed during
theconsultations wasirrelevant when itcame todeciding whether thePanel should examine ameasure
which didnotexist.
3.27 TheUnited States argued thatthereport ofthepanel onUnited States -Standards for
Reformulated andConventional Gasoline ,onwhich Argentina principally relied, revealed theweakness
ofitsargument. Ifthatpanel decided torefrain fromexamining ameasure nolonger ineffect, itdid
sobecause themeasure inquestion wasnotincluded inthatpanel’sterms ofreference andthere was
nochance ofitsrecurrence. However, thepassage fromthepanel report quoted byArgentina,44noted
thattheearliercasesinwhichpanelshadexaminedmeasuresnolongerineffectwerefactuallydissimilar.
Indeed, thatpassage stated "inthe1978 Animal FeedProtein case, thePanel ruled onadiscontinued
measure, butonethathadterminated afteragreement onthePanel’sterms ofreference. Inthe1980
Chile Apples case, thePanel ruled onthemeasure terminated before agreement onthePanel’sterms
ofreference, however, theterms ofreference inthatcasespecifically included theterminated measure
and,itbeing aseasonal measure, there remained theprospect ofitsreintroduction".
3.28 TheUnited States consequently underlined thatthefactsofthismatter werequite similar to
those present inthecases onEEC-Measures onAnimal FeedProteins andonEEC-Restrictions on
43Panel Report onUnited States -Standards forReformulated andConventional Gasoline ,adopted on20May 1996,
WT/DS2/R, para. 6.19.
44Ibid., para. 6.19.WT/DS56/R
Page13
Imports ofApples fromChile45andunlike those ofUnited States -Standards forReformulated and
Conventional Gasoline .Thefootwear specific import duties wereexplicitly listed inthePanel’sterms
ofreference, andthere wasaconsiderable possibility thatthemeasures would beresurrected.
3.29 TheUnited States further argued thatArgentina hadsought todistinguish thecaseonUnited
States -Measures Affecting Imports ofWoven Wool Shirts andBlouses fromIndia byclaiming that
theUnited States hadnotwithdrawn themeasure untilthereport wascirculated. Thiswasincorrect.
TheUnited States withdrew themeasure before thepanel issued thefinalreport totheparties andthis
factwasnoted bythepanel:
"WenotethattheUnited States [withdrew themeasure] inaFederal Register Notice
dated 4December 1996. Intheabsence ofanagreement between theparties to
terminate theproceedings, wethink thatitisappropriate toissue ourfinalreport
regarding thematter setoutintheterms ofreference ofthisPanel inorder tocomply
withourmandate, asreferred toinparagraph 1.3ofthisreport, notwithstanding the
withdrawal oftheU.S.restraint".46
3.30 TheUnited States stressed that,asinthisdispute, thepanel’sterms ofreference inthereport
onUnited States -Measures Affecting Imports ofWoven Wool Shirts andBlouses fromIndia permitted
thepanel to"comply with[its]mandate" notwithstanding thatthemeasures hadbeenwithdrawn before
thepanel’sdecision. Similarly, theterms ofreference ofthepanels inUnited States -Prohibition
onImports ofTuna andTuna Products ,andEEC-Measures onAnimal FeedProteins hadprovided
panels withthemandate toruleonmeasures thathadbeenwithdrawn before eachpanel issued its
determination.
3.31 TheUnited States argued thatthemeasures onfootwear werepartoftheterms ofreference,
asoutlined indocument WT/DS56/6, dated 11April 1997. Thisdocument referred tothepanel request
indocument WT/DS56/5 which specifically stated thattheUnited States wasseeking review ofthe
consistency ofArgentina ’sspecific duties onfootwear withitsWTO obligations. Therequest ofthe
United Stated alsooutlined anumber ofmeasures suchasResolutions No.305/95 andNo.103/96
which applied onlytofootwear. TheUnited States hadindicated inthepanel request thatthe
consultations hadfailed tosettlethedispute asitrelated toArgentina ’sspecific duties, including specific
dutiesrelatingtofootwear.DocumentWT/DS56/6providedthatthe"parties[had]agreedtothestandard
terms ofreference," which bydefinition incorporated themeasures specified intheUSpanel request.
Thus, while Argentina maymaintain thatthePanel should notreview itsspecific duties onfootwear,
Argentina could notdispute thattheterms ofreference, asarticulated indocument WT/DS56/5, included
thefootwear specific duties.
3.32 Argentina acknowledged thatthePanel'sterms ofreference contained indocument WT/DS56/6
explicitlyincluded"specificdutiesonfootwear".Theproblemwaswhethertheminimumspecificimport
duties onfootwear having beenincluded intheterms ofreference (astheyformed partoftheUnited
States request) there wasstillmerit inthePanel'sconsidering them, inasmuch asthese specific duties
hadalready definitively ceased toexistatthetimethePanel'sterms ofreference wereadopted. There
wasnopoint inruling onaquestion which, being non-existent, could innowayimpair oraffect the
rights ofWTO Members. Argentina didnotdispute thecontent ofthePanel'sterms ofreference, but
thenature oftheexamination which thePanel would beobliged tocarry outifitacceded totheUnited
States 'request. Indeed, theminimum specific import duties applied tofootwear imports, mentioned
inthePanel'sterms ofreference, were those which hadbeenrevoked byResolution No.225/97.
45Adopted on10November 1980, BISD 27S/98.
46Panel Report onUnited States -Measure Affecting Imports ofWoven Wool Shirts andBlouses ,para. 6.2.WT/DS56/R
Page14
3.33 Argentina added thatinthecaseonUnited States -Standards forReformulated andConventional
Gasoline ,themeasure questioned hadbeenrevoked before theadoption oftheterms ofreference and
there wasnothing toindicate thatitwastobereintroduced. Thesame wastrueofthepresent case.
InEEC-Measures onAnimal FeedProteins, itwasaquestion ofameasure abolished aftertheadoption
oftheterms ofreference. InthecaseonEEC-Restrictions onImports ofApples fromChile,themeasure
wasaseasonal onewhich might obviously bereintroduced. Thepresent Panel wascompletely different
fromthetwoprevious onesmentioned above, sincetheUnited States wasobjecting toameasure which
simply didnotexistatthetimethePanel hadbeenestablished anditsterms ofreference defined.
3.34 Argentina noted thattheUnited States haddismissed Argentina 'scomments onthebackground
totheEEC-Measures onAnimal FeedProteins ,United States -Prohibition onImports ofTuna and
Tuna Products andEEC-Restrictions onImports ofApples fromChile cases claiming thattheywere
technical points withlittlemeaning. ThePanel could notregard asatechnical point withlittlemeaning
anotesuchasthatwhich theUnited States hadsentCanada inthesecond casementioned above
threatening toreintroduce themeasure iftheCanadian Navy weretoseize avessel.47Norcould one
attribute "little meaning" tothefactthattheUnited States informed thepanel inthesame caseofits
readiness tocontinue collaborating withthepanel and,secondly, requested thelatter tomake aruling
justifying theUnited States measure onthebasisofArticle XX(g) ofGATT.48Inthiscase,Argentina
wasnottrying tojustify aparticular measure, since there simply wasnomeasure .
(c) Effect ofprecedent oftherequest oftheUnited States
3.35 Argentina argued thattheUSrequest wasnotonlycontrary totheprovisions oftheWTO,
butitalsosuggested thatpanels should ruleonhypothetical cases, adangerous evolution fortheWTO
system. Itwould encourage panels andtheAppellate Body tolegislate whereas Article IX:2ofthe
Marrakesh Agreement Establishing theWorld Trade Organization ("WTO Agreement"), attributed
thistaskexclusively totheMembers oftheWTO through theMinisterial Conference andtheGeneral
Council. Thiswould alsobecontrary toGATT practice under Article XXV.49
3.36 Argentina argued that,pursuant toArticle 3.7DSU, parties should endeavour toreach mutual
agreement, failing which theissuecould besubmitted toapanel which could recommend thewithdrawal
oftheillegal measure. Inthecaseunder consideration, there could benomutual agreement between
theparties ontheminimum specific import duties applied tofootwear since theywere nolonger in
effect, norcould therebeanyrecommendation towithdraw ameasure thatdidnotexist. Inotherwords,
proceedings could notbeinitiated without aspecific subject ofdispute towhich theycould apply.
TheWTO Agreement ingeneral, andthedispute settlement system inparticular, rested ontheprinciple
ofconsidering measures actually inforce. Thus, theideaofpanels ruling inabstracto ormerely on
thebasis ofallegations astowhatmight beexpected wasentirely inappropriate. Thatapanel could
ruleinrespect ofahypothetical casewhen theminimum requirement forarecommendation wasthat
itshould pertain toameasure thatwasinforce would leave Article 19.1DSU meaningless.50
3.37 Argentina alsonoted thattheUnited States hadrecently expressed itsopposition toinabstracto
rulings bypanels ortheAppellate Body. Ontheoccasion oftheadoption bytheDSBoftheReport
onUnited States -Measures Affecting Imports ofWoven Wool Shirts andBlouses fromIndia,theUnited
47BISD 29S/91, para. 2.12.
48Ibid., para. 3.25.
49Argentina referred toErnst-Ulrich Petersmann, TheGATT/WTO Dispute Settlement System, Kluwer LawInternational,
(1997), atpp.75-76: "[u]nlike generally binding authoritative interpretations ofGATT rules adopted bytheContracting
Parties pursuant toArticle XXV, thelegally binding effect ofdispute settlement rulings [...]is[...]limited".
50Argentina noted thatArticle 19.1DSU stipulated that"where apanel ortheAppellate Body concludes thatameasure
isinconsistent withacovered agreement, itshallrecommend thattheMember concerned bring themeasure intoconformity
withthatagreement" (emphasis supplied byArgentina).WT/DS56/R
Page15
States haddeclared thattheAppellate Body hadstated that"wedonotconsider thatArticle 3.2of
theDSU ismeant toencourage either thepanel ortheAppellate Body to"make law"byclarifying
existing provisions oftheWTO Agreements outside thecontext ofresolving aparticular dispute. A
panel needonlyaddress those claims which mustbeaddressed inorder toresolve thematter inissue
inthedispute".51
3.38 Argentina wasconcerned bytheeffect onthemultilateral trading system ofadecision bya
panel toreceive complaints suchastheonelodged bytheUnited States, asMembers, ifthisbecame
anaccepted practice, could contemplate thepossibility ofresorting tothedispute settlement system
inorder tomake surethatlawsabolished foralongtimewould notbereintroduced. Afailure torule
adequately ontheArgentine request forapreliminary ruling alsowould open upthepossibility of
disputes being initiated under thedispute settlement system asameans ofobtaining "ananticipatory
precautionary measure", thatistosay,using theDSU toprevent theimplementation ofameasure
which aMember thought might injure itinthefuture.
3.39 TheUnited States replied thatcontrary toArgentina ’sargument, itwasnotasking thePanel
to"legislate" ortoaddress an"abstract" question, butrather toreview particular measures thatArgentina
hadmaintained untiljustdaysbefore theformation ofthePanel, thatwere specifically included in
thePanel’sterms ofreference andthatmaywellberesurrected intheevent Argentina ’ssafeguard
measures onfootwear were terminated.
3.40 TheUnited States argued that,likeArgentina, itbelieved thatpanels hadtoapproach theissue
ofwithdrawn measures withcaution. Thetestarticulated bythepanel inthecaseonUnited States -
Standards forReformulated andConventional Gasoline (i.e.whether themeasure waspartoftheterms
ofreference ofthepanel, andwhether there wasthepossibility ofitsreintroduction) provided the
necessary safeguard.
3.41 FortheUnited States, thePanel hadtobearinmind thenegative effects onthefunctioning
oftheWTO dispute settlement ifMembers were permitted toevade panel review ofWTO-illegal
measures bysimply withdrawing onetypeofmeasure andintroducing another. Ifthetestadvocated
byArgentina, i.e.noexamination ofanywithdrawn measure byanypanel, wasusedthenMembers
maybeinclined tointroduce slightly revised measures toavoid panel review. IfthePanel were to
agree withArgentina, Members trying toescape WTO review would beabletodelay theestablishment
ofapanel indefinitely bywithdrawing onemeasure andimposing another initsplace. Pursuant to
Argentina ’stheory, thenewmeasure would mandate additional consultations under Article 4DSU
andtheresetting ofatleasta90-day period oftimebefore apanel could beestablished. Argentina ’s
position, therefore, wasnotonlyinconsistent withprior practice, italsowould subvert theability of
theDSBtosolve trade problems. ThePanel should advance theobjectives oftheDSBandtakecare
torefrain from unduly restricting thescope ofitsreview.
3.42 Argentina argued thatallWTO Members came under pressure fromtheirdomestic industries
toresort tothedispute settlement system assoonasthose industries considered themselves tohave
aproblem. Although itwasessential thatevery Member should befullyentitled toresort tothedispute
settlement procedure, itwasnolessimportant toemphasize thatthesystem hadanobligation toclose
thedooragainst possible abuse. Doing otherwise would givedomestic industries anenormous incentive
todemand from theirauthorities theestablishment ofpanels withaview simply toconfirming that
another Member country orother Member countries would continue tofulfil theirobligations asin
thepast. Inother words, apanel could notberequired torulethatArgentina should notre-establish
specific duties which werenotpartofitslegislation. Totaketheopposite viewwould betoquestion
afundamental principle ofinternational lawpursuant towhich pacta suntservanda .Thiswould also
51Argentina quoted fromthestatement bytheUnited States totheDispute Settlement Body on23May1997ontheoccasion
oftheadoption ofthereports incaseWT/DS33. SeeWT/DSB/M/33, p.11.WT/DS56/R
Page16
raiseuncertainty andspeculation which, taken tothelimit, might result inthecollapse ofthedispute
settlement system.
3.43 Argentina noted thatsuchelements werepresent inthiscaseandArgentina 'slegitimate decision
toinitiate asafeguard investigation forfootwear anditsapplication ofaprovisional measure hadled
ultimately totheUnited States initiating apanel concerning theapplication ofspecific duties inanother
sector, thatoftextiles andclothing. Asawayofresponding tothecomplaint ofthefootwear
manufacturers andgiven thelegal impossibility ofchallenging directly asafeguard inprocess of
investigation, theUnited States wastrying toreach itindirectly. Asaresult, thePanel wasfaced with
atheoretical caseinwhich ithasbeenclearly shown thatthere werenoactual transactions involved.
Thequestion raised bytheUnited States before thePanel masked therealissue: theArgentine decision
torevoke theminimum specific import duties onfootwear andsubsequently toinitiate aninvestigation
attherequest oftheindustry inthatsector.
3.44 Argentina further contended thattheEC'sthird-party submission anditsoralsubmission were
centred almost entirely onthespecific footwear duties andevenincluded arequest forthePanel to
ruleonthesafeguard measure, which noteventheUnited States hadsuggested.
3.45 According toArgentina, allthisdemonstrated theneedforthePanel toaccede toArgentina 's
request thatitmade aspecial preliminary ruling totheeffect thattherewasnogrounds forittoexpress
anopinion onthespecific footwear duties since those duties hadbeendefinitively revoked before the
Panel wasestablished.
3.46 Argentinastatedthattheassertionthatrecoursetoasafeguardmeasuretodaycouldmeanrecourse
toArticle XXoranother article tomorrow, wasalsounacceptable. NotonlywasthisnotArgentina 's
intention, butitcould notevenbeconsidered asapossibility. Thiswould betantamount tosaythat
WTO Members could notmake useoftheirrights under thedifferent provisions ofGATT 1994 and
theWTO Agreement.
3.47 Argentina argued thatthePanel wasfaced withataskthatextended farbeyond theparticular
caseatissue, since itsconclusions could clearly affect theproper functioning oftheWTO dispute
settlement system. Inorder toavoid using theDSU abusively, itwasessential thatthePanel should
redirect thiscase, taking adecision onthespecial preliminary ruling requested byArgentina atthe
appropriate time.
2. REQUEST BYARGENTINA FOR ARULING OFTHE PANEL REGARDING THE
SUBMISSION OFCERTAIN EVIDENCE BYTHE UNITED STATES
3.48 On21July1997, theUnited States submitted tothePanel twoexhibits thatitintended topresent
atitssecond substantive meeting on23July1997. Thefirstexhibit waspresented asasummary of
anumber ofindustry-supplied examples ofexport shipments toArgentina which hadbeenassessed
duties inexcess of35percentadvalorem .Thesecond exhibit contained copies of95pages ofArgentine
customs documents which reflected theapplication ofthespecific duties summarized intheexhibit
previously mentioned. TheUnited States mentioned thatthese documents hadbeensubmitted atthat
timeinorder toprovide boththePanel andArgentina withtheopportunity toreview them prior to
thesecond meeting ofthePanel.
3.49 Argentina requested thePanel todisregard theevidence submitted bytheUnited States as
untimely.TheUnitedStateshadresortedtoanextemporaneoussubmissioninconsistentwiththesequence
oftime-limits laiddown intheDSU andultimately intended tomaintain, ateachstage ofthePanel
procedure, therequired balance between theparties.WT/DS56/R
Page17
3.50 TheUnited States specified thatithadproduced newdocuments tocontradict theclaims of
Argentina. Forexample, theevidence atissue contradicted Argentina ’sclaims thattheUnited States
allegedly hadnoproof ofduties being assessed over35percentadvalorem .FortheUnited States,
thePanel should encourage theuseofformal evidence suchasthose submitted bytheUnited States
asopposed tosimply accepting oraldenials andmere allegations offacts. Thesubmission ofnew
documents wasanatural process inadispute. Were apanel toprevent thesubmission ofnewdocuments
during itssecond substantive meeting withtheparties, thiswould inhibit thetruth-testing process and
prohibit aparty from contradicting statements made atthelastminute bytheother party.
B. VIOLATION OFARTICLE IIINRELATION TOTHE IMPLEMENTATION OF
ARGENTINA 'SSCHEDULE LXIV
1. INTRODUCTION
3.51 TheUnited States argued that,during theUruguay Round, Argentina hadagreed toamaximum
bound rateof35percentadvalorem onimports oftextiles, apparel andfootwear. However, Argentina
imposed minimum specific import duties onhundreds ofcategories ofthese products. Thespecific
duties often amounted tomore than35percentoftheactual value ofaffected goods. Ontheeveof
formation ofapanel inthisdispute, Argentina hadeliminated itsspecific duties onfootwear, replacing
themwithspecific duties presented as"provisional safeguard" measures. However, Argentina ’sspecific
duties ontextiles andapparel remained ineffect.
3.52 TheUnitedStatescontendedthatinimposingminimumspecificimportdutiesontextiles,apparel
andfootwear, Argentina hadviolated Article IIofGATT 1994. Even ifthespecific duties, asapplied,
didnotexceed 35percentadvalorem, theystillviolated Article II.EachofArgentina ’sspecific duties
hadthepotential toexceed 35percentadvalorem withrespect tosome imports. Argentina alsoviolated
Article IIbyexceeding itsbound tariff rateandfailing toapply onlyadvalorem duties inaccordance
withitsSchedule.
3.53 Argentina argued thattheapplication ofminimum specific import duties didnotandcould
notviolate Article II.Therelevant lawsinArgentina precluded anyeffective orpotential violation
ofthe35percentadvalorem bound ratebytheminimum specific import duties. Thiswassobecause
thepayment ofadutycould notbetaken inisolation from theother rights andobligations accorded
under national lawtoalltheparties involved inanimport transaction. No-one wasobliged topaymore
thanthe35percentbound advalorem rate,since there wasalegalremedy available tochallenge any
amount thattheauthority mayattempt tolevyinexcess ofthelegalcommitments ofArgentina.
3.54 This sub-section firstly addresses thearguments oftheparties onthegeneral notion of
"predictability" oftariffs. Itthenincludes successively thearguments oftheparties regarding thealleged
violation ofArticle IIthrough: theapplication ofminimum specific import duties when Argentina 's
Schedule allegedly refers onlytoadvalorem duties; thepotential effects oftheapplication ofminimum
specific duties andthesituations where the35percentadvalorem bound rateisallegedly exceeded.
Italsoaddresses thegeneral issueoftheburden ofproof. Thediscussion ofthearguments ofArgentina
related totheconstitutional ranking oftheWTO Agreements intheArgentine legal order andthe
existence ofarecurso deimpugnación (challenge procedure) isdeveloped inthesecond partofthis
sub-section, eventhough arguments related tothese aspects mayappear briefly inthefirstpart.
2. GENERAL REMARKS ONTHE NOTION OF"PREDICTABILITY" OFTARIFFS
3.55 TheUnited States submitted thatArticle IIoffered "predictability" toWTO Members and
theirtraders byestablishing upper limits ontheimposition oftariffs. Itdidsointwoways. Firstly,
Article II:1(b) made clearthatbound tariffratesweremaximum rates: products described inaMember ’sWT/DS56/R
Page18
Schedule "shall [...]beexempt fromordinary custom duties inexcess ofthose setforthandprovided
therein". Thisprovision guaranteed thattariffs levied byWTO Members would benomore thanthe
maximum ratestipulated intherelevant Schedule. Secondly, Article IIreinforced thisguarantee by
stating that"[e]ach contracting party shallaccord tothecommerce oftheother contracting parties
treatment nolessfavourable thanthatprovided forintheappropriate Partoftheappropriate Schedule".
Pursuant tothislanguage, Members were forbidden tomanipulate theadministration oftheirduties
soastocollect excessive duties through indirect means. Article II’sproscription against levying duties
inexcess ofabound ratewasunqualified. Itwasaguarantee thatwasnotaltered bythewhims of
themarket, regardless offluctuations intradeflows orprices. Through theirSchedules, WTO Members
ineffect provided oneanother withanassurance thatwhatever duties wereassessed attheirborders
would notandcould notbemorethantheapplicable bound rate.Thatwasthecentral purpose underlying
Article IIandthatwasthe"predictability" thearticle provided.
3.56 Inrelation tothis,theUnited States referred toprevious panel reports. Thereport ofthepanel
onEuropean Communities -Import Regime onBananas hadconcluded that:
"indetermining whether treatment accorded byatariffmeasure wasnolessfavourable
thanthatprovided forintheSchedule, ithadtotakeintoaccount notonlytheactual
consequences ofthatmeasure forpresent imports butalsoitseffects onpossible future
imports. Thisfollowed from theprinciple recognized bymany previous panels that
theprovisions oftheGeneral Agreement serve notonlytoprotect actual trade flows
butalsotocreate predictability forfuture trade".52
3.57 Italsoreferred tothereport ofthePanel onNewsprint ,which stated that:
"[it]shared theviewexpressed before itrelating tothefundamental importance tothe
security andpredictability ofGATT tariff bindings, aprinciple which constitutes a
central obligation inthesystem oftheGeneral Agreement".53
3.58 FortheUnited States, Argentina ’sspecific duties didnotoffersuch"predictability". Bytheir
nature, Argentina ’sspecific duties necessarily hadthepotential toexceed 35percentadvalorem for
some products, especially low-price items. TheUnited States supported thisbymaking adescription
ofhoweachofArgentina ’smore than600categories ofspecific duties hada"Break-Even Price" -
i.e.,avalue below which allitems weresubject toduties greater than35percentadvalorem .Whether
anitemimported intoArgentina wasbelow the"Break-Even Price" turned onmarket factors -i.e.,
whether goods ofcertain values would beimported -which werebeyond Argentina ’scontrol. Given
thissituation, Argentina ’strading partners hadnowayofknowing ifArgentina would meet the
obligations itassumed under itsbinding. The"unpredictable" nature ofthisregime wascompounded
bythefactthatthefixed-rate specific duties remained constant while imports andtheirprices changed.
Aspecific dutyforagiven article might bewithin thebound rateatonemoment, butexceed itlater.
Argentina, therefore, wasunable toprovide fellow WTO Members withtheessential assurance that
Article IIdemanded: thatitsduties would notexceed therelevant bound rateforallcovered imports.
3.59 According totheUnited States, Argentina hadconceded thatitsspecific duties -asapplied
attheborder -could exceed 35percentinrelation tosome items. IntheviewoftheUnited States,
Argentina alsodidnotappear todispute thenotion thatithadtomaintain duties thatcould notexceed
theapplicable bound rate. However, theUnited States recalled thatArgentina hadexplained thatit
believed itsregime wasconsistent withArticle IIbecause itmaintained "challenge procedures" toreduce
anyovercharges. FortheUnited States, thissurely could notbethesecurity and"predictability" in
tariffratesthatother WTO Members thought theyhadreceived fromArgentina intheUruguay Round.
52DS38/R, 11February 1994, unadopted, para. 135.
53Adopted on20November 1984, BISD 31S/114, para. 52.WT/DS56/R
Page19
Argentina ’strading partners hadtheright toexpect thatArgentina would impose onlythose duties
which inform andamount were notcapable ofexceeding 35percentadvalorem .
3.60 Argentina replied thatinthecaseunder consideration, thedefinition ofpredictability inthe
context ofArticle IIstemmed from theeffective implementation ofthetariff concessions negotiated
whose value wasexpressed intherespective national Schedules. Itpointed outthatwhatthisPanel
wasexamining wasnotthe"unpredictable" nature ofthespecific duties, which could varyinaccordance
withthevalue ofthegoods, butwhether ornotthebound advalorem levelhadbeenviolated.
3.61 Argentina believed thatitsregime ensured predictability firstly because itsSchedule bound
theentire tariff. Thiscommitment entered intobytheArgentine Government during theUruguay Round
hadbeenratifiedbytheArgentineCongressandhadconstitutionalstatusinaccordancewithArticle75.22
oftheArgentineConstitution.ThisfeatureofArgentina'sconstitutionalsystemendowedScheduleLXIV
withanabsolute levelofpredictability. Anyinfringement would opentheway,through asummary
proceeding, toobtain ajudicial decision obliging theArgentine Government tocomply withinternational
obligations deriving fromWTO agreements, overandabove anydomestic norms, suchaslaws, decrees,
ministerial resolutions, orothers. Ontheother hand, thetariff applicable waswellknown and
transparent. Furthermore, withveryfewexceptions, itcould notbechanged unilaterally byArgentina,
anychanges having tobeagreed withtheother members ofMERCOSUR. Thisrestricted thefreedom
ofaction ofeachoftheparties tothattreaty, thereby adding afurther safety factor.
3. IMPOSITION OFSPECIFIC DUTIES INSTEAD OFADVALOREM DUTIES
3.62 TheUnited States considered thatArticle IIofGATT 1994 prohibited WTO Members from
exceeding theirbound tariff ratesandaccording treatment lessfavourable thantheterms stipulated
inSchedules. Thisconclusion wassupported byaconsistent lineofpriorGATT decisions which had
foundthattheimpositionofspecificdutieswasimpermissiblewhenadvaloremdutieshadbeenpromised.
These decisions indicated thatsucharegime violated Article II:1(a) GATT 1994, which provided that
WTO Members hadtoaccord toother Members "treatment nolessfavourable thanthatprovided for
[...]intheappropriate Schedule", andArticle II:1(b), which provided thatimported goods fromWTO
Members hadtobe"exempt from ordinary customs duties inexcess of"theapplicable bound rate.
Inthislight, prior GATT bodies hadfound thattheimposition ofspecific duties wasimpermissible
when thepertinent schedule provided foradvalorem tariffs.
3.63 FortheUnited States, thiswasso,atleastinpart,because useofoneform ofdutyinstead
oftheother carried withitthepotential tobreak abinding. Asthepanel onEEC-Import Regime
onBananas explained:
"The Panel considered thattheactual levying ofadutyinexcess ofthebound rate
clearly constituted atreatment ofbananas lessfavourable thanthatprovided forinthe
EEC’sSchedule ofConcessions. ThePanel thenproceeded toexamine whether also
themere possibility thatthespecific tariff rateapplied bytheEECmight behigher
thenthecorresponding bound advalorem rate,rendered itinconsistent withArticle II.
ThePanel recalled theimportance ofsecurity andpredictability intheapplication of
tariffs bindings. Itnoted thatprevious panels andworking parties hademphasized
thattariffbindings justify reasonable expectations about market access andconditions
ofcompetition. TheCONTRACTING PARTIES hadconsistently found thatachange
fromabound specific toanadvalorem ratewasamodification oftheconcession [...]
ThePanel [...]concluded that,indetermining whether treatment accorded byatariff
measure wasnolessfavourable thanthatprovided forintheSchedule, ithadtotake
intoaccount notonlytheactual consequences ofthatmeasure forpresent imports but
alsoitseffects onpossible future imports. Thisfollowed fromtheprinciple recognizedWT/DS56/R
Page20
bymany previous panels thattheprovisions oftheGeneral Agreement serve notonly
toprotect actual trade flows butalsotocreate predictability forfuture trade".54
3.64 TheUnited States added that,forthese reasons, ithadlongbeenrecognized intheGATT that
converting bound duties from advalorem tospecific, orviceversa, violated Article IIandthatsuch
achange waspermissible onlythrough renegotiation under Article XXVIII.55Asearlyas1955, aGATT
working partyhadaddressed aregime ofminimum specific duties akintothose imposed byArgentina.56
Inthatcase,Austria ’sSchedule allowed itto"change thespecific intoadvalorem rates". TheAustrian
Government, however, "feltthatitwould notbeimpairing thevalue oftheconcessions ifitretained
beside theadvalorem dutytheoldspecific rateasaminimum rate". Theworking party disagreed,
finding "thatsuchchanges would constitute modification ofAustria ’sobligations andthatitcould not
recommend theiracceptance asrectifications. Suchmodifications could onlybeinserted inaprotocol
ofrectifications andmodifications afternegotiations authorized bytheCONTRACTING PARTIES
inaccordance withtheproper procedures". Austria accepted thedecision oftheworking party.57
3.65 Intheopinion oftheUnited States, subsequent decisions hadfound thisreasoning compelling.
Infact,allGATT bodies thathadaddressed thequestion -regardless ofwhether itwastheimposition
ofspecific oradvalorem duties thatwasobjected to-hadlikewise determined thattheapplication
ofanalternative mode oftariffwasimpermissible when theother formofdutywasbound. Reviewing
thishistory, thePanel onNewsprint explained that"under long-standing GATT practice, evenpurely
formal changes intheSchedule ofacontracting party, which maynotaffect theGATT rights ofother
countries, suchastheconversion ofaspecific dutytoanadvalorem dutywithout anincrease inthe
protective effect ofthetariff rateinquestion, hadbeenconsidered torequire negotiations".58The
Panel onNewsprint found thattheECwasnotpermitted toreduce themetric tonnage eligible forduty
freetreatment under abound tariff ratequota (“TRQ") totakeintoaccount themerger intotheEC
ofthree nations thatformerly hadbeen theprincipal beneficiaries oftheTRQ. Inreaching this
conclusion, thepanel stated thatit"shared theviewexpressed before itrelating tothefundamental
importance tothesecurity andpredictability ofGATT tariff bindings ,aprinciple which constitutes a
central obligation inthesystem oftheGeneral Agreement".59
3.66 Argentina noted thattheUnited States hadexpressed "concern" overtheimposition ofspecific
duties, butitsmainlineofargument attacked therightquestion, namely ensuring thatthebound level
could notbeviolated. Inthisrespect, theUnited States itself recognized thattheproblem didnotlie
withtheconversion ofspecific intoadvalorem duties orviceversa.Argentina noted thattheUnited
54DS38/R, Op.Cit., para. 135(emphasis added bytheUnited States).
55TheUnited States referred totheReport oftheNinth Session Working Party onSchedules onTransposition ofSchedule
XXXVII (Turkey), L/294, adopted on20December 1954, BISD 3S/127, which mentioned, atparas. 3-4,that"noprovision
intheGeneral Agreement [...]authorizes acontracting party toalterthestructure ofbound rates ofdutyfrom aspecific
toanadvalorembasis.[...]Theobligationsofcontractingpartiesareestablishedbytheratesofdutyappear ingintheschedul es
andanychange intheratesuchasachange from aspecific toanadvalorem dutycould insome circumstances adversely
affect thevalue oftheconcessions toother contracting parties. Consequently, anyconversion ofspecific intoadvalorem
rates ofdutycanbemade onlyunder some procedure forthemodification ofconcessions".
56TheUnited States referred totheWorking Party Report onFourth Protocol ofRectifications andModifications ,adopted
on3March 1955, BISD 3S/130. (hereafter alsotheWorking Party onAustria)
57TheUnited States referred alsototheWorking Party Report onRectifications andModifications ofSchedules ,adopted
on24October 1953, BISD 2S/63, para. 8,where theworking party reviewed aproposal byGreece to"introduce aminimum
advalorem rateforcertain specific ratesandcame totheconclusion thatsuchchanges could notbeconsidered rectifications
[...]Itdecided therefore torefer thequestion totheCONTRACTING PARTIES sothatsuchchanges could form theobject
ofconsultations andnegotiations [...]". Inaddition, theUnited States referred toJohn H.Jackson, World Trade andthe
LawofGATT, Bobbs-Merrill Co.(1969), which mentioned atp.215that"theintroduction ofaminimum specific ratewhere
theSchedul erateisonlyadvaloremisnotpermittedunder GATT withoutgoingthroughthesespecialrenegot iationprocedur es".
58Op.Cit., para. 50.
59Ibid., para. 52(emphasis added bytheUnited States).WT/DS56/R
Page21
Stateshadacknowledgedthatanadvaloremtariffcouldalsoviolateabinding.Thequestionwaswhether
there wereanyguarantees that,whatever formthetariff took, thebound levelwould notbeexceeded.
3.67 InArgentina 'sview, itwasquite inaccurate tostatethatadvalorem duties were converted
intospecific duties. Nosuchconversion waspossible, since thespecific duties werealready ineffect.
Argentina hadbound amaximum advalorem "ceiling" of35percentforalltariffheadings, including
thesector under consideration. Argentina hadapplied minimum specific duties totextiles andclothing
sincetheadoption ofResolution No.811/93 oftheMinistry ofEconomy andPublic Works andServices,
dated 29July1993, inother words since before theconclusion oftheUruguay Round. Argentina 's
Schedule LXIV wasapproved aspartofLaw24.425, which gaveeffect toalltheWTO Agreement
inArgentina asfrom 1January 1995. Schedule LXIV bound tariffs atamaximum ceiling of35per
centadvalorem ,withtheexception ofcertain tariff headings bound below thislevel asaresult of
theKennedy, Tokyo andUruguay Rounds. ThefactthatArgentina continued toapply minimum specific
import duties totextiles andclothing wasnotinconsistent withitscommitments under theUruguay
Round insofarasthebound advalorem levelwasnotexceeded. AstohowaWTO Member could
beaware ofArgentina 'sintention tokeepitspractice ofusing specific duties within themaximum ad
valorem ceiling, Argentina saidthatithadsubmitted itstariff totheCommittee onMarket Access.
Inaddition, ithadformally notified thetariffwithin thecontext ofMERCOSUR, anotification which,
initself, ensured thetotaltransparency ofthetariff levels applicable. Moreover, itwaswellknown
thatduring theUruguay Round negotiations Argentina wasapplying minimum specific import duties
ontextiles. Inthisconnection, atthecloseoftheUruguay Round theUnited States andtheECbilaterally
threatened nottoaccept theArgentine Schedule iftheminimum specific import duties werenotremoved.
Inthese circumstances, Argentina hadreplied thattheminimum specific import dutyregime would
notbechanged.
3.68 Argentina rejected theargument based onthealleged conversion ofadvalorem import duties
intospecific duties because theprecedents citedbytheUnited States werenotapplicable tothiscase.
Firstly, noneofthementioned precedents pointed toaconversion ofadvalorem duties intospecific
duties. InthecaseoftheWorking Party onAustria ,Austria wanted toretain thespecific dutyasa
minimum without being abletogiveanassurance thatthespecific dutywould notexceed thebound
advalorem rate.Thepresent casewasradically different inasmuch astheArgentine minimum specific
import duties operated asaminimum onlytotheextent thatitdidnotexceed thebound 35percent
advalorem rate.Intheinstance addressed bytheWorking Party onAustria ,itwasaquestion ofbinding
tariff ratesforcertain specified tariff headings. Bycontrast, inthepresent caseitwasaquestion of
binding amaximum tariff ceiling of35percentadvalorem fortheentire universe ofgoods, withthe
exception ofcertain headings bound atlower levels, andthemaintenance ofpre-existing specific duties
forparticular sectors calculated soasnottoexceed thebound level.
3.69 ArgentinaalsocontendedthattheGATT1947practicecitedbytheUnitedStateswasnotrelevant
asprecedent tothepresent caseforthefollowing reasons. ThecaseonTransposition ofSchedule XXXVII
(Turkey)60showed diverging conclusions reached byaworking party concerning thetransformation
ofaspecific intoanadvalorem duty. Thatcasewasqualitatively different because theworking party
stated that"achange from aspecific toanadvalorem dutycould insome circumstances [...]affect
thevalue oftheconcessions [...]Consequently, anyconversion [...]canbemade onlyunder some
procedure forthemodification ofconcessions".61Theworking party'sstatement mentioned "some
circumstances" applicable tothespecific case(thatofTurkey). Noconclusion should therefore be
drawn from itandapplied ergaomnes toallcases thatmayentail theconversion ofspecific duties
toadvalorem duties. Theworking party report didnotcontain unanimous viewpoints. Quite tothe
contrary, various members expressed disagreement withtheabove-cited conclusion. Therepresentative
60Thiscasewasreferred tobytheUnited States infootnote 55above.
61BISD 3S/127, para. 4.WT/DS56/R
Page22
ofBrazil said"theconversion ofspecific duties toadvalorem duties doesnotaffect thevalue of
negotiated concessions andinmostcases nothing more isinvolved thanasimple arithmetic calculation.
Except incases where suchcalculation cannot bemade, initsopinion suchconversions aremerely
amatter offormandshould notrequire special authority".62Onthesame occasion Austria stated that
"therecommendationwhichisbasedonexceptionalcircumstancescouldnotbeconsideredasaprecedent
forother proposals relating totheconversion ofspecific duties intoadvalorem duties".63
3.70 ForArgentina, some other precedents mentioned bytheUnited States were nomore than
incidental tothetopicofchanging onetypeofdutyintoanother, considering thatthematter indispute
didnotconcern thepossible conversion ofadvalorem duties intotheirequivalent specific dutyasin
thepresent case. Strictly speaking, theymerely addressed thepossibility ofless-favourable treatment.
Hence, inthePanel onNewsprint ,thecomplaint byCanada questioned the"unilateral EECdecision
toimplement aduty-free tariff quota of500,000 tonnes for1984, which impaired itsGATT binding
toopenatariff quota of1.5million tonnes".64This"tariff quota lessthantheamount bound inits
Schedule invalidated theprinciple ofthesecurity andpredictability ofaccess".65Inthiscase,thepanel
hadfound that"although intheformal sense theEChadnotmodified itsGATT concession, ithad
infactchanged itsGATT commitment unilaterally".66Thisseemingly contradictory lineofreasoning
refocused thediscussion onwhatwasthecruxofthematter: thevalue oftheconcession andnotits
form. Thepanel recognized thatwhile theECdidnotfailtocomply withaparticular formal obligation,
itsaction changed thevalue ofthenegotiated concession. Thistherefore justified theEC"engaging
inrenegotiations under Article XXVIII".67Inthiscasethepanel didnotobject totheformal procedure,
buttothechange inthevalue oftheconcession. Itwasthisdefacto situation thattriggered the
negotiating procedure andwhich thepanel believed should behandled through thenegotiation process
provided forinArticle XXVIII. Thestatement that"even purely formal changes [...]without anincrease
intheprotective effect [...]havebeenconsidered torequire negotiations" didnotinitself represent
afinding. Thisobservation hadnopractical impact onthepanel'sconclusion, which wasbased on
asubstantive consideration astothevalue ofwhathadbeennegotiated. Consequently, thefindings
ofthepanel referred toamodification ofthevalue oftheconcession andnottothelegalimplications
offormal changes intheSchedules. InArgentina 'sopinion, thestatement quoted bytheUnited States
"Under longstanding [...]require negotiations" wasnotafinding ofthePanel butanobiter dictum ,
anopinion expressed incidently indelivering ajudgement which didnotconstitute oneofitsessential
elements.
3.71 ForArgentina, theonlycasethatboreacertain resemblance withthepresent situation was
thatonEEC -Import Regime forBananas ,butthecorresponding report hadnotbeen adopted.
Moreover, eveninthehypothetical caseofatransfer (andthisdidnotapply tothecaseatissue), this
would notbeenough toconstitute aviolation ofthecommitments assumed withrespect tobound import
duties, since Argentina hadalegalmechanism toensure thatthebound levelof35percentwasnot
exceeded. Thiswasthechallenge procedure laiddown intheArgentine Customs Code, theexistence
ofwhich putatresttheUnited States assertions withrespect tothesecurity andpredictability oftariff
bindings aswellastopotential effect on,orexpectations of,market access bytrade partners.
3.72 Argentina contended thatthecaseinquestion wasquitesimilar butcertainly notidentical, for
thefollowing reasons. TheUnited States quoted paragraph 134ofthereport ofthepanel onEEC -
Import Regime forBananas ,andunderlined thegeneral obligation arising from Article IItoaccord
..."treatment nolessfavourable thanthatprovided forinthe[...]Schedule". Thequotation then
62BISD 3S/127, para. 6.
63Ibid.
64BISD 31S/114, para. 14.
65Ibid., para. 17.
66Ibid., para. 50.
67Ibid., para. 54.WT/DS56/R
Page23
described thepanel'sanalysis oftheECmechanism whereby theeffective advalorem dutydepended
onthevalue ofthebananas, while thespecific duties depended ontheirweight. Onthatbasis andin
regard tothetwocategories ofspecific duties under consideration, thepanel considered thatinone
case, thatofthespecific dutyof850ECUs perton,theyclearly violated the20percentCommunity
binding andintheother (thecaseofthespecific dutyof100ECUs perton),theEChadneither argued
norsubmitted anyevidence thatthisdutycould never exceed 20percentadvalorem .Inconsequence,
thepanel found thatthespecific duties hadinfactviolated thebinding.
3.73 ForArgentina, theconclusions revealed significant qualitative differences between thecase
oftheEECimport regime forbananas andthepresent case. Tobegin with, theArgentine minimum
specific import duties hadbeencalculated soasnottoexceed thetariff ceiling of35percent. This
wasexplained indetail byArgentina initsanalysis ofthetheoretical andpractical examples ofalleged
violations ofthetariff bindings submitted bytheUnited States tothePanel.68
3.74 Argentina pointed outthatcontrary totheUnited States assertion, thepanel onEEC-Import
Regime forBananas didnotbaseitsconclusions onthemodification ofthewayinwhich thetariff
wascalculated, butonthefactthattheECcould notguarantee thatthisspecific dutywould never exceed
thebound level. Thissituation wasentirely different from theoneunder consideration. Under Law
No.22.415, bymeans ofthe"challenge procedure", Argentine legislation fullyguaranteed thatthe
levelofthetariff binding could never beexceeded.
3.75 Finally, Argentina formulated twoobservations regarding thelegalvalue ofthatcase.Firstly,
thatreport wasanunadopted panel report. Thevalue ofsuchreports aslegalprecedents within the
GATT/WTO framework wasminimal. Indeed, asstated bythepanel onJapan -Taxes onAlcoholic
Beverages ,citedbytheAppellate Body inthesame case, they"have nolegalstatus intheGATT or
WTO system sincetheyhavenotbeenendorsed through decisions bytheCONTRACTING PARTIES
toGATT orWTO Members".69Secondly, thepossibility thatitmayprovide "useful guidance" was
contingent upon whether theprecedent was"relevant" tothematter under examination.70
3.76 Furthermore, Argentina recalled thatthelimited scope ofpanel reports wasaccepted and
unquestioned practice under GATT andhadbeenreaffirmed bytheWTO. Thedoctrine wasclear
inthisregard: "Theadoption bytheContracting Parties [...]ofadispute settlement report isregarded
inGATT practice asa"ruling" andauthoritative determination ofexisting GATT rights andobligations
ofthedisputants intheinstant case".71Theprovisions oftheGeneral Agreement, inparticular of
Article XXIII, maynotbeusedtochange theobligations deriving fromtheAgreement. "Article XXIII
[...]should notbeusedinsuchamanner astoeffectively impose positive obligations onGATT members
thatarenotcontained intheAgreement".72Thiswasparticularly applicable when theconclusions
ofapanel hadbeenquestioned bysome ofitsmembers andother contracting parties hadexpressed
disagreement attheiradoption.
3.77 FortheUnited States ,thedecisions ofpriorGATT bodies haddetermined thattheimposition
ofspecific duties wasimpermissible where advalorem tariffs hadbeenpromised.73Argentina hadnot
andcould notfindameaningful basis todistinguish thereasoning underlying these earlier decisions
68Seediscussion insub-sections B.4and5.
69WT/DS8/AB/R, DS10/AB/R, DS11/AD/R, pp.14-15.
70Ibid.
71Ernst-Ulrich Petersmann, TheGATT/WTO Dispute Settlement System, Kluwer LawInternational Limited (1997)
p.75.
72ParHallstrom, TheGATT Panels andtheFormation ofInternational Trade Law, Juristförlaget (1994), p.156(citing
John H.Jackson).
73TheUnitedStatesreferredinparticulartothePanel Repor tsonEEC-ImportRegimeforBananasandPanelonNewsprint,
Op.Cit.WT/DS56/R
Page24
fromthepresent dispute. Argentina essentially hadasked thePanel tooverlook afirmly established
principle ofGATT jurisprudence, atenetthathadguided GATT Contracting Parties andWTO Members
since theearliest daysoftheGeneral Agreement.
3.78 TheUnited States argued thatArgentina attacked these decisions onalternate grounds. In
particular, Argentina pointed outthatthereport ofthepanel onEEC-Import Regime forBananas
hadnotbeenadopted. Thiswastrue,buttheUnited States noted thattheAppellate Body hadindicated
that"apanel could nevertheless finduseful guidance inthereasoning ofanunadopted panel report
thatitconsidered toberelevant".74
3.79 Argentina contended thatArticle II:1(b) GATT 1994 didnotimpose theapplication ofa
particular typeoftariff butlaiddown theobligation that"ordinary customs duties" could notexceed
"those setforth andprovided" intheSchedule. IfthetextofArticle II:1(b) hadsought todefine the
scope oftheconcept of"customs duties" (limiting theoptions interms ofthetypeoftarifftobeapplied),
thecontracting parties would havespecified thisinduecourse orwhen negotiating thetextofthe
Understanding ontheInterpretation ofArticle II:1(b) oftheGeneral Agreement onTariffs andTrade
1994.
3.80 Therefore, according toArgentina, onehadtodetermine whether ornottherewasanobligation
deriving from GATT 1994 which prohibited aMember from applying aspecific dutyrather thanan
advalorem dutyproviding itdidnotexceed thebound rate.Thekeyconcept inArticle IIwastreatment
nolessfavourable .Itmade noreference whatsoever totheobligation tointroduce aparticular type
ofduty(inthiscaseadvalorem ),nordiditstipulate thatsuchdutymaynotsubsequently betransformed
intoaspecific dutyprovided thatthefinaldutyeffectively paidbytheimporter torelease thegoods
intothemarket wasnothigher thanthebound tariff.
3.81 TheUnited States replied thatithadnoobjection tospecific duties perse.Infact,theUnited
States recognized thatWTO Members maybindtheirtariffs using either advalorem tariffs orspecific
tariffs, orboth. Theconcern oftheUnited States wasthatArgentina chose tobinditself toanad
valorem tariff butnonetheless imposed specific duties. Byimposing minimum specific duties despite
itspurely advalorem binding, Argentina ’sregime allowed forcertain goods tobesubject toimport
duties higher than35percentadvalorem .Thisdeprived WTO Members andtheirtraders ofthe
"predictability" thatshould accompany amaximum bound rate.Article IIoffered WTO Members a
guarantee thattheirproducts would notbesubject toduties greater thantheamount established inthe
relevant Schedules. Theyalsoguaranteed thatWTO Members would notmanipulate theadministration
ofduties soastocollect excessive tariffs. Thiswastrueregardless ofthevicissitudes ofthemarketplace.
Trade flows orprices riseorfallshould notdisturb thesanctity ofthecommitment made inatariff
concession.
3.82 According totheUnited States, advalorem andspecific duties were quite distinct andhad
different aimsandeffects. Advalorem duties garnered greater sums fromhigh-value goods thanlow-
value goods, andtheamount assessed varied constantly asprices fluctuated. Such duties offered a
hedge against inflation forcountries imposing them, since anyincrease intheprice ofgoods yielded
acommensurate increase inthetariff charged. Incontrast, specific duties borenodirect relation to
thevalue ofimported merchandise butinstead were dependent upon quantity. Oneratewaslevied
perunit. Asapractical matter, though, theflatrateofaspecific dutyaffected low-price merchandise
disproportionately incomparison withhigh-price items. AUS$5 specific dutymight beabargain to
themanufacturer ofaUS$100 product yetanalmost insurmountable obstacle totheproducer ofaUS$1
article.
74TheUnited States referred totheAppellate Body Report onJapan -Taxes onAlcoholic Beverages ,Op.Cit., p.15.WT/DS56/R
Page25
3.83 TheUnited States further argued thatthefactthatthetwoforms ofduties differed wasnot
tosaythatonewassuperior totheother ormore orlesslegitimate. Rather, itwastosaythatthetwo
wereunique andthuswerenotinterchangeable. Reliance onadvalorem ratesrather thanspecific, or
theother wayaround, necessarily involved theimposition orthethreatened imposition oftariffs in
contravention ofabound rate. Forexample, nomatter howloworreasonable aspecific dutymight
seem onitsface, suchadutyhadthepotential toviolate abound advalorem rateforasufficiently
low-price item.75
3.84 FortheUnited States, theproblem wasoneofdetermining andensuring equivalency. For
instance, aUS$5 specific dutyamounted to500percentforaUS$1 item, butonly5percentofa
US$100 item. Where tariffs hadbeenbound inadvalorem terms, aswasthecasewithArgentina,
theimposition ofspecific duties necessitated thedetermination oftheadvalorem equivalent foreach
itemineachcategory. Even ifnogoods hadentered Argentina subject toduties greater than35per
cent,theuseofminimum specific duties created thepossibility thatthebound ratewould beexceeded.
Thiscould notoccur ifArgentina imposed onlyadvalorem tariffs.
3.85 TheUnited States acknowledged thatArgentina wasfreetobinditsduties inavariety ofways,
including acombination ofspecific andadvalorem .However, having selected apurely advalorem
binding, Argentina could notmaintain aregime inwhich some items would besubject toduties in
excess ofitsbound rate.
3.86 ForArgentina ,theapplication ofminimum specific import duties thatdidnotexceed the35
percentbound ratewasnotaviolation ofthecommitment undertaken, nordiditimpair theconcession
granted intheUruguay Round. Argentina didnotcriticize thereport ofthepanel onEEC-Import
Regime forBananas Panel because thereport wasnotadopted, butstated thattheEChadbeenfound
inbreach ofitsobligations because noevidence hadbeenpresented thatthespecific dutytobepaid
could notexceed theadvalorem tariff undertaking. Argentina, ontheother hand, submitted concrete
proof inthisrespect.
4. VIOLATION ASARESULT OFTHE POTENTIALITY OFEXCEEDING THE BOUND
RATE OFDUTY
3.87 TheUnited States argued that,evenifArgentina 'sminimum specific import duties, asapplied,
didnotexceed 35percentadvalorem, theystillviolated Article IIbecause eachofArgentina ’sspecific
duties hadthepotential toexceed 35percentadvalorem withrespect tosome imports. Infact,in
allinstances, thespecific duties hadthepotential toexceed Argentina ’stariff binding. Thiswas
especially truewithrespect tolowcostproducts forwhich specific duties comprised agreater percentage
ofvalue thanhigher priced merchandise. Thus, bytheir verynature, thespecific duties denied
Argentina ’strading partners thepredictability andsecurity forwhich theyhadnegotiated a35percent
advalorem binding.
3.88 TheUnited States argued thatthereport ofthepanel onEEC-Import Regime forBananas
hadaddressed anissue quite similar totheoneinvolved inthisdispute. Thepanel haddescribed the
relevant considerations asfollows:
"The Panel noted thatArticle IIrequired thateachcontracting party 'accord tothe
commerceoftheothercontractingpartiestreatmentnolessfavourablethanthatprovided
forintheappropriate Partoftheappropriate Schedule annexed tothisAgreement '.
ThePanel thenconsidered whether theintroduction ofaspecific tariff forbananas in
place oftheadvalorem tariff provided forinitsSchedule constituted 'treatment no
75TheUnited States added that,likewise, theconverse wastrue. Anadvalorem tariff could exceed abound specific
dutyifsufficiently high-price merchandise were imported.WT/DS56/R
Page26
lessfavourable 'interms ofArticle II.ThePanel observed thatwhile thebound ad
valorem tariff wasrelated tothevalue ofbananas, thenewspecific tariff wasbased
ontheweight ofbananas. Anychange inthevalue ofbananas pertontherefore led
toachange intheadvalorem equivalent ofthespecific tariff [...][T]he Panel also
noted thattheEEChadneither argued norsubmitted anyevidence thatthistariffcould
never exceed 20percent advalorem ;according tothecomplainants, the[...]specific
tariff hadalready exceeded theequivalent ofthebound 20percentadvalorem tariff
[...]ThePanel consequently found thatthenewspecific tariffs ledtothelevying of
adutyonimports ofbananas whose advalorem equivalent was,either actually or
potentially, higher than20percent advalorem ".76
3.89 TheUnited States added that,based onthese facts, thereport ofthepanel onEEC-Import
Regime forBananas haddetermined thatcomplainants needed notprove thatspecific duties actually
exceeded abinding. Themerepossibility ofabreach sufficed todemonstrate aviolation ofArticle II’s
requirement thatimported products subject toaSchedule received treatment "nolessfavourable" than
whatwasprovided forinthatSchedule:
"The Panel considered thattheactual levying ofadutyinexcess ofthebound rate
clearly constituted atreatment ofbananas lessfavourable thanthatprovided forinthe
EEC’sSchedule ofConcessions. ThePanel thenproceeded toexamine whether also
themere possibility thatthespecific tariff rateapplied bytheEECmight behigher
thanthecorresponding bound advalorem rate,rendered itinconsistent withArticle
II.ThePanel recalled theimportance ofsecurity andpredictability intheapplication
oftariffs bindings. Itnoted thatprevious panels andworking parties hademphasized
thattariffbindings justify reasonable expectations about market access andconditions
ofcompetition. TheCONTRACTING PARTIES hadconsistently found thatachange
fromabound specific toanadvalorem ratewasamodification ofaconcession [...].
ThePanel [...]concluded that,indetermining whether treatment accorded byatariff
measure wasnolessfavourable thanthatprovided forintheSchedule, ithadtotake
intoaccount notonlytheactual consequences ofthatmeasure forpresent imports but
alsoitseffects onpossible future imports. Thisfollowed fromtheprinciple recognized
bymany previous panels thattheprovisions oftheGeneral Agreement serve notonly
toprotect actual trade flows butalsotocreate predictability forfuture trade".77
Thepanel onEEC-Import Regime forBananas thushadfound thatthemere possibility ofexceeding
abound rateinherent inconverting from advalorem tospecific duties wasinconsistent withArticle
II.Inreaching thisconclusion, thepanel followed priorGATT practice regarding conversions between
advalorem andspecific duties. Asthatpanel explained, suchachange undermined thestability and
predictability ofSchedules, oneofthecornerstones oftheGATT. Based onthese considerations, the
Bananas panel concluded thatthemere possibility ofabreach sufficed todemonstrate lessfavourable
treatment forpurposes ofArticle II:1(a). Thesame reasoning wasapplicable inthisdispute.
3.90 Argentina contended thattheprecedents citedbytheUnited States werenotapplicable tothe
present case. InEEC-Import Regime forBananas ,thepanel considered whether the"mere possibility"
thatadutymayexceed thebound ratemade thesaidspecific dutyinconsistent withArticle IIofGATT
1994. After studying thecases concerning Turkey andnewsprint from Canada, thepanel concluded
that"indetermining whether treatment accorded byatariff measure wasnolessfavourable thanthat
provided forintheSchedule, ithadtotakeintoaccount notonlytheactual consequences ofthatmeasure
forpresent imports butalsoitseffects onpossible future imports".78
76DS38/R, Op.Cit., para. 134.
77Ibid., para. 135(emphasis inoriginal).
78Ibid.WT/DS56/R
Page27
3.91 Argentina argued thattheconclusion inpara. 135ofthereport onEEC-Import Regime for
Bananas seemed todiverge fromtheprinciple wellanchored inGATT legalprecedent andthinking,
wherebyGATTrulesandGATTjurisprudenceareconstructedtoprotectexpectationsonthecompetitive
relationship between imported anddomestic products rather thanexpectations onexport volumes.
Where thatpotential toaffect expectations ofaccess wasnotaccompanied byconcrete measures that
made itpossible toverify itstrade impact, ithadbeenrejected under panel practice (even incases
where therewerelegalprovisions thatcontemplated thepossibility ofadopting suchconcrete measures).
3.92 Hence, thereport ofthepanel onUnited States -Measures Affecting theImportation, Internal
SaleandUseofTobacco ,agreeing withtheUnited States position onapointrelated totobacco inspection
fees,stated: "that panels hadconsistently ruled thatlegislation which mandated action inconsistent
withtheGeneral Agreement could bechallenged assuch, whereas legislation which merely gavethe
discretion totheexecutive authority ofacontracting party toactinconsistently withtheGeneral
Agreement could notbechallenged assuch; onlytheactual application ofsuchlegislation inconsistent
withtheGeneral Agreement could besubject tochallenge".79
3.93 Argentina submitted thattodetermine howthese imports could beaffected inthefuture, and
whether thatdetermination wasrelevant interms oftheGATT provisions, ithadtobedecided inthe
firstplace whether ornottherewasarestrictive measure affecting saidimports. Onlyifsuchameasure
existed andwasinconsistent withtheGeneral Agreement would expectations ofaccess beaffected.
Itwasthose expectations ofaccess andnotaquantum ofimports thattherules were designed to
safeguard.
3.94 Argentina stated thatinorder todetermine thedifferences between thecaseinthepanel report
onEEC-Import Regime forBananas andthepresent case, itwasfirstnecessary toconsider more
closely thearguments ofthecomplainants intheEEC -Import Regime forBananas case. The
complainants wereoftheviewthatArticle II"setforthoneofthecentral legalobligations oftheGeneral
Agreement, namely theundertaking ofcontracting parties torespect thetariff concessions, thus
prohibiting theapplication oftariffs foraspecific product thatwerehigher thanthose specified ineach
country 'sschedule ofconcessions".80TheEChaving adopted certain restrictive tariff andnon-tariff
measures, paragraph 1(a)ofArticle IIhadbeenviolated insofar asthisregime implied lessfavourable
treatment thanthatestablished intheconcession granted. Thecomplainants further argued that"[...]
thenewmonetary conversion ratesyielded advalorem values ofthenewly introduced specific rates
wellabove thebound rateof20percentforbananas bothwithin andabove thequota. The100ECUs
pertontranslated towellover25percentadvalorem whereas 850ECUs pertonwereeight tonine
times higher thanthebound duty".81
3.95 According toArgentina, these twoparagraphs constituted thecentral argument ofthe
complainants intheEEC-Import Regime forBananas case. TheUnited States wasusing thiscase
nottosupport itsarguments withregard totheobligation nottogrant lessfavourable treatment but
tosalvage thepanel'scollateral finding (notfinally adopted bythecontracting parties) totheeffect
that"themere possibility thatthespecific tariff rateapplied bytheEEC might behigher thanthe
corresponding advalorem raterendered itinconsistent withArticle II".82
3.96 Argentina considered thatitwasinthislatter point thatthetwocases differed since theEEC
didnotargue thatitsspecific duties didnotviolate thebinding, whereas Argentina maintained, since
itsfirstsubmission, thattheDIEM werenotinexcess ofthebound advalorem equivalent of35per
cent. Thefindings ofthepanel onEEC-Import Regime forBananas related to"thespecific tariff
79Adopted on4October 1994, DS44/R, para. 118, infine.
80DS38/R, Op.Cit., para. 20.
81Ibid., para. 24.
82Ibid., para. 135(emphasis inoriginal).WT/DS56/R
Page28
rateapplied bytheEEC", which puttheirscope intoperspective. Thisapplied tothecaseunder
consideration andtothespecific tariffs discussed therein, apart from thefactthatthescope ascribed
toanyprecedent should belimited, since otherwise itcould betaken outofcontext. TheEECspecific
tariff which thepanel hadanalyzed hadthefollowing characteristics:
(a) "theadvalorem equivalent ofthe850ECUs pertonspecific tariffonbananas exceeded
byfar20percentadvalorem "(para. 134);
(b) "astothe100ECUs pertonspecific tariff, theEEChadneither argued norsubmitted
anyevidence thatthistariff could never exceed 20percentadvalorem "(same
paragraph).
3.97 Argentina asserted thatitwasthisspecific tariffapplied bytheEEC, withthesecharacteristics,
inrespect ofwhich thepanel examined whether "themerepossibility thatthespecific tariffrateapplied
bytheEEC might behigher thanthecorresponding bound advalorem raterendered itinconsistent
withArticle II".Thepanel hadnotarrived atitsfinding inavacuum orwithrespect toanyspecific
tariff ratebutwithrespect toonewhich hadinfactalready violated thebound ceiling (thisfinding
wasalready partofthepanel'sconclusions) andwithrespect towhich italsomade thissecond collateral
finding.
3.98 Argentina added that,inrelation tothisspecific tariff, thepanel hadconcluded "that, in
determining whether treatment accorded byatariff measure wasnolessfavourable thanthatprovided
forintheschedule, ithadtotakeintoaccount notonlytheactual consequences ofthatmeasure for
present imports butalsoitseffects onpossible future imports". Itwasfrom thissecond conclusion
thattheUnited States inferred thatArgentina 'sspecific duties hadthepotential toexceed thetariff
binding.
3.99 Inrelation tothis,Argentina contended firstly thatthepanel'sconclusion seemed toindicate
thatitwasaquestion ofprotecting export volumes rather thanexpectations ofaccess anditwasthis
which Argentina challenged. Secondly, thepotential assuchwould beaninfringement onlyiftrade
wereaffected (asinthecaseofbananas inwhich tariff binding wasviolated). Otherwise, ifonewere
toaccept theideaof"potentiality" advanced bytheUnited States, anyregulation orprovision which
allowed forthepossibility ofaninfringement would bepotentially inviolation oftheGATT/WTO
commitments. Thishasbeenclearly rejected bypanels adopted bythecontracting parties suchasthe
panel onUnited States -Measures Affecting theImportation, Internal SaleandUseofTobacco .
3.100 Finally, tobring outthedifference between thetwocases stillmore clearly, Argentina argued
thateveniftheconcept of"mere possibility" (putforward byapanel whose report wasnotadopted),
which theUnited States defined as"potential", were accepted asavalid precedent, inthecaseof
Argentina thissituation didnotarisesince the"challenge procedure" guaranteed thetariff binding in
LawNo.22.425. Nothing similar waseither argued bytheEEC orconsidered bythePanel inthe
EEC-Import Regime forBananas case.
3.101 TheUnited States noted thattheparties disagreed regarding themandatory nature ofameasure.
According tothereport ofthepanel onEEC-Import Regime forBananas ,aslongasthere wereor
could beimports thatentered aWTO Member subject toduties inexcess ofabound rate,those duties
violated Article II.Thisreasoning ofthepanel onEEC-Import Regime forBananas echoed the
analysis ofother panels which haddetermined thatWTO Members maynotmaintain mandatory
legislation thatwasinconsistent withGATT obligations, regardless ofwhether theinconsistency arose
atthepresent orinthefuture. Asthepanel onUnited States -Taxes onPetroleum andCertain Imported
Substances hadstated inanother context, theGATT served "toprotect expectations ofthecontractingWT/DS56/R
Page29
parties astothecompetitive relationship between theirproducts andthose oftheother contracting
parties".83Thiswas
"notonlytoprotect current trade butalsotocreate thepredictability needed toplan
future trade. Thatobjective could notbeattained ifcontracting parties could not
challenge existing legislation mandating actions atvariance withtheGeneral Agreement
untiltheadministrative actsimplementing ithadactually beenapplied totheirtrade".84
3.102 TheUnited States recalled that,likewise, thepanel onUnited States -Measures Affecting
Alcoholic andMaltBeverages hadnoted thatpriorpanels hadconsistently found GATT violations where
contracting parties imposed mandatory legalmeasures thatwere inconsistent withprovisions ofthe
General Agreement solely astheyrelated tofuture trade.85Thisimportant principle applied here. The
measures instituting Argentina ’sspecific duties weremandatory, andtheyallowed fortheimposition
ofexcessive duties inrelation tocertain products thatmaybeimported intoArgentina inthefuture.
Themandatory nature ofthemeasures wasmade plainbyArgentina when itstated that"[t]he national
tariff mustbeapplied bytheNational Customs Administration which, ofcourse, isnotcompetent to
change it".Further, theUnited States demonstrated initssubmissions thatArgentina ’sspecific duties
necessarilyhadthepotentialtoexceed35percentadvalorem.EvenassumingthatArgentina’sminimum
specific import duties hadbeenenacted witheffect from1January 1998, thePanel could, andshould,
havefound thatmeasures requiring theimposition ofduties inexcess ofbound levels violated Article
II,evenifsuchmeasures werenotyetineffect. Indeed, thepassage citedfrom theSuperfund panel
report related toamandatory tax,which wasenacted in1986 butwasnottogointoeffect untilthree
years later. Thepanel intheSuperfund casefound thatbecause thetaxinquestion wasamandatory
tax,itcould bechallenged, thatistosay,itwasamatter justiciable byaGATT panel eventhough
itwasnotyetbeing imposed.
3.103 TheUnited States noted thatArgentina further criticized thereport ofthepanel onEEC-Import
Regime forBananas asbeing inconsistent withthepanel report onUnited States -Measures Affecting
theImportation, Internal SaleandUseofTobacco which hadfound thatthenon-application of
discretionary measures could notbefound tobeinviolation ofGATT 1994. Argentina appeared to
confuse thenotions ofpossible future commercial disadvantages ofmandatory legislation withthat
ofdiscretionary legislationaddressedinthereportonUnited States -Measures Affecting theImportation,
Internal SaleandUseofTobacco .Thisreport relied onbyArgentina dealtwithaUSdiscretionary
provision ontobacco inspection feeswhich allowed, butdidnotrequire ,theUSauthorities toimpose
afee.
3.104 TheUnitedStatesarguedthat,incontrast,theArgentinemeasuresinthiscaserequiredArgentine
officials toimpose minimum specific duties without regard tothevalue ofimported products. Argentina
hadadmitted thatitscustoms officials hadnodiscretion nottoapply thespecific duties. AstheUnited
States haddemonstrated, thislackofdiscretion hadledtotheimposition ofspecific duties wellinexcess
ofArgentina ’sbound 35percentadvalorem rate. Similarly, thereport ofthepanel onEEC-Import
Regime forBananas dealtwithrequired application ofspecific duties bytheEC,andconducted its
discussion ofthepotential toviolate abound rateinthefuture inthatcontext.86
83Adopted on17June 1987, BISD 34S/136, para. 5.2.2., hereafter the"Superfund "case.
84Ibid.
85Adopted on19June 1992, BISD 39S/206, para. 5.39.
86DS38/R, Op.Cit.,para. 135. TheUnited States alsoreferred tothePanel Report onUnited States -Measures Affecting
Alcoholic andMaltBeverages ,Op.Cit.,para. 5.39infinewhich mentioned that"because Illinois legislation inissue allows
aholder ofamanufacturer ’slicense tosellbeertoretailers, without allowing imported beertobesolddirectly toretailers,
thelegislation mandates governmental action inconsistent withArticle III:4".WT/DS56/R
Page30
3.105 Intheopinion oftheUnited States, ifArgentina ’sargument thatWTO Members mayadopt
regimes capable ofviolating abinding solongastheydidnotdosoinapplication weretobeaccepted,
thesecurity afforded byArticle IIwould bediminished. WTO Members would onlybeabletoenforce
theirrights under Article IIbydemonstrating excessive duties onafact-specific, case-by-case basis,
rather thanthrough examination oftheimplementing measures themselves. Panels ineffect would
beputintheposition ofbeing akindoffinalappeals court ineachcustoms dispute. Thissurely had
notbeenintended bythedrafters ofArticle II,oroftheDSU.
3.106 Argentina replied thatitsargument wasnotbased onthefactthatthepanel report onUnited
States -Measures Affecting theImportation, Internal SaleandUseofTobacco wasdifferent fromthat
ofthepanel onEEC-Import Regime forBananas .Argentina wasnotseeking freedom toauthorize
measures contrary totheWTO obligations, allow them tolapse andthensubsequently indicate that
theydidnotapply. Argentina asserted thatthemere existence ofameasure thatmight possibly be
contrary toWTO obligations wasnotenough tocondemn acountry. Inother words, anyalleged
violation ofanobligation hadtobeproved byciting concrete cases andnotsimply bytheoretical
statements. Itwasonlyinthiswaythataprima facie caseofnullification orimpairment could be
determined.
3.107 Argentina argued thattheconcept ofthebinding nature ofarulehadtobeanalyzed inrespect
ofaparticular case. InthecaseofArgentina, boththeResolution imposing theDIEM regime and
Law24.425 incorporating theWTO Agreement inArgentine legislation werebinding. Thedifference
instatus between thetwobinding rules wastobefound intheirplace inthehierarchy, because the
Lawtookprecedence overtheMinisterial Resolution.
3.108 TheUnited States argued that,because market prices fortextiles, apparel andfootwear changed
rapidly, especially forcertain categories, Argentina ’sminimum duties based on"average import prices"
could notbeguaranteed tobeequal toorlessthanthebound rateof35percentadvalorem .Aspecific
dutyonacertain fabric oranarticle ofclothing might bewithin thebound rateatonemoment and
above itthenext. Thepotential tosurpass thebound ratewaseverpresent. Given suchconditions,
Argentina, liketheEECinthecaseonEEC-Import Regime forBananas ,hadnowaytoassure other
WTO Members andtheirtraders thatthespecific duties would remain within thebound rate.
3.109 TheUnited States noted thatArgentina hadargued thatitsspecific duties wereconsistent with
Article IIbecause theywerenomore than35percentoftheadjusted "average import price" ofeach
relevant HScategory. However, inspection ofthedecrees imposing these duties showed thatthey
simply specified alistofminimum specific duties, notamethodology forvaluing imports. Argentina ’s
useofanadjusted "average import price" instead ofactual transaction values insetting itsspecific
duties wascontrary toArticles II:3GATT 1994, aswellasArticle VIIGATT 1994 asclarified by
Articles 1to8oftheCustoms Valuation Agreement.87These provisions made clearthataWTO Member
maynot"alter itsmethod ofdetermining dutiable value [...]soastoimpair thevalue ofanyof[...]
concessions",88andthatWTO Members should relyonactual transaction values rather than"arbitrary
orfictitious values".89Thatthespecific duties maybenomore than35percentofan"average import
price" wassimply irrelevant forpurposes ofestablishing duties tobeimposed onparticular imports.
3.110 TheUnitedStatesnotedthatatableproducedbyArgentinarelatingtoimportsunderHSChapters
51to63showed thatsome oftheminimum specific import duties were, onaverage, more than35
87Inconnection withthis,theUnited States mentioned thatArgentina wasasignatory totheCustoms Valuation Agreement
andthat, although Argentina hadreserved limited rights withrespect totheapplication ofcertain procedures under the
agreement, Argentina hadnottimely invoked thefive-year delay incoverage available todeveloping nations andcould no
longer doso.TheUnited States referred todocument G/VAL/6, of10January 1996.
88Article II:3GATT 1994.
89TheUnited States referred toArticle 7oftheCustoms Valuation Agreement.WT/DS56/R
Page31
percentadvalorem. Argentina hadexplained thatitderived thespecific duties bymultiplying a
"representative international price" foraparticular line-item -often anaverage ofUSprices -bythe
bound rateof35percent. Thetablehadfourcolumns. Thefirstrepresented theline-item; thesecond
listed the"representative international price"; thethirdshowed 35percentoftherepresentative price;
andthefourth identified thethenproposed specific duty(which inalmost every instance became the
actual duty). TheUnited States hadfound 32line-items where thetableconcerned stated thatthespecific
dutywasgreater than35percentofthe"representative international price". Argentina offered no
explanation astowhysomany ofitsspecific duties were setatanamount greater than35percent
ofthe"representative international prices" orhowitcould justify imposing duties atthese levels.
Argentina similarly wasunable toexplain whyitbelieved thatnogoods hadentered Argentina with
values lessthanthe"international representative price" incategories where thespecific duties were
greater thanorequal totherepresentative price. Essentially, Argentina wasasking thePanel tobelieve
thattheseaverageorrepresentativepriceswerealsominimumpricesforentirecategoriesofmerchandise.
Inother words, Argentina assumed thatinternational merchants andexporters could notpossibly set
theirprices lower thantheset"representative" price. However, asdemonstrated, exporters and
merchants oftextile, apparel andfootwear products could anddidshipandselltheproducts forless
thanArgentina ’s"setprice". Theresult wasthatArgentina ’sspecific duties exceeded 35percent
advalorem foranextensive number ofproducts.
3.111 Argentina replied thatitsCustoms applied onlytheprovisions oftheCustoms Valuation
Agreement. Consequently, itcould notapply acriterion based onthe"world import price" which
didnotexistintheArgentine legislation. Thenational tariffhadtobeapplied bytheNational Customs
Administrationwhichwasnotcompetenttochangeit.However,intheunlikelysituationofahypothetical
caseinwhich customs weretorequire thepayment ofaminimum specific import dutywhich exceeded
35percentadvalorem ,theimporter would havetherighttochallenge theassessment made bythe
National Customs Administration. Thecustoms authority would havetoinitiate achallenge procedure
andtheimporter would automatically beallowed torequest therelease ofthegoods intothemarket
afterpaying onlythesumheconsidered appropriate forthose goods anddepositing aguarantee.
3.112 Argentina added that,sincetheestablishment ofthePanel, theminimum specific import duties
hadbeenreduced, through Resolution No.597/97, toanadvalorem equivalent ofapproximately 25per
centfortextiles and30percentforclothing. Thenewresolution fixing minimum specific import duties
at5percentand10percentbelow thebound ceiling made itevenlesslikely thattherecould beimport
transactions exceeding the35percentceiling.
3.113 TheUnited States ,inorder toshow theproblems inherent intheminimum specific import
duties applied byArgentina, provided thePanel withanexample: foragiven category ofathletic shoes -
forinstance, soccer shoes -theadvalorem ratemight be20percentandthespecific dutyUS$3.50
perpair.Ifonepairofsoccer shoes weretoenterArgentina withanactual transaction value ofUS$5.00,
thespecific dutywould beassessed. Thiswassobecause theadvalorem ratewould result inaduty
ofUS$1.00, farlessthanthespecific dutyofUS$3.50. Infact,apairofathletic shoes inthiscategory
would havetobeworth more thanUS$17.50 fortheadvalorem ratetoapply. Thisexample revealed
whyArgentina ’sduties wereexcessively high. TheUS$3.50 specific dutywould amount to70per
centoftheUS$5.00 transaction value oftheshoes. Thiswasdouble Argentina ’smaximum bound
rateof35percent. Each pairofsoccer shoes inthecategory entering Argentina withatransaction
value below US$10.00 would besubject toadutyinexcess of35percentadvalorem .Thus, bytheir
verynature, Argentina ’sspecific duties hadthepotential toexceed 35percentadvalorem inallrelevant
categories. Foreachspecific dutyimposed byArgentina, there were, orattheveryleastthere could
be,products withsufficiently lowprices suchthattheywould enterArgentina subject tospecific duties
above thebound rate. Thiswould occur withregard toallshoes worth lessthanUS$10.00.
3.114 TheUnited States concluded that,given thatArgentina ’sspecific duties hadthepotential to
exceed 35percentadvalorem ,thePanel should findthatthespecific duties wereinconsistent withWT/DS56/R
Page32
Article II.Further, Argentina ’simposition ofminimum specific duties violated Article IIbecause they
impaired thevalue oftheconcessions Argentina hadmade during theUruguay Round. Even ifthese
duties werenotexcessive foranyproducts thathadalready entered Argentina, theduties necessarily
hadthepotential toviolate itsbound rateof35percentadvalorem forsome covered items inthe
future. Thiswasabreach oftheguarantee Argentina hadgiven tofellow WTO Members innegotiating
itsSchedule and,thus, itwasaviolation ofArticle II.
3.115 With respect towhathappened when thetransaction value forthegood concerned waslower
thanUS$10, Argentina argued that,according totheArgentine law,thespecific dutywasnotpayable
because US$3.50 wasgreater than35percentofthetransaction value. Ontheother hand, thead
valorem dutyof35percentapplied hereasaresult oftheremedies available inArgentine law,essentially
thechallenge procedure (recurso deimpugnación) .
5. IMPOSITION OFDUTIES EFFECTIVELY EXCEEDING THE BOUND RATE
3.116 FortheUnited States ,oneofthefundamental objectives oftheGATT 1994was"thesubstantial
reduction oftariffs".90Toensure thattariff concessions, oncemade, hadthefullforce andeffect
intended, Article IImade plainthatthedutyratessetforthinbindings weremaximum limits thatmay
notbeexceeded.91TheUnited States argued thatArgentina ’sspecific duties were inconsistent with
these rulesbecause theyexceeded Argentina ’sbound maximum rateof35percentadvalorem .The
amountbywhichArgentina’sspecificdutiessurpassedtheboundrateinmanyinstanceswasconsiderable,
often equal totheentire value ofimported products orevendouble ortriple thevalue.
(a) USexamples based ontheArgentine methodology fortheapplication ofDIEM
3.117 Inorder todemonstrate thattheapplication ofspecific minimum import duties exceeded
Argentina 'sbound rate,theUnited States submitted tothePanel anhypothetical example illustrating
how, initsopinion, themethodology usedfortheapplication oftheminimum specific import duties
operated. Assuming thattheapplicable advalorem rateforacategory ofgoods was20percentand
thespecific dutywasUS$3.50 perunit,Argentina would assess thespecific dutyofUS$3.50 onall
goods inthecategory withanactual transaction value oflessthanUS$17.50 perunit. Thiswould
besobecause, inthose cases, thespecific dutywould begreater thantheadvalorem duty(e.g.,20
percentofUS$10 isUS$2.00, lessthanthespecific dutyofUS$3.50). Incontrast, goods withan
actual transaction value ofmorethanUS$17.50 would besubject totheadvalorem duty, which resulted
inadutyabove US$3.50 (e.g.,20percentofUS$20 wasUS$4.00, which wasmore thanthespecific
dutyofUS$3.50). While higher priced goods inthecategory would besubject toproper advalorem
duties, items worth lessthanUS$17.50 would enter Argentina under aspecific dutyinexcess of
Argentina ’sbound rateof35percent.
3.118 TheUnited States, onthebasis ofdatasupplied byArgentina, hadidentified more than100
HScategories inwhich Argentina ’sspecific duties, onaverage ,werehigher than35percentadvalorem .
Thismeant thatthespecific duties constituted morethan35percentoftheaverage ofactual transaction
prices ofmerchandise imported ineachcategory. Forexample, theaverage ofactual import prices
forHScategory 6303.19 wasUS$1.00 perkilogram, while thespecific dutywasUS$4.80 perkilogram.
Thespecific dutythusequalled 480percentoftheaverage value ofmerchandise inthecategory, and
allmerchandise inthecategory entering Argentina withavalue oflessthanUS$13.71 perkilogram
90GATT 1994, Preamble, para. 3.TheUnited States stated thatpanels should address issues inlightoftheunderlying
purposes oftheGATT 1994 andreferred tothePanel Report onUnited States -Restrictions onImports ofSugar ,adopted
on22June 1989, BISD 36S/331, paras. 5.2-5.3.
91TheUnited States referred tothePanel onNewsprint, Op.Cit.,pp.131-132, which mentioned atpara. 52that"[t]he
Panel shared theviewexpressed before itrelating tothefundamental importance ofthesecurity andpredictability ofGATT
tariff bindings, aprinciple which constitutes acentral obligation inthesystem oftheGeneral Agreement".WT/DS56/R
Page33
weresubject toduties greater than35percentadvalorem .Thiswassobecause 35percentofUS$13.71
wasUS$4.80. TheArgentine pesowaspegged totheUSdollar. Thus, dollar figures equalled the
same amount inpesos.
3.119 ThespecificdutiesoftenweregreaterthanArgentina’sboundrate,becauseArgentinaestablished
themfortheverypurpose ofimposing adutyhigher thantheadvalorem dutyotherwise tobeapplied.
Theintention toraiseduties above thebound advalorem ratewasclearfromResolution No.1696/93,
which stated thatthespecific duties served tocombat "theharm tothe[domestic] athletic footwear
industry resulting from these commercial practices [that] cannot beoffset through anincrease inthe
advalorem tariffratescurrently ineffect", and"thespecific import duties [...]willoperate asaminimum
ofthecorresponding advalorem import duty".
3.120 Argentina firststated thatthespecific duties werenotcalculated arbitrarily. Indetermining
theiramount, theArgentine authorities utilized thefollowing methodology:
(a) Arepresentative international price wascalculated foreachcategory ofproducts andtariff
heading. Since there werenostandard international prices fortextile andclothing products,
theprices prevailing inthemajor markets wereused, mainly theUnited States market. The
useofdataconcerning these markets wasdetermined ingeneral terms byvolume andthe
representative nature ofthemarkets, andalsobythedegree ofreliability ofthestatistics;
(b) aspecific dutyequivalent toamaximum advalorem tariff of35percentwasapplied tothe
international prices thusdetermined, adjusted toputthemonac.i.f.-Buenos Aires portbasis.92
3.121 Inorder toexplain inpractical terms whatwasimplied bytheapplication ofspecific duties,
Argentina analyzed theexample citedbytheUnited States above. Thisexample made themistake of
comparing alevelofspecific dutywithanadvalorem dutyof20percent. Thismaycorrespond to
thetariff effectively applied tothetariff heading cited, butitdidnotrepresent Argentina 'sWTO
obligation, which wasnottoexceed thebound levelof35percentadvalorem equivalent. Intheexample
cited, ifthespecific dutywasUS$3.50 foraproduct withavalue ofUS$17.50, theadvalorem equivalent
would be20percent. Inthisparticular case, the35percentlevelwould onlybebreached iftheprice
ofthegoods were lessthanUS$10 andnot,asmentioned bytheUnited States, ifitwere lessthan
US$17.50.
3.122 Argentina further argued that,onthatbasis, itmight beimagined thattheprincipal issueraised
bytheUnited States wastheconfusion between thetariff applied andthetariff bound byArgentina
intheWTO. Theadvalorem import tariff applicable tothetextiles sector ranged from 12percent
to20percentdepending ontheproduct 'slevelofprocessing, whereas thebound advalorem import
tariff remained atauniform levelof35percentforthewhole ofthissector ofgoods andformany
other sectors intheArgentine customs tariff. When ithadbeendecided toapply minimum specific
import duties according tothepriceofthegoods, therehadbeennointention toutilize themethodology
referred toabove buttoestablish alevelthatdidnotexceed the35percentbound byArgentina in
theWTO.
3.123 ForArgentina, theexample citedbytheUnited States revealed aconceptual error. Acloser
study showed thattherehadnotsimply beenacalculation error, asmight beimagined when firstreading
it(3.50 pesos wasnot35percentof17.50 pesos), butthatthecalculation showed thatthemethodology
usedtoarrive attheconclusion thatArgentina wasviolating itsWTO commitments wasflawed. The
calculation showed thattheUnited States based itscaseonthepresumption thatArgentina hadtomeet
92Argentina submitted tothePanel atable onthemethodology forcalculation ofminimum specific import duties for
HSChapters 51through 63.WT/DS56/R
Page34
theadvalorem equivalent ofthetariff actually applied andnot,aswasthecase, thetariff bound in
Schedule LXIV.
3.124 Inorder toillustrate theprocedure, Argentina suggested toassume thattheadvalorem import
dutyforacategory ofgoods was20percentandthespecific dutywasUS$3.50 perunit. Argentina
would apply thespecific dutyofUS$3.50 toimports inthiscategory withatransaction value ofless
thanUS$17.50 because insuchcases thespecific dutywould begreater thantheadvalorem dutyof
20percent(i.e.20percentofUS$10 wasUS$2, lessthanthespecific dutyofUS$3.50). Onthe
other hand, goods whose transaction value exceeded US$17.50 would besubject totheadvalorem
duty, because itwould behigher thanthespecific duty(i.e.20percentofUS$20 wasUS$4, which
wasmore thanthespecific dutyofUS$3.50). Theexample given bytheUnited States didnotmake
clear whathappened when thetransaction value foragood inthiscategory waslower thanUS$10.
Insuchcases, according totheArgentine law,thespecific dutywasnotpayable because US$3.50
wasgreater than35percentofthetransaction value. Ontheother hand, theadvalorem dutyof35per
centapplied hereasaresult oftheremedies available inArgentine law,essentially thechallenge
procedure (recurso deimpugnación) described insub-section B.7.b) below (i.e.35percentofUS$5
wasUS$1.75, lessthanthespecific dutyofUS$3.50).
3.125 Tosummarize, Argentina stated that,foracategory ofgoods towhich anadvalorem duty
of20percenteffectively applied andwhich weresubject tothepayment ofaspecific dutyofUS$3.50,
thefollowing three possibilities occurred:
Transaction value Import duty
Over US$17.50 20percentadvalorem
Between US$17.50 andUS$10 US$3.50
LessthanUS$10 35percentadvalorem
3.126 ForArgentina, theconfusion regarding itsWTO obligation torespect the35percentfigure,
andnotthetariff inforce, wasallthemore obvious when considering some ofthesubmissions made
byUnitedStatesexportersinthecourseoftheinternalproceedingsunderSection301oftheUnitedStates
Trade Act.93
3.127 TheUnited States responded bystating thatitwasnotarguing thatthere wasrelevance in
comparing whether Argentina 'sspecific dutywashigher thantheotherwise applicable advalorem rate.
TheUnited States focused onwhether thespecific dutywentabove thebound rateof35percent, in
actuality, oratleastpotentially.
(b) Obligation fortheArgentine customs toassess thefullamount ofduties
3.128 TheUnited States argued thatArgentina hadacknowledged thatitscustoms service could only
impose theduties asprovided forintherelevant resolutions ordecrees. Italsodeclared thatUStraders
hadreported thattheArgentine customs service assessed thefullspecific dutylisted inthegoverning
resolution ordecree, evenwhere thatdutywasinexcess of35percentadvalorem .
93Argentina referred tothesubmission from theAssociation oftheNon-Woven Fabrics Industry totheOffice ofthe
United States Trade Representative of5November 1996(Docket No.301-108: Section 302Investigation ofArgentine Specific
Duties andNon-Tariff Barriers Affecting Apparel, Textiles andFootwear), where thisAssociation questioned thefactthat
thecorresponding specific dutyhadanadvalorem equivalent thatexceeded theapplicable tariff of18percent. Inthe
subsequent paragraph, theadvalorem equivalent wascalculated at28.56 percent. Argentina argued that,eventhough this
submission recognized thatthesaidequivalent waslower than35percent, inorder toprove thealleged violation itargued
thatthestatistical taxanddomestic taxes hadtobeadded, although these elements borenorelation toimport duties.WT/DS56/R
Page35
3.129 Argentinaarguedthattheadvaloremequivalentsoftheminimumspecificimportdutiesassessed
byArgentina werelower thanthetarifflevels inArgentina 'sSchedule LXIV. Argentina haddifficulties
inaccepting orinconsidering theUnited States 'argument since, ontheonehand, there wasno
infringement ofthecommitments made inArgentina 'sSchedule and,ontheother hand, Argentina 's
legalsystem constituted asingle andinseparable whole which included theprocedure forchallenging
assessments. Inthese circumstances, theArgentine authorities applied theminimum specific import
duties laiddown. Thiswasdoneatthetimeofassessment oftheimport duties andother duties and
charges which importers hadtopayinorder torelease imported goods forconsumption.
3.130 ForArgentina, noduties inexcess of35percentadvalorem hadbeenapplied. Argentina had
noknowledge ofinstances oftheimposition ofspecific duties ontextile orclothing imports which
hadresulted inaninfringement ofthebound tariff of35percentadvalorem .Moreover, there had
beennocases ofimports oftextile products andclothing inwhich importers hadraised thequestion
oftheapplication ofspecific duties inexcess ofthe35percentadvalorem bound intheWTO.
3.131 Argentina specified alsothatineachimport operation theArgentine customs administration
assessed taxes onthebasis ofthecustoms value ofthegoods. There wasnodocumentation ofany
kindthatindicated theimposition ofDIEM inanytariff category inexcess ofthebound tariff of35
percentadvalorem .TheUnited States didnotofferevidence ofthealleged imposition ofminimum
specific import duties inexcess ofthetariff bound intheWTO fortextiles andclothing imports. In
these circumstances, itcould onlybeassumed thatsuchcases didnotexist.
(c) Data regarding theincome forArgentina from levying duties above thebound rate
3.132 TheUnited States supplied achart tothePanel showing theapproximate amount thatArgentina
hadallegedly collected asaresult oftheimposition ofthespecific import dutyinexcess ofwhatwould
havebeencollected hadvaluations beenconducted based ona35percentadvalorem basisinspecific
HScategories between January andSeptember 1996. Thischartshowed abreak-down ofdutycollection
forsweaters (US$161,000), fabrics (US$544,000), carpets (US$348,000), apparel (US$450,000), other
textiles (US$291,000) andtotal(US$1,634,000). Inaddition, theUnited States claimed thatthechart
wasprepared based upon customs datasupplied byArgentina.
3.133 With reference tothose data,Argentina replied thattheUnited States wrongly assumed that
Argentina wasapplying specific duties inexcess of35percentequivalent advalorem .There hadbeen
norefunds toimporters forduties imposed inexcess ofthebound tariffs inasmuch asnoproceedings
onthese grounds hadbeenbrought before theArgentine customs.
3.134 Argentina stated thatResolution No.597/97, which reduced theminimum specific import duties
applicable onanumber oftextile andapparel products hadbeenadopted aspartofthetrade policy
measures oftheArgentine economic authorities. Thistrade policy wasinkeeping withthetrend to
reduce import tariffs and,withthisinmind, ithadbeendecided thatinthetextile product andclothing
sector tariffs should notexceed maximum levels ofapproximately 25percentfortheformer and30
percentforthelatter. Thismeant thatalargenumber oftariffheadings corresponded tospecific duties
whose advalorem equivalent waslower thanthese levels. Thereason whyitwasdesirable totake
thisaction atthistimewasrelated tothefactthatitwasprecisely inthemonth ofApril every year
thattheforeign trade statistics corresponding tothetotals fortheprevious yearbecame available.
Theevents of1996 inthetextile andclothing sector, asconfirmed bythestatistics available inApril
ofthecurrent year, formed thebasis fortheanalysis leading totheadoption ofthismeasure. The
calculation method employed wasbased ontheimport prices ofgoods entering Argentina. Thisdecision
wastaken because, from1996, withtotalimports oftextiles andclothing valued atUS$871 million,
thequantities considered weresufficiently representative tobetaken intoaccount. In1993, when the
minimum specific import duties wereestablished forthepurpose ofproviding acertain leveloftariff
protection forthedomestic industry, thevolumes were notsufficiently representative ofArgentineWT/DS56/R
Page36
imports inorder totakethemintoaccount tosetanaverage import price. In1990, imports amounted
toUS$100 million. Accordingly, in1993 itwasdecided towork onthebasis oftheprices forthese
goods inrepresentative markets ofother countries.
3.135 Argentinacontendedthattheabove-mentionedchartsubmittedbytheUnitedStateswasintended
topersuade thePanel that,inactual fact,US$1,634,000 hadbeenpaidoverandabove theamount
which should havebeencollected onthebasis ofa35percenttariff, butthiswasonlytheoretical ,
since thementioned amount wasbased onatheoretical calculation andnotonevidence ofapayment
actually made.
(d) Arguments regarding theusebytheUnited States oftables prepared byArgentina
3.136 TheUnited States recalled that,during consultations withtheUnited States, Argentina had
produced customs datareflecting c.i.f.values andquantities (intonnes) oftextile andapparel forline-
items within HSchapters 51-64 fortheperiod January-September 1996. Thisdocument consisted of
twotables: atableoftotalimports for1995and199694andatableontheprincipal countries oforigin
ofArgentine imports for1995 andtheperiod January-September 1996.95Based upon thisArgentine
data, theUnited States calculated average advalorem equivalents foreachline-item.
3.137 TheUnited States hadrequested thedatainquestion forthepurpose ofperforming the
calculations ofadvalorem equivalents. Thisinformation should beviewed ashighly credible and
showing Argentina ’sspecific duties tobeabove itsbound rate. TheUnited States elected torelyupon
thisdata,rather thanusing other information, because itwanted tominimize factual conflicts forthe
Panel.
3.138 Argentina stated thatthefirstlistintheabove-mentioned document hadbeenprepared for
thepurpose ofanalysing priceproblems concerning certain tariffheadings. Intheconsultation meetings
therehadbeenextensivediscussionoftheconsiderabledifferenceswhichhademergedbetweenArgentine
import prices andUnited States export prices forexports toArgentina. These differences suggested
theexistence ofsignificant underinvoicing inmany transactions. Thisresulted intheinformation being
supplied totheUnited States asabasis forassessing themagnitude oftheproblem. Thesecond list
intheabove-mentioned Argentine document hadbeenprovided sothattheUnited States could note
itsminor importance asatextiles supplier toArgentina, ascompared withotherexporters suchasChina.
Thus, theinformation ontheorigin ofimports hadbeenprovided toshow theUnited States thatthe
commercial interests alleged tobeaffected were actually confined toaveryfewtariff headings. At
notimehaditbeenenvisaged thatthedatainquestion might beusedfordeducing prices according
totheorigin ofthegoods.
3.139 Argentina further specified that,inthesecond list,thefigures related toimports percountry
oforigin wereexpressed inthousands. Given thelowvolume oftransactions inmany tariff headings
thisyielded anunacceptable margin oferror, asshown bythefollowing example. If160kgofa
particular good wereimported forUS$1,495, theprice perkilogram would beUS$9.34. However,
ifthesame information wasrounded offtothenearest thousand, theimport value would beUS$1,000
for0.2thousand kg.Theaverage price calculated onthebasis ofthelatter datawould beUS$1/0.2
=US$5. There wasaconsiderable difference between US$9.34 andUS$5, butbothfigures were
derived fromthesame information. Thiswasthecause oftheerror made bytheUnited States inits
tableidentifying 118cases ofimposition ofduties above the35percentadvalorem bound rate.(see
para. 3.141).
94Importaciones deProductos delosCapitulos 51a64delaNomenclatura Arancelaria Armonizada (1995 y1996, en
Valor, Cantidades yPrecios porKilogramo )
95Importaciones deProductos delosCapitulos 51a64delaNomenclatura Arancelaria Armonizada (1995 y9Meses
de1996, enValor yCantidades, porPaisdeOrigen ).WT/DS56/R
Page37
3.140 TheUnited States replied thatArgentina ’scontention thattherounding ofcertain numbers
affectedtheconclusionstobedrawnfromthedocumentithadsubmittedlackedmerit.Firstly,Argentina
ignored thefactthattheJanuary toSeptember 1996 import datainthefirstlistwere notrounded to
thousands, butrather totensofdollars. Thiswasreflected bytheuseofthetwo-place decimal points
inthefifthandseventh columns ofthefirstlist.Moreover, eventhesecond listcontained adecimal
pointsotherounding indollars wasonlytohundreds. Moreover, totheextent rounding hadanyimpact
onthecalculations thattheUnited States performed onthebasisofthesetables, theeffect wasminimal.
Fifty-nine ofthe118categories identified bytheUnited States inthetablereferred toinpara. 3.141
involved imports worth overtenthousand dollars, ofwhich 17reflected imports amounting tohundreds
ofthousands andevenmillions ofdollars. Therounding inthese categories would beinsignificant.
(e) Evidence ofviolation onanaverage basis
3.141 TheUnited States emphasized that, inthisdispute, thePanel needed notrelysolely on
possibilities ofbinding breaches. Argentina ’sspecific duties notonlyhadthepotential toexceed the
bound rate,butinfactdid.Todemonstrate this,theUnited States hadidentified inatablegathering
Argentina 'stextiles andapparel imports fromtheUnited States subject toadvalorem rateshigher than
35percent118HScategories oftextiles andapparel inwhich Argentina ’sspecific duties, onaverage ,
were greater than35percentadvalorem .Thedatacontained inthattablerepresented (a)thevalue
ofArgentine imports from theUnited States forJanuary-September 1996; (b)theirvolume, (c)the
average price forthesame period (a/b); (d)theArgentine DIEM inUS$/kg; (e)thebreak-even price
inUS$/kg (seebelow) and;(f)theadvalorem equivalent dutyforimports forthesame period. The
listedspecificdutiesconstitutedmorethan35percentoftheaverageoftransactionpricesofmerchandise
imported ineachcategory. Thistable made plain that,attheleast, allmerchandise having alower
actual value thantheaverage weresubject toduties above 35percentadvalorem .Forexample, with
respect toHScategory 6110.30, theaverage transaction price wasUS$11.39 perkilogram while the
applicable specific dutywasUS$6.40 perkilogram. Thisresulted, onaverage, induties equivalent
to56percentadvalorem .Allgoods withavalue lessthantheaverage ofUS$11.39 perkilogram
were subject toduties greater than56percent. Inaddition, thecalculations of"break-even price"
signified thatallgoods incategory 6110.30 worth lessthanUS$18.29 perkilogram would besubject
toduties inexcess of35percentadvalorem .Thiscolumn wascalled the"break-even price" because
onlygoods withavalue greater thantheamount listed entered Argentina subject tospecific duties within
thebound rate.
3.142 TheUnited States alsoadjusted itscalculations contained inthese tableandchart totakeinto
account Resolution No.597/97, which provided 5stages ofmodifications ofspecific duties incertain
categories.96Theadjusted figures werereflected inatablewhere thenewspecific duties wereapplied
toimports fortheperiod January-September 1996. Applying theArgentine datasubmitted byArgentina
during theconsultations97tothenewduties, theUnited States hadfound thatArgentina stillwasin
excess of35percent, onaverage, withrespect to72line-items. TheUnited States hadattempted
toshow howthese figures broke-down interms ofproduct sectors. Achart covering specific sectors
reflected howhighArgentina ’sspecific duties were withrespect toavariety oftextile andapparel
groupings, ranging onaverage from 40.9percentto56.2percent.
3.143 TheUnited States contended thatthetable described inpara. 3.141 above notonlyshowed
thatArgentina ’sminimum specific import duties wereexcessive forproducts inthelisted categories,
butitalsorevealed howminimum specific import duties -nomatter howloworseemingly modest -
96Boletín Oficial delaRepública Argentina ,No.28.650 of20May 1997.
97Thedocument submitted byArgentina wasentitled Importaciones deProductos delosCapitulos 51a64dela
Nomenclatura Arancelaria Armonizada (1995 y1996, enValor, Cantidades yPrecios porKilogramo )andImportaciones
deProductos delosCapitulos 51a64delaNomenclatura Arancelaria Armonizada (1995 y9Meses de1996, enValor y
Cantidades, porPaisdeOrigen). Seefootnotes 94and95above.WT/DS56/R
Page38
would violate anadvalorem bound rateforatleastsome products inacategory. Forexample, under
HS5514.22, thespecific dutyforthiscategory wasUS$1.20 perkilogram. However, theaverage
ofactual transaction values forthecategory wasonlyUS$2.61 perkilogram, resulting inanaverage
advalorem equivalent of46percent. Thus, while aUS$1.20 specific dutymayseem reasonable on
itsface, inapplication itwould exceed thebound rateforsome products.
3.144 TheUnited States specified thatithadnodataonimport prices for1995. Thetableithad
presented inpara. 3.141 above, which reflected 118categories inwhich Argentina ’sspecific duties
exceed 35percentadvalorem ,wasbased onprice datasupplied byArgentina fortheperiod January
through September 1996. Information on1995figures wasexclusive within thecontrol oftheArgentine
authorities. TheUnited States hadhowever applied the1996 price datapreviously supplied by
Argentina98tothespecific duties thatwere ineffect under Decree No.2275/94 through September
1995. Theresults demonstrated thateventhelower duties inplaceformuch of1995stillwereexcessive
when compared against theArgentine pricedataforJanuary through September 1996, themostreliable
dataavailable. Accordingly, Argentina ’sspecific duties, onaverage, would haveexceeded 35percent
advalorem withrespect to76tariffline-items. Theaverages frequently werequitehigh,evenexceeding
100percentadvalorem .Asexcessive asweretheduties ascalculated above, thespecific duties imposed
byResolutions No.304/95 andNo.305/95 wereevenhigher. Thus, theUnited States hadidentified
farmore categories (118) which onaverage exceeded 35percentadvalorem .
3.145 Referring toanevidence provided bytheUnited States withrespect toimports under tariff
heading HS6303.19, Argentina noted thattheUnited States alleged thattheadvalorem equivalent
ofthespecific dutyapplicable was480percent. Ifcertain datawereexamined closely, however, it
could beseenthatthisinformation wasincorrect. Therepresentative price datausedtocalculate the
minimum specific import duties in1994 corresponded tovalues for1992-1993 andshowed aprice
ofUS$48.60 perkgfortariff heading HS6303.19. Thecorresponding representative price forthe
same tariff heading for1996amounted toUS$16 perkg.Making acomparison, bywayofexample,
itcould beseenthattheadvalorem equivalent oftheminimum specific import duties applicable to
thistariffheading (6303.19) remained below 35percent,despite thesharp fluctuation inprices. During
1996, imports intoArgentina ofgoods under tariff heading 6303.19 hadamounted to256kg.fora
value ofUS$342. Thiscorresponded tofivesamples andtheaverage price ofUS$1.33 wassolely
duetothecostoffreight andinsurance. Samples withnocommercial value werenotsubject topayment
ofimport duties inArgentina. Moreover, itwaswellknown thatthere wasnotextile product with
acommercial value ofUS$1.33 perkg.Thispricedidnotevencome closetothevalue ofinternational
prices fortherawmaterials.
3.146 Argentina contended thatif,forthesolepurpose ofanacademic mathematical exercise, one
usedanother price basis forcomparison withtheminimum specific import dutyratesthatappeared
inthemethodology fortheestablishment oftheDIEM criticized bytheUnited States, theresult could
betotally different. Forexample, taking export prices fortextiles andapparel fromtheUnited States
toArgentina,manytariffheadingswhoseadvaloremequivalentexceeded35percentintheUSexamples
would benowbelow thisfigure.
3.147 Argentina wasoftheviewthatitwasimpossible toignore thedifferences between thetheoretical
prices ofthegoods onentering Argentina andtheprices declared forthesameheadings bytheexporters
intheUnited States. Forexample, ifonetookthefirstfour-digit heading (5208) intheUnited States
tabledescribed inpara. 3.141 above andcompared itwiththefigures declared atexportation forthat
heading during thesameperiod, according totheUnited States, theadvalorem equivalent ofthespecific
duties forthefirstsixlinesofthetablewould range from45percentto97percentwithanaverage
price ofUS$7.67 c.i.f. -PortofBuenos Aires -andanaverage "break-even price" ofUS$/kg12.71.
98Ibid.TheUnited States noted thatvolume datawasnotprovided for1995 which made thecalculation ofaverage duties
paidforthatperiod impossible.WT/DS56/R
Page39
Ifonetookthedeclarations made bytheexporters intheUnited States forthesame headings andthe
same period, onesawthattheaverage export price forArgentina wasUS$12.97 f.a.s., i.e.,
approximately US$15 c.i.f. Buenos Aires. Thiswaswithout taking intoaccount theabove-mentioned
considerations concerning theeffect ofrounding offtothenearest thousand, together withtheweight
ofthepackaging, thenon-payment ofdutyonsamples, etc.Theconclusions wereobvious withrespect
toboththevalidity oftheabove mentioned evidence submitted bytheUnited States andthereason
whynoimporter hadbeenprepared tochallenge atransaction. Indeed, ithadtobeborne inmind
thatunderinvoicing mayconstitute anoffence.
3.148 Argentina argued that,astheothertables submitted bytheUnited States showing infringements
ofthe35percentceiling onaHSlinebasis hadbeenproduced inthesame way,there wasreally no
wayofknowing theactual grounds onwhich theUnited States wasclaiming forarightwhich itdid
notknow tohavebeeninfringed. Inparticular, thecharts prepared bytheUnited States onthebasis
ofthetablesubmitted byArgentina useddatawhich presupposed ortookitasanaccepted factthat
theprices andvalues corresponded toactual import transactions. These weresuppositions, notfact,
since thedataderived from thetwotables mentioned byArgentina inparas. 3.138-3.139 above and
hadalltheshortcomings anddefects previously noted.
3.149 Themostimportant thing wasthatthepricebasishadtobederived fromdataother thanthose
declared bythealleged importers oftextiles andapparel inArgentina. Certainty could onlybefound
inimport transactions thatactually tookplace. Theonlywayofknowing whether these import
transactionsexistedandwereeffectivelysubjecttopaymentofminimumspecificimportdutiesexceeding
35percentwastousethefullcustoms documentation corresponding tothetransactions, including
thereceipt forpayment oftheimport duties andtaxes.
(f) Theuseofnetv.gross weight
3.150 Argentina contended thattheadvalorem equivalents ofparticular specific duties could be
calculated theoretically bytaking theaverage prices ofimports. Nevertheless, itcould notbeclaimed
thatthese theoretical calculations constituted ademonstration orproved therealexistence ofimport
transactions actually corresponding tothetheoretical analysis. Oneofthereasons forthiswasthatthe
import figures inkilograms included samples withnocommercial value (which didnotpayimport
duties) andtheweight oftheouter packaging. Thispackaging wasoften heavy enough toaffect the
weight actually usedforassessing minimum specific import duties.
3.151 Moreover, Argentina stressed thatthese specific import duties were calculated onthebasis
ofthegross weight ofthegoods, i.e.without taking intoaccount thepackaging ofeachshipment or
thewooden supports fortherollsofcloth, thecrates, etc.Thus, theimport statistics expressed the
weight inkilograms corresponding tothetransport documents which theimporter presented when
registering theimportation andnottheweight onwhich thecalculation ofthespecific dutywasbased.
Inaccordance withtheabove, theprices indicated intheUStableidentifying 118cases ofimposition
ofduties above the35percentadvalorem bound rateshould notbeusedevenformaking theoretical
calculations oftheadvalorem equivalents ofthespecific duties. Inasmuch astheUnited States had
useddatawhich were notcompiled toform thebasis forananalysis oftheadvalorem equivalents
ofspecific duties, theabove-mentioned tablerepresented aresult which could notbeconsidered useful
fordrawing conclusions ofanykind.
3.152 TheUnited States considered that,byarguing thatitsowndatareflected "gross" weight instead
of"net" weight, Argentina sought toreduce thekilograms reflected inthetables submitted bythe
United States. These kilograms were thendivided intothevalue (which Argentina didnotseekto
change) toachieve ahigher average price. Thehigher theaverage price, themore likely itwould
bethattheequivalent advalorem figures would bebelow 35percent. FortheUnited States, there
werecompelling reasons tobelieve thattheArgentine datadiscussed insub-section B.5.(d) above alreadyWT/DS56/R
Page40
reflected "net", not"gross" weight. Thedocument said"importaciones deproducts decapitulos 51
a64"andtheir"valor, cantidades andprecios porkilogramo" .Thusthetitlemade itclearthatthese
weretheweights ofproducts intheseHSitems. Further, ahandwritten portion said"posiciones sujetas
aderechos especificos 1996: enero -septiembre yvalor anualizado ".AsArgentina asserted thatits
derechos specificos werecalculated onthebasisofnetweight, whywould Argentina make anyreference
topositions "sujetas aderechos especificos "ifthedatacould notbeusedtocalculate suchspecific
duties? Argentina attempted toshow the"difference ofprices inArgentina andprices inexport market".
USexport datawasreported andcollected onanet,notgross, weight basis. Indeed, thetables submitted
byArgentina inrelation toUSandECexports reflected USexport databased onanetweight basis.
Ifthepurpose ofArgentina when preparing thisdocument were tocompare average import prices,
itshould havecompared itsimport prices tothose oftheUnited States, calculated using netweight
basis.
3.153 FortheUnited States, thedataArgentina triedtoimpeach werethedataitsupplied when the
United States hadasked forinformation toperform itscalculation ofequivalents advalorem .The
dataformed animportant partoftheconsultations between theparties. Argentina never asserted in
theconsultations, inthefirstmeeting withtheparties, orinitsanswers tothePanel’sortheUnited
States 'questions thatthisdataincluded "gross" weight. Suchposthocanalysis, without anyevidence
other thanArgentina ’sbaldassertion, could notbeavalidbasisforArgentina toreject itsownstatistics
which demonstrated itsrepeated andclear violation ofArticle II.
3.154 TheUnited States further stressed that,evenassuming arguendo thatArgentina wascorrect,
andthatthestatistics referred toinsub-section B.5.(d) above didreflect thegross weight figures, the
substitution of"net" figures didnotchange theresults significantly. According toaleading USexpert
onthesubject, useofgross weight would result inadistortion intherange of2to5percentfortextiles
and10-12 percentforapparel items. Inmoreextreme cases ofhigh-priced apparel items, thepackaging
could addasmuch as33percenttotheweight. Toshow thenegligible impact, theUnited States
hadadjusted thetableithadpresented inpara. 3.141 above toreduce theweight ofmerchandise in
thesubject categories by5percentfortextiles and12percentforapparel. Thisadjustment was
illustrated inarevised tablewhich reflected thattherewerestill99line-items where thespecific duties,
onaverage, exceeded 35percentadvalorem .
3.155 Moreover, theUnited States recalled thatithadsubmitted atableonimports fromtheEuropean
Communities forcertain tariff headings ontextiles which reflected calculations ofthe"equivalents ad
valorem "andreflected theminimum specific import duty. Argentina hadasserted thatitcalculated
specific duties onthenetweight ofthegoods, i.e.,notcounting theweight oftheshipping packaging.
Thus, itsimply would make nosense forArgentina tocalculate theadvalorem equivalent dutyusing
thegross weight. Indeed, thepurpose ofthisdocument appeared tobetoshow theECthattherewere
"only" fourHScategories inwhich duties wereapplied onaverage inexcess of35percentadvalorem.
Such ademonstration could bemade onlyiftheweight reflected onthedocument wasthatusedto
calculate theapplication ofspecific duties.
3.156 TheUnited States further argued thatArgentina hadalsostated regarding theuseof"gross
weight" that"wedonothavenetweight data", "Argentina cannot doit[collect thedata]inanyother
way[than bygross weight]", and"wehavealways usedgross weight inpresenting ourimport and
export data". TheUnited States submitted the1983 issue oftheINDEC statistical yearbook, which
described howArgentina presented andcollected itsexport andimport datain1983. Thisdocument
wastheintroduction toamuch larger setsofArgentine import andexport datafor1983. Near the
bottom ofthesecond pageoftheabove mentioned document wasanotewhich stated "comprende las
cantidades netas declaradas paracadaarticulo porlosexportadores eimportadores, expresadas en
launidad demedida quecorresponda" .Thisdocument made itclearthatatleastin1983, theArgentine
authorities didcollect onlynetdatatoreport theirimports andexports. Argentina hadtocome forward
withdocuments toshow thatitdidnotcollect datathisway.WT/DS56/R
Page41
3.157 TheUnited States recalled thatArgentina alsohadstated that"Peso bruto could befound in
alltheindividual customs forms [...]submitted bytheUnited States". Thiswasincorrect. Infact,
theonlypeso(weight) which wasfound inallspecific shipment documents waspesoneto(netweight).
Argentina gavesome examples where itclaimed thatgross weight wasreflected andwhere itshowed
thatgross weight differed substantially from netweight. However, Argentina ignored thefactthat
ithadonlycounted onepagereflecting oneportion ofmulti-HS shipments. Forexample, Argentina
citedpage2ofthedocument. However, itignored pages 3and4where there wasnogross weight
reflected, butinstead there wasareference atthetopofthepageto"item 1".Thisitem1referred
backtothefirstpageofthegroup ofdocuments where thetotalgross weight forthetotalshipment
wasreflected. Thegrouping ofthree documents wasshown intheUSdocument summarizing the
maindatamentioned inthecustoms documents atissue. Thesamesituation existed forother examples
mentioned byArgentina. These examples showed thatgross weight wasnotcomputed orreflected
inallArgentine customs documents. Only netweight wasreflected inalldocuments.
3.158 TheUnited States added thattextile, apparel, andfootwear products were shipped inlarge
crates orcontainers. Inmost instances, products ofdifferent HScategories were shipped together.
Inorder todetermine thegross weight, thecrate orcontainer wasweighed onceonly. Itwasthe
weight ofthegoods coming outofthecrate thathadtobeweighed todetermine thespecific duties.
Thiswasnetweight. ThedataArgentina hadcollected andtabulated initsHSannual statistics, was
thatwhich itcollected, i.e.,onanetbasis. There wassimply noevidence thatgross datawascollected
onan8digitlinebasis, onlynetdatawas. Indeed, itwould beimpossible tocollect gross weight on
an8digitlinebasis using theimport documents atissue.
3.159 Insum, fortheUnited States, theArgentine datarepresented netweight, notgross weight.
Assuch, thisdatawasareliable datasource tocreate thedocuments demonstrating violations ofthe
35percentadvalorem ratereferred toinparas. 83etseq.above.
3.160 Regarding United States statements onthestatistical dataconcerning imports ofproducts of
HSChapters 51to64invalue, quantities andprices perkilograms andbycountry oforigin, inparticular
onthevolume/quantityofimportsandtheir"net"or"gross"value,Argentinaarguedthattheconclusions
drawn bytheUnited States regarding thealleged advalorem equivalents didnotcorrespond tothe
actual import transactions towhich theysupposedly relate. Inorder toascertain thetruesituation,
adistinction hastobedrawn between gross andnetweights and,ifthiswasdone, theresult ofcalculating
theadvalorem equivalent would most likely bedifferent from thatsubmitted bytheUnited States.
Thisstatement wasconfirmed bytheinformation given inthealleged customs documents submitted
bytheUnited States. Some ofthesedocuments showed thedifferences between gross andnetweights.
These differences could notbeexplained solely, astheUnited States haddone, bystating thattheimports
inquestionformedpartofshipmentsthatcontainedotherimports.TheinformationsuppliedbyArgentina
andsubmitted bytheUnited States regarding imports ofproducts ofHSChapters 51to64invalue,
quantities andprices perkilograms andbycountry oforigin hadbeenprepared onthebasis ofdata
directly compiled bytheDepartment ofForeign Trade onthebasis oftariff headings, andthevalues
corresponding toquantities weregross kilograms. Thisinformation could notbecompared withthe
foreign trade statistics published eachyearbyINDEC initsstatistical yearbooks. Moreover, itwas
particularly significant thatcriticism wasdirected atArgentina bysubmitting acopy ofthe1983
Yearbook. Notonlyhad15years gonebysincethen,butArgentina 'stariffnomenclature hadchanged,
thedatacollection system wasnotthesameand,since1991, Argentine Customs (52offices throughout
Argentina) hadbegun computerizing itsoperations, aprocess which affected andmodified thecollection
ofdata.WT/DS56/R
Page42
(g) Evidence based onimports from theECandtherestoftheworld
3.161 TheUnited States considered that,regardless ofanyproblems Argentina mayhavewithits
owndata,which formed animportant partoftheconsultations preceding theformation ofthisPanel,
Argentina hadseparately confirmed thatitsspecific duties, onaverage, exceeded 35percentadvalorem
inanumber ofcategories. InatableonArgentina 'stextile andapparel imports fromtheECandthe
restoftheworld ofselected categories oftextiles andapparel subject toadvalorem rateshigher than
35percent(January-July 1996), theUnited States hadlisted specific duties forselected categories
oftextile andapparel items fromtheEuropean Communities thatArgentina hadacknowledged were
greater thanitsbound rate. Thedocument consisted offourpages andcovered fourdifferent types
ofinformation: ECimports toArgentina in1995; ECimports inthefirstseven months of1996; all
other imports during 1995; andallother imports during thefirstseven months of1996. Thedocument
identified foreachline-item thetotalkilograms oftextiles imported, theirtotalvalue, theaverage c.i.f.
value, thespecific duties charged, andtheadvalorem equivalent .Thistablealsoshowed categories
thatArgentina haddetermined tobeinexcess of35percentadvalorem ,onaverage, withrespect
totextiles andapparel fromsources other thanEurope. These numbers werenotonlybased ondata
supplied byArgentina, butArgentina hadactually performed thecalculation ofadvalorem equivalency.
3.162 Argentina contended thatthistablewasbased onstatistical information whose origin remained
obscure.99Methodologically, thevolume andvalue figures could notbeusedforcalculating anaverage
price forcomparing withtheArgentine minimum specific import dutyandobtaining anadvalorem
equivalent. Theminimum specific import dutyapplicable toheading 57.04.90 wasinfactUS$1.70
during 1996. Itwasapplied totheweight oftheimported goods, excluding outer packaging and
supports.
3.163 TheUnitedStatesrepliedthattheinformationcontainedinitsdocumentwasparticularlyreliable,
since ithadbeencreated byArgentine officials whousedArgentine customs datatocalculate thead
valorem equivalency of35line-items oftextiles. Argentina hadgiven thisdocument totheEC,and
theEChadprovided ittotheUnited States. Argentina ’scalculations showed that4ofthe35line-items
ofECimports during 1995 and1996 exceeded 35percentadvalorem. Fortherestoftheworld,
22ofthe35textile andclothing categories exceeded thebound rateonaverage in1996 and26of35
for1995. Many oftheaverage percentages fortherestoftheworld for1995and1996werewell-over
50percentadvalorem .Since theprices ofproducts within eachofthe35HStariff headings varied,
some imports were above andsome were below theaverage prices. Given thelarge number ofHS
categories withanaverage greater than50percent,therenecessarily weremany individual transactions
well-above 35percentadvalorem .
3.164 Intheopinion oftheUnited States, Argentina hadmade norealattempt toattack thevalidity
oftheequivalent advalorem calculations itsofficials hadperformed fortheEuropean Communities.
Attheconsultation between theECandArgentina, theECpresented anddiscussed thisdocument
extensively. TheECstated attheconsultations thatArgentine customs officials hadpresented the
document tothem inBuenos Aires inthelatefallof1996. Argentine officials atthe12June1997
consultation didnotdispute thisfact. TheECgavetheUnited States acopyofthedocument atthe
consultation towhich theUnited States wasajoined party. Thedocument wasinSpanish, itreferred
totheDIEM, anditcontained import datathatonlytheArgentine Government could generate.
Accordingly, therecould benodoubt thatthiswasadocument produced bytheArgentine Government.
Itwassimply notsufficient forArgentina toclaim thattheorigins ofthedocument were obscure.
Significantly, Argentina didnotclaim thatthestatistics anddataofthesame nature regarding imports
ofcertain textile products from theEuropean Communities, which theUnited States hadsubmitted
separately tothePanel, were inaccurate.
99Seepara. 3.166, below.WT/DS56/R
Page43
3.165 Argentina stated thatwithrespect totheadvalorem equivalents mentioned intheabove-
mentioned tableand,inparticular, regarding theadvalorem equivalent of49.2(imports fromtheEC)
or45.7percent(imports fromtherestoftheworld) mentioned forheading 5704.90 (carpets), itshould
bepointed outthat,onthebasis oftheaverage prices ofimports from theUnited States in1996 for
heading 5704.90, theminimum specific import dutycollected ($1.66) represented anadvalorem
equivalent of35percent.
3.166 Argentina added that,generally, thedocuments submitted bytheUnited States weretheresult
ofacompilation ofstatistical information supplied byArgentina, butforpurposes other thanthose
putforward atthetimeitwasrequested. Thestatistics supplied byArgentina inthecourse ofits
consultationswiththeUnitedStateshadbeensuppliedforotherpurposes,andtheiruseinthecalculations
made bytheUnited States hadledtoanumber ofproblems andinaccuracies intheresults obtained.
Inthisrespect, thetablesubmitted bytheUnited Satesregarding Argentina 'stextiles andapparel imports
from theECandtherestoftheworld ofselected categories subject toadvalorem rateshigher than
35percentforJanuary-July 1996 hadnotbeensupplied byArgentina either totheUnited States or
totheEuropean Communities. Thedocumentation inquestion wasnotprovided byArgentina during
formal consultations withtheECintheframework oftheDSU. Ontheoccasion onwhich theUnited
States sawthementioned document (thatis,inassociation withtheArticle XXII consultations with
theEC), Argentina made itclearthatthepaper didnotcome from Argentina andwasnotsubject to
discussion.
3.167 Theminimum specific import duties onimports oftextiles andapparel didnotexceed 35per
centadvalorem because therates hadbeenestablished onthebasis ofcalculations made prior to
application ofthose specific duties. Thecalculations made bytheUnited States inorder toshow that
the35percentadvalorem equivalent hadbeenexceeded were notcorrect because theywerebased
onstatistics thatwere inappropriate. Acomparison ofaverage prices based onstatistics ofimport
volume andvalue andtheminimum specific import duties gaveatheoretical advalorem equivalent.
Thiswasnottheimport dutyactually paidbyimporters ineachcase.
3.168 NotingArgentina'sstatementthatthe"bestandcloseststatisticstorealityavailableinthisdispute
came fromtheUnited States export data", theUnited States mentioned thatithadrefrained fromusing
itsexport databecause itwanted tofocus onArgentina-produced datatoavoid anyassertions of
inaccuracy ofdata. Ithadsome doubts about theaccuracy andcompleteness ofitsexport data.
Nevertheless, given thefactthatArgentina hadmade thestatements above, theUnited States felt
compelled toprovide thePanel withtheUSexport dataevidence available. TheUnited States produced
adocumentwhichlisted104entireHScategorieswheretheaverageadvaloremequivalentpriceexceeded
35percent. Theprices andquantities therein reflected prices andquantities reported fromUSexport
data. Thiswasanother example thatdemonstrates thatnomatter howthePanel examined thedata,
nomatter whatthesource ofthedatawas,itshowed thatArgentina ’sspecific duties violated its35per
centadvalorem bindings.
(h) Examples ofindividual transactions
3.169 TheUnited States stated thatparticular shipments alsoreflected payments inexcess of35per
centadvalorem .Itconsequently submitted, during thefirstsubstantive meeting ofthePanel, copies
oftwocommercial invoices aswellaspartofthecustoms documentation pertaining totwoimport
transactions, together withasummary table oftheinformation contained inthose documents. The
documents referred toshipments of9May1996 and4April 1996. Theexample ofashipment on
9May1996 ofUScarpets (style 1)inHScategory 5703.20 included ac.i.f. value ofUS$56,271.90.
Argentine customs documents indicated thatspecific duties ofUS$20,531, ora36percentadvalorem
equivalent, hadbeenimposed andpaid. Theother documentation showed imports on4April 1996
ofthreetypes ofUScarpets (styles 2,3and4)inHScategory 5703.30. These invoices andArgentineWT/DS56/R
Page44
customs documents reflected thattheimposition ofspecific duties hadresulted inthepayment ofduties
ofrespectively 40;60and67percentadvalorem .
3.170 Argentina haddoubts concerning thevalidity andreliability oftheinvoices forthealleged
import transactions regarding shipments dated 9May1996(onecategory ofproduct under HS5703.20)
and4April 1996 (three categories ofproducts under HS5703.30) submitted bytheUnited States.
Itcould beseenfrom these twocommercial invoices, especially thesecond one,thatnotonlywas
therenomentionoftheimporter'sname,taxidentificationnumber(CUIT),etc.,butalsothatcorrections
andadditions hadbeenmade byhandthatwereincomprehensible. Thesecond ofthealleged invoices
submitted contained prices perunitofUS$1.97, 2.61and3.77persquare metre forstyles 2,3and
4respectively. Theinformation onUnited States textile exports in1996provided byArgentina indicated
anaverage export price toArgentina ofUS$5.91 persquare metre forthesame tariff heading, a
difference which highlighted thefactthatiftheinvoiced price hadbeencloser totheaverage levels,
onceadjusted toc.i.f. itwould innoneofthecases haveexceeded 35percent. Thus, thenextitem
oftheinvoice, which represented double thevolume ofthethreeprevious items together, withaprice
perunitofUS$6.92 wasnotclaimed toexceed the35percentlimit. Itwasdifficult tounderstand
whytheimportershadnothadrecoursetothechallengeprocedureunderthosecircumstances.Moreover,
theinvoices showed thatsamples valued atUS$2,340 entered dutyfreewhen themaximum amount
thatmaylegally beimported intoArgentine customs territory under thisheading wasUS$100. This
raised further doubts regarding thevalue ofthisdocument asevidence. Inaddition, ifthevalue of
thesamples wasadded totheimport total, theadvalorem equivalent didnotexceed 35percent.
Regarding theother transaction (styles 2,3and4),taking theUnited States export prices, itcould
beseenthatinnocasedidtheyexceed 35percent. Taking theprices allegedly declared bytheimporter
onthisinvoice, however, thetotalwasdifferent. Consequently, itwasnotclear whytheimporter
didnotutilize thechallenge procedure tocontest thedifference.
3.171 TheUnited States alsoprovided thePanel withcopies ofsixArgentine customs documents
relating toduties charged during 1996, identifying examples where specific duties inexcess of35per
centadvalorem hadbeenimposed andpaidbyimporters. Examples 1-5hadbeenderived from 2
shipments ofdifferent types offootwear produced byaUSmanufacturer inIndonesia. Example 6
involves woven cotton fabric produced intheUnited States.
- Example 1consisted ofanArgentine customs form indicating atotal c.i.f. value of
US$15,722.53 andatotalspecific dutyofUS$10,560.00. Thisdemonstrated thatthespecific
duties constituted anadvalorem equivalent of67percent.
- Example 2consisted ofanArgentine customs form indicating atotal c.i.f. value of
US$23,046.20 andatotalspecific dutyofUS$14,476.00. Thisdemonstrated thatthespecific
duties constituted anadvalorem equivalent of63percent.
- Example 3consisted ofanArgentine customs formindicating atotalc.i.f.value ofUS$7,444.33
andatotalspecific dutyofUS$4,809.60. Thisdemonstrated thatthespecific duties constituted
anadvalorem equivalent of65percent.
- Example 4consisted ofanArgentine customs form indicating atotal c.i.f. value of
US$94,846.13 andatotalspecific dutyofUS$56,909.70. Thisdemonstrated thatthespecific
duties constituted anadvalorem equivalent of60percent.
- Example 5consisted ofanArgentine customs form indicating atotal c.i.f. value of
US$30,690.17 andatotalspecific dutyofUS$19,576.20. Thisdemonstrated thatthespecific
duties constituted anadvalorem equivalent of64percent.WT/DS56/R
Page45
- Example 6consisted ofanArgentine customs form indicating atotal c.i.f. value of
US$19,384.01 andatotalspecific dutyofUS$7,087.61. Thisdemonstrated thatthespecific
duties constituted anadvalorem equivalent of37percent.
3.172 According totheUnited States, thecalculation ofthese percentages waseasily accomplished
byexamining thelower portion ofeachofthesixArgentine customs forms presented, anddividing
thespecific duties (derecho especifico )bythetotalc.i.f. value (Valor enAduana enDivisa ).
3.173 Withrespect totheabove-mentioned copies ofinvoices submitted bytheUnited States involving
footwear import transactions ,Argentina considers them irrelevant since itwasnotappropriate for
thePanel toruleonameasure which hadbeenrevoked prior totheadoption ofitsterms ofreference.
Inanycase,itcould easily bedetermined thatallthesecases corresponded toimport operations carried
outbyalarge USmanufacturer ofathletic shoes.100According totheinformation available, these
operations presumably form partofthevarious actions which thatcompany hadbrought against the
Argentine State. Secondly, thespecific operations submitted related toimports offootwear originating
inIndonesia andnottotextile imports from theUnited States.
3.174 Finally, Argentina could notgiveanopinion regarding thecopyofinvoice submitted bythe
United States (Example 6above) which wassaidtocorrespond totheimportation ofatextile product
(woven cotton fabric) produced intheUnited States andaccording towhich theduties collected were
2percentinexcess ofthebound rate. Argentina didnothavethename oftheimporter orthenumber
oftheoperation, thetariff heading wasillegible and,atthesame time, there wasnostamp or
confirmation thatthiswasadocument thathadbeenprocessed bythecustoms authorities.
3.175 Inaddition totheabove-mentioned examples, theUnited States presented aspecific example
fromOctober 1995(acopyofadespacho deimportación )regarding ashipment ofUScarpet onwhich
specific duties ofUS$1,775.00 onac.i.f. value ofUS$2,811.58 hadbeenassessed. Application of
specific duties inthisinstance resulted inadutyequivalent to63percentadvalorem .Iffurther particular
examples ofhowArgentina ’sspecific duties exceeded 35percentadvalorem wereneeded, Argentina
hadprovided them bysubmitting copies ofthechallenges byimporters ofCompany X(involving
footwear) andCompany Y(involving textiles) against theimposition ofminimum specific duties greater
than35percentadvalorem .
3.176 Argentina replied thattheoperation ofOctober 1995referred tobytheUnited States involved
onlyanamount ofUS$3,000 andtheunittransaction value wasUS$1.90 although, in1995, theyear
ofthetransaction, theaverage price forexports fromtheUnited States toArgentina inthesame tariff
heading gaveaf.a.s. unitvalue ofUS$2.79. Ifthistransaction hadbeencarried outattheaverage
value indicated, withtheadjustment needed toberegarded asc.i.f.-Port ofBuenos Aires, theminimum
specific import dutyapplied (US$1.09) would haveresulted inanadvalorem equivalent oflessthan
35percent(average c.i.f. value equalled US$3.18; advalorem equivalent equalled 34percent).
Argentina alsonoted thatthedutyhadnotbeenchallenged, eventhough itwasprecisely forthesespecific
cases, i.e.theoperations withatransaction value much lower thantheaverage forthetariff heading,
thatthechallenge procedure wasavailable. Similarly, asthedocumentation provided bytheUnited
States recorded, theoperation wascarried outunder the"Green Channel" procedure, sothatthegoods
were notexamined bytheArgentine customs administration.
3.177 ForArgentina, itwashighly significant thattheUnited States could onlysubmit asingle
transaction among thethousands corresponding totheapproximately 580tariff headings towhich
minimumspecificimportdutieswereapplied.Moreover,thetransactionvaluerepresentedapproximately
60percentoftheaverage price ofArgentine imports fromtheUnited States inthistariff heading and
100Thiscompany ishereafter referred toas"Company X".WT/DS56/R
Page46
theimporter chose nottomake useoftheprocedure established byArgentine lawforcorrecting possible
excessive dutyassessments.
3.178 TheUnited States stressed thatthebestevidence oftheexcessive nature ofArgentina ’sspecific
duties were theArgentine customs forms identifying assessed duties. However, these were inthe
possession oftheArgentine Government. Forthisreason, theUnited States hadrequested Argentina
toproduce allrelevant customs forms involving imports inHSline-items 5407.81 (woven synthetic
fibrefabric),5703.20(carpets),and6110.30(manmadefibresweaters)fortheperiodJanuary-September
1996. TheUnited States hadchosen these three categories inpartbecause Argentine customs data
showed thattheaverage dutypaidforthese three groups ofimports from theUnited States was99,
43and56percent,respectively, during theperiod January-July 1996.101Argentina hadfailed toproduce
these documents.
3.179 TheUnited States alsopresented additional evidence before thesecond meeting ofthePanel.
Thisevidence consisted ofatableandcopies ofimport documents. Thecopies ofimport documents
reflected theunderlying Argentine customs documents thatweresummarized inthetable. Thepage
numbers onthecopies oftheimport documents related tothefirstcolumn inthetable. Likeother
Argentine customs documents presented bytheUnited States tothePanel, these documents showed
examples inwhich Argentina hadapplied duties inexcess ofits35percentadvalorem duties. The
tables reflected alargenumber ofspecific examples where Argentina hadapplied andenforced specific
dutiesthatviolatedArgentina’s35percentadvalorembindings.Oneoftheabove-mentioneddocuments
summarized themall:itreferenced atotalof11shipments ofhosiery andsocks during 1996and1997
within theapparel HScategories covered bytheArgentine measures atissueinthisdispute. Because
many ofthese shipments included products indifferent HScategories, these 11shipments involved
atotalof20instances ofproducts inwhich Argentina hadapplied duties inexcess of35percentad
valorem. Thesame tables alsosummarized examples regarding footwear shipped during 1996. As
withmostoftheapparel examples, there weremore thanoneproduct category ineachshipment. In
58separate instances ofproducts within theseexamples, thespecific duties applied resulted inpayment
inexcess of35percentadvalorem duties. Thus, intotal, thetablereflected 78different instances
ofshipments inwhich specific duties hadbeenlevied andpaidinexcess of35percentequivalent ad
valorem.
3.180 Among thedatasubmitted bytheUnited States, Argentina considered theexample oftheimport
document inwhich theexport originated inUnited States customs territory .Apart from thegeneral
consideration thatitconcerned animport transaction forwhich customs clearance hadbeencarried
outmanually, thisparticular casesuffered from anumber offormal defects which could ultimately
invalidate thesubstantive arguments theywere intended tosupport. Firstly, itrepresented onlypart
ofalarger shipment forwhich thecustoms documentation hadnotbeensupplied. What thetotal
shipment consisted ofwasnotsaid, norwasthefullassessment ofimport duties andtheamount to
bepaidbytheimporter onthebasisofthatfullassessment mentioned. Inaddition, therewasnoreceipt
from theBanco delaNación which represented thelaststepinthecustoms clearance procedure for
imported goods. Secondly, thelegal basis indicated fordetermining theadvalorem dutyapplied to
thementioned goods waserroneous, since Decree No.2275/94 wasnotinforce inMarch 1996, when
thetransaction tookplace, asithadbeenreplaced byDecree No.998/95 on1January 1996. Thirdly,
thelegalbasisfordetermining thespecific dutyapplicable tothetariffheading declared bytheimporter
wasapparently Resolution No.1554/94, which infactdated backto1993 andinanyevent wasnot
inforce onthedayinMarch onwhich thesaidimport allegedly wentthrough clearance procedures
uponentry intoArgentina. Fourthly, thelegalbasisonwhich thethreepercentstatistical taxwaslevied
wasdefinitely erroneous, sinceResolution No.1031/94 wasnotinforce onthedayinMarch onwhich
theimport allegedly wentthrough Argentine customs clearance procedures. Indeed, atthattime, the
101TheUnited States specified thatthese three categories, onaverage, would remain inexcess of35percentadvalorem
even under Argentina ’slatest revision ofitsspecific duties ontextiles andapparel.WT/DS56/R
Page47
applicable statistical taxhadbeenbrought intoforcebyDecree No.389/95. Fifthly, thevalues declared
bythealleged importer ofthegoods inquestion wereUS$6.19 perdozen pairsintwocasesandUS$8.05
perdozen pairsinthethirdcase. These values wereconsiderably lower thantheaverage export prices
oflikegoods (ofthesame tariffheading) originating intheUnited States in1996. Howwasitpossible
forthealleged Argentine importer ofthegoods toaccept topayaspecific dutyofUS$12,578 forthis
import transaction asagainst theapplicable advalorem tariff ofUS$3,999 without having recourse
tothechallenge procedure? Finally, Argentina found itimpossible todelve further intoallofthese
matters asthealleged importer 'sregistration number andtaxidentification number (CUIT) aswell
astheimport registration number, andthename andregistration number ofthecustoms agent, had
beenrubbed out.Allofthese considerations casted serious doubt onthecredibility ofthisdocument.
3.181 Argentinabelievedthatitwasunacceptable,intheframeworkoftheWTO,tocontinueaddressing
trade issues onthebasis ofanonymity oftheactors involved anddisputes settled between States on
thebasisofanonymous challenges. Itwould havebeenextremely useful forArgentina tohaveaccess
totheelements which would havenotonlymade itpossible toverify, before thePanel, thecredibility
ofthedocumentation submitted, butwhich would alsobeenveryuseful totheCustoms Authorities
andtheGeneral-Directorate ofTaxes incombatting fraud, evasion andsmuggling which, toacertain
extent, underlaid thisdiscussion.
3.182 Argentina added that,ofalloftheevidence submitted bytheUnited States there wasnota
single onethatprovided evidence ofimport duties actually paidtotheArgentine Customs byimporters.
Onlyifsuchdocumentation hadbeenincluded inthepresentation would ithavebeenpossible toassert
thattariffs inexcess of35percentadvalorem were collected forgiven textile orclothing imports.
Argentina alsoprovided thefollowing documents:
- payment ofimport duties, Form OM2132 (electronic registration);
- form OM686B(manual registration) (Banco delaNación );
- fullsetwithasample ofanimport transaction processed through theso-called "manual
system" (asopposed totheMARIA computer system).
3.183 Argentina argued thatitcould beseenfrom these documents thattheevidence presented by
theUnited States didnotinclude allthesedifferent elements involved inthefullprocessing ofanimport
transaction byArgentine customs.
3.184 Argentina alsoraised thefactthatthegoods concerned intheevidence submitted bytheUnited
States wereofItalian origin inallcases butone.Second, allofthetransactions occurred in1997except
one.Third,theyinvolveddifferenttypesandvarietiesofthesameproduct,i.e.tightsundertariffheading
6115. Fourth, allofthetransactions were processed using the"manual system" while theoretically
alltransactions processed bytheBuenos Aires Customs should usetheMARIA computer system. The
essential difference wasthat,withthemanual system, theclearance formwasfilled incompletely by
thecustoms agent andthensubmitted toCustoms, whereas withthecomputer system, theagent has
direct access totheCustoms computer, butmayonlyfeedincertain data,therestoftheinformation
coming fromtheCustoms databank. Theclearance forms provided didnotsignify thattheduties were
actually paid. Thepayment voucher, which represented thelaststepinthecustoms clearance process,
hadnotbeenprovided either. Finally, atleasttwooftheshipments werepartial shipments; inother
words, onlypartofthecustoms documentation foracomplete shipment wasprovided.
3.185 TheUnited States argued thatArgentina appeared toclaim thatthespecific examples putforth
bytheUnited States thatdidnotreflect imports fromtheUnited States wereirrelevant. Thus, Argentina
appeared toconfuse twoseparate issues. Thefirstissue waswhether theUnited States hadinitiated
adispute settlement proceeding without anylegitimate trade interest. Even assuming suchadefenseWT/DS56/R
Page48
wasvalid, Argentina hadnotasserted it.Inanyevent, there wasnodoubt thattheUnited States had
substantialexportsoftextiles,apparelandfootweartoArgentina.Thesecondissuewasentirelyseparate,
i.e.,whether Argentina wasapplying specific duties totextile, apparel, andfootwear imports inexcess
of35percentequivalent advalorem .Thiswasanissue notdependent ontheorigin oftheimported
goods. Argentina hadadmitted thatitscustoms officials hadnodiscretion nottoapply theminimum
specific import duties, whatever theexporting country. Accordingly, evidence thatimports fromany
WTO Member hadbeensubject toduties inexcess ofa35percentequivalent advalorem rateinthe
relevant HScategories wasveryrelevant todemonstrate Argentina ’sviolation ofArticle IIGATT 1994.
3.186 FortheUnited States, Argentina repeatedly claimed thattheabove-mentioned import documents
werenotreliable orauthentic because theydidnotinclude anyproof ofpayment. However, Argentina
didnotcontest thatforeachofthe78examples submitted bytheUnited States (seepara. 3.179) there
wasareflection ofthecalculation ofspecific duties inexcess of35percentequivalent advalorem .
3.187 Withrespect toArgentina 'sargument regarding oneofthedocuments thatitquoted thewrong
legaltexts, theUnited States submitted thattheproducts inquestion weresocks fromtheUnited States
found under HS6115.92.00. Argentina wascorrect thatResolution No.2275/94 citedinthelower
lefthandcorner ofthedocument wasnolonger ineffect inMarch 1996. However, theresolution
ineffect atthetimetheproducts indocument 34wereimported -Resolution No.304/95 -hadexactly
thesame specific duty(US$7.6) asResolution No.2275/94 -anditwasthecorrect US$7.6 specific
dutywhich wasreflected intheimport document concerned. Argentina ’sarguments didnotshow
thatthedutyhadnotbeenpaidorthatthedocument wassomehow notauthentic. Rather, itshowed
thattheimporter could notkeeptrack withtheconstant changes intheArgentine resolutions.
3.188 Inresponse tothearguments oftheUnited States thatwhether ornotthelegalmeasures referred
tointhisalleged customs document werecorrect wasnotimportant; thattheminimum specific import
duties rateapplicable onthereported dateofimport (sometime inMarch 1996) wasthesame asthat
indicated; thatArgentina didnotcontest the"assessments ofspecific duties" andthusacknowledged
thattheyhadbeenpaid, Argentina reaffirmed thedoubts thatthisalleged customs document raised
astowhether itcould beaccepted asvalidandrecognized aspartofanimport transaction thatactually
tookplace.
3.189 Argentina alsoargued thattheUnited States statements concerning thedifficulty ofobtaining
thisalleged documentation from Argentine importers, indicating thattheydidnotprovide itbecause
theyfeared reprisals, wereextremely surprising. Onepossible reason forthedifficulty encountered
bytheUnited States incollecting evidence fromArgentine companies could beinferred fromthedata
onexport prices fromItalytotheUnited States forthesameproducts thathadallegedly beenimported
intoArgentina according tothedocumentation submitted bytheUnited States. Information onimports
intotheUnited States under heading HS6115showed thatarticles entering theUnited States ataprice
ofUS$51.52/kg were being imported intoArgentina atamuch lower price.
3.190 Argentina added thatthese alleged customs documents submitted bytheUnited States related
toanalleged import processing through theBuenos Aires Customs under theso-called "manual system".
Thismade itvirtually impossible tocarry outanyverification unless alltheelements needed toidentify
theimport andtheimporter wereavailable. Without thepossibility ofchecking, itwasnotpossible
todifferentiate between realandfictitious imports.
3.191 TheUnited States replied that,withrespect totheauthenticity ofthese customs documents
andinvoices, customs stamps andsignatures could befound onmany ofthedocuments. Many ofthese
stamps werefrom Argentine customs agents andwerefound atthebottom orthetopofsome forms
under Oficializado -Firma ySello Despachante deAduana. Argentina hadadmitted initsreplies to
questions oftheUnited States that"customs agents wereconsidered tobeauxiliary customs officials
forimport operations". Certainly, these official stamps ofcustoms agents constituted apresumptionWT/DS56/R
Page49
thatthedocuments were official unless Argentina could present evidence -notjustoralassertions -
thattheywere notauthentic orconstituted forgeries. Nosuchevidence hadbeenpresented.
3.192 TheUnited States added thatArgentina admitted thatitscustoms officials hadnodiscretion
nottoapply thespecific duties. "Applying" specific duties meant these customs officials hadtocharge
andinsist onpayment oftheduties before customs clearance. Given thislackofdiscretion, Argentina
could notpossibly claim thatthespecific duties reflected onthedocuments werenotpaid. There was
noother waythatthegoods could havecleared customs, atleastlegally. Argentina hadpresented
noevidence thatthere wasnopayment ofthese specific duties. Ithadpresented noevidence that
therewerehugesupplies ofgoods piling upincustoms warehouses where nopayment hadbeenmade.
3.193 Argentina replied thatinthepresent caseduties inexcess of35percentadvalorem hadnot
beenapplied. Furthermore, therehadbeennocases ofimports oftextile products andclothing where
theimporters hadchallenged theapplication ofspecific duties onthegrounds thattheyexceeded the
35percentadvalorem bound intheWTO. Under itslegislation thecommitment nottoexceed the
boundtarifflevelof35percentrankedabovethedomesticlawsandregulations.Moreover,theso-called
challenge procedure provided forinLawNo.22.415 (Customs Code) fullyguaranteed thatthebound
levelcould notbeexceeded. Theexistence ofthisremedy neutralized thepotential forexceeding the
binding which, according totheUnited States, wasinherent intheminimum specific import duty.
6. BURDEN OFPROOF
(a) Principles applicable totheburden ofproof
3.194 Argentina argued thatoneofthevarious precedents regarding burden ofproof wasthereport
onEEC-Measure onAnimal FeedProteins ,inwhich thepanel stated that:
"having heard noevidence thateither thepurchasing obligation, thesecurity deposit [...]
discriminated against imports of'likeproducts '[...]thePanel concluded thattheEECmeasures
were notinconsistent".102
3.195 Argentina added thatinthecaseUnited States -Measure Affecting Imports ofWoven Wool
Shirts andBlouses fromIndia,theAppellate Body hadspecifically elaborated thisconcept andgiven
itsinterpretation:
"Inaddressing thisissue, wefinditdifficult, indeed, toseehowanysystem ofjudicial settlement
could work ifitincorporated theproposition thatthemere assertion ofaclaim might amount
toproof. Itis,thus, hardly surprising thatvarious international tribunals, including the
International Court ofJustice, havegenerally andconsistently accepted andapplied therule
thattheparty whoasserts afact,whether theclaimant ortherespondent, isresponsible for
providing proof thereof. Also, itisagenerally accepted canon ofevidence incivillaw,common
lawand,infact,most jurisdictions, thattheburden ofproof restsupon theparty, whether
complaining ordefending, whoasserts theaffirmative ofaparticular claim ordefence".103
3.196 Argentina recalled thatthisinterpretation hadbeenexplicitly supported bytheUnited States
initsstatement totheDSBwhen thereport wasadopted. Onthatoccasion, theUnited States 'delegation
hadstated thatitsupported adoption ofthereport mentioning, inparticular, several ofthepoints
contained therein, inrespect ofwhich itasked thatitsstatement beplaced onrecord. TheUnited States
stated thefollowing regarding these points:
102Panel Report onEEC-Measures onAnimal FeedProteins ,Op.Cit.,para. 4.21, ascitedintheAppellate Body Report
onUnited States -Measure Affecting Imports ofWoven Wool Shirts andBlouses from India,Op.Cit., p.15.
103Ibid., p.14.WT/DS56/R
Page50
"The Appellate Body reaffirmed ageneral principle ofGATT andWTO jurisprudence that
aparty claiming aviolation ofaprovision oftheWTO Agreement must assert andprove
itsclaim'.Once theclaiming party hassatisfied thisobligation, theburden thenshifts tothe
responding party tobring forward evidence andargument todisprove theclaim".104
3.197 Argentina considered thatthequestion raised bytheUnited States before thisPanel wasa
theoretical one.TheUnited States hadfailed todemonstrate thatArgentina levied tariffs exceeding
themaximum bound rateof35percentadvalorem .Norhaditbeenabletopresent argument sufficient
toestablish apresumption, theprerequisite forshifting theburden ofproof totheother party in
accordance withthereport onUnited States -Measure Affecting Imports ofWoven Wool Shirts and
Blouses fromIndia.
3.198 TheUnited States replied that,insubmitting itsevidence, ithadmetitsburden ofproof as
articulated bytheAppellate Body inUnited States -Measures Affecting Imports ofWoven Wool Shirts
andBlouses fromIndia.TheAppellate Body hadindicated thatitwasuptotheparty asserting a
violation "topresent evidence andargument sufficient toestablish apresumption" thattheviolation
hasoccurred.105Once thatpresumption wasestablished, "theburden thenshifts totheother party,
whowillfailunless itadduces sufficient evidence torebut thepresumption".106TheAppellate Body
further noted that"precisely howmuch andprecisely whatkindofevidence willberequired toestablish
suchapresumption willnecessarily varyfrommeasure tomeasure, provision toprovision, andcase
tocase".107
3.199 TheUnited States contended that,byanystandard, theevidence submitted bytheUnited States
wassufficient toestablish apresumption ofaviolation ofArticle II.Infact,thePanel needed look
nofurther thanthefaceoftheArgentine resolutions anddecrees imposing thespecific duties thatwere
thesubject ofthisdispute. Forevery line-item inwhich Argentina applied specific duties, there was
a"break-even point" below which lower-priced merchandise entered Argentina inexcess of35per
centadvalorem. Thus, thespecific duties necessarily hadthepotential toexceed 35percentadvalorem .
Previous GATT jurisprudence hadmade clearthatthispotential, inandofitself, wasasufficient basis
forthePanel tofindthatArgentina hadviolated Article II.
3.200 TheUnited States alsoargued thatapanel could condemn Argentina ’smandatory minimum
specific import duties eveniftheywerenotyetbeing applied. Inthatcasethepanel would examine
theminimum specific import duties 'structure andthemanner inwhich itcould bepredicted tooperate.
Inthepresent casetheminimum specific import duties provisions wereinfactbeing applied butthey
could equally bejudged bythisPanel onthesame criteria. Thefactthatthetariff wasbeing applied
didnotmake itnecessary foracomplaining party toprovide elaborate proofs concerning itsapplication
inpractice. Examination ofthetariff’sstructure, thebasis onwhich itwascharged, andthemanner
inwhich itwould predictably operate, weresufficient tomeetthecomplaining party’sburden ofproof.
Bythese criteria, andwiththeapplication ofsimple arithmetic, thePanel could easily conclude that
theArgentine tariff mandated theimposition ofduties inexcess ofbound rates.
(b) Application inthepresent case
3.201 TheUnited States stressed thatthere weretwofactual issues before thePanel: first,whether
theUnitedStateshadestablishedapresumptionthattheapplicationofArgentina’sspecificdutiesviolated
Argentina ’sbound advalorem rateof35percent; andsecond, whether Argentina hadproduced sufficient
104Statement bytheUnited States attheDSB meeting of23May 1997, Op.Cit.
105Appellate Body Report onUnited States -Measure Affecting Imports ofWoven Wool Shirts andBlouses fromIndia,
Op.Cit., pp.12-17.
106Ibid., p.14.
107Ibid.WT/DS56/R
Page51
evidence torebut thepresumption. TheUnited States believed thatithadpresented sufficient evidence
toestablish apresumption ofaviolation ofArticle IIandthatArgentina hadnotproduced sufficient
evidence torebut it.
3.202 ArgentinaarguedthattheUnitedStateshadprovidednoorinsufficientproofsofitsaffirmations.
3.203 TheUnited States contended thatithaddemonstrated thatArgentina imposed specific duties
innumerous HSline-items fortextiles, apparel andfootwear inexcess ofits35percentadvalorem
bound rate.TheUSevidence consisted of:(1)invoices andcustoms forms forparticular textile, apparel
andfootwear shipments during 1995 and1996, (2)calculations performed byArgentina showing HS
line-items where average duties paidbyimporters in1995 andthefirst9months of1996 exceeded
35percentadvalorem ,and(3)computations based onArgentine import datareflecting 118textile
andapparel line-items which, onaverage, exceeded 35percentadvalorem .Thisinformation proved
thatArgentina ’sspecific duties were above itsbound rateinviolation ofArticle II.
3.204 FortheUnited States, given theweight oftheevidence presented tothePanel, theburden had
shifted toArgentina to"adduce sufficient evidence torebut thepresumption" thatArticle IIhadbeen
violated. Argentina hadnotprovided anysuchevidence, letalone evidence sufficiently credible to
rebut theproof submitted bytheUnited States. Instead, Argentina hadrelied onunsubstantiated,
categorical denials thatArgentine customs authorities hadapplied, orevencould haveapplied, specific
duties inexcess of35percentadvalorem .
3.205 Argentina replied thattheevidence supplied bytheUnited States weregenerally theoretical
ornotbased onproven facts. With respect totheassertion thattheminimum specific import duties
imposed were100to300percentofthevalue, suchanallegation wasnotacceptable without concrete
proof. Theallegations made bytheUnited States didnotpermit anassessment ofwhether there had
beenanynon-compliance, oritspossible extent. Theevidence submitted bytheUnited States concerning
textile andclothing imports consisting ofinvoices andcustoms documents didnotsuffice toestablish
a"presumption" withrespect totheallegations against Argentina. Indeed, thecomparison ofaverage
import pricestatistics withtheminimum specific import dutyinforcetoobtain anadvalorem equivalent
didnotsignify thatthetariffs inquestion were actually collected from importers inthecourse of
transactions thatwereactually carried out.These documents didnotcorrespond tothereality ofwhat
actually mayhavebeenpaidtotheCustoms. Other evidence wereoutofproportion withArgentina 's
imports oftextiles. Intherecourse byCompany Ytothechallenge procedure, thethree transactions
atissue represented avalue ofUS$42,698, when textile imports inArgentina totalled more than
US$1,500 million fortheperiod 1995/1996. Eachtransaction wasimportant andwassubject toWTO
regulations, buttheamount involved ledArgentina towonder whether theminimum requirements of
Article 3.7oftheDSU, which stipulated thatamember "shall exercise itsjudgement astowhether
action under these procedures would befruitful", hadbeenmet.
3.206 Argentina further recalled that,inresponse tothePanel'srequest toprovide concrete cases
ofviolation, theUnited States hadsubmitted asevidence certain transactions whose shortcomings were
sufficiently clear. Argentina noted thatallofthetextile transactions, withtheexception ofone,had
beencarried outbyECexporters. TheECwasnotacomplaining party inthiscase. Itwasinteresting
tonoteinthisconnection thattheevidence submitted bytheUnited States showing import transactions
involving goods ofItalian origin corresponded toatariffheading (HS6115, tights) thatwasnotincluded
among theexamples ofviolation ofArgentina 's35percenttariff binding mentioned bytheECitself
initsthirdparty submission. Allthetransactions corresponded togoods ofItalian origin andallhad
taken place in1997, withoneexception. TheUnited States could nothaveknown ofthesetransactions
when itrequested theestablishment ofthisPanel. Argentina 'sconclusion regarding theadditional
series ofinvoices submitted bytheUnited States before thesecond meeting ofthePanel wasthatthe
information ontextile exports fromandoriginating intheUnited States wasbothunclear andimprecise.
Thiswasthebestproof thattheUnited States wasfighting acaseinwhich itneeded toresort tosourcesWT/DS56/R
Page52
ofinformation outside itsownmarket totrytosubstantiate itsclaim thatArgentina hadviolated its
obligations. Argentina alsoquestioned theacceptability foraparty topresent evidence pertaining to
alleged transactions ofanother country afterthedeadline forrebuttals.
3.207 ForArgentina,theaboveobservationsclearlydemonstratedthelackofargumentforestablishing
apresumption inrespect oftheallegations contained inthecomplaint bytheUnited States. Without
thispresumption, Argentina could notbeasked tosubmit evidence offactswhich hadnotbeenshown
toexist. IftheUnited States wasunable tosubstantiate apresumption thatitscomplaint waslegitimate,
itcould notbeclaimed thattheburden oftheproof hadshifted tothepoint where evidence hadto
besubmitted torefute thepresumption. IftheUnited States wasunable toprovide clearandprecise
examples ofimport transactions inthetextiles andclothing area, itcould onlybeassumed thatthe
United States claim waspurely theoretical, since Argentina hadnotbeengiven reason tobelieve that
itscustoms authorities collected minimum specific import duties inexcess ofthe35percentWTO
binding.
3.208 TheUnited States argued thatthedocuments, dataandcalculations discussed withthePanel
identified numerous line-items where Argentina ’sspecific duties onaverage weregreater than35per
centadvalorem .These documents didnotreflect isolated instances inwhich Argentina hadexceeded
itsbound rate. Argentina didnotcontest theaccuracy ofthespecific dutyratesreflected onitsown
documents. Argentina didnotcontest thefigures onvalue, ton,orprice perkilogram contained in
thedocuments originally prepared byArgentina andprovided tothePanel bytheUnited States. With
respect tothespecific examples ofinvoices andcustoms documents submitted bytheUnited States,
Argentina didnotcontest thattheimporters actually paidthese charges orhadtofilebonds tocover
theamounts inexcess of35percentadvalorem duties. Argentine documents andArgentine data
conclusively demonstrated thatArgentina ’sposition wasincorrect.
3.209 TheUnited States contended that,inlightoftheimport dataprovided byArgentina totheUnited
States, production oftherelevant documents would haveresulted inmany other examples ofduties
inexcess of35percentadvalorem. ThePanel wasfaced withArgentina ’srefusal toproduce directly
relevant evidence initspossession asrequested bytheUnited States. Given thatArgentina didnot
produce these documents, thePanel wasfreetodrawanadverse inference thatthese documents would
reflect additional examples ofduties imposed andpaidinexcess ofa35percentadvalorem duty.
Argentina ’srecalcitrant behaviour should notbeusedagainst theUnited States inaneffort toassert
thatthelatter hadsomehow failed toadequately satisfy itsburden ofproof withthelimited documents
initspossession.108Infact,theUnited States hasfullymetitsburden ofproof. Ithaddemonstrated
thattheArgentine duties predictably andmandatorily resulted inimposition ofduties inexcess ofbound
levels inarange ofsituations. Inaddition, ithadprovided examples ofactual levying ofsuchduties.
3.210 Argentina contended thattheUnited States appeared tobetrying toobtain from Argentina
evidence substantiating thealleged infringement ofthebound tariff which ithadsofarbeenunable
toprovide. Itwassurprising thattheattempt tojustify theallegations hadbeenbased solely ontheoretical
speculation which didnotcorrespond totherealities oftrade andthatnoconcrete evidence hadbeen
provided ofimport operations inwhich duties inexcess of35percenthadbeenassessed. Theburden
ofproof should fallontheparty bringing thecomplaint before thePanel. Argentina alsoargued that,
withrespect toevidence relating toimports offootwear, suchdatawere notrelevant tothepresent
casesince theDIEM onfootwear nolonger existed anddidnotexist atthetimethePanel was
established.
108TheUnited States referred tothejudgement oftheInternational Court ofJustice of9April 1949, inTheCorfu Channel
case,ICJReports 1949, p.4,atp.32,inwhich, taking formal noteoftherefusal byaparty toproduce documents, the
Court stated thatit"cannot, however, draw from thisrefusal toproduce the[naval] orders [requested bytheCourt] any
conclusions differing from those towhich theactual events gave rise".WT/DS56/R
Page53
3.211 AccordingtotheUnitedStates,ArgentinadidnotrespondtoUnitedStatesargumentsconcerning
thedocument regarding imports intoArgentina fromtheECandtherestoftheworld which theUnited
StateshadproducedbeforethePanel.ThePanelwasleftwithArgentina’slast-minuteattempttodiscredit
itsowndocuments thatithadproduced andrelied onduring consultations withtheUSandtheEC.
Indeed, Argentina 's"rebuttal" consisted ofanassertion thatthedocument didnotexist. Thisdocument
formed animportant element ofconsultations between theEC,Argentina andtheUnited States.
Argentina should notbefreetorelyupon information thatitgenerated forpurposes ofconsultations
onlytodisavow itlaterinapanel proceeding.
3.212 TheUnited States noted thatArgentina alsoclaimed thatthespecific examples offootwear
products wereirrelevant. TheUnited States replied thatthemeasures imposing footwear specific duties
werepartofthePanel’sterms ofreference. Theevidence submitted bytheUnited States, inparticular
theinvoices andcustoms documents related tospecific import transactions submitted before thesecond
substantive meeting ofthePanel, established without anydoubt thatupuntilthetimethatArgentina
revoked thefootwear measures on14February 1997, Argentina applied specific duties inviolation
ofits35percentadvalorem bindings onthose products. Moreover, exactly thesame specific duty
system existed forfootwear products asfortextiles andapparel throughout 1996 tothistime. The
examples relating tofootwear wereaverygood illustration ofhowtheArgentine system functioned
inmany instances toimpose duties inexcess of35percentadvalorem rates.
7. DIRECT EFFECT OFTHE WTO AGREEMENT INTHE ARGENTINE LEGAL ORDER
AND ROLE OFTHE CHALLENGE PROCEDURE
3.213 TheUnited States noted thatArgentina hadattempted todefend itsspecific duties byarguing
thattheywerenotabove 35percentadvalorem andunder nocircumstances could theybeabove the
bound ratebecause theywereessentially capped at35percentadvalorem fortworeasons. Firstly,
Argentina maintained thattheWTO Agreement, including Argentina ’sbinding, haddirect application
inArgentine lawandwassupreme todomestic laws. Secondly, Argentina hadprocedures under Law
No.22.415 whereby importers hadtherighttochallenge anyduties assessed beyond thebound rate
which waspurportedly apartofArgentine law.
(a) Direct effect oftheWTO Agreement intheArgentine legal order
3.214 ArgentinastatedthatthestabilityandpredictabilityofconcessionsinitsScheduleweresupported
byArticle 75.22 oftheArgentine Constitution of1994. These commitments were atthetopofthe
legal hierarchy and,therefore, tookprecedence overdomestic legislation. Anyjudge inArgentina
hadthepower todeclare, attherequest ofaninterested party, theunconstitutionality ofanymeasure
adopted inbreach ofrulescontained inaninternational treaty, suchastheWTO Agreement. Thisfeature
oftheArgentine legalsystem wasabsolutely essential toitsfunctioning, which differed fundamentally
fromthatofcountries where international treaties wereinterpreted bydomestic legislation. Another
fundamental characteristic oftheArgentine legalsystem wasthatsubsequent domestic lawcould not
annul aninternational treaty, assuchlawwaslower inrank. Thisconstitutional provision provided
ahighdegree oflegalcertainty. Iftheprocedures envisaged inArticles 1053to1079 ofArgentina 's
Customs Code (essentially thechallenge procedure referred toinsub-section B.7.(b) below) werenot
satisfactorily resolved bytheauthority concerned, thesummary proceeding wasalways available before
domestic courts bywhich importers could obtain ajudicial decision obliging theArgentine Government
tocomply withinternational obligations deriving fromWTO Agreements, overandabove anydomestic
regulations, suchaslaws, decrees, ministerial resolutions, orothers.
3.215 Argentina noted thatUStraders hadreported thattheArgentine customs service regularly asked
forpayment ofthefullspecific dutyanddidnotinform them ofarighttopayonlythose duties that
"they consider correct", asitseemed tobepossible. Asked bytheUnited States whether itconsidered
ittheresponsibility ofimporters toknow thattheywerebeing asked topayamounts inexcess of35WT/DS56/R
Page54
percentadvalorem duties, Argentina replied thatthelegislation inforce intheArgentine Republic
wasassumed tobeknown toallinhabitants andwaspublic knowledge oncepublished intheOfficial
Journal (Boletín Oficial )oftheArgentine Republic (Title IoftheCivilCode oftheArgentine Republic).
ThiswasthecasewithLawNo.24.425, published on5January 1995, which approved theWTO
Agreement, including asannexes therespective textsofeachagreement, andArgentina 'sSchedule
LXIV, which contained thecommitment tomaintain atariff ceiling of35percentanddetails ofthe
corresponding tariff headings. Similarly, itwasnotconsidered necessary forthecustoms authorities
expressly toinform importers oftheprovisions ofLawNo.24.425 orofthepossibility ofresorting
totheoptions provided forintheCustoms Code (Law No.22.415). Importers themselves were
responsible forknowing theirrights intheevent oftheirbeing required topayaminimum specific
import dutyinexcess of35percentofthedeclared value ofthegoods. Thesame would apply if
theywererequired topayanadvalorem dutyinexcess ofthatlaiddown intheArgentine tariff. This
wasbecause theimporters knew thevalue ofthegoods theydeclared andcould make acomparison
either immediately orinadvance, before presenting theirsworn declaration andrequesting clearance
ofthegoods.
3.216 Withrespect towhether ithadanyregulations orpublished procedures instructing itscustoms
service torefrain from assessing specific duties thatwere greater thantheequivalent of35percent
advalorem ,Argentina stated thatLawNo.24.425, which approved theWTO Agreement andallits
annexes, including Argentina 'sSchedule LXIV, wasmandatory andbinding onallnational authorities,
including thecustoms authorities, which hadtoaccept andobserve thecommitments contained therein
intheirentirety. Argentina alsocontended, regarding potential regulations orpublished procedures
instructing Argentina 'scustoms service toapprise importers oftheapplicability ofthemaximum rate
of35percentadvalorem onimported products subject tospecific duties, thatimporters andthecustoms
service itself could relyonlongstanding publications suchasthePractical Guide forImporters and
Exporters ,theCustoms Tariff Directory andthepublications oftheCentro deDespachantes deAduana .
These publications keptimporters continuously uptodateandinformed ofthetariff levels inforce.
Similarly, importers could always count ontheexpert advice ofthecustoms agents. Under thelaw,
thelatter wereconsidered tobeauxiliary customs officers forimport operations andwerepersonally
responsible forinforming importers oftheprovisions ofthelegislation inforce, including theremedies
which Argentine lawprovided.
3.217 Argentina considered ittheresponsibility ofimporters toknow thatthesupremacy accorded
toWTOcommitmentsunderArgentinelawmandatedthatspecificdutiesontextiles,apparelandfootwear
hadtobenogreater thantheequivalent of35percentadvalorem ,evenifnoArgentine legalmeasure
specifically soprovided. Thequestion ofthesupremacy oftheprovisions ofaninternational treaty
approved byalawoftheArgentine Congress overdomestic lawwasspecifically dealtwithinArticle
75.22 oftheConstitution, asamended in1994. TheConstitution, likelawsandother administrative
enactments, wasconsidered tobepublic knowledge, fromthedayfollowing itspublication intheOfficial
Journal.
3.218 FortheUnited States ,thisargument appeared torestonalegalfiction. While Argentina ’s
tariffbindingmaybethe"supreme"lawintheArgentineconstitutionalframework,Argentinamaintained
aseries ofmandatory legal measures imposing duties inconsistent withitsbinding. Inoperation,
Argentina systematically undermined thesignificance ofitsWTO commitments byrequiring itscustoms
officials tocollect thefullspecific duties, evenincircumstances where anovercharge wasobvious
orgrossly excessive. IfthePanel were toaccept thedirect application oftreaty lawandsupremacy
oftheWTO Agreement asadefense, thenMembers withsuchlegalsystems ineffect would beimmune
from dispute settlement proceedings. Argentina ineffect wasasking thisPanel tobestow immunity
fromWTO review onanyMember which treated WTO Agreements asself-executing under theirlaw.
These Members always would beabletoargue thattheprovisions oftheWTO Agreements werepart
oftheirlawandthus,bydefinition, non-conforming domestic lawshadbeenrendered consistent with
anyrelevant WTO provisions. Suchanoutcome would undermine thevitality ofthedispute settlementWT/DS56/R
Page55
understanding. TheUnited States further considered thatArgentina ’sargument regarding direct effect
oftreaties hadnoinherent limitation totariffobligations. Argentina wasineffect arguing thatitcould
takeanyaction itwished inviolation ofanyWTO obligation, andthatArgentina could thenescape
anyfinding ofresponsibility under theDSU, because affected private parties could asktheArgentine
courts tonullify theArgentine Government ’sactions asinconsistent withtheWTO Agreement. For
theUnited States, theargument ofArgentina concerning themandatory nature ofitsconstitutional law
wasanargument which Argentina continued toassert based onalegalhierarchy which ignored the
actual operation ofmandatory laws. Itmaywellbethatthere wasaconstitutional ranking ofthe
Argentine laws. However, thefactremained thatArgentina hadadmitted thatitscustoms officials
hadnodiscretion nottoapply thedecrees mandating theuseoftheminimum specific import duties.
Infact,Argentine customs officials were required toviolate theArgentine constitutional law.
3.219 Argentina considered thatthecomments oftheUnited States concerning a"non-conforming
lawconsistent withtheagreement" didnotstand up,since thesupremacy ofthetreaties overtheother
lawsandregulations under theArgentine constitutional system wasdemonstrated bythecopyofthe
judicial order incase8.447/97 FILA (Argentina) S.A.etal.submitted bytheUnited States,109which
constituted factual evidence ofthefullandtotalincorporation oftheWTO Agreement intotheArgentine
legalsystem.
(b) Thechallenge procedure (recurso deimpugnación )
3.220 Argentina mentioned thatArgentina 'slegalsystem constituted asingle andinseparable whole
which included theprocedure forchallenging assessments: thechallenge procedure (recurso de
impugnación ).Inahypothetical import transaction where thespecific dutywould exceed 35percent
advalorem ,theimporter would havearemedy available which guaranteed thatbymeans ofasimple
submission theamount tobepaidwould belimited totheamount resulting fromtheWTO obligation.
Theprocedure wasautomatic, freeofcharge, required neither middlemen norlegaladvice ofanykind
andhadpredetermined time-limits. Thechallenge procedure waslaiddown inArgentina 'sCustoms
Code -LawNo.22.415 (Articles 1053 to1067). Itspurpose wastoprotect theimporter incaseof
discussions about classification, valuation orthelevelofimport duties applicable inaparticular instance.
TheArgentine Customs Code provided thatimporters mayexpress disagreement iftheyconsidered
thatthevaluation ofthegoods ortheimport duties levied hadbeeninappropriate. Itallowed importers
torequest therelease ofthegoods intothemarket afterpaying onlythesumthattheyconsidered
appropriate under therelevant laws. TheNational Customs Administration mayrequire theimporter
todeposit asecurity tocover thedifference between theamount actually paidandtheamount claimed.
When importers hadrecourse tothisprocedure, theyhad10daysinwhich tosubmit thenecessary
arguments andinformation. Inthemeantime, theimportation process continued. Asfarasspecific
duties were concerned, ithadtobedemonstrated thattheamount setinaparticular casefollowing
theirapplication exceeded 35percentofthecustoms value ofthegoods.
3.221 According totheUnited States ,theavailability of"challenge procedures" didlittletomake
Argentina ’sspecific duties "predictable". Infact,these procedures onlyadded totheconfusion. By
assessing thefullamount oftheapplicable specific duties attheborder, regardless oftheiradvalorem
equivalent, andbyrequiring importers toemploy ancillary procedures involving either aninitial
overpayment ortheposting ofabond, Argentina leaved traders andWTO Members withgreat
uncertainty astowhattheactual duties charged would beandwhen thatamount ultimately would be
determined.
3.222 Argentina stressed thatthechallenge procedure wasnotviewed byArgentine lawaspurely
theoretical. Onthecontrary, andtoillustrate howitworked inpractice, Argentina referred totwo
109Seefootnote 31above.WT/DS56/R
Page56
cases concerning textiles andfootwear. Inthefirstcase, thecompany representing Company Xin
Argentina, made asubmission totheNational Customs Administration,110challenging thepayment
ofspecific duties onseveral shipments onthegrounds thattheyexceeded the35percentadvalorem
equivalent. Onthebasis ofthatonesubmission, several shipments ofgoods were released intothe
market withthedeposit ofasurety tocover theunpaid duties. Asecond example concerned textile
products involving Company Y,relating tothechallenge byatextile articles importing firmofthe
inclusionofpackaginginthecalculationofspecificduties.Theexampleincludedthedocumentcertifying
payment ofasecurity covering thedifference between thetariff paidandthetariff setbycustoms and
thecustoms clearance certificate. Bothcases clearly showed thattheprocedure guaranteed inasimple
anddirect manner therelease ofnumerous shipments ofimported goods intothemarket without payment
ofduties exceeding the35percentbound rate.
3.223 TheUnited States argued thatthefirsttimeArgentina raised LawNo.22.415 toexplain why
itsspecific duties werewithin itsbound ratewasinitssubmissions before thePanel. Argentina had
previously taken theposition thatitsspecific duties wereconsistent withitsWTO obligations because
theduties werenomorethan35percentofanadjusted average import priceforeachcategory. Likewise,
theavailability ofdomestic procedures tochallenge anassessed dutydidnotjustify theestablishment
ofduties inexcess ofthebound rate. Argentina seemed tobetaking theposition thatitsSchedule
maylistanydutyrate,nomatter howhigh, anditmayassess thatrateattheborder aslongasafinal
appeal adjusted thedutytonomore than35percentadvalorem .Argentina ’sargument ignored the
extreme uncertainty suchpractices would create. Importers would berequired either topaythefull
amount ofthespecific duties andawait arefund fromArgentina orpayapartial amount andprovide
abond fortherest. Under bothscenarios, importers onaregular basis were subject tocharges in
excess ofthebound rate. Inreality, theywould onlyknow whatthedutywasafterthecustoms service
orthecourts hadmade afinaldecision. Surely thiswasnotthepredictability andsecurity intariff
ratesthattheGATT andWTO were designed toachieve.
3.224 Argentina wasnotoftheopinion thatArticle IIGATT 1994 permitted aWTO Member to
assess anydutyatitsborder, nomatter howhigh, solongasthatMember provided appeal orchallenge
procedurestosubsequentlyconformthedutytotheboundrate.IftherewereboundtariffsintheSchedule
ofaWTO Member, thelatter mayonlyrequire thepayment ofthemaximum tariffs bound. However,
below thatlevelitcould apply thetarifflevelitconsiders mostappropriate andassess itonanadvalorem
orspecific basis. Asked bytheUnited States whether itwasoftheopinion thatnoimpairment of
Argentina 'stariff concessions existed where importers were assessed duties inexcess ofthebound
ratebutwerepermitted topayaportion oftheduties assessed, postabond andthenwaitforappeal
orchallenge procedures toconclude before receiving areturn oftheirbond, Argentina replied that
theUnitedStatesquestionwasbasedonapurelyhypotheticalpremise,sinceArgentinawasnotinfringing
thetariffs bound initsSchedule foranyproduct category. Argentina considered thatimpairment of
theconcessions granted byacountry existed ifthelatter assessed atariffinexcess ofthebound level,
thereby adversely affecting imports which should havereceived thetreatment provided initsWTO
Schedule. Inexceptional situations which might hypothetically ariseandinwhich thetariff applied
exceeded thebound tarifflevel, Argentine legislation provided forthechallenge procedure thatenabled
importers toquestion theadministrative actrequiring thepayment ofatariff higher thanthatwhich
hadbeenbound.
3.225 TheUnited States contended thattheexistence ofadministrative "challenge procedures" did
notjustify violations ofArticle II.Argentina hadacknowledged thatitscustoms service charged specific
duties assetbyrelevant resolutions anddecrees evenifsuchduties amounted tomore than35per
centadvalorem .Argentina defended thispractice bystating that,totheextent thespecific duties
exceeded thebound rate,importers werefreetouse"challenge procedures" torecover anyoverpayment.
110Argentine Customs Administration, FileNo.404.349.WT/DS56/R
Page57
Argentina explained thatsuch challenges were bound tosucceed because, under theArgentine
constitution, WTO obligations wereself-executing andsupreme todomestic law.However, Argentina ’s
argument lacked merit forseveral reasons. Argentina ’sinvocation ofitschallenge procedure raised
formoversubstance. Thereality ofimporting textiles, apparel andfootwear intoArgentina wasthat
theArgentinecustomsservicechargedexcessivespecificdutiesandexpectedpaymentofthefullamount.
Although Argentina admitted thatitcould "only require thepayment ofthemaximum bound rate",
ithadexplained thatthespecific duties weretobeapplied bytheArgentine customs officials whohad
nocompetence tomodify theduties .
3.226 FortheUnited States, therateArgentina charged atitsborder hadtobetherelevant dutyfor
purposes ofArticle II,notsome amount adjusted lateronappeal. Argentina hasconceded asmuch
when ithadrecognized thatGATT Article IIdidnot"permit aWTO Member toassess anydutyat
itsborder, nomatter howhigh, solongasthatMember provides appeal orchallenge procedures to
subsequently conform thedutytothebound rate". Thishadtobethecase, otherwise Argentina or
anyother WTO Member could charge hundreds andeventhousands ofdollars foreachkilogram of
textiles andstillmeetitsWTO obligations since, atsome undetermined point inthefuture, theduty
would bereduced towithin thebound rate.ThefactthatArgentina hadamechanism forappealing
aninitial dutyassessment, asdidalmost allWTO Members inaccordance withArticle X:2(b) GATT
1994, issimply immaterial.
3.227 TheUnited States alsoargued thatArgentina ignored theextreme uncertainty thatresort to
thechallenge procedures created. Importers wererequired either topaythefullamount ofthespecific
duties andawait arefund from Argentina orpayapartial amount andprovide abond fortherest.
Under bothscenarios, importers onaregular basisweresubject tocharges inexcess ofthebound rate.
Importers onlylearned whattheactual dutywould beafterthecustoms service orthecourts hadmade
afinaldecision. Ifthemere availability ofchallenge procedures wasadefense totheimposition of
excessive duties attheborder, asArgentina seemed tosuggest, thenoneofthefundamental principles
underlying Article II,thatMembers shallbeexempt fromduties inexcess ofabound rate,would lose
much ofitsmeaning.
3.228 TheUnited States further contended that,bycharging excessive specific duties andrequiring
importers totakeaction torecover anybalance owed, Argentina hadcollected farmore induties than
whatwaspermissible under Article II.During theJanuary -September 1996period alone, Argentina
hadapparently overcharged importers handling relevant types oftextiles andapparel fromtheUnited
States byapproximately US$1,634,000. Based onother evidence ofsimilar overcharging, Argentina
hadreaped large sums inovercharges inconnection withimports fromother sources, including Asia
andtheEC.111
3.229 Tothis,Argentina replied thattherepeated claim thatasumamounting toUS$1,634,000 had
beenpaidwassimply atheoretical calculation using statistical datathatwere inappropriate forthe
purpose, since theywere notintended forelaborating average prices.112
3.230 IntheviewoftheUnited States ,administrative andevenlegalchallenges totheinitially assessed
duties werenotsimple. Such appeals often werelengthy, complicated andexpensive. Thissystem
alsoinherently contained alessfavourable treatment aspect asforeign traders received thebenefit of
aboundrateonlyafteremployingancillaryprocedures.ContrarytoArgentina’ssuggestion,CompanyX
hadnotfound theprocedures simple orpainless. Infact,Company Xhadattempted tousetwoways
ofchallenging theassessment ofspecific duties. Inoneinstance, Company Xpaidthefullspecific
duties charged andlaterclaimed arefund. Todate, Company Xhadnotrecovered anyofthe
approximately US$2.5 million itexpected tobereturned. Company Xalsohadtriedpaying aportion
111Seesub-section B.5(c) above
112Ibid.WT/DS56/R
Page58
oftheduties assessed andposting abond forarest. With regard tothese entries, Company Xhad
beenwaiting more than18months foradecision bytheArgentine customs service foradetermination
astowhether Company Xwould beheldliable forthedifference.
3.231 Argentina insisted thatithadmentioned theexample ofasubmission bythefirmrepresenting
Company XinArgentina asconstituting oneofthefirstofsuchcases ithadidentified. Inthiscase,
theArgentine customs administration, while recognizing thatthechallenge wasinorder, decided to
declare itimproper because anappeal bythesame company onthesame issue hadbeenlodged with
theMinistry oftheEconomy which preceded thechallenge procedure. However, thepointtobestressed
wasthatthechallenge procedure wasbased, among other elements relating todomestic legislation,
ontheassumption thattheresolution imposing theduties wascontrary tothelawratifying theWTO
Agreement andonthefactthattheConstitution stipulated thattreaties andconcordats aretosupersede
laws, andtherefore theprovision inquestion should notestablish adutywhich exceeds thesaidrate
(35percent)orthatconstitutes abreach oftheprovisions oftheInternational Treaty. These arguments
were largely inlinewiththose presented byArgentina toshow thatinthehypothetical casethata
minimumspecificimportdutywereappliedtoagiventransactionorshipmentinexcessoftheadvalorem
equivalent of35percent,thechallenge procedure would beapplied asadirect means ofensuring that
theimporter didnothavetopaymore thanthe35percentceiling.
3.232 TheUnited States considered thatthechallenge procedures hadoffered nogenuine relief to
importers. Argentina hadnotrefunded anyamount ofduties toimporters oftextiles, apparel and
footwear under these procedures. Argentina hadexplained thatthiswasso"because there havenot
beenanyrestitution proceedings brought before Argentine customs officials" and"nocases existin
theareaofimports oftextile andapparel products where importers haveraised theissueoftheimposition
ofspecific duties thatexceed the35percentadvalorem ".However, thetotalabsence ofachallenge
byanytextile orapparel importer -aremarkable factinlightofthegrievances filedbyEuropean,
Hungarian andUStraders withtheirrespective governments -strongly suggested theinadequacy of
Argentina ’sregime.
3.233 FortheUnited States, thefactthatthechallenge procedure wasseldom ifeverusedbytextile
andapparel importers could beattributable tothefactthatArgentina didnotpublicize thisremedy,
nordiditinform importers when thespecific duties, asapplied inparticular cases, wereabove 35per
centadvalorem. Indeed, theexistence ofprocedures purportedly guaranteeing thatArgentina would
notassess duties above itsbound ratewasnotonlyunknown totraders, butalsototheUnited States.
TheUnited States andArgentina hadheldfourrounds ofconsultations inthismatter andatnotime
hadArgentina attempted tojustify itsregime based ontheavailability ofchallenge procedures.
3.234 Argentina acknowledged thatthisremedy hadnotbeendiscussed untilthePanel proceedings
began. However, theexistence ofthechallenge procedure waspublic knowledge andhadbeenpart
ofdomestic legislation since 1981. Thefactthatitwasnotmentioned inconsultations withtheUnited
States wasirrelevant, bothasregards itsstatus asanintegral partofArgentina 'slegalorder andas
atoolusedbyimporters. Theprocedure hadbeenapplied frequently since itsintroduction indisputes
orissues relating totariff classification, valuation andother preparatory measures fortheassessment
ofcustoms duties. Argentina recalled thatthetotalnumber ofcurrent challenge proceedings onall
grounds -classification orestimated value -wascalculated tobeabout 12,000. Thisindicated that
importers wereperfectly accustomed tousing thisprocedure. Among the12,000 cases recorded ithad
notbeenpossible tofindasingle challenge relating totextile products based ontheapplication ofa
minimumspecificimportdutyinexcessof35percentadvalorem.ItwasunderstandablethatArgentina's
tradepartners wondered whythischallenge procedure hadnotbeenusedinthepastforalleged violations
ofthe35percentbound ratebytheminimum specific import duties. Thefirstexplanation wasthat
thespecific duties applied didnotinfactexceed the35percentbinding, evenonexceptional occasions.
However, thismaynotbetheonlyexplanation. Firstofall,eventhough theprocedure waswellknown,
importers might nothavebecome aware ofthefactthatitwasalsoavailable foralleged violations ofWT/DS56/R
Page59
thebound rate,asArgentina 'sobligation toapply atariff ceiling fortextile products onlydated back
to1995, withtheentry intoforce oftheWTO Agreement. Moreover, onlysince 1994, withthe
amendment oftheConstitution, hadArticle 75thereof stipulated thatinternational treaties maintained
ahigher position intheconstitutional hierarchy thanArgentine law.Thismayhavecaused acertain
delay before theimporting firms reached theconclusion thatthesame challenge procedure thatthey
wereprobably using tochallenge assessments inconnection withother types ofproblems could also
beusedtochallenge theimposition ofspecific duties exceeding 35percent.
3.235 Secondly, according toArgentina, another element could helptoexplain thelackofrecourse
tothechallenge procedure: theproblem ofunderinvoicing and,ingeneral, theproblem ofcustoms
control. Under-invoicing wasachronic problem inArgentina. Themagnitude ofthecustoms problem,
which wasnotlimited tounder-invoicing butinvolved allkinds ofillegal operations, hadbeendescribed
during consultations. Aseries ofmodifications inthecustoms system hadbeenmade in1996toaddress
it,including changes inthewayitoperated andtheestablishment ofasystem ofpreshipment inspection.
Thevolume ofunder-invoiced transactions wasenormous (itwassaidthat,inthelastyears, some
27,000containershadbeensmuggledacrossthebordercausinglossestotheArgentinetreasuryestimated
atUS$3,000millionandinestimabledamagetothedomesticindustry).Thejudicialinvestigationscarried
outthusfarhadshown thatlarge quantities oftextile products andclothing were alsoinvolved. In
thiscontext dominated bytheinefficiency ofthecustoms system andthewidespread practice of
underinvoicing, itwashighly unlikely thatmany importers would resort tothechallenge procedure.
Bydoing so,theywould haveruntheriskofdrawing theattention oftheauthorities tothequestion
ofthelegality oftheir operations. Asfrom 1996, theinvestigations conducted bytheArgentine
Government, thecourts andtheCongress with respect toimport transactions began tomake
underinvoicing difficult andthedecision bytheGovernment tobring thecustoms body andthe
Directorate-General ofTaxation together under asingle authority made itpossible, among other things,
tocarry outelectronic cross-checking ofinformation supplied intheimport price declarations against
domestic taxpayments, thereby completely altering theeconomic equation forthose intending tounder-
invoice: ifthedomestic tax-collection body wasmuch more efficient anddifficult toevade, therisk
considerably outweighed profits thatmight bederived fromunderinvoicing. Thisalsoexplained why,
in1996, import prices fortextile products andclothing increased inArgentina, atrend which wasnot
reflected intheinternational market.
3.236 Argentina declared thatthechallenge procedure, which mayhaveappeared tohavebeennothing
more than"window dressing", nowprovided aclear andtransparent guarantee ofcompliance with
international commitments. Indeed, under thechallenge procedure, ifanimport dutyassessment was
challenged because itexceeded the35percentlimitsetbyLawNo.24.425, thegoods werenonetheless
released. Inother words, tosecure theentry oftheimports, theimporter maypaythetariff inforce
andchallenge anyminimum specific import duties applied inexcess ofthedutybound within theWTO.
Theimporter, theholder oftheclearance documents, wastheonelegally authorized tofileachallenge
application. There wasnoprocess fortheautomatic initiation ofachallenge procedure bytheArgentine
customs officials. Theprocess could onlybeinitiated attherequest ofanindividual whoshowed that
hisrights hadbeeninfringed. AsArgentina didnotapply specific duties ortariffs inexcess of35per
centadvalorem ,itwasnotdeemed necessary tosetupnotification machinery forpurely hypothetical
cases. Theprocedure hadtobeentered intobytheimporter within 10daysofthenotification ofthe
customs dutyassessment.113Thechallenge hadtheeffect ofsuspending payment ofthedifference in
thedutyrates.114Bypaying asecurity tothecustoms authorities reflecting thedifference between the
tariffinforceandtheminimum specific import dutyclaimed bycustoms, theimporter mayautomatically
(within three orfourdaysatthemost) release thegoods intothemarket. Thecustoms authorities then
had40daystoproduce evidence against theimporter 'sclaim.115Ifsuchevidence wasproduced, the
113Argentine Customs Code, Article 1054.
114Ibid., Article 1058.
115Ibid., Article 1062.WT/DS56/R
Page60
importer hadsixdaystorefute theevidence.116Oncethattime-limit hadelapsed, thecustoms authorities
had60daystoconfirm orrevoke thechallenged administrative measure.117Thus, inaccordance with
these time-limits, theprocess maylast116days. Ifthemeasure wasconfirmed (theassessed import
duties being below 35percent), theimporter hadtopaythedifference between thetwoamounts.
Ifthemeasure wasrevoked, theduties exceeding the35percentadvalorem limit, theimporter was
freed ofallobligations. Theonlyformwhich importers hadtocomplete toobtain therelease oftheir
security wasform 1190-A which wasusedforbothlodging andreleasing thesecurity.
3.237 Argentina specified thatifthecustoms authorities decided against theimporter, theimporter
hadtwoalternatives: either toappeal thedecision before theTaxCourt ortoappeal totheFederal
Administrative Tribunal. TitleIII(Remedies) oftheCustoms Code (Articles 1132to1183) described
theprocedure forappealing afinaldecision signed bytheheadofthelocal customs department. If
thelocal manager tookafinaldecision unfavourable totheimporter, thelawallowed thelatter 15
working daysfollowing thenotification ofthedecision toappeal totheTaxCourt. Theappeal was
presented totheTaxCourt together withtheevidence, andtherecords weresubmitted totheCourt
bytheProceedings Division ofthecustoms service. Ifthechallenger losthiscase, hecould appeal
thedecision oftheTaxCourt totheNational Chamber intheFederal Administrative Litigation Division.
3.238 Regarding thenature ofproof (facts, documentation, testimony statements) requested under
thechallenge procedure, Argentina stated thatanimporter could initiate achallenge proceeding without
having toprovide anyproof. Fortheremedy tobeavailable itwassufficient fortheimporter toindicate
tothecustoms administration hisintention tochallenge thedutyassessment. Intheparticular case
ofchallenges entered against duties inexcess of35percent, theprocedure wasevensimpler since
itwasonlynecessary toprovide thecommercial invoice oranidentical copy. Theproceeding was
substantiated bythedocumentation inthepossession ofthecustoms, thecertificate ofpayment ofthe
dutieswhich,intheopinionoftheimporter,shouldbepaidandthecorrespondingbondforthedifference
induty.
3.239 TheUnited States questioned themeaning ofArgentina 'sstatement thattheprocess was
"automatic" and"without cost", inparticular itasked whether itwasitscontention thatimporters
challenging suchassessments inexcess ofthe35percentadvalorem ratehad"nocosts" imposed on
theminterms oftime, opportunity costs, costsofsecurity, experts andattorney 'sfees,anddelay and
uncertainty intheshipment ofgoods.
3.240 Argentina replied thatsaying thattheprocess wasautomatic signified thattheimporter could
enter thegoods forconsumption bypaying onlytheduties which heconsidered applicable. Saying
thattheprocess waswithout costmeant thatitwasnotaprocedure forwhich there were charges.
3.241 Regarding legalrepresentation, Argentina mentioned thatexperts werenotneeded tocalculate
35percentofthecustoms value ofthegoods. Forthepurposes ofinitiating achallenge proceeding,
Article1034oftheCustomsCoderequiredlegalrepresentation.Therelevantdocumentationwasprovided
bythecustoms administration itself. Asked whether there were established procedures ifany,for
refunding attorney 'sandexpert 'sfees,thecosts ofobtaining abond orother security, andthecosts
ofemployee timeexpended inasuccessful challenge procedure, Argentina replied thattheattorney 's
feeswerepaidbytheimporters concerned. Thesamewould apply tothefeesofexperts whoparticipated
intheproceedings attherequest oftheimporter, since customs didnotautomatically require their
participation which, moreover, wasnon-existent inthese cases. Thecostofbond insurance wasvery
small, generally consisting inthepayment ofanannual premium which varies between only1.8per
centand2percentdepending onthetypeofactivity andtheamount ofsecurity which, itshould not
beforgotten, represents onlythedifference induty. Finally, ifdespite thefactthatthecosts ofthe
116Ibid., Article 1063.
117Ibid., Article 1065.WT/DS56/R
Page61
challenge proceeding werelow(bearing inmind thatthere werenocharges) theimporter wanted to
bereimbursed, healways hadtheoption ofsuing forreimbursement inthecompetent court.
3.242 Withrespect tointerests onthemoney heldbyArgentina ifthefullamount ofdutyexceeding
35percentadvalorem hadbeenpaid, Argentina mentioned thattheaction forrestitution which could
bebrought against thecustoms, ifwonbytheimporter, would provide fortherefunding oftheamounts
improperly collected plusinterest duefromthepoint atwhich thereturn ofwrongly collected duties
hadbeenrequested (form 1724-B), thatistosay,afterpayment oftheassessment resulting from
clearance. Within 10daysoftheValuation Technique Division notifying theimporter oftheapplication
ofspecific duties, thelattermayoptforthechallenge procedure (payment ofthedutyapplicable, without
payment oftheDIEM, lodging ofadeposit orproperty bond forthedifference) ortopayeverything
thecustoms required andbring anaction fortherestitution oftheamounts heconsiders tohavebeen
overpaid.
3.243 TheUnited States submitted thatchallenge procedures werenotanessentially painless process
bywhich importers mayrectify anyovercharges. Theprocedures werenotnecessarily quick orsimple,
aswasevidenced bytheloneinstance inwhich aUSmanufacturer hadattempted torelyonthechallenge
procedures. Company Xhadattempted tousetwowaysofchallenging theassessment ofspecific duties.
Inoneinstance, Company Xhadpaidthefullspecific duties charged andlaterclaimed arefund. To
date,Company Xhadnotrecovered anyoftheapproximately US$2.5 million itwasexpecting tobe
returned. Company Xalsohadinitiated achallenge procedure inApril 1996. Ithadpaidaportion
oftheduties assessed andposted abond fortheremainder. Ithadusedlegal counsel whofileda
substantial briefandsupporting documentation. Despite Company X’sexperience, Argentina claimed
thatthemaximum length oftimeforsuchaproceeding was116days. InthecaseofCompany X,
ithadnotbeenrespected. Company Xalsonoted thatunder Argentine law,ifitwanted toappeal
anyeventual ruling oftheArgentine customs service, itwould havetopaythefullamount ofthespecific
duties. AsCompany Xlearned, importers were putatacompetitive disadvantage bythedelay and
uncertainty ofhaving tousethese procedures instead ofbeing charged aproper dutyattheborder.
Importers alsowereforced tobearneedless costsinterms ofinterest onthevalue ofanybondposted.
3.244 According totheUnited States, thiscould haveeasily beenavoided ifArgentina hadimposed
onlyadvalorem ratesofnomore than35percent. There wasnoreason whyArgentina could not
doso.Argentina hadadmitted itcollected value andquantity information fromwhich anadvalorem
dutycould beapplied inthecaseofeachshipment ofimports. Itfurther hadadmitted thatithad
spent US$328 million collecting statistical information in1996, anditcould notdenythatithadlevied
itsstatistical taxonanadvalorem basis. Atminimum, Argentina could haveinstructed itscustoms
officials torefrain from charging specific duties inexcess of35percentadvalorem .
3.245 ForArgentina ,although theexample ofCompany Xwasnotpertinent since itconcerned a
question relating tofootwear, theUnited States 'criticism ofthechallenge procedure anditsduration,
which mentioned thecases ofCompany X,wasnotcorrect. Ifinaspecific case, Company Xchose
toappeal against theimposition ofminimum specific import duties totheMinistry ofEconomy, the
Argentine authorities could notberesponsible fortheproper choice, inaspecific case,oftheremedies
which thelawplaced attheimporter 'sdisposal. Thechallenge procedure wasnotajustification for
applying minimum specific duties. Thecharacteristics ofthechallenge procedure could notbeevaluated
solely onthebasisoftheexperience ofCompany X.Ifthiscompany haddecided toutilize other bodies
when dealing withtheadministration, thiswasbeyond theArgentine Government 'scontrol. Itwas
amatter fordecision atalegallevel. Thisexperience didnotprove thatthechallenge procedure was
notanappropriate mechanism forthepurposes explained inArgentina 'ssubmission. Itwasalso
important toclarify thatCompany Xwasnotawaiting arefund asaresult ofusing thechallenge
procedure. According tothisprocedure, nothing more thantheadvalorem rateineffect waspaidand
abond wasdeposited. There could benorefunds because whatwaspaidwasthesumconsidered to
bepayable. Company Xhadutilized another appeals procedure known asrepetición (reimbursementWT/DS56/R
Page62
procedure). Thecompany paidandthenrequested therefund oftheamount thatallegedly exceeded
the35percentlevel. Thechallenge procedure mechanism provided guarantees toreassure operators
thattheywould notberequested topayanimport dutyexceeding 35percentadvalorem .
3.246 According totheUnited States ,byciting itschallenge procedures, Argentina wasessentially
asking thePanel toadopt anewrulerequiring WTO Members andtheirtraders toexhaust localremedies
before bringing amatter toapanel. However, GATT lawdidnotinclude the"local remedies rule"
asitwasrecognized inpublic international law.118Disputes under theGATT addressed rights and
obligations between WTO Members, notindividuals, andthedoctrine didnotapply todisputes solely
between nations.119Neither theGATT northeWTO hadeveradopted apractice ofrequiring exhaustion
oflocal remedies before bringing amatter toadispute settlement panel. TotheUnited States '
knowledge, noprior panel orworking party hadmade exhaustion oflocalremedies aprerequisite to
commencing dispute settlement proceedings. Thus, there wasnothing within thetradition orpractice
oftheWTO dispute settlement system which supported Argentina ’sargument and,accordingly, ithad
toberejected.
3.247 Argentina replied thatitwasnotrequesting thePanel toestablish anewrulerequiring the
Members oftheWTO andtheirentities to"exhaust localremedies". Argentina wasstating thatitwas
notpossible foracountry tocome before theWTO andutilize thedispute settlement mechanism without
sufficient evidence ofthefactsitwished toprove.
3.248 Argentina recalled thatthere wasachallenge procedure thatformed anintegral partofthe
Argentine legalsystem andtowhich itwascustomary toresort. Itwasdifficult toexplain howthis
alleged "legal fiction", which included recourse totheordinary courts andhadgenerated about 12,000
cases, hadnotbeenusedbytheimporters ofUnited States goods.
3.249 FortheUnited States ,thedirect application oftheWTO Agreement inArgentine domestic
lawandtheexistenceofacustomsappealsmechanismofferednomeaningfulrelieftoaggrievedimporters
anddidnotjustify thebreaking ofbindings. Argentina hadconfirmed thatnospecific duties ontextiles
orapparel hadbeenrefunded. TheUnited States haddescribed theefforts Company Xhadbeenforced
tomake inattempting torecover overpaid duties, andhadfurnished thePanel withastatement from
Company Xthatithadhadrecourse tothe"challenge procedures", afactthatArgentina contested.
Argentina hadtoexplain whyCompany Xwasstillwaiting foradecision 18months afterithadinvoked
therecurso deimpugnación proceedings. NordidArgentina contest thatCompany Xwasforced to
payspecific duties farinexcess of35percentequivalent advalorem, regardless oftheprocedures
itinvoked.
3.250 ArgentinarepliedthattheconstitutionalstatusoftheUruguayRoundAgreementsdidnotpretend
tobeajustification forauthorizing measures thatviolated thecommitments undertaken. Consequently,
itwasnottruethatthemeasures adopted byArgentina imposing theminimum specific import duties
systematically violated itsWTO obligations. Argentina didnotseeknoraskforany"immunity" in
order toapply measures ofanysortthatwerecontrary toitsWTO obligations. Thelegislation inforce
andthechallenge procedure were intended toguarantee toallimporters thatthere would beno
uncertainties. Theabsence ofchallenges, farfromshowing thattheprocedure wasnotvalid, showed
thatimporters hadnotutilized itspecifically toquery theminimum specific import duties ontextiles.
118TheUnitedStatesreferredtoErnst-UlrichPetersmann, "Settlement ofInternationalandNationalTradeDisputesThrough
theGATT: TheCase ofAntidumping Law" inAdjudication ofInternational Trade Disputes inInternational andNational
Economic Law, Ernst-Ulrich Petersmann &Gunther Jaenicke, eds,Fribourg University Press, (1992), pp.126127.
119TheUnited States referred tothejudgement oftheInternational Court ofJustice of20July1989 incaseElettronica
Sicula (ELSI) ,ICJReports, p.15,andmentioned that,even though governments often brought anissue before theWTO
onbehalfofprivatecitizens, disputeswerefundament allybetween States.Consequent ly,requiringexhaust ionoflocalremedi es
ofStates would befutile.WT/DS56/R
Page63
Either importers didnotfinditnecessary toutilize theprocedure ortheydidnotdosoforreasons
known onlytothem.
C. THE STATISTICAL TAX
3.251 TheUnited States argued thatArgentina ’sthree percentadvalorem import taxwasacharge
onimported products inconsistent withArgentina ’sobligations under Article VIIIGATT 1994. The
United States referred inparticular toArticle VIII:1(a) andArticle VIII:4(c) which made clear that
feesandcharges relating to"statistical services" fellwithin thescope ofArticle VIII.
3.252 Argentinacontendedthatthestatisticaltaxwasacommitmentundertakenbyagreementbetween
Argentina andtheInternational Monetary Fund(IMF). Thiscommitment obliged Argentina tomaintain
thestatistical taxatarateofthree percentuntilitexpired in1998. Anyalteration oftheratebefore
completion oftheperiod laiddown intheagreement withtheIMFwould imply non-compliance with
theobligations assumed bytheArgentine State vis-à-vis thatorganization.
1. VIOLATION OFARTICLE VIII
(a) Advalorem taxv.fixed tax
3.253 TheUnited States noted thattherequirement inArticle VIII:1(a) thatthecharge be"limited
inamount totheapproximate costofservices rendered" was"actually adualrequirement, because
thecharge inquestion hadfirsttoinvolve a'service 'rendered andthenthelevelofthecharge had
nottoexceed theapproximate costofthat'service ’".120
3.254 TheUnited States argued that,asforthe"level ofthecharge," anadvalorem levywithno
fixed maximum fee,byitsverynature, wasnot"limited inamount totheapproximate costofservices
rendered". Withrespect toaservice largely identical, high-price items necessarily boreamuch greater
taxburden thanlow-price goods, because anydifferences thatmayexist ingathering statistical
information withrespect toeachwould notaccount forthedifference intheamount assessed.
3.255 TheUnited States contended thatGATT precedent indicated thatanunlimited advalorem charge
onimported goods violated Article VIIIbecause suchacharge wasnotrelated tothecostoftheservice
rendered. Inthereport onUnited States -Customs UserFee,thepanel hadexamined theconsistency
of0.22and0.17percentadvalorem customs merchandise processing feeswithnoupper limits. The
complaining parties hadargued thatanadvalorem feeapproximating theactual costsofservices could
beconsistent withArticle VIII, butsuchacharge hadtohaveamaximum toensure thatimporters
ofhigh-value goods didnotpayexcessive amounts.121
3.256 TheUnited States further noted that,confronting thesame typeofcharge aswasatissue in
thepresent matter, thereport oftheworking party onAccession oftheDemocratic Republic ofthe
Congo hadstated that:
Members oftheWorking Party pointed outthatthestatistical taxof3percentad
valorem applied bytheCongolese authorities onimports wasnotcommensurate with
theservice rendered andwascontrary totheprovisions ofArticle VIII:1(a). The
120TheUnited States referred tothePanel Report onUnited States -Customs User Fee,adopted on2February 1988,
BISD 35S/245, para. 69.
121Ibid. para. 86,where thePanel concluded that"theterm'costofservices rendered '[...]inArticle VIII:1(a) must
beinterpreted torefer tothecostofthecustoms processing fortheindividual entry inquestion, andaccordingly thatthe
advalorem structure oftheUnited States merchandise processing feewasinconsistent with, [...] Article VIII:1(a) tothe
extent thatitcaused feestobelevied inexcess ofsuch costs".WT/DS56/R
Page64
representative oftheCongo recognized thatthistaxexceeded thecostoftheservice,
andexplained thatthesurplus revenue from thetaxwould beemployed toward
improving theservice. Hisauthorities were prepared toconsider theadjustment of
thestatistical tax,inthelightoftheprovisions ofArticle VIIIassoonastheywere
inaposition toafford it.TheWorking Party tooknoteofthisstatement andinvited
theGovernment oftheDemocratic Republic oftheCongo tore-examine itspresent
method ofapplication ofthestatistical taxandtoreport totheCONTRACTING
PARTIES onthepossibilities ofbringing thetaxintolinewiththeprovisions ofArticle
VIII:1(a).122
3.257 TheUnited States argued thattheArgentine taxonimports could notbemeaningfully
distinguished from thecharges atissue inthepanel report onUnited States -Customs User Feeor
thereport onAccession oftheDemocratic Republic oftheCongo ,norcould itbesquared withthe
reasoning cited above. Infact,thecharge examined bytheworking party ontheAccession ofthe
Congo wasidentical tothecharge atissueinthisdispute andtheworking party hadfound thecharge
tobeinconsistent withArticle VIII. Argentina ’staxwaslevied onanadvalorem basiswithnoceiling.
Thetaxasassessed onmany goods wasnotinproportion tothecostofanyservice rendered.
3.258 Argentina contended that,asfarastheWorking Party ontheAccession oftheDemocratic
Republic oftheCongo wasconcerned, ithadbeenrequired toexamine afiscal charge different innature
from thestatistical taxapplied byArgentina. Thepurpose ofthischarge hadnothing todowiththe
rendering ofservices andthereport ontheaccession oftheCongo, which involved simply afiscal
charge without thesupply ofanyservice, didnottherefore apply.
3.259 Argentina added thatthedrafting history ofArticle VIIIshowed thatthealternatives involving
theuseofasystematic method suchasauniform dutydidnotruleoutthepossibility ofusing advalorem
duties forthepurpose.123Anyapproach thatwasselected foradministering theservice mayhave
advantages ordisadvantages. Thetrend towards automation ofcustoms transactions required methods
ofcalculation which served tofacilitate theprocedure, withtheaimofprocessing asmany transactions
aspossible withalimited stock ofcustoms resources. Calculating thecostofeachtransaction would
havecreated atrade barrier andestablishing aschedule oftransaction feeswould havecaused trade
distortions, withtheriskoftransactions being manipulated inorder tominimize theimpact ofsuch
fees.
3.260 Argentina argued thatoneoftheadvantages oftheadvalorem taxwasitsminimal impact on
low-value imports andthelackofaprotective effect. Inaddition, theadvalorem method hadseldom
beenplaced indoubt asamechanism forrecovering theapproximate costs oftheservices rendered.
Intheproceedings oftheWorking Party reviewing Venezuela 'saccession toGATT, therepresentative
ofthatcountry hadindicated that:
"recent experience hadshown thattheapplication ofanysystem other thananadvalorem fee
would beextremely complex andbring inanelement ofadministrative discretion which might
leadtoundesirabledelaysorobstaclestoimports.Moreover,theadministrativecostofoperating
atransaction-based feewould beveryhigh".124
122Adopted on29June 1971, BISD 18S/89, para. 5(emphasis added bytheUnited States).
123Argentina referred tothePanel Report onUnited States -Customs User Fee,Op.Cit., paras. 87-94 which stated,
atpara. 94,that"[W]hether considered individually orasawhole, theevents which constitute thathistory simply donot
demonstrate anysuch understanding".
124Working Party Report ontheAccession ofVenezuela ,adopted on11July1990, BISD 37S/43, para. 22.WT/DS56/R
Page65
Itwasnoteworthy thattheWorking Party hadreached theconclusion that"subject tothesatisfactory
conclusion oftherelevant tariff negotiations, Venezuela beinvited toaccede".125
3.261 Argentina further noted that,atthetimeofTunisia 'saccession, although objections wereraised
toacustoms levyoffivepercentonthegrounds ofincompatibility withGATT, thisdidnotprevent
approval ofTunisia 'saccession.126
3.262 TheUnited States replied thatArgentina 'sargument thatanadvalorem feewasmore equitable
andefficient thananyalternative hadbeenfound wanting bythepanel onUnited States -Customs User
FeeandArgentina hadnotmade anyeffort todisprove thatsome importers, perhaps evenmost, would
beassessed ataxthatwasdisproportionate tothecostofanyservice rendered tothem.
(b) Services andcosts covered bythetax
3.263 Regarding thenature oftheservice tobecovered bythetax,theUnited States argued that
theterm"services rendered" inArticle VIIImeant "services rendered totheindividual importer in
question".127Thetypeofservices thatmaybenefit anindividual importer hadbeen expansively
construed. "Services" included "government activities closely enough connected totheprocesses of
customs entry thattheymight, withnomore thanthecustomary artistic licence accorded totaxing
authorities, becalled a'service 'totheimporter inquestion".128Despite thebreadth ofthisinterpretation,
some charges hadbeenfound tobetooremotely connected toanyservice benefitting imported goods
toallow forimposition ofthecharge (e.g.,charges forprocessing passengers, charges covering lost
revenue fromgoods exempt fromthesame fee,andcharges forservices performed onbehalf ofgoods
previously imported).129Thegovernment imposing thefeehadtheburden ofdemonstrating thata
service wasinfactperformed forthebenefit oftheimporter.130
3.264 TheUnited States submitted thattheleading decision inthisarea, thereport ofthepanel on
United States -Customs UserFee,made clear thattheterm"services rendered" inArticle VIII:1(a)
meant "services rendered totheindividual importer inquestion". Thepanel recognized thataflat
ratemight haveagreater impact onlowprice merchandise, butnonetheless concluded thatArticle
VIIIrequired covered charges tobetailored totheindividual services provided. Thepanel concluded
thatanunlimited advalorem charge violated Article VIIIbecause suchcharges exceeded "thecost
of[...]processing [...]theindividual entry inquestion". Despite theclear findings ofthisdecision,
Argentina initssubmission asked thisPanel toreach anoutcome thatwasdirectly contradictory to
thereport onUnited States -Customs UserFee,thatitsthree percentadvalorem taxonimports was
proper eventhough (a)thecharge wasnotconnected toaservice toanyindividual importer butto
international trade generally and(b)thecharge covered thecostofstatistical services forexported
goods aswellasimported goods. Decree No.389/95 stated thatthetaxwasintended toraiserevenue
forthepurpose offinancing customs activities related totheregistration, computing anddataprocessing
ofinformation onbothimports andexports. While thegathering ofstatistical information concerning
imports maybenefit importers, Article VIIIbared thelevying ofanytaxorcharge onimporters to
support activities relating toexports .GATT precedent indicated thatcharges onimported products
maynotbeusedtofinance services benefitting other interests. Inacomplaint brought against France
in1952, theUnited States hadmaintained thattheFrench "statistical andcustoms control" taxesviolated
Article VIII:1 sincetheproceeds ofthistaxwerealsousedforfunding social security benefits tofarmers.
125Ibid., para. 91.
126Working Party Report ontheAccession ofTunisia ,adopted on12December 1990, BISD 37S/30, para. 38.
127United States -Customs User Fee,Op.Cit., para. 80.
128Ibid., para. 77.
129Ibid., paras. 96-112.
130Ibid.WT/DS56/R
Page66
France acknowledged theinfringement andsubsequently abolished thetax.131Thatthecharge was
infactnomore thanataxation ofimported merchandise wasconfirmed byArgentina ’srepresentation
thatitimposed thetaxtoraiserevenue tomeetIMFobligations.
3.265 According toArgentina ,thepurpose ofthestatistical taxwastocover thecostofsupplying
thecorresponding statistical service intended toprovide areliable basis forforeign trade operations.
Inthisconnection, itwasimportant tonotethattheservice wasnotrendered totheindividual importer,
thespecific importer associated withaparticular operation, buttoforeign trade operators ingeneral
andforeign trade asanactivity perse.Therefore, astheservices rendered inthiscaseandinthecase
onUnited States -Customs User Feewere different, theprecedent intheUnited States -Customs
UserFeecasedidnotapply.
3.266 Regarding thecoststobecovered bythetax,Argentina stated thatthere wasnodispute about
thefactthatthesums collected byapplying therateinforce forthestatistical taxshould notexceed
theapproximate costsnecessary tomaintain theservice. Despite theinterpretation ofthepanel onUnited
States -Customs UserFee,thecostoftheservices towhich Article VIIIoftheGATT 1994 referred
should include notonlytheservices rendered totheindividual importer butalsothetotalcostofthe
service.
3.267 Argentina stressed thatthecostoftheservices rendered through thestatistical taxwasnot
calculated foreachindividual transaction, norwassuchanapproach required under Article VIII,which
made noprovision foraligning thecostoftheservice rendered withthelevelofthetaxapplied for
eachtransaction. Article VIIIdidnotrequire Members tosetfeesonalevelcommensurate withthe
costofeachshipment, onacase-by-case basis.
3.268 Argentina argued thatthecostofaservice -inaccounting ortradeterms -consisted ofadirect
costandanindirect cost, bothcosts incurred bytheorganization providing theservice whenever it
wasprovided. Thiswasevenmore obvious inthecaseoftheArgentine customs territory, since 52
customs posts andoffices hadtobekeptopenpermanently. Ifforanyreason thecustoms services
weretoexclude indirect costsfromthebasiccriteria usedtocalculate thecostoftheservice theyprovide,
those costs would endupbeing metfrom within overall taxreceipts. Astheservice provided had
direct andindirect costs, itwould bedifficult torecover those costsbyapplying aflatfeeperindividual
import operation. Ifitwere necessary toconsider thepossibility ofapplying aflatfeeperimport
operation, thatfeeought nottobecalculated exclusively asafunction oftheservice rendered in
connection witheachimport operation inparticular. Thecalculation ofanyflatfeeorlevywould
havetotakeintoaccount theexisting indirect costs andnotonlytheexpenses directly related with
eachparticular operation.
3.269 TheUnited States argued thatArgentina hadignored thereport onUnited States -Customs
UserFee,which rejected theargument thatArticle VIII’srequirements weremetifthetotalrevenues
generated byacharge approximated thetotalcostofthegovernment services. Thepanel inthatmatter
hadrecognized thataflatratemight haveagreater impact onlowprice merchandise, butnonetheless
concluded thatArticle VIIIrequired covered charges tobetailored totheindividual services provided.
Thepanel concluded thatanunlimited advalorem charge violated Article VIIIbecause suchcharges
exceeded "thecostof[...]processing [...]theindividual entry inquestion".
3.270 TheUnited States added that,evenifoneweretoreject thereasoning intheUnited States -
CustomsUserFeereportandadoptafeescollectedmustapproximateactualcostsapproach,Argentina’s
answers toUSquestions showed itwould failthistestaswell. Argentina stated thatthefunds collected
fromthistaxranged fromUS$534 million in1992 uptoUS$1.143 billion in1993, again increasing
131Seepara. 98document SR.9/28.WT/DS56/R
Page67
toUS$1.2 billion in1994, down toUS$215 million in1995 anduptoUS$328.8 million in1996.
Certainly, thecostsofcollecting statistical information, towhich these collected funds hadtodirectly
relate, could notpossibly have shifted sodramatically during thespace offiveyears. Moreover,
Argentina hadnotprovided requested documentation toconfirm thedirect relationship between its
collections andcosts.
3.271 Argentina replied thattherevenue collected priorto1995didnotreflect thecostoftheservices.
In1995 and1996, thecharge collected wastherefore reduced andwasapproximately equivalent to
thecostoftheservices rendered. With respect totherationale foreliminating thestatistical taxin
December 1994 asoutlined inDecree No.2777/94, andtherationale andexplanation forreinstating
iton22March 1995, Argentina mentioned thatthefiscal situation inDecember 1994 justified the
decision thatastatistical service forforeign trade ingeneral could beprovided without relying onthe
revenue derived fromlevying astatistical taxonimports. Thecrisis related tothedevaluation ofthe
Mexican pesoledtospecial internal policy adjustment measures discussed withtheIMF, theWorld
BankandtheBIS,aswellasbytheprivate banks. Inorder toconfront thisfiscal problem, itwasdecided
tosignanagreement withtheIMF. Inorder tobeabletocontinue providing statistical services for
foreign tradeingeneral itwasnecessary toreinstate thestatistical taxonimports. Otherwise itwould
nothavebeenpossible toprovide theservice oritwould havebeennecessary toobtain funds from
other sources which atthetimedidnotexist.
3.272 TheUnited States concluded fromtheabove thatArgentina hadessentially admitted thatthe
purpose ofthestatistical taxwasa"taxation ofimports [...]forfiscal purposes" incontravention of
Article VIII. Argentina stated thatitlevied thecharge pursuant torequirements imposed bya"grave
fiscal problem" caused bytheMexican pesocrisis. Argentina further stated thatthestatistical tax,
alongwithotherfiscalenhancingtaxesintheIMFpackage,wasnecessary"toconfrontthefiscalproblem
andtoassure theavailability offunds necessary tocounteract theoutflow offunds fromourcountry,
andtoavoid theconsequent damage andcessation ofactivities ofmany national financial institutions".
Byanyobjective criteria, these rationales forthestatistical taxwerefor"fiscal purposes" asthatterm
wasusedinArticle VIII:1(a).
3.273 Furthermore, theUnited States noted thatArgentina hadasserted thattheapproximate cost
oftheprovision ofstatistical services totalled US$326 million in1996. Argentina hassimply stated,
without anyproof -asrequested bythePanel andtheUnited States -thatitsreceipts for1995 and
1996 wereroughly equivalent tothecostoftheservices. Thiswassimply notanadequate response.
Argentina hadbeenrequested toprovide specific evidence andhadnotproduced itsowndocuments.
(c) Inclusion ofthetaxinArgentina 'sSchedule
3.274 Argentina argued that,inSchedule LXIV presented byArgentina attheoutcome oftheUruguay
Round negotiations, thethreepercentstatistical taxhadbeenbound under theheading of"other duties
orcharges". Inaseparate column attached totheSchedule, thethree percentratewasestablished
foreachoftheHSheadings under which import duties werebound. Itthusrejected theclaim bythe
United States thatthestatistical taxconstituted indirect protection fordomestic products. Atthevery
least, thisassertion required supporting evidence tosubstantiate trade distortion.132
3.275 TheUnited States contended thatArgentina ’sreference tothetaxinitsSchedule comported
withtheUnderstanding ontheInterpretation ofGATT Article II:1(b) which, inorder toensure
transparency, required thatsuchcharges berecorded inSchedules. TheUnderstanding, though, made
132Argentina referred tothePanel Report onUnited States -Customs UserFee,Op.Cit.,para.120, which provided that
"[i]twasnotnecessary forthePanel todecide whether the'indirect protection 'criterion actually involved arequirement
ofnoadverse trade effects. ThePanel concluded that,even ifitdid,ithadnotbeen demonstrated thatthese advalorem
charges hadhadatrade distorting effect".WT/DS56/R
Page68
clearthatincluding acharge inaSchedule innowayimmunized thatcharge from WTO scrutiny or
from being declared inviolation ofanapplicable GATT rule. TheUnderstanding stated that"such
recording didnotchange thelegalcharacter of'other duties orcharges ’"and"[a]ll Members retain
therighttochallenge, atanytime, theconsistency ofany'other duties orcharges 'withsuch[GATT
1994] obligations". Thiswasconsistent withprior GATT jurisprudence.133
2. IMFCOMMITMENTS AND CROSS-CONDITIONALITIES
3.276 Argentina argued thatthestatistical taxwaspartofacommitment undertaken byagreement
betweenArgentinaandtheInternationalMonetaryFund.ThiscommitmentobligedArgentinatomaintain
thestatistical taxatarateofthree percentuntilitexpired in1998.
3.277 Argentina stressed thatthestatistical taxwasacommitment entered intobyArgentina vis-à-vis
theIMF. Atthesame time, Argentina hadequivalent obligations asaMember oftheWTO primarily
under Article VIIIGATT 1994andArticle V:1oftheWTO Agreement. Iftheassertions oftheUnited
States regarding aviolation ofArticle VIIIweretrue,Argentina would finditselfinvolved inaconflict
ofcross-conditionalities, since Argentina might finditself inasituation where itwould beprevented
from fulfilling itsIMFcommitments ifitwereobliged tofulfil itsWTO commitments. Conversely,
thecontinued implementation ofitsIMFcommitments could place itinaposition incompatible with
itsobligation under theWTO.
(a) Mandatory nature ofthestatistical taxunder Argentina 'sagreement withtheIMF
3.278 Argentina contended thatitscommitment withtheIMFtomaintain thattaxatitscurrent level
untiltheendof1998wasrecorded intheMemorandum ofUnderstanding signed in1995andformed
partofArgentina 'spublic sector financing package. TheUnited States allegation created aconflict
ofcross-conditionalities which weakened thebasic institutions responsible forestablishing exchange
andtradedisciplines.TheobligationArgentinaassumedinthatMemorandumofUnderstandinginvolved
achieving aspecified level offiscal revenue andnotexceeding acertain level offiscal expenditure
inorder toreduce thedeficit toaspecified amount, alsodefined intheMemorandum, andadopting
ormaintaining aseries ofmeasures, including thestatistical tax,inorder toattain thesefiscal objectives.
Thiscommitment meant thatincalculating revenue acertain amount wasallocated tothestatistical
taxwhile incalculating expenditure acertain amount wasincluded forservices rendered inconnection
withforeign trade statistics. Iftheamount obtained from thecollection ofstatistical taxwere not
sufficient topayfortheservices rendered inconnection withstatistics forforeign trade operators and
itwastherefore necessary tousefunds from elsewhere inthebudget, there would beproblems for
theentire financing plantowhich Argentina wascommitted. Failure toobtain therevenue envisaged
from theapplication ofthestatistical taxwould leadtothenon-fulfilment oftheundertaking given
totheIMF. Themeasures included intheMemorandum ofUnderstanding were theproduct notof
anIMFrequirement butoftheagreement reached withthatinstitution onthebasis offiscal andother
measures which theIMFhadapproved andtherefore considered thattheGovernment should adopt
inorder tobeabletoachieve theagreed fiscal objectives. Themeasures ofthistypelisted inthe
133TheUnited States referred tothereport ofthepanel onUnited States -Restrictions onImports ofSugar, adopted on
22June1989, BISD 36S/331, para. 5.7,which stated that"thePanel found thatArticle II:1(b) doesnotpermit contracting
parties toqualify theirobligations under other provisions oftheGeneral Agreement andthattheprovisions intheUnited
StatesGATT Schedul eofConcessi onscanconsequent lynotjustifythemaintenance ofquantitativerestrictionsontheimportation
ofcertain sugars inconsistent withtheapplication ofArticle XI:1". TheUnited States alsoreferred totheReport ofthe
working Party onOther Barriers toTrade ,adopted on3March 1955, BISD 3S/222, para. 14,which provided that"there
wasnothing toprevent contracting parties, when theynegotiate forthebinding orreduction oftariffs, from negotiating on
matters [...]which might affect thepractical effects oftariff concessions andfrom incorporating intheappropriate schedule
annexed totheAgreement theresults ofsuchnegotiations; provided thattheresults ofsuchnegotiations should notconflict
withother provisions oftheAgreement "(emphasis added bytheUnited States).WT/DS56/R
Page69
Memorandum ofUnderstanding constituted theIMF'sso-called "conditionality" forallowing access
tothefacilities atthedisposal ofmember countries.
3.279 TheUnited States noted thatArgentina hadacknowledged thattheMemorandum of
Understanding ithadsigned withtheIMFin1995 wasmerely directed towards obtaining ageneral
levelofrevenue andthatitdevised thetaxasamechanism forreaching thefiscal target. TheUnited
States recalled thatArgentina hadclaimed thattwoyears afterthereintroduction ofthetaxinMarch
1995, revenues formeeting these fiscal goals remained "scarce". However, Argentina hadnotstated
thattheIMFactually required theuseofthestatistical tax.
3.280 Inreplytothis,Argentina emphasized thattheconditions imposed bytheIMFwerethesubject
ofa"letter ofintent" between Argentina andtheIMFwhich referred totheadoption ofnational economic
rationalizationplans.Legalwritersconsideredtheseagreementsas"simplifiedinternationalagreements".
InthecaseofArgentina, these agreements hadbecome valid upon signature, without theneedfor
subsequent legislative approval. TheMemorandum ofUnderstanding wasbinding onArgentina. This
didnotmean thattheIMFrequested application ofthestatistical tax.Thepoint wasthatArgentina 's
commitment totheIMFincluded thestatistical tax.Itadded thatthemargin ofmanoeuvre forachieving
thefiscal goalagreed withtheIMFwaslimited. Atthetimeofnegotiating theMemorandum of
Understanding itwould nothavebeenpossible forArgentina toincrease thefueltax,because ofits
recessionary effects, ortoincrease further therateofVAT. Even supposing thattheinitiative tore-
establish thestatistical taxatthree percenthadoriginated withArgentina, theIMFhadtogiveits
approval. From thatmoment, itbecame alegalobligation oftheArgentine Government towards the
IMF, towhich ithadmade commitments equivalent tothose ithadmade asaMember oftheWTO.
3.281 TheUnited States argued thattherewasnoevidence thatthestatistical taxhadbeenapproved
bytheIMF, which would berequired under theArticles ofAgreement oftheIMF. Moreover,
Article VIII:3 oftheArticles ofAgreement oftheIMFspecifically prohibited exchange measures which
discriminated andthestatistical taxwasnotlevied onimports from MERCOSUR countries. These
factors strongly suggested thattheIMFhadnotspecifically approved thestatistical tax.Indeed, the
understanding oftheUnited States wasthattheIMFrecently hasurged Argentina toeliminate the
statistical tax.TheUnited States invited thePanel toconsult withtheIMFregarding itsposition on
theArgentine tax.
3.282 Regarding thestatement thattheIMFhadurged Argentina toeliminate thetax,Argentina
noted thatwhat wasbeing discussed wasarevision ofthesource offiscal revenue withaview to
renewing theagreement onthefacilities in1998. Thiscould innowaybeinterpreted asimplying
thattheIMFhadsuggested toArgentina thatitshould notmeetthecommitment agreed withtheFund.
(b) Relevance ofthedeclarations annexed totheWTO Agreement andoftheWTO agreement
withtheIMF
3.283 According toArgentina ,theconflict between WTO andIMFobligations wasoneofthefactors
thathadmotivated theDeclaration ontheContribution oftheWTO toAchieving Greater Coherence
inGlobal Economic Policymaking ("Declaration onCoherence").134Atthesigning ofthecooperation
agreement withtheIMF, theDirector-General oftheWTO hadacknowledged thepossibility ofthe
occurrence ofsuchconflicts.
3.284 Argentina added thatcompliance withanobligation assumed vis-à-vis theIMFandfulfilment
ofanobligation arising from GATT 1994 should, according totheDeclaration onCoherence, avoid
134Declaration ontheContribution oftheWTO toAchieving Greater Coherence inGlobal Economic Policymaking, in
TheResults oftheUruguay Round -TheLegal Texts, GATT Secretariat (1994), p.442.WT/DS56/R
Page70
"theimposition ongovernments ofcross-conditionality oradditional conditions".135Ministers hadalso
recognized:
"difficulties theorigins ofwhich lieoutside thetradefieldcannot beredressed through
measures taken inthetrade fieldalone. Thisunderscore theimportance ofefforts to
improve other elements ofglobal economic policymaking tocomplement theeffective
implementation oftheresults achieved intheUruguay Round. [...]Theinterlinkages
betweenthedifferentaspectsofeconomicpolicyrequirethattheinternationalinstitutions
withresponsibilities ineachofthese areas follow consistent andmutually supportive
policies".136
3.285 Moreover, Argentina added thattheDeclaration ontheRelationship oftheWorld Trade
Organization withtheInternational Monetary Fund,137noted theclose relationship between the
CONTRACTINGPARTIEStotheGATT1947andtheInternationalMonetaryFund,andtheprovisions
oftheGATT 1947 governing thatrelationship, inparticular Article XVoftheGATT 1947.
3.286 Argentina submitted thatthese textsandtheprecedents under Article XV138covered, onthe
onehand, thehandling ofthebalance-of-payments problems which constituted thetraditional areaof
cooperation between theWTO andtheIMFand,ontheother hand, theobligations arising from
Article V:1oftheWTO Agreement andtheDeclaration onCoherence, which were meant tocover
theareaoffuture cooperation. Theyhadtobeanalyzed fromthestandpoint ofGATT/WTO obligations,
inasmuch astheywere anintegral partoftheUruguay Round Agreements.
3.287 ForArgentina, theDeclaration onCoherence wasoneoftheagreements inquestion andhad
tobeconsidered forthepurpose ofinterpreting thescope ofobligations under Article VIIIGATT 1994
inrelation toArgentina 'sagreement withtheIMFanditsimpact onfulfilment oftheobligations under
theWTO. Thisimplied thattheDeclaration onCoherence constituted an"instrument" agreed between
theparties inconnection withtheconclusion ofatreaty, within themeaning ofthegeneral ruleof
interpretation contained inArticle 31.2(b) oftheVienna Convention ontheLawofTreaties (1969).139
3.288 Argentina emphasized thatthesubsequent practice oftheCONTRACTING PARTIES had
confirmed thisinterpretation inasmuch as,inthelight, interalia,oftheabove-mentioned Article V:1
oftheWTO Agreement, theGeneral Council hadapproved, atitsmeeting of7,8and13November
1996,theAgreementbetweentheInternationalMonetaryFundandtheWorldTradeOrganization("IMF
Agreement").140Paragraph 10oftheIMFAgreement specifically accepted andacknowledged the
possibility ofinconsistency between measures adopted bytheparties inthelightofoneortheother
agreement. Argentina therefore concluded thatanyevaluation thatwasmade ofthealleged inconsistency
oftheArgentine statistical taxhadtotakeintoaccount theexistence ofapotential conflict ofrules
which wentbeyond theframework ofapossible bilateral trade dispute.
3.289 TheUnited States considered thatArgentina wasasking thePanel tocreate anewexception
notfound anywhere inthebody oftheGATT ortheWTO Agreement andindirect contravention of
Article 3DSU, which provided thatdecisions oftheDSBcould notaddtoordiminish therights or
obligations ofWTO Members.
135Ibid., p.443, para. 5.
136Ibid., p.443, paras. 4-5.
137Declaration ontheRelationship oftheWorld Trade Organization withtheInternational Monetary Fund, inTheResults
oftheUruguay Round -TheLegal Texts, GATT Secretariat (1994), p.447.
138Seeparas. 3.297-3.305 below.
139UNDocument A/CONF.39/27 (1969), hereafter the"Vienna Convention".
140Document WT/L/195, Annex I,approved byadecision adopted bytheGeneral Council atitsmeeting on7,8and
13November 1996, document WT/L/194, 18November 1996.WT/DS56/R
Page71
3.290 TheUnited States argued thattheseveral WTO declarations calling forgreater cooperation
orcoordination between theWTO andtheIMF, which Argentina cited insupport toitsarguments
maybelaudable goals. However, thedeclarations hardly established concrete exceptions tofixedWTO
rules.ThesedeclarationsimposednobindingobligationsonMembers,andtheycertainlydidnotaddress
thespecific issue before thePanel inthismatter.
3.291 According totheUnited States, Argentina hadnotdemonstrated thatimposition ofthethree
percenttaxwasrequired orevenrequested bytheIMF. Asitappeared thatArgentina itself chose
tolevythetaxasameans toachieving fiscal goals established bytheIMF, theUnited States declared
thatMembers should notbepermitted tovoluntarily adopt WTO-inconsistent practices tomeetIMF
commitments ofageneral nature. Totheextent Argentina haddoneso,itstaxwasadopted for"fiscal
purposes" indirect contravention ofArticle VIII.
3.292 TheUnited States maintained thatthequestion ofwhether amendments orexemptions should
bemade under theWTO Agreement toprovide forbetter cooperation withtheIMFwasreserved for
theWTO Members, notadispute settlement panel.
3.293 Argentina wastotally inagreement thatamendments orexemptions should bereserved for
WTO Members, butitwastheUnited States which hasbrought thisquestion before thePanel while
Argentina wasrequesting thePanel torule,inthisspecific case, ontheexistence ofcross-obligations
responsible forasituation which, intheviewoftheUnited States, represented thenon-fulfilment of
obligations vis-à-vis theWTO. Inother words, itwastheresponsibility ofthePanel todetermine
whether Argentina should act,asproposed bytheUnited States, andfailtofulfil anobligation tothe
IMF, onthegrounds thatthestatistical taxwasunrelated totheapproximate costoftheservice.
Argentina rejected thepossibility thatnosuchrelationship existed andalsorejected theprecedent of
notcomplying withitslegitimate international obligations.
3.294 ForArgentina, the"empirical "method ofsolving problems astheyarisewhich aspecial sub-
group oftheWorking Party onQuantitative Restrictions hadsuggested withrespect totheinterpretation
ofArticle XV141meant relying on"practice". InGATT terms, practice hadconsisted, firstly, inholding
consultations withtheIMF, consultations which Argentina considered pertinent andindeed requested.
Secondly, anyresponse bytheIMFshould beexamined andevaluated inthelightoftheparticular
characteristics ofthecase.
3.295 Argentina further considered that, accordingly, thePanel should consider thesubsequent
legislative developments. TheDeclaration onCoherence wasanintegral partofaninternational treaty:
theWTO Agreement. Intheprocess ofconverting theprovisions oftheWTO Agreement, which were
"programmatic", into"operational" rules, Argentina hadworked together withtheotherWTO Members
onpreparing theAgreements between theWTO andtheIMFandtheWorld Bank, approved bythe
General Council atitsmeeting on7,8and13November 1996.
3.296 ThecaseoftheArgentine statistical taxconstituted anexample ofcross obligations between
thetwoinstitutions. Theexistence ofthisandother examples waswhathadinspired theDeclaration
onCoherence.
(c) Scope ofArticle XV
3.297 Inrelation tothedeclarations andagreements regarding therelationship between theWTO
andtheIMF, Argentina recalled thatArticle XV:1 oftheGeneral Agreement provided that"the
CONTRACTING PARTIES shallseekcooperation withtheInternational Monetary Fund [...]with
141Seepara. 3.299 below.WT/DS56/R
Page72
regard toexchange questions within thejurisdiction oftheFund [...]andother trade measures within
thejurisdiction oftheCONTRACTING PARTIES".
3.298 Argentinanotedthat,onthebasisofthisconnectionbetweentherulesgoverningtheGATT/IMF
relationship, which found concrete expression inspecific provisions authorizing, forexample, theuse
ofexchange controls inaccordance withtheArticles ofAgreement oftheInternational Monetary Fund
(Article XV,paragraph 9(a)), thepossibility wasenvisaged ofsituations where conflicts could arise
inrespect oflegalobligations.
3.299 Thus, According toArgentina, aworking party sub-group which looked intowhether Article
XV,paragraph 9(a)provided exemption fromcompliance withobligations under GATT, "agreed that
itwould bepreferable nottotrytolaydown general principles ontherelationship between paragraphs
4and9buttoleave thisquestion overforempirical consideration ifandwhen particular points arose
which hadabearing onit".142
3.300 Argentina stressed thatthepractical upshot ofallthiswasthat,forexample, when faced with
acomplaint byItalyagainst Turkey concerning theestablishment ofanequalization fundwhich was
financed bythesaleofimport permits (allegedly inbreach ofArticle II:1(b) GATT), "theFund had
stated thatitdidnotobject tothetemporary continuance ofthese practices andwould remain in
consultation withTurkey onthese practices. Thecomplaint wasreferred tothePanel onComplaints
butwaswithdrawnlater".143Thepurposeofthisinter-agencycollaborationwastoencouragethemember
governments ofbothorganizations todevelop coordinated action intheireconomic policymaking.
3.301 Argentina further argued that,inrelation tothescope andapplication ofArticle XV,the
following hadbeen noted intheTokyo Declaration of1973 which launched theTokyo Round of
multilateral trade negotiations:
"thepolicy ofliberalizing world tradecannot becarried outsuccessfully intheabsence
ofparallel efforts tosetupamonetary system which shields theworld economy from
theshocks andimbalances which havepreviously occurred. TheMinisters willnot
losesight ofthefactthattheefforts which aretobemade inthetrade fieldimply
continuing efforts tomaintain orderly conditions andtoestablish adurable andequitable
monetary system".
TheMinisters recognize equally thatthenewphase intheliberalization oftradewhich
itistheirintention toundertake should facilitate theorderly functioning ofthemonetary
system".144
3.302 FortheUnited States ,Article XVdidnotspeak totheimposition ofastatistical tax.Instead,
Article XVwasconcerned withexchange arrangements. Itwasinapplicable tothisdispute because
thetaxinquestion wasnotanexchange control measure andborenodirect relationship toexchange
issues. Rather, asacknowledged byArgentina, thetaxwasacharge onimports forthegathering of
statisticaldataregardingArgentina’sinternationaltrade.Towhateverdegreeexchangecontrolsapproved
bytheIMFmaybeallowed under Article XV,Argentina ’staxclearly wasoutside thescope ofthat
provision. While Article XVdidgenerally callforcooperation between GATT contracting parties
andtheIMF, Article XV:4 wascareful tostatethat"[c]ontracting parties shallnot,byexchange action,
142Argentina referred totheWorking Party onQuantitative Restrictions Relations between theGATT andtheInternational
Monetary Fund Report oftheSpecial Sub-Group, BISD 3S/170, p.195, para. 8.
143Argentina referred todocument SR.9/7, asmentioned inGATT, Analytical Index: Guide toGATT LawandPractice,
Updated 6thEdition (1995), p.439.
144MIN(73)1, Declaration ofMinisters approved atTokyo on14September 1973, BISD 20S/19, p.22,para. 7.WT/DS56/R
Page73
frustrate theintent oftheprovisions ofthisAgreement".145Argentina ’stax,though, didjustthat.
Therefore, tosuggest thatthelatitude accorded toMembers under Article XVtomeetcommitments
totheIMFinrelation toexchange controls extended sofarastopermit theimposition ofataxin
violation ofArticle VIII,would necessarily expand thescope ofArticle XVfarbeyond whatitsdrafters
intended.
3.303 Argentina replied thatthepractice relating toArticle XVshould notbeoverlooked orexcluded
because thatArticle referred tomeasures relating toexchange controls. Argentina didnotdispute the
subject matter ofthisArticle, butconsidered ittoformpartofthehistorical relationship between GATT
andtheIMF.
3.304 Thenegotiating effort made bytheWTO Members tomake "operational" theDeclaration on
Coherence andthefactthattheArgentine casewasspecifically mentioned during theprocess constituted
palpable evidence thatitwasnotsolely aquestion of"laudable goals". Thehistory ofArticle XVand
theDeclaration onCoherence werespecifically applicable totheArgentine case,sinceitwasaquestion
ofaprecedent which hadledtothesigning oftheAgreement between theWTO andtheIMF. Argentina
hadmentioned Article XVasabasis fortheDeclaration onCoherence, which asmentioned above,
itconsidered applicable inthiscaseasan"instrument" agreed between theparties inconnection with
theconclusion ofatreaty.
3.305 Argentina didnotwishtoextend thescope ofArticle XVtothiscase, butcited thehistory
oftheproblems relating totheexchange agreements asastageintheprocess ofWTO/IMF cooperation.
Ifthere hadnotbeenproblems overandabove those relating toexchange rates, there would, firstly,
havebeennoneedtonegotiate thetextoftheDeclaration onCoherence and,secondly, noneedto
negotiate thesubsequent agreements between theWTO andtheIMFandtheWorld Bank inorder to
beabletodealwithprecisely suchsituations astheoneatissue. Likewise, mention ofArticle XV
oftheGATT 1994when referring tothequestion of"WTO-IMF relations", didnotmean thatArgentina
intended tomake anassimilation between thestatistical taxandanexchange measure orsome similar
measure. Neither diditimply thatthestatistical taxwasameasure which "frustrate[d] theintent"
oftheAgreement.
D. ARTICLE 7ATC
3.306 TheUnited States considered that,astheyapplied totextiles andapparel, Argentina ’sspecific
duties andtaxonimports werecontrary toArticle 7ATC. Article 7ATCimposed asweeping obligation
onsignatories totakewhatever stepswerenecessary tobring theirregimes intocompliance withGATT
obligations astheyaffected textiles andapparel, andthereby toimprove market access fortheseproducts.
ATCsignatories hadrecognized theacuteimportance ofgreater market access forcovered merchandise
and,through Article 7,hadaccepted anaffirmative obligation toeliminate improper methods of
protection. Ataminimum, aviolation ofaprovision oftheGATT thataffected textiles andapparel
alsoconstituted aviolation ofArticle 7ATC. Thebroad language ofArticle 7ATC suggested aneven
more expansive application. However, given whatappeared tobeclearGATT violations inthiscase,
thePanel needed onlyfindthatsuchviolations, astheyrelated totextiles andapparel, alsocontravened
Article 7ATC. Inagreeing totheATCaspartoftheWTO Agreement, Argentina hadagreed to"achieve
improved access" toitstextile andapparel market through lower tariffs andreduced non-tariff barriers.
145TheUnited States added thatadArticle XVaddressed theword "frustrate" inArticle XV:4 bypermitting infringements
oftheletter ofanyArticle by"exchange action" solongas"there isnoappreciable departure from theintent oftheArticle".
However, inthisinstance, there wasnoexchange action. Even ifArgentina ’sstatistical taxcould beconsidered assuch,
theimposition ofthethree percentstatistical taxwasan"appreciable departure" from therequirements ofArticle VIII.
Moreover, theexamples intheAdNote onlyrelated toexchange measures consistent withtheArticles ofAgreement of
theIMF.WT/DS56/R
Page74
Byimposing itsspecific duties inviolation ofGATT Articles IIandVII,aswellasitstaxonimports
inviolation ofGATT Article VIII, Argentina hadnotonlyviolated theGATT butalsotheATC.
3.307 Argentina wasoftheviewthatthepurpose oftheATC wastoeliminate existing quantitative
restrictions withaviewtointegrating thissector intotherulesofthemultilateral trading system. Article
7.1(a) ATC referred tocompliance withbound tariff ratesandthelifting ofthequantitative barriers
maintained bysome countries which Member countries mayhavenotified totheTextile Monitoring
Body ("TMB") inaccordance withArticle 7.2.When theWTO Agreement, including theATC, entered
intoforce, Argentina wasnotapplying quantitative restrictions under theMFA oranybilateral
agreements. Argentina didnotmaintain quantitative restrictions ornon-tariff measures suchascustoms,
administrative andlicensing formalities thatmight giverisetoaroll-back obligation, norhaditdone
sointhepast.
3.308 ForArgentina, theinterpretation seeking todefine Article 7ATCasimposing alegalobligation
toopenupmarkets beyond thelevelofbound tariffs hadbeenrejected byboththeGeneral Council
andtheWTO Ministerial Conference ofSingapore.146ThefactthatArticle 7provided that"Members
shalltakesuchactions asmaybenecessary toabide byGATT 1994rulesanddisciplines" presupposed
theimplementation oftariff bindings. TheUnited States 'invocation ofArticle 7ATC wasneither
legally noreconomically justifiable. Thegrowth ofArgentine imports oftextiles andapparel during
theperiod 1991-1996 unambiguously demonstrated theopenness oftheArgentine market andthelack
ofbarriers orobstacles totheentry ofthose products. Imports oftextiles hadrisen by800percent
between 1991and1996. During thesameperiod United States textile imports hadrisenbyamaximum
of50percentandthose oftheECby41percent.
3.309 TheUnited States noted thatArgentina appeared towagree withtheUnited States thatifits
practices violated GATT obligations, thentheyalsoviolated Article 7ATC. However, theUnited States
considered thatattempts tonarrow thisprovision ’sapplication were inconsistent withitslanguage,
history andunderlying purpose. India, asathirdparty tothisdispute, hadadvocated averynarrow
interpretation ofArticle 7ATC. India hadsuggested thatArticle 7implicated onlyalimited category
ofmeasures, i.e.,tariff concessions andquantitative restrictions listed inaMember ’sschedule which
related totextiles andclothing.147Applying India’stheory, violations ofGATT 1994provisions such
asArticle I:1andIII:2would notviolate Article 7ATC, eveniftheynegatively impacted market access
fortextiles andclothing, solongastheydidnotrelate toaparticular tariff orquantitative restriction
listed inaparticular Member ’sSchedule.
3.310 TheUnited States argued thatIndia’sinterpretation ignored Article 31oftheVienna Convention
andwasinconsistent withthetext,context, andobject andpurpose ofArticle 7ATC. Theproper
interpretation ofthephrase "thespecific commitments undertaken bytheMembers" wasallGATT
1994rulesanddisciplines which negatively impacted improved market access forclothing andtextiles.
India’sreading oftheword "commitments" tomean onlyspecific scheduled concessions wasfartoo
limited. Thetextdidnotread"specific commitments undertaken byaMember", butrather "thespecific
commitments undertaken bytheMember s".Thismeant allcommitments undertaken byallWTO
Members inthesingle undertaking, atleastastheyregarded theprovisions ofGATT 1994. This
interpretationwasconfirmedbytheimmediatecontextofthe"specificcommitments"phraseinArticle7,
which stated that"allMembers shalltakesuchactions asmaybenecessary toabide byGATT 1994
rulesanddisciplines soasto:(a)achieve improved access tomarkets fortextile andclothing products
through suchmeasures astariffreductions andbindings, reduction orelimination ofnon-tariff barriers ,
andfacilitation ofcustoms, administrative andlicensing formalities".148IfArticle 7werelimited to
only"scheduled" tariffandquantitative restriction concessions asIndia argued, thenthenon-tariff and
146Argentina referred todocument WT/MIN(96)/2, 26November 1996, Section IV.
147India'sarguments arecontained insection IV.C below (Third Parties Submissions).
148Emphasis added bytheUnited States.WT/DS56/R
Page75
non-quantitative references inArticle 7.1(a) to(c)would berendered anullity.149The"schedules"
ofMembers simply didnotinclude references tonon-tariff barriers, facilitation ofcustoms,
administrative, andlicensing formalities, dumping andsubsidies, orintellectual property rights.
Moreover, thefactthatArticle 7.2anticipated thatMembers 'actions already mayhave"been notified
toother WTO bodies" other thantheTMB suggested afarbroader context forGATT 1994provisions
thantextiles andapparel.
3.311 TheUnited States contended that,onthecontrary, theinterpretation ofArticle 7ATCadvocated
bytheUnited States andtheECwasconsistent withitsobject andpurpose ofachieving improved market
access fortextile andclothing products. While theATC generally dealtwithquantitative textile and
apparelrestrictions,Article7ensuredthatnon-quantitativerestrictionssuchastariffs,non-tariffbarriers,
licensing provisions, intellectual property provisions were notusedinamanner which undermined
market access forallWTO members. Anoverly-restrictive reading ofArticle 7ATCsuchasproposed
byIndia andArgentina would limittheability oftheTMB (pursuant tonotifications received under
Article 7.2)topursue itsmandate ofcollecting andreporting onnon-tariff measures having anegative
impact onmarket access fortextile andapparel products.
3.312 Finally, theUnited States contested India’sreference toalleged negotiating history ofArticle 7
ATC, based onmeetings ofwhich nominutes weretaken. Article 32oftheVienna Convention limited
theuseofpreparatory work ofatreaty "inorder toconfirm themeaning" ofthetext. Since India
wasnotusing this"preparatory work" toconfirm aparticular meaning ofthetext,nortodemonstrate
thatthemeaning ofthetextwasambiguous orobscure orthatitwould leadtoaresult which would
bemanifestly unreasonable, there wasnobasis forthePanel toreview orrelyonsuchwork.
3.313 Argentina considered thatthearguments oftheUnited States hadbeenadequately queried
byIndia initsthird-party statement, which itfully supported. Also, inrelation tothevalue of
preparatory work asamethod ofinterpretation, Argentina stated thatpreparatory work should serve
toconfirm theinterpretation ofatextassuchandnottoconfirm theunilateral interpretation made
byaparty.
IV. THIRD PARTIES SUBMISSIONS
A. THE EUROPEAN COMMUNITIES
4.1 TheEuropean Communities noted thatArgentina 'sregime ofminimum specific duties on
textiles, apparel andfootwear hadbeenfrequently renewed andamended. Themeasures applying to
footwear hadbeenplaced onadifferent legal basis tothose concerning textiles andapparel since
14February 1997, thedateonwhich Argentina opened asafeguard investigation anddecided toimpose
"provisional" minimum specific duties onfootwear. Generally, these decisions innowayaltered the
nature oftheregime ofminimum specific duties fortextile andapparel products northefactthatby
theirnature theycould exceed thebound duties. They served tounderline however thatthecomplaint
hadtobeconsidered asdirected attheregime, nottheindividual legalactsimposing theduties which
were susceptible toconstant change.
4.2 TheECalsonoted thatthenew"safeguard" duties were identical inform totheduties they
replaced. Thesafeguard measures wereexpressly stated inArticle 2ofResolution No.226/97 tobe
"provisional minimum specific duties", thatistheyhadexactly thesame nature astheirpredecessors
since theyapplied where theamount oftheadvalorem dutywaslessthanthespecified "minimum
149TheUnited States referred totheAppellate Body Report onUnited States -Standards forReformulated andConventional
Gasoline ,Op.Cit., p.23,where theAppellate Body stated thataninterpreter wasnotfreetoadopt areading thatwould
result inreducing whole clauses orparagraphs ofatreaty toredundancy orinutility.WT/DS56/R
Page76
duty". Noteventheir"provisional" nature allowed themtobedistinguished since theywerenomore
"provisional" thantheprevious duties.
4.3 TheECargued thatthePanel should notaccept therequest byArgentina forapreliminary
ruling todismiss thecomplaint insofar asitrelated tothefootwear duties onthegrounds thattheduties
complained against nolonger existed. Theprovisional safeguard measures which hadbeenadopted
soonaftertheduties onfootwear hadbeenrepealed operated inexactly thesame wayasthepreviously
existing duties. Theprovisional safeguard measures werealsoclearly intended toreplace theprevious
duties aswasevidenced bythereference inthepreamble ofeachoftherepealing andsafeguard
Resolutions totheother Resolution andthesimultaneity oftheirentry intoforce. TheUScomplaint
should betaken tobedirected against theregime ofminimum specific duties andnotagainst specific
legalacts.Thereference tospecific Argentine legalactsintheUSrequest forthepanel onlyserved
todescribe thefeatures ofthemeasures complained of.Iftheapproach ofArgentina were tobe
followed, thentheUScomplaint against thespecific duties ontextiles andapparel could alsobe
considered tobeinadmissible, since theArgentine measures imposing ithadalsochanged. Thefact
thattheminimum specific duties onfootwear werenowbased ontheArgentine legislation onsafeguards
constituted anattempt tojustify themeasures assafeguard measures andthisjustification needed to
beexamined.
4.4 TheECshared theviewoftheUnited States thatinimposing itsregime ofminimum specific
duties ontextiles, apparel andfootwear, Argentina hadviolated Article IIGATT 1994 byallowing
duties tobeimposed which exceeded itsbound tariff rateof35percentadvalorem .
4.5 FortheEC,anysuchsystem created apossibility fordutyratestoexceed thebound ratewith
theprobability ofthishappening increasing asthecustoms value oftheimported product decreased.
Argentina effectively admitted thiswhen itinsisted ontheavailability ofthechallenge procedure in
itsCustoms Code toavoid thepayment ofexcess duty. Such aneffect wasparticularly likely inthe
present caseinviewofthemethod usedbyArgentina toestablish theminimum specific import duty.
Asthiswasexplained byArgentina itselfinbilateral exchanges andduring theseproceedings, thereason
fortheexistence ofthesystem wasthatcertain shipments ofthegoods wereconsidered tobeimported
atparticularly lowprices which caused injury totheArgentine industry.
4.6 According totheEC,since theprices ofproducts within atariff heading varied andtheprice
usedtocalculate thecorresponding minimum specific dutywasanaverage orrepresentative price,
itwasobvious thatsome imports would beabove andsome below these prices. Since thedutywas
calculated at35percentofthe"average" or"representative" price, allthose products imported atbelow
the"average" or"representative" price boreadutyofmore than35percentadvalorem .
4.7 TheECargued thattheexplanation ofthecalculation oftheduties supplied byArgentina in
theform ofatableincluding alistoftariff heading fortextile andclothing, average prices usedas
abasis forthecalculation andtheDIEM proposed showed some proposed minimum specific duties
which were above theamount calculated tobe35percentofthe"representative price", sometimes
byveryhighmargins. TheECreferred thePanel toHStarifflines5209.52.00, 5309.11.00, 5513.12.00,
5513.22.00, 5514.12.00, 5513.13.00, 5516.22.00, 5516.42.00, 5516.91.00, 5516.93.00, 5606.00.00,
5607.21.00, 5607.50.11, 5607.90.10, 5702.10.00, 5702.20.00, 5702.49.00, 5702.92.00, 5705.00.00,
6102.30.00, 6104.29.00, 6107.92.00, 6116.92.00, 6204.13.00, 6204.19.00, 6207.22.00, 6210.10.00,
6302.92.00, 6306.41.00, 6306.91.00, 6306.99.00, 6310.10.00. ForHSChapter 56theproposed duties
were sometimes over10times the35percentlimitandtherefore equivalent to300percentduties
(see,e.g.,tariff line5607.90.10). Even theweighted average dutyforthewhole ofChapter 56was
above 35percentofthe"representative prices". Acomparison withthelatest version oftheminimumWT/DS56/R
Page77
specificdutiesimposedbyResolutionNo.597/97150of14May1997showedthatsomeoftheseminimum
specific duties ofover35percentadvalorem ofthe"representative prices" werestillbeing applied
byArgentina.
4.8 TheECagreed withArgentina thattheUnited States boretheburden ofproof. However, it
could bedemonstrated thatapplied duties would exceed 35percentadvalorem simply byconsidering
thewayinwhich theduties were calculated. TheUnited States hadalsogiven specific examples of
tariff positions where theduties exceeded 35percent.TheECfurther considered thatArgentina had
admitted thatsome oftheexamples provided bytheUnited States demonstrated anapplied dutyin
excess of35percent. Iffurther specific examples ofhowapplied duties mayexceed thebinding under
thissystem wereneeded, theyhadbeenprovided byArgentina itself. Theexamples ofadministrative
appeals bytheimporter ofCompany XandbyCompany Yrelated totheimposition ofminimum specific
duties exceeding 35percentadvalorem .
4.9 TheECagreed withArgentina thatArticle IIGATT 1994 didnotimpose anobligation on
aWTO Member toapply aspecific typeofdutybutonlytogrant tarifftreatment "nolessfavourable"
thanthatprovided initsSchedule. Thus, totheextent thattheapplied tariffs werelower (e.g., 20per
centadvalorem )thanthetariffbinding of35percentadvalorem ,therewassome scope forArgentina
toapply duties higher thantheapplicable advalorem ratesolongastheapplied duties didnotinany
caseexceed thebound rateof35percentadvalorem.
4.10 TheECcould therefore share theconclusion expressed byArgentina that,foracategory of
goods withanadvalorem applied dutyof20percentandsubject tothepayment ofaspecific duty
ofUS$3.50, thethree following possibilities existed:
CUSTOMS VALUE CUSTOMS DUTY
more than $17.50 20percentadvalorem
between $17.50 andUS$10 $3.50
lessthan $10 35percentadvalorem
4.11 TheEChadunderstood Argentina asadmitting thatArticle IIGATT 1994 required thatthe
customs dutyimposed onanygoodsubject totheregime ofminimum specific duties could notinany
caseexceed 35percentadvalorem .TheECthusconsidered theargument byArgentina thata"mere
potentiality" ofaWTO incompatibility wasnotsufficient tofound aviolation, wasmisleading and
unfounded.
4.12 TheECnoted thatArgentina hadreferred toGATT case-law according towhich there was
noviolation ifthenational measure merely provided forthepossibility ofameasure being incompatible
withWTOrules.Argentinaequated"possibility"with"potentiality"andarguedthatthisprincipleapplied
inthepresent case. Thisparallel wasmisleading andincorrect. Theprinciple wasthatlawsand
regulations ofWTO Members which allowed taking measures which would beincompatible withthe
WTO werenotthemselves violations. Theviolation onlyoccurred when theauthorities oftheWTO
Member actually usedthepossibility given toitandtookameasure contrary totheWTO. Thesituation
inthepresent casewasdifferent. Thecustoms authorities ofArgentina wereobliged toimpose minimum
specific duties evenwhen theyexceeded 35percentadvalorem .Argentina 'slegislation didnotallow
them adiscretion inthematter. Thepotentiality invoked byArgentina wasmerely thefactthatthe
minimum specific duties would notalways exceed 35percentadvalorem butwould onlydosowhen
thecustoms value ofthegoodwasbelow acertain level. Since the"potentiality" ofaviolation ofArticle
IIGATT 1994 depended ontheprice oftheproduct, notonanyaction byArgentina ,theprinciple
established bytheGATT case-law invoked byArgentina wasnotapplicable.
150Boletín Official delaRepública Argentina ,No.28.650 of20May 1997.WT/DS56/R
Page78
4.13 TheECnoted thattheArgentine Customs Code (Law No.22.415) contained anadministrative
procedure bywhich animporter could challenge, interalia,theamount ofcustoms dutyitwasasked
topay.Inaddition, Article 75.22 oftheConstitution oftheArgentine Republic of1994provided that
treaties were hierarchically superior toandtherefore prevailed overdomestic Argentine laws. Any
Argentine judge wasabletodeclare unconstitutional anyprovision ofArgentine lawwhich violated
theprovisions ofaninternational treaty suchastheWTO Agreement which hadbeenratified by
Argentine LawNo.24.425. Theimplication seemed tobethatArgentina 'sregime ofminimum specific
duties wascontrary toitsConstitution. TheECtherefore wondered whyArgentina hadnotabolished
itssystem ofminimum specific duties oratleastintroduced aceiling of35percentadvalorem to
ensure thatitrespected theWTO Agreement andArgentina 'sConstitution.
4.14 FortheEC,thechallenge procedure described byArgentina, eveninconjunction withthe
principle ofthehierarchy ofnorms, wasnotsuchastobring thesystem ofminimum specific duties
intoconformity withArticle IIGATT 1994. Argentina claimed thattheimporter wasentitled, ifhe
introduced a"challenge procedure" tohavehisgoods cleared through customs andplaced infree
circulation withonlythepayment oftheamount which heconsiders due,provided thattheimporter
submits aguarantee ofpayment ofthedifference, pending theadjudication ofhischallenge. Argentina
furtherclaimedthattheprocedurewasautomatic,freeandrequirednolegalrepresentation.Theexamples
provided byArgentina demonstrated thatthiswasnotthecase. According totheEC,thechallenges
mentioned byArgentina werelongandcomplicated. Argentina hadgiven onlytwoexamples butthere
certainly existed thousands ofpotential cases. Finally, noindication wasgiven astotheoutcome of
these challenge procedures. They hadbeenintroduced inFebruary andNovember 1996 andwere
apparently stillpending.
4.15 TheECfurther argued that,evenifitwerethecase,thatachallenge procedure would "simply
andautomatically" leadtothedutynotexceeding 35percentadvalorem (andthishadnotbeen
demonstrated), thesystem would stillnotbecompatible withArticle IIGATT 1994. Thehigher duty
wasimposed bylawandtheimporter wasforced tofollow aprocedure toavoid it.Inthemeantime
hehadtobearthecosts ofthechallenge andtheprovision ofaguarantee.
4.16 TheECstated thatthetransformation oftheminimum specific duties imposed onfootwear
into"provisional minimum specific duties" on25February 1997 (date ofentry intoforce) andthe
initiation ofasafeguard investigation constituted amere change oflegal basis andthemeasures
themselves remained thesame. TheECtherefore considered thischange oflegalbasistobeanattempt
byArgentina tojustify itsmeasures under theWTO. Thesafeguard investigation hadnotbeenopened,
andtheprovisional measures notimposed, inconformity with WTO Agreement. Accordingly,
Argentina 'ssystem ofminimum specific duties onfootwear stillviolated Article IIGATT 1994 just
asitdidbefore 25February 1997.
4.17 TheEC'sinformation concerning Argentina 'ssafeguard investigation andprovisional measures
derived from Argentina 'sResolution No.226/97 opening theproceeding andimposing provisional
measures, WTO notification documents G/SG/N/6/ARG/1 -G/SG/N/7/ARG/1 (including Corr. 1)
andG/SG/N/6/ARG/1/Suppl.1 -G/SG/N/7/ARG/1/Suppl.1, andthereplies byArgentina toquestions
putbytheECinthecourse ofconsultations heldunder Article 12.4oftheAgreement onSafeguards
on2May1997.
4.18 TheECnoted thatArticle 6oftheAgreement onSafeguards setouttwopreconditions which
needed tobemetbefore safeguard measures maybeimposed: (i)critical circumstances where delay
would cause damage which itwould bedifficult torepair; and(ii)apreliminary determination that
therewasclearevidence thatincreased imports hadcaused orwerethreatening tocause serious injury.
Inaddition, Article 2(Conditions) oftheAgreement onSafeguards, which applied toallmeasures
taken under thisAgreement, provided inparagraph 1thatsafeguards mayonlybeimposed ifproductsWT/DS56/R
Page79
were being imported "insuchincreased quantities, absolute orrelative todomestic production, and
under suchconditions astocause orthreaten tocause serious injury".
4.19 TheECrecalled thatArticle 2.1oftheAgreement onSafeguards required thatproducts be
imported inincreased quantities. Thiswasnotanalternative totheconditions ofimport andtherefore
hadtobesatisfied inevery case. Argentina 'sResolution No.226/97 andtheArgentine notifications
totheWTO referred tobytheECinparagraph 4.17above demonstrated thatimports intoArgentina
offootwear haddecreased between 1994 and1995inbothabsolute andrelative terms. Argentina did
notdenythisbutclaimed during consultations withtheECthatthere hadbeenanincrease inimports
between 1991 and1995. Safeguard measures were intended toprotect against emergencies and
unforeseen circumstances.151TheECconsidered thatanincrease inimports between 1991 and1995
could notjustify safeguard measures imposed in1997 where there wasadecrease inimports inthe
mostrecent period forwhich datawasavailable (1994 and1995). Even ifitmaybejustified toprovide
(asinArticle 8andAnnex IofArgentina 'sDecree No.1059/96), thatinformation onimport data
"must besupplied forthelastfive(5)fullyears", thiswastoprovide abackground against which trends
could beestablished, notinorder tomeasure theinjury. TheECconsidered thatArticle 5.1ofthe
Agreement onSafeguards foresaw asareference period forcalculating quantitative restrictions aperiod
ofthelastthree representative years.
4.20 TheECargued that,asregards thesecond element inArticle 2.1,i.e.theconditions under
which theproducts were imported, therequirement thatimports hadtohaveaneffect ondomestic
prices through price-undercutting, price-suppression orprice-depression wasclearly established. Since
Argentina hadnotconducted thisanalysis (thenotification documents didnotpresent anyinformation
onprices), anessential andseparate condition fortheapplication ofsafeguards hadnotbeenmet.The
ECcould notaccept asanexcuse thestatement ofArgentina during theconsultations under Article
12.4oftheAgreement onSafeguards, thatpriceanalysis was"difficult" duetothevariety ofproducts
under consideration, since itwould havebeenpossible torestrict thescope ofthemeasures tothose
products forwhich itwaspossible todetermine whether thisrequirement wasfulfilled.
4.21 TheECalsoinsisted thattherewasnoclearevidence ofserious injury. According toArticle 6
oftheAgreement onsafeguards, there hadtobeclearevidence ofserious injury orathreat ofinjury.
Thenotification under Article 12.1(a) oftheAgreement onSafeguards (initiation ofinvestigatory
process)152didnotcontain anyevidence ofserious injury. Thedatainthenotification under Article
12.4(imposition ofprovisional measures)153referred onlytocritical circumstances .Itwasfurthermore
insufficient toprovide "clear evidence" fortheexistence ofserious injury because itonlyreferred to
thechange inthecondition ofthedomestic industry from1991to1995which was,inparticular because
oftheduration oftheperiod, irrelevant forassessing thesituation oftheindustry. Thenotification
contained nodataonprofitability ofthedomestic industry eventhough thiswasrequired byArticle
4.2(a) oftheAgreement onSafeguards. Initsresponse totheEC’squestions raised during the
consultations under Article 12.4oftheAgreement, Argentina admitted thattheinvestigation lacked
information onprofitability inthesector being investigated. Thenotification documents didnotpresent
anyinformation onproductivity oftheArgentine industry.
4.22 TheECnoted thatanother element ofserious injury forwhich clearevidence would berequired
wastheexistence ofacausal linkbetween theimports andtheinjury sothatinjury caused byfactors
other thanincreased imports would notbeattributed toimports (Article 4.2.(b) oftheAgreement on
Safeguards). Itwasstated inArgentina 'snotification document154thatthesituation ofthedomestic
151SeeArticle XIXGATT 1994.
152Document G/SG/N6/ARG/1; G/SG/N7/ARG/1, 25February 1997.
153Document G/SG/N6/ARG/1/Suppl. 1;G/SG/N7/ARG/1/Suppl. 1,18March 1997.
154Ibid.WT/DS56/R
Page80
industry wasonly partly aresult ofimport trends.155Initsresponse totheCommunity ’s
questions during theconsultations under Article 12.4oftheAgreement onSafeguards, Argentina had
admitted theexistence ofother factors forthecondition ofthedomestic industry suchastheapparent
contraction oftheArgentine footwear market andageneral economic crises in1995. Additionally,
although onlyimports from non-MERCOSUR countries were subject tothemeasure, imports from
MERCOSURcountrieswereincludedintheinjuryassessment.Importsfromnon-MERCOSURcountries
had,according toadocument dated 25April 1997submitted bytheimporter 'sassociation CAPCICA
tothesafeguards investigation, dropped continuously since 1992 toonly4.69percentin1996. This
demonstrated thatimports fromnon-MERCOSUR countries could notbethecause ofanyinjury that
mayexist.
4.23 TheECalsocriticized theabsence ofcritical circumstances .According toArticle 6ofthe
Agreement onSafeguards, theimposition ofprovisional measures required theexistence ofcritical
circumstances where delay could cause damage which would bedifficult torepair. TheECconsidered
thatthiswasanadditional requirement andthedataprovided onthecondition ofthedomestic industry
alone could notbesufficient tojustify theneedtoimpose measures immediately. There wasnoreference
toanimminent danger ofsevere damage inArgentina 'snotification documents except thefactthat
the"mere absence ofMinimum Specific Duties would recreate thecritical circumstances required for
theadoption ofprovisional measures".156TheECconsidered thataWTO Member could notrelyon
itsownacts,suchastheremoval oftheprevious minimum specific import duties toestablish critical
circumstances andjustify provisional safeguard measures.
4.24 Inconclusion, theECconsidered thattheimposition ofaprovisional safeguard measure in
thiscasewasmanifestly unjustified andtheregime ofminimum specific duties onfootwear measures
remained contrary toArticle IIGATT 1994.
4.25 With respect tothealleged violation ofArticle 7ATC, theECshared theviewoftheUnited
States that,astheyapplied totextiles andapparel, Argentina ’sspecific duties onimports werecontrary
toArticle 7.1ATC. There wasnobasisinthatprovision fortheclaim byArgentina thattheobligations
itcreated were limited tothose matters which Members hadnotified pursuant toArticle 7.2ATC.
Onthecontrary, Article 7.2required notification totheTextiles Monitoring Body ofallactions taken
under Article 7.1which hadabearing ontheimplementation oftheATC. Argentina hadalsoviolated
Article 7.2ATC bynotnotifying itsmeasures asrequired bythatprovision.
4.26 TheECconcluded thatthePanel should findthatArgentina 'ssystem ofminimum specific
duties forfootwear, textiles andapparel, violate Article II:1(a) andII:1(b) ofGATT 1994 andthose
relating totextiles andapparel alsoviolate Article 7,paragraphs 1and2ATC andrecommend that
Argentina bring itsmeasures intoconformity withitsobligations under GATT 1994 andtheATC.
B. HUNGARY
4.27 Hungary considered thatArgentina 'sminimum specific import duties often hadamounted to
more than35percentoftheactual value oftheaffected products, asitwasthedeclared purpose of
Argentina when establishing them toimpose adutyhigher thantheadvalorem dutyotherwise tobe
applied. Hungary provided dataregarding theevolution forthesixmostaffected Hungarian exports:
Specific duties indollar perkilogram
Product 1993 1994 from 1995
155Ibid., p.2,para. 5.
156Ibid.WT/DS56/R
Page81
6201.11.00 - 6.0 16.3
6202.11.00 - 3.9 16.3
6203.11.00 - 16.5 26.2
6203.31.00 - 13.7 26.2
6203.41.00 - 14.0 14.0
6204.31.00 - 13.2 26.2
4.28 Hungary stated that,duetotheintroduction andlaterthedrastic increase oflevelofspecific
duties, theHungarian textiles andapparels exports toArgentina hadpractically ceased toexist.
4.29 Hungary recalled thatArticle IIofGATT 1994prohibited Members oftheWTO fromexceeding
theirbound tariffratesandaccording treatment lessfavourable thantheterms stipulated inSchedules.
Inimposing specific duties ontextiles andapparel, Argentina hadviolated Article IIbyexceeding or
having thepotential toexceed itsbound tariff rateandfailing toapply onlyadvalorem duties in
accordance withitsSchedule.
4.30 Hungary underlined thatArgentina hadalsoviolated itsWTO obligations byimposing athree
percentadvalorem statistical tax.Article VIIIofGATT 1994 provided thatallfeesandcharges on
importsotherthantariffsimposedbyWTOMembers"shallbelimitedtotheapproximatecostofservices
rendered". Argentina 'sstatistical taxviolated Article VIIIbecause itborenorelation tothecostof
anyservice rendered toimporters.
4.31 Hungaryaddedthatbyimposingitsspecificdutiesontextilesandapparel,aswellasitsstatistical
taxonimports, Argentina hadalsoviolated Article 7ATC. Under thisprovision, Argentina hadagreed
to"take suchaction asmaybenecessary toabide byGATT 1994 rules anddisciplines soasto(a)
achieve improved access tomarkets fortextile andclothing products through suchmeasures astariff
reductions andbindings, reduction orelimination ofnon-tariff barriers". Hungary claimed that,as
aconsequence ofthereferred measures, thevalue oftheHungarian textiles andapparel exports had
decreased drastically: from US$1.6 million in1994 toUS$0.07 million in1996.
4.32 Inconclusion, Hungary requested thePanel tofindthatDecree No.998/95 andResolution
No.22/97 which imposed specific duties ontextiles andapparel, violated Article IIofGATT 1994
andArticle 7ATC; thatDecree No.389/95, which applied astatistical taxonimports, violated Article
VIIIofGATT 1994 andArticle 7ATC. Finally, Hungary requested thatthePanel recommend that
Argentina bring itsmeasures intoconformity withitsobligations under GATT 1994 andtheATC.
C. INDIA
4.33 India limited itssubmission totheinterpretation ofArticle 7ATC advocated bytheUnited
States. InIndia'sopinion, thisinterpretation could neither bejustified onthebasis ofthelanguage
ofArticle 7,norwithreference tothenegotiation history ofthisprovision. Themostcrucial element
inArticle 7.1wasthephrase "with reference tothespecific commitments undertaken bytheMembers
asaresult oftheUruguay Round". Inview ofthisphrase, aMember 'sobligations withregard to
tariffreductions andbindings, reduction orelimination ofnon-tariff barriers hadtobeinterpreted with
reference tothespecific commitments undertaken bythatMember asaresult oftheUruguay Round.
Therefore, India totally disagreed withthestatement oftheUnited States that"Article 7imposed a
sweeping obligation onsignatories totakewhatever steps arenecessary tobring theirregimes into
compliance withGATT obligations astheyaffect textiles andapparel, andthereby improve market
access forthese products". TheUnited States could notlegitimately argue thatthrough Article 7,
Members oftheWTO accepted any"affirmative obligation". Theobligation inArticle 7.1ATC was
limited inscope inthesense thattheobligation waswithreference tothespecific commitments
undertaken bytheMembers. Theargument oftheUnited States according towhich violation ofaWT/DS56/R
Page82
provision ofGATT thataffected textiles andapparel ipsofactoconstituted aviolation ofArticle 7ATC
wasnotcorrect. IfaWTO Member violated aGATT provision without going backonanyspecific
commitmentsundertakenbythatMemberinitsUruguayRoundSchedule,insofarasthesecommitments
related tomarket access inrespect oftextiles andclothing products covered bytheATC, thatMember
could bedeemed tobeviolating GATT butnotnecessarily Article 7ATC.
4.34 India recalled thatArticle 7ATC hadbeennegotiated intheverylasthours oftheUruguay
Round between theUnited States, theEuropean Communities, India, Pakistan andHong Kong. It
wasnosecret thattheUnited States andtheECdidnotwantArticle 7ATCtobeinterpreted asimposing
more obligations onthem thanwhat theyhadaccepted through theback-loaded integration process
envisaged intheATC. Thephrase "aspartoftheintegration process" appearing inArticle 7.1ATC
wassupposed toimply thattherewasnoadditional obligation fortheUnited States andtheECtoremove
theMFA-inherited quotas faster thanwhatwasenvisaged through theback-loaded integration process
outlined inArticle 2.6and2.8ATC. Thephrase "with reference tothespecific commitments undertaken
bytheMembers asaresult oftheUruguay Round" implied thatArticle 7would notbeusedtomake
additional demands inrespect oftariffreductions, tariffbindings, etc.oncountries likeIndia, Pakistan,
Argentina, etc.overandabove what theyhadcommitted themselves tointheir Uruguay Round
Schedules. Inthatcontext, India expressed itssurprise thattheUnited States wastrying toimpose on
Argentina anobligation withregard toimproved access totextiles andapparel market without linking
itinanymanner totheobligations undertaken byArgentina initsSchedule. India agreed withthe
viewexpressed byArgentina thatthecentral purpose oftheATCwastoputanendtothediscriminatory
quota regime which haddominated thetextile andclothing sector forsolongandtobring itunder
thediscipline ofthemultilateral trading system. India alsosupported thepoint made byArgentina to
theeffect thattheinterpretation which sought todefine thewording ofArticle 7ATCasalegalobligation
toopenupmarkets beyond thelevelofbound tariffs hadnever beenaccepted bytheWTO Membership.
V. INTERIM REVIEW
5.1 On7October1997,ArgentinaandtheUnitedStatesrequestedthePaneltoreview,inaccordance
withArticle 15.2oftheDSU, theinterim report thathadbeenissued totheparties on30September
1997. Wecarefully reviewed thearguments presented byArgentina andtheUnited States andrevised
paragraphs 3.15, 3.140 and3.234 oftheDescriptive Partinthelightofthecomments made bythe
parties. Inresponse totheircomments, wehaveclarified thewording ofparagraphs 6.41, 6.53, 6.67
and6.71ofthereport. Wehavealsomade small modifications onother paragraphs.
5.2 Regarding Argentina ’sargument thatitinformed theCommittee onMarket Access thatitwas
notgoing tochange itsminimum specific duties, asapplied before theUruguay Round (seeparagraph
6.21), wehavereferred totherelevant argument submitted byArgentina inparagraph 3.67ofthe
Descriptive Part.
5.3 Argentina alsocontested that,inparagraph 6.79ofthepanel report, thePanel didnotaddress
thewiderandmorefundamentalissueoftheexistenceofcross-conditionalitiesandconflictingobligations
thatcould existbetween aMembers ’scommitments totheIMFandunder theWTO Agreement. We
seenoreason toaddress thiswider issue since, inthesituation before thePanel, there isnoevidence
thatArgentina wasrequested bytheInternational Monetary Fund ("IMF") toimpose animport tax
thatwould violate theprovisions oftheWTO Agreement. Moreover, weseenothing intheAgreement
Between theIMFandtheWTO157,theDeclaration ontheRelationship oftheWorld Trade Organization
withtheInternational Monetary Fund andtheDeclaration ontheContribution oftheWorld Trade
Organization toAchieving Greater Coherence inGlobal Economic Policymaking thatsuggests that
weshould change ourapproach.
157Annex ItoWT/L/195, adopted bytheGeneral Council on7,8and13November 1996.WT/DS56/R
Page83
5.4 TheUnited States hasrequested that,since wehavedecided nottoreach anyconclusion on
itsclaim thatArgentina alsoviolated Article 7oftheAgreement onTextiles andClothing ("ATC"),
welimitourdiscussion onthematter. Wehave, consequently, adjusted ourfindings inparagraph
6.87.
VI. FINDINGS
6.1 TheUnited States claims thatArgentina ’stariffs onimports oftextiles, apparel andfootwear
items violate, generally andinspecific cases, theprovisions ofArticle IIoftheGeneral Agreement
onTariffs andTrade 1994 ("GATT"). TheUnited States alsoclaims thatthestatistical taxofthree
percentadvalorem collected byArgentina onimports158isinviolation oftheprovisions ofArticle VIII
ofGATT. Finally, theUnited States claims thatthese violations giverisetoaninfringement ofthe
provisions ofArticle 7oftheAgreement onTextiles andClothing ("ATC").
6.2 Argentina raises apreliminary objection ofaprocedural nature onthejurisdiction ofthePanel
toaddress partoftheUSclaim, challenges theevidence submitted bytheUnited States andasksthe
Panel toreject theUSclaims asunfounded.
6.3 Thisdispute raises, therefore, various legalissues which wehaveidentified andgrouped as
follows:
A. Argentina ’spreliminary objection. Should thePanel consider ameasure relating to
tariffs applied onfootwear which wasrevoked prior totheestablishment ofthePanel?
B. Article IIofGATT. Does theimposition ofminimum specific duties byArgentina,
which hasbound thetariffs atissue atanadvalorem rate,constitute aviolation ofArticle II?
Does Argentina 'stariff system havethepotential toviolate Article IIandisthispotential
sufficient toconstitute aninfringement thereof? HasArgentina imposed duties inexcess of
itsbound rateof35percentadvalorem ?Howshould wetreattheissues raised bytheparties
withregard toproof andevidence submitted tothePanel?
C. Thedomestic challenge procedure. Dotheconstitutional supremacy ofinternational
lawunder theArgentine Constitution andtheexistence ofadomestic procedure tochallenge
duties imposed inexcess ofArgentina 'sbound ratesconstitute adefense totheclaimed violation
ofArticle IIofGATT?
D. Article VIIIofGATT. What arethecriteria forapplication ofArticle VIII’slimits
oncharges andfeesimposed inconnection withimportation? Isthestatistical taxofthree
percentadvalorem collected byArgentina onimports inviolation ofArticle VIIIofGATT?
E. Article 7oftheATC. Does aviolation ofanyprovision oftheWTO Agreement in
thetextile andapparel sector constitute aviolation ofArticle 7oftheATC? HasArgentina
violated theprovisions ofArticle 7oftheATC?
A. PRELIMINARY OBJECTION BYARGENTINA
6.4 Initsrequest forestablishment ofapanel, dated 9January 1997, theUnited States claims that
thetariffs imposed byArgentina ontextiles, apparel andfootwear violate theprovisions ofArticle II
ofGATT. ThePanel wasestablished on25February 1997. On14February 1997, i.e.,afterthe
158Seeparas. 2.19-2.21 oftheDescriptive Part.WT/DS56/R
Page84
circulation oftheUSrequest fortheestablishment ofapanel butbefore thePanel wasestablished by
theDSB, Argentina revoked thespecific duties thatithadbeenimposing onfootwear.
6.5 Onthedaythatitrevoked thechallenged footwear duties, Argentina imposed aprovisional
safeguard measure intheform ofspecific duties (G/SG/N/6/ARG/1, G/SG/N/7/ARG/1, dated
25February 1997 andG/SG/N/6/ARG/1 Supp.1, G/SG/N/7/ARG/1 Supp.1 dated 18March 1997)
onfootwear andinitiated asafeguard investigation.
6.6 Initsfirstwritten submission, Argentina claims thatthePanel doesnothavejurisdiction to
address thespecific duties onfootwear which werewithdrawn before thePanel wasestablished. At
thefirstmeeting ofthePanel withtheparties, Argentina requested adecision onthisissue before
proceeding tothesubstantive questions.
6.7 Wedecided thatwewould notrender apreliminary decision onthisissue andinvited both
parties tosubmit evidence andarguments onallaspects oftheUSclaims.
6.8 Argentina essentially argues thatthespecific duties onfootwear wererevoked before thePanel
wasestablished sothat,eveniftherevoked measure isstillcontained intheterms ofreference ofthis
Panel, thatclaim hasbecome "abstract", pertaining totheillegality ofameasure thatnolonger exists.
ForArgentina, WTO proceedings cannot beinitiated without aspecific subject ofdispute towhich
theycanapply. Insupport ofitsclaim, Argentina refers thePanel toArticle 19.1oftheDSU, which
provides that"where aPanel ortheAppellate Body concludes thatameasure isinconsistent witha
covered agreement, itshallrecommend thattheMember concerned bring themeasure intoconformity
withthatagreement". Argentina stresses thatthepresent tense isused. Moreover, forArgentina,
making hypothetical assessments ofexpired measures would distort thedispute settlement mechanism
andamount tomaking interpretations oftheWTO agreements, contrary tothespecific provisions of
theWTO Agreement.
6.9 TheUnited States argues thatthePanel should ruleonArgentina ’sspecific duties onfootwear
since theyarecontained intheterms ofreference ofthePanel. Inaddition, theprovisional safeguard
duties areessentially thesameasthose applied asspecific duties which werepartofthesame "regime"
ofspecific duties imposed ontextiles, apparel andfootwear. IntheUSview, thesafeguard duties
haveinanycaseaclose factual connection withtheduties stillinforce, inthattheyapply parallel
provisions. Finally, theUnited States argues thatmeasures similar tothose revoked maybereinstated
attheexpiry ofthesafeguard measures orshould Argentina loseapanel proceeding onsuchsafeguard
measures.
6.10 Wenotefirstthattheterms ofreference ofthisPanel include thespecific duties onfootwear
since theterms ofreference simply refertotheUSrequest forestablishment ofapanel. Thatrequest
specifically mentioned:
"Resolution 304/95, 305/95, 103/96, 299/96, Decree 998/95 andothermeasures which
impose specific duties onvarious textile, apparel orfootwear items inexcess ofthe
bound rateof35percentadvalorem provided inArgentina 'sschedule LXIV".
6.11 Panels andtheirterms ofreference areestablished bytheDSBandpanels arenotauthorized
toamend unilaterally theirmandate. Ontheother hand, panels haveoften beenrequired todetermine
their jurisdiction overamatter (Seeforinstance United States -Standards forReformulated and
Conventional Gasoline,159Japan -Taxes onAlcoholic Beverages,160Brazil -Measures Affecting
159Panel andAppellate Body Reports adopted on20May 1996, WT/DS2/R andWT/DS2/AB/R.
160Panel andAppellate Body Reports adopted on1November 1996, WT/DS/8, 10,11/R and
WT/DS8, 10,11/AB/R.WT/DS56/R
Page85
Desiccated Coconut,161andEC-Regime fortheImportation, SaleandDistribution ofBananas162
("Bananas III")).Asstated bytheAppellate Body inBananas III,inanother context:
"142. Werecognize thatapanel request willusually beapproved automatically at
theDSBmeeting following themeeting atwhich therequest firstappears ontheDSB's
agenda.163Asapanel request isnormally notsubjected todetailed scrutiny bythe
DSB, itisincumbent uponapanel toexamine therequest fortheestablishment ofthe
panel verycarefully toensure itscompliance withboththeletter andthespirit of
Article 6.2oftheDSU".
6.12 Onseveraloccasions,panelshaveconsideredmeasuresthatwerenolongerinforce.164Itappears
thatineachofthose cases, however, there wasnoobjection raised byeither party tothepanel’s
consideration oftheexpired measure. Inarecent case, anobjection wasraised bytherespondent to
panel consideration ofameasure nolonger ineffect. Inthatcase, thepanel stated:
"6.19 ThePanel observed thatithasnotbeentheusual practice ofapanel established
under theGeneral Agreement toruleonmeasures that,atthetimethePanel'sterms
ofreference werefixed, werenotandwould notbecome effective. Inthe1978Animal
Feed Protein case, thePanel ruled onadiscontinued measure, butonethathad
terminated afteragreement onthePanel'sterms ofreference. Inthe1980Chile Apples
case, thePanel ruled onameasure terminated before agreement onthePanel'sterms
ofreference; however, theterms ofreference inthatcasespecifically included the
terminated measure and,itbeing aseasonal measure, there remained theprospect of
itsreintroduction. Inthepresent casethePanel'sterms ofreference wereestablished
afterthe75percentrulehadceased tohaveanyeffect, andtherulehadnotbeen
specifically mentioned intheterms ofreference. ThePanel further noted thatthere
wasnoindication bytheparties thatthe75percentrulewasameasure that,although
currently notinforce, waslikely toberenewed [...].ThePanel didnottherefore
proceed toexamine thisaspect oftheGasoline under Article I:1oftheGeneral
Agreement".165
6.13 Asnoted earlier, theArgentine measure under consideration wasrevoked before thePanel
wasestablished anditsterms ofreference set,i.e.before thePanel started itsadjudication process.
TheGasoline panel report would argue infavour ofnotconsidering theArgentine specific duties on
footwear. Moreover, asnoted bytheAppellate Body intheShirts andBlouses166case,theaimofdispute
settlement isnot
"toencourage either panels ortheAppellate Body to'make law'byclarifying existing
provisions oftheWTO Agreement outside thecontext ofresolving aparticular dispute.
Apanel needonlyaddress those claims which mustbeaddressed inorder toresolve
thematter inissue inthedispute".
161Panel andAppellate Body Reports adopted on20March 1997, WT/DS22/R andWT/DS22/AB/R.
162Panel andAppellate Body Reports adopted on25September 1997, WT/DS27/R andWT/DS27/AB/R.
163DSU, Article 6.1.
164Seeforinstance,the Gasoline Panel Report atpara.6.19; Panel andAppellate Body Reports onUnited States -Measures
Affecting Imports ofWoven Wool Shirts andBlouses fromIndia,adopted on23May1997, WT/DS33/R andWT/DS33/AB/R;
Panel Report onEEC -Measures onAnimal Feed Proteins, adopted on14March 1978, BISD 25S/49; andPanel Report
onUnited States -Prohibition onImports ofTuna andTuna Products from Canada ,adopted on22February 1982, BISD
29S/91.
165Panel Report onGasoline .
166SeeAppellate Body Report onUnited States -Measures Affecting Imports ofWoven Wool Shirts andBlouses from
India,adopted on23May 1997, WT/DS33/AB/R, p.19.WT/DS56/R
Page86
6.14 However, theUnited States claims thatthere isaserious threat ofrecurrence since Argentina
could easily reintroduce theprevious import measures, andtheUnited States suggests thatArgentina
islikely todosobecause there isonlyaweak justification foritssafeguard measure onfootwear.
Wecannot evaluate thejustification orlikely duration ofthatsafeguard measure. Moreover, inthe
absence ofclearevidence tothecontrary, wecannot assume thatArgentina willwithdraw thesafeguard
measure andreintroduce thespecific duties measure inanattempt toevade panel consideration ofits
measures. Wemustassume thatWTO Members willperform theirtreaty obligations ingood faith,
astheyarerequired todobytheWTO Agreement andbyinternational law167.Weconsider, therefore,
thatthere isnoevidence thattheminimum specific import duties onfootwear willbereintroduced.
6.15 Consequently, wewillnotreview theWTO compatibility ofthespecific duties which used
tobeimposed onfootwear andwhich have, since theestablishment ofthisPanel, beenrevoked.
However, since these specific duties onfootwear were inforce foralongperiod until14February
1997, andforourunderstanding ofthetypeofduties usedbyArgentina, wemay, when reviewing
theimport regime applied totextiles andapparel, refertosome examples oftransactions involving
footwear because thetypeofduties usedatthetimebyArgentina fortextiles, apparel andfootwear
wasthesame.
B. ARTICLE IIOFGATT
6.16 TheUnited States claims thatArgentina violates theprovisions ofArticle IIofGATT intwo
ways:
a) Argentina ’sapplication ofminimum specific duties toproducts inrespect ofwhich
itboundadvaloremdutiesviolatesArgentina’sobligationtomaintainadvaloremtariffspursuant
toArticle II;and
b) Thespecific duties applied byArgentina willinevitably leadandhaveinfactledto
theimposition ofduties inexcess ofthe35percentadvalorem tariff ratebound byArgentina
pursuant toArticle II.
6.17 Argentina argues thatanallegation ofa"potential" violation ofArticle IIisnotsufficient,
andthatinanycaseitstariffs donothavethepotential andindeed havenever exceeded thebound
rateof35percentadvalorem .Italsoresponds thataslongasitsapplied tariffs donotexceed the
equivalent of35percentadvalorem ,itisfreetouseanytypeofduties, including specific duties.
Argentina alsoaddsthatinitsConstitution, international lawprevails overdomestic lawandthatit
istherefore unconstitutional inArgentina toviolate WTO rules. Inthiscontext, Argentina further
argues thatitmaintains adomestic mechanism whereby Argentine importers, should theyberequired
topayduties above Argentina ’sbindings, canaskanyjudge todeclare suchduties tobeillegal and
unconstitutional, which, itnotes, hasnever happened inthesector oftextiles, apparel andfootwear.
6.18 Argentina states thatthespecific duties were determined according tothefollowing
methodology168:
(a) Arepresentative international price wascalculated foreachcategory ofproduct and
tariffheading. Since therearenostandard international prices fortextile andclothing
products, theprices prevailing inthemajor markets wereused, mainly theUnited States
market. Theuseofdataconcerning these markets wasdetermined ingeneral terms
byvolume andtherepresentative nature ofthemarkets, andalsobythedegree of
reliability ofthestatistics.
167SeeArticle 3.10oftheDSU andArticle 26oftheVienna Convention ontheLawofTreaties (Pacta SuntServanda) .
168Seepara. 3.120 oftheDescriptive Part.WT/DS56/R
Page87
(b) Aspecific dutywasapplied totherepresentative international prices thusdetermined,
adjusted toputthem onac.i.f. -Buenos Aires basis.
6.19 Thevariousresoluciónes(hereaftertranslatedas"resolutions")establishingtheminimumspecific
dutysystem fortextiles, apparel andfootwear function thesame way:theyimpose minimum specific
duties tobeusedasequivalents toapplied advalorem duties169.Thedutycollected isthegreater of
theapplicable specific dutyoradvalorem duty. Forexample, thisisclearfrom thefirstresolution
(No.811/93) assigning specific import duties totextile andapparel imports submitted bytheUnited
States170:
“Aclárase quelosderechos deimportación específicos queseestablecen porelartículo
1delapresente resolución, operarán como mínimo delcorrespondiente derecho de
importación advalorem".171
TheAnnex 1tothisresolution liststheDerecho Especifico Minimo (Minimum Specific Import Duty)
foralistofPosición NCE(Foreign Trade Nomenclature (NCE) Heading). Wenotethatallthefollowing
resolutions regarding theminimum specific dutyregime imposed onthetextile, apparel andfootwear
sector, weresimilar. Thelevels oftheminimum specific duties havebeenadjusted fromtimetotime,
buttheyalways havebeencalculated asdescribed.
6.20 Adescription ofhowtheDIEM. usedbyArgentina operates wasfurther explained inaletter
sentbyArgentina totheUnited States andsubmitted bytheUnited States172:
"Elfuncionamiento delnuevo sistema dederechos aduaneros (v.g.DIEM), seexplica
delasiguiente manera. Unavezarribado elproducto azonaaduanera, ydeterminado
suprecio C.I.F. porunidad (enestecasoparticular, cadaunidad estáconstituida por
unpardecalzados), secompara elvalor delDIEM vigente conelmonto resultante
deaplicar delDerecho deImportación Extrazona vigente alproducto encuestión,
correspondiendo paralanacionalización delmismo (despacho aplaza) laaplicación
delmayor delosmontos cotejados. Acontinuación segráfica elfuncionamiento con
dosejemplos hipotéticos" .173
6.21 Initsfirstsubmission, Argentina states thatithasnotchanged itstypeofduties butrather that
ithassimply continued tousespecific duties asitdidbefore theUruguay Round. Allthatitdidin
theUruguay Round, wastobindcertain tariffs at35percentadvalorem .Weasked Argentina whether,
initsSchedule, ithadreserved itsrighttocontinue toimpose minimum specific duties uptoamaximum
advalorem dutyof35percent. Argentina responded thatitdeclared thesituation totheMarket Access
Committeebutdidnotrefertoanyminutesofmeetings.174Nofurtherevidenceofanysuchspecifications
inthebindings wasbrought toourattention.
169They arereferred toinparas. 2.4and2.7-2.21 oftheDescriptive Part.
170Seepara. 3.15 oftheDescriptive Part.
171Resolution No.811/93, 29July1993, Article 3.TheEnglish translation forthispiece oflegislation reads asfollows:
"Itishereby expressly stated thatthespecific import duties established byArticle 1ofthisdecision shalloperate asaminimum
ofthecorresponding advalorem import duty".
172Seepara. 3.15 oftheDescriptive Part.
173Letter oftheNational Director ofIndustry Affairs explaining theArgentine minimum specific import duties. The
English translation ofthisletter reads asfollows: "This newcustoms system, i.e.,DIEM, operates asfollows. Once the
product hasarrived inthecustoms areaanditsc.i.f. price hasbeen determined perunit(inthisparticular case, eachunit
consists ofonepairofshoes), thecurrent value oftheDIEM iscompared against theamount obtained byapplying thecurrent
extra-zone import dutytotheproduct inquestion, andthehigher ofthetwoamounts compared willbeapplied forpurposes
ofinward customs clearance. Thetwohypothetical examples given below willillustrate howthisworks".
174Seepara. 3.67 oftheDescriptive Part.WT/DS56/R
Page88
6.22 Article II(1)(a) ofGATT reads asfollows:
"1. (a) Each Member shallaccord tothecommerce oftheother Members
treatment nolessfavourable thanthatprovided forintheappropriate Partofthe
appropriate Schedule annexed tothisAgreement".
Theissue forthePanel is,therefore, todecide whataretheobligations covered bythe"treatment no
lessfavourable thanthatprovided forintheappropriate [...]Schedule".
1. THE TYPE OFDUTIES USED
6.23 TheUnited States claims thatthetypeofduties applied byaWTO Member -evenbelow any
bound rate-mustconform tothatspecified intheSchedule ofsuchMember. Since Argentina hasbound
itstariffs at35percentadvalorem initsSchedule ofConcessions (hereafter called "Schedule"), the
United States argues thatArgentina mayonlyimpose advalorem duties. Argentina responds thatas
longastheduties itimposes arebelow theequivalent of35percentadvalorem ,itcanuseanytype
ofduties.Therefore,wehavetodecidewhethertheimpositionofminimumspecificdutiesbyArgentina,
which hasbound thetariffs atissue atanadvalorem rate,constitutes aviolation ofArticle II.
6.24 Thewording ofArticle IIdoesnotseem toaddress explicitly whether WTO Members have
anobligation touseaparticular typeofduty. However, thewording ofArticle IImustbeinterpreted
inthelightofpastGATT practice, asmentioned inArticle XVI:1 oftheWTO Agreement andparagraph
1(b)(iv) ofAnnex 1Aincorporating theGATT 1994 intotheWTO Agreement, andindicated bythe
Appellate Body inJapan -Taxes onAlcoholic Beverages .175Issues similar tothose presented inthis
casehavearisen onanumber ofoccasions.176
6.25 Inthisconnection, theWorking Party Report onRectifications andModifications ofSchedules177
stated in1953:
"TheWorking Party alsoconcerned itselfwiththeproposal oftheGreek Government
tointroduce aminimum advalorem rateforcertain specific rates andcame tothe
conclusion thatsuchchanges could notbeconsidered rectifications tobedealt with
bytheWorking Party, [...][I]tdecided therefore torefer thequestion tothe
CONTRACTING PARTIES sothatsuchchanges could formtheobject ofconsultations
andnegotiations withtheparties having aninterest inthese items".
6.26 In1954, theWorking Party Report onTransposition ofSchedule XXXVII -Turkey178stated:
175"Article XVI:1 oftheWTO Agreement andparagraph 1(b)(iv) ofthelanguage ofAnnex 1Aincorporating theGATT
1994 intotheWTO Agreement bring thelegalhistory andexperience under theGATT 1947 intothenewrealm oftheWTO
inawaythatensures continuity andconsistency inasmooth transition from theGATT 1947 system. Thisaffirms the
importance totheMembers oftheWTO oftheexperience acquired bytheCONTRACTING PARTIES totheGATT 1947
--andacknowledges thecontinuing relevance ofthatexperience tothenewtrading system served bytheWTO. Adopted
panel reports areanimportant partoftheGATT acquis .They areoften considered bysubsequent panels. They create
legitimate expectations among WTO Members, and,therefore, should betaken intoaccount where theyarerelevant toany
dispute. However, theyarenotbinding, except withrespect toresolving theparticular dispute between theparties tothat
dispute.[Footnote 30:Itisworth noting thattheStatute oftheInternational Court ofJustice hasanexplicit provision, Article 59,
tothesame effect. Thishasnotinhibited thedevelopment bythatCourt (anditspredecessor) ofabody ofcaselawinwhich
considerable reliance onthevalue ofprevious decisions isreadily discernible.] Inshort, theircharacter andtheirlegalstatus
have notbeen changed bythecoming intoforce oftheWTO Agreement ".SeeAppellate Body Report onJapan -Taxes on
Alcoholic Beverages, adopted on1November 1996, WT/DS8, 10,11/AB/R, p.14.
176SeealsoJohn H.Jackson, World Trade andtheLawoftheGATT, Bobbs-Merrill Co.(1969), p.215.
177Adopted on24October 1953, BISD 2S/63.
178Adopted on20December 1954, BISD 3S/127.WT/DS56/R
Page89
"3. TheWorking Party hasalsoexamined theproposal tochange thespecific duties
intheTurkish Schedule toadvalorem duties, incases where suchachange isnot
expressly provided forintheSchedule, inorder thatthenewtariff asregards bound
items willconform withtheGovernment ’sobligations under theGeneral Agreement.
Acomparison bythesecretariat oftheproposed advalorem rateswithrateswhich
would haveresulted, iftheconversion hadbeencarried outoncertain otherbases which
weresuggested, hasindicated thatforaconsiderable proportion oftheitems themethod
employed bytheTurkish Government hasresulted inlower ratesthanwould havebeen
thecaseifoneofthose other bases hadbeenused. TheWorking Party considered the
proposals inrelation totheprovisions oftheAgreement andtothepractices ofthe
CONTRACTING PARTIES which dealwiththemodification ofschedules. Itwas
foundthatthereisnoprovisionintheGeneralAgreementwhichauthorizesacontracting
party toalterthestructure ofbound rates ofdutyfromaspecific toanadvalorem
basis. (Emphasis added)
4. Theobligations ofcontracting parties areestablished bytherates ofduty
appearing intheschedules andanychange intheratesuchasachange fromaspecific
toanadvalorem dutycould insome circumstances adversely affect thevalue ofthe
concessions toother contracting parties. Consequently, anyconversion ofspecific
intoadvalorem rates ofduty canbemade only under some procedure forthe
modification ofconcessions".
6.27 TheWorking Party Report ontheFourth Protocol ofRectifications andModifications179reached
similar conclusions in1955 :
"1. Onequestion could notbesolved bytheinterested parties andwasreferred
totheWorking Party. Among therectifications requested bytheAustrian Government
werethose relating toItems 140to144oftheAustrian Tariff which werebeing made
under theauthority oftheNotetotheseitems included intheAustrian Schedule XXXII
which granted theAustrian Government freedom tochange thespecific intoadvalorem
rates. TheAustrian Government feltthatitwould notbeimpairing thevalue ofthe
concessions ifitretained beside theadvalorem dutytheoldspecific rateasaminimum
rate.
2. TheWorking Party took theview thatsuch changes would constitute
modifications ofAustria ’sobligations andthatitcould notrecommend theiracceptance
asrectifications.Suchmodificationscouldonlybeinsertedinaprotocolofrectifications
andmodifications afternegotiations authorized bytheCONTRACTING PARTIES
inaccordance withtheproper procedures. TheAustrian delegation, therefore, did
notfurther insist ontheinsertion intheFourth Protocol ofRectifications and
Modifications ofthespecific minimum ratesinItems 140to144". (Emphasis added)
6.28 In1984, thereport ofthePanel onNewsprint180described GATT practice asfollows:
“50. [...][U]nder longstanding GATT practice, evenpurely formal changes inthe
tariff schedule ofacontracting party,which maynotaffect theGATT rights ofother
countries, suchastheconversion ofaspecific dutytoanadvalorem dutywithout an
increase intheprotective effect ofthetariff rateinquestion, havebeenconsidered
torequire negotiations". (Emphasis added)
179Adopted on3March 1955, BISD 3S/130.
180Adopted on20November 1984, BISD 31S/114.WT/DS56/R
Page90
6.29 Themost recent panel report toconsider thisissue, Bananas II,181concluded asfollows:
“134. [...]The Panel thenconsidered whether theintroduction ofaspecific tarifffor
bananas inplace oftheadvalorem tariff provided forinitsSchedule constituted
'treatment nolessfavourable 'interms ofArticle II.ThePanel observed thatwhile
thebound advalorem tariffwasrelated tothevalue ofbananas, thenewspecific tariff
wasbased ontheweight ofbananas. Anychange inthevalue ofbananas perton
therefore ledtoachange intheadvalorem equivalent ofthespecific tariff. Since the
value ofbananas wasunpredictable, theadvalorem equivalent ofthespecific tariff
could alsonotbeforeseen. ThePanel noted inthiscontext thattheadvalorem
equivalent ofthe850ECUs pertonspecific tariff onbananas presently exceeded by
far20percentadvalorem .Astothe100ECUs pertonspecific tariff, thePanel also
noted thattheEEChadneither argued norsubmitted anyevidence thatthistariffcould
never exceed 20percentadvalorem ;according tothecomplainants, the100ECUs
pertonspecific tariff hadalready exceeded theequivalent ofthebound 20percent
advalorem tariffafter1July1993. ThePanel consequently found thatthenewspecific
tariffs ledtothelevying ofadutyonimports ofbananas whose advalorem equivalent
was,either actually orpotentially, higher than20percentadvalorem .
135. ThePanel considered thattheactual levying ofadutyinexcess ofthebound
rateclearly constituted atreatment ofbananas lessfavourable thanthatprovided for
intheEEC’sSchedule ofConcessions. ThePanel thenproceeded toexamine whether
alsothemerepossibility thatthespecific tariffrateapplied bytheEECmight behigher
thanthecorresponding bound advalorem rate,rendered itinconsistent withArticle
II.ThePanel recalled theimportance ofsecurity andpredictability intheapplication
oftariffs bindings. Itnoted thatprevious panels andworking parties hademphasized
thattariffbindings justify reasonable expectations about market access andconditions
ofcompetition. TheCONTRACTING PARTIES hadconsistently found thatachange
fromabound specific toanadvalorem ratewasamodification oftheconcession [...].
ThePanel [...]concluded that,indetermining whether treatment accorded byatariff
measure wasnolessfavourable thanthatprovided forintheSchedule, ithadtotake
intoaccount notonlytheactual consequences ofthatmeasure forpresent imports but
alsoitseffects onpossible future imports. Thisfollowed fromtheprinciple recognized
bymany previous panels thattheprovisions oftheGeneral Agreement serve notonly
toprotect actual trade flows butalsotocreate predictability forfuture trade".
(Emphasis added)
6.30 TheBananas IIpanel report clearly recognizes thepastGATT practice andcanbereadas
concluding thattheimposition ofspecific duties when onlyadvalorem duties arebound issufficient
toestablish aviolation ofArticle II.
6.31 WenotethatthepastGATT practice isclear: asituation whereby acontracting party applies
onetypeofduties while itsSchedule refers tobindings ofanother typeofduties constitutes aviolation
ofArticle IIofGATT, without anyobligation forthecomplaining party tosubmit further evidence
thatsuchvariance leads toaneffective breach ofbindings. ThefactthatArgentina claims thatitis
simply following itspastpractice ofusing specific duties would notseem toberelevant, since itmade
181Panel Report onEEC-Import Regime forBananas ,DS/38/R, 11February 1994, notadopted (Bananas II).Although
thePanel Report onBananas IIwasnever adopted, theAppellate Body stated clearly, initsReport onJapan -Taxes on
Alcoholic Beverages atp.15, thatalthough theyhavenolegalstatus, thereasoning ofanunadopted panel report canprovide
useful guidance toapanel andbe,therefore, relevant. Inthiscontext weconsider thereasoning ofthepanel inBananas II
toberelevant anduseful tothepresent dispute.WT/DS56/R
Page91
advalorem tariff concessions ontheproducts inquestion andthuscreated anobligation foritself to
impose suchtypeofduties. Asaguarantee forpredictability andtoensure thefullrespect ofthe
negotiations under Article II,GATT practice hasgenerally required thatonceaMember hasindicated
thetype(s) ofduties inspecifying itsbound rate,itmust apply suchtype(s) ofduties. Accordingly,
faced withsuchavariance inthetypeduties applied byArgentina fromthatreflected initsSchedule,
weconsider thatwedonothavetoexamine theeffects ofthatvariance onpossible future imports.
Indeed, suchavariance undermines thestability andpredictability ofMembers 'Schedules.
6.32 We,therefore, findthatArgentina, inusing asystem ofspecific minimum tariffs although
ithasbound itstariffs atadvalorem ratesonly, isviolating theprovisions ofArticle IIofGATT and
thattheUnited States doesnothavetoprovide further evidence thattheresultant duties exceed the
bound tariff rate. Such avariance between Argentina ’sSchedule anditsapplied tariffs constitutes a
lessfavourable treatment tothecommerce oftheother Members thanthatprovided forinArgentina ’s
Schedule, contrary totheprovisions ofArticle IIofGATT.
2. THE APPLICATION BYARGENTINA OFSPECIFIC MINIMUM DUTIES
6.33 TheUnited States alsoclaims thatthesystem ofminimum specific duties applied byArgentina
willnecessarily leadto,andinfacthasledto,theimposition ofduties inexcess ofthetariff rateof
35percentadvalorem bound byArgentina pursuant toArticle IIofGATT. TheUSsubmission on
those claims canbedivided intothree parts:
- First, theUnited States argues thatthewaytheminimum specific dutysystem isimplemented
necessarily leads tobreaches ofArgentina ’sbindings.
- Second, theUnited States submits aseries oftables andcharts todemonstrate that,based on
theaverage transaction value ofimports andtheaverage levelofduties collected, duties wellabove
the35percentadvalorem oftheimport price havebeencollected byArgentina onmany items.
- Third, theUnited States submits aseries ofcustoms documents identifying examples where,
itsubmits, specific duties inexcess of35percentadvalorem wereimposed andpaidbyimporters.
Argentina contests theauthenticity andtherelevance oftheevidence, andthearguments submitted
bytheUnited States.
(a) Burden ofproof andnature oftheevidence required
6.34 Before welookattheparties 'arguments andevidence, weaddress theissue oftheburden
ofproof andthenature oftheevidence required inGATT/WTO panel proceedings. Asnoted above,
Argentina hasobjected tomuch oftheevidence submitted bytheUnited States.
6.35 Concerning theissue ofwhat onemaycallthe"burden ofproof", theAppellate Body has
confirmed theGATT practice whereby
a) itisforthecomplaining party toestablish theviolation italleges;
b) itisfortheparty invoking anexception oranaffirmative defense toprove thatthe
conditions contained therein aremet;and
c) itisfortheparty asserting afacttoprove it.WT/DS56/R
Page92
6.36 IntheShirts andBlouses182case, theAppellate Body stated:
“Weagree withthePanel thatitwasuptoIndia topresent evidence andargument
sufficient toestablish apresumption thatthetransitional safeguard determination made
bytheUnited States wasinconsistent withitsobligations under Article 6oftheATC.
With thispresumption thusestablished, itwasthenuptotheUnited States tobring
evidence andargument torebut thepresumption".
6.37 Weconsider thatwhen theAppellate Body refers totheobligation ofthecomplainant party
toprovide sufficient evidence toestablish a"presumption", itrefers totwoaspects: theprocedural
aspect, i.e.,theobligation forthecomplainant topresent theevidence first, butalsotothenature of
evidence needed. Inthepresent case,weconsider thatitwasfortheUnited States toraiseapresumption
thatArgentina didviolate theprovisions ofArticle IIofGATT. Then, itisforArgentina toprovide
sufficient evidence torebut thesaidpresumption. When, however, Argentina isclaiming aspecific
affirmative defense, suchthatitsnational challenge procedure canbeusedtocorrect anyalleged violation
ofGATT rules, itisforArgentina toraisefirstapresumption thatsuchsystem operates inawaythat
there is,ineffect, noinfringement ofGATT/WTO rules.
6.38 Theconcept of"presumption" mayneedsome elaboration. Apresumption isaninference
infavour ofaparticular factandwould alsorefer toaconclusion reached intheabsence ofdirect
evidence.183
6.39 Forinternational disputes itseems normal thattribunals, inevaluating claims, aregiven
considerable flexibility. Inference (orjudicial presumption) isauseful means atthedisposal of
international tribunals forevaluating claims. Insituations where direct evidence isnotavailable, relying
oninferences drawn from relevant factsofeachcasefacilitates thedutyofinternational tribunals in
determining whether ornottheburden ofproof hasbeenmet. Itwould therefore appear tobethe
prerogative ofaninternational tribunal, ineachgiven case, todetermine whether applicable and
unrebutted inferences aresufficient forsatisfying theburden ofproof. Inthisrespect, theInternational
Court ofJustice, insome cases, found itdifficult toassert stringent rules ofevidence.184
6.40 Another incidental ruletotheburden ofproof istherequirement forcollaboration oftheparties
inthepresentation ofthefactsandevidence tothepanel andespecially theroleoftherespondent in
thatprocess. Itisoftensaidthattheideaofpeaceful settlement ofdisputes before international tribunals
islargely based onthepremise ofco-operation ofthelitigating parties. Inthiscontext themostimportant
result oftheruleofcollaboration appears tobethattheadversary isobligated toprovide thetribunal
withrelevantdocumentswhichareinitssolepossession.Thisobligationdoesnotariseuntiltheclaimant
hasdoneitsbesttosecure evidence andhasactually produced some prima facieevidence insupport
ofitscase. Itshould bestressed, however, that"'discovery 'ofdocuments, initscommon-law system
sense, isnotavailable ininternational procedures".185Weshall, therefore, follow these general rules
when addressing, forinstance, therequest oftheUnited States toArgentina forproduction ofdocuments
andthefactthatArgentina didnotdoso.
182Appellate Body Report, p.13.
183Thiswould appear tobeinconformity withtheordinary meaning ofthewords. SeeBlack ’sLawDictionary, 6th
Edition, West Publishing (1991); Raymond Guillien andJeanVincent, Lexique determes juridiques, Dalloz (1981); and
other similar dictionaries.
184SeeKeith Highet,"Evidence andProof ofFacts" inTheInternational Court ofJustice ataCrossroads, Transnational
Publishers, Inc.(1987), p.355andMojtaba Kazazi, Burden ofProof andRelated Issues, Kluwer (1996).
185SeeMojtaba Kazazi, Op.Cit.and,forfurther discussions ontheruleofcollaboration, George Scelle, Yearbook of
International LawCommission (1950), vol.II, p.134 andother references infootnote 184above.WT/DS56/R
Page93
(b) Minimum specific duties necessarily leadtobreaches ofArgentina ’sbindings
6.41 TheUnited States submits thatthewaytheminimum specific duties wereinitially determined
byArgentina, i.e.ona"representative international price" based essentially ontheUSmarket price,
willalways leadtobreaches ofthebound tariff rateof35percentforthose exports which arepriced
sufficiently below suchaverage price. TheUnited States submits theexample ofsoccer shoes which
aresubject toaspecific minimum dutyofUS$3.50 andanapplied advalorem dutyof20percent.
Forshoes imported atavalue ofUS$5.00, theminimum specific dutyassessed ofUS$3.50 represents
adutyof70percentadvalorem .Indeed, allshoes imported atavalue below US$10.00 would be
subject toanadvalorem dutyabove 35percent186.Inother words, every timeagood isimported
ataprice below the"representative international price", thespecific duty-which issetonthebasis
ofwhatArgentina thought the"price should be"and,asargued byArgentina, tocounteract theproblem
ofunderpriced imports -would besuperior tothenormally applicable advalorem duty, andpossibly
above thebound rateof35percentadvalorem .FortheUnited States, thepurpose ofsuchminimum
specific dutyscheme istoimpose duties inexcess ofthe35percentadvalorem collected ontheeffective
import price because, allegedly, goods areoften imported intoArgentina atprices below the
representative international price sothatthebound rateof35percentwasnotsufficient. TheUnited
States further argues thatforatleast32HSheadings, thespecific dutywassetatarateevengreater
than35percentoftheso-called "representative international price" andreferred thePanel toitschart
showing onthebasisofcalculations made byArgentina, theabove mentioned instances ofviolations187.
Later theUnited States submitted anadditional listof104categories ofHSlineswhich demonstrated
thattheadvalorem equivalents ofthespecific duties, evenwhen applied onUSexport prices, were
above 35percent.188
6.42 Argentina ’sresponse isthree-fold. First, itargues thattheminimum specific dutywasalways
setsoastobebelow 35percentadvalorem oftherepresentative international priceofanysuchitem.
Thus, ifimports were priced attherepresentative international price, there would benoproblems.
Second, forArgentina, theUSallegations aretoogeneral, hypothetical andtheoretical and,therefore,
notrelevant andthatthePanel should notconsider such"hypothetical" situations without evidence
ofspecific transactions where breaches occurred, since otherwise thedispute settlement system would
beabused withfrivolous claims. ForArgentina, apotential violation would constitute aninfringement
onlyiftrade wasaffected andrefers thePanel totheTobacco189casewhere, according toArgentina,
thepanel refused tosanction mere possibility ofviolations. Third, Argentina argues that,because
ofitsConstitution under which international lawissupreme andoverrides anydomestic law,inthe
hypothetical caseinwhich acustoms official would make amistake andrequire thepayment ofaduty
above 35percent, theimporter hasaccess toadomestic mechanism tochallenge suchcustoms
determination. Weshallreturn tothislastdefense raised byArgentina inSection 3below.
6.43 Weunderstand thatthespecific duties weresetbased onrepresentative international prices.
Inthesecircumstances, when thespecific duties aresetsoastobeequivalent toa35percentadvalorem
rate,itiscertain thatevery timeagood isimported atatransaction value below therepresentative
international price, thespecific dutylevelwillbemore than35percentadvalorem ofthetransaction
value. Inthecaseofspecific duties setsoastobeequivalent toatariff rateoflessthan35percent,
ifagood isimported atatransaction value sufficiently below therepresentative international price
usedtosettheduty, thebound rateof35percentadvalorem willalsobeexceeded. Forexample,
iftherepresentativeinternationalpriceofaproductisUS$100.00andthespecificdutyissetatUS$20.00
toreflect anadvalorem equivalent of20percent,iftheproduct isimported atapricebelow US$57.00,
186Seeparas. 3.113 and3.117 oftheDescriptive Part.
187Seepara. 3.110 oftheDescriptive Part.
188Seepara. 3.168 oftheDescriptive Part.
189Panel Report onUnited States -Measures Affecting theImportation andInternal SaleofTobacco ,adopted on
4October 1994, DS44/R.WT/DS56/R
Page94
theeffective advalorem ratewillalways exceed 35percent. Thus, inmany cases, itseems clearthat
thespecific duties atissuewillnecessarily result inadutyinexcess ofthe35percentbound ratewhen
thecustoms value ofaproduct isbelow therepresentative international price forsuchproduct.
6.44 Wenotethatcustoms duties arenormally tobeimposed onthetransaction value ofimported
goods asdefined intheAgreement ontheImplementation ofArticle VIIofGATT 1994 (“Customs
Valuation Agreement"). Thetransaction value isdefined as"theprice actually paidorpayable for
thegoods when soldforexport tothecountry ofimportation". Obviously, ifthecustoms value declared
bytheimporter doesnotrepresent theprice actually paid, theArgentine authorities maytakeaction
tocounteract afalsedeclaration through, forexample, revisions ofthecustoms value declared inspecific
cases andevencriminal prosecutions. However, neither theCustoms Valuation Agreement norany
other provision oftheWTO Agreement allows thebreach oftariff bindings made under Article IIof
GATT onthegrounds ofageneral suspicion thatdeclared customs values aresometimes understated.
Wenote,therefore, thatmechanisms tocounteract alleged underpricing190practices arenotjustifications
forArticle IIviolation.
6.45 Inrespect oftheArgentine argument thattheUSclaim should notbeconsidered because it
addresses onlyapotential violation -insupport ofwhich itrefers totheTobacco panel report -we
notethattheArgentine measures, thespecific duties, aremandatory measures. Argentina admits that
itscustoms officials areobligated tocollect thespecific duties onallimports. GATT/WTO caselaw
isclearinthatamandatory measure canbebrought before apanel, evenifsuchanadopted measure
isnotyetineffect, andindependently oftheabsence oftradeeffect ofsuchmeasure forthecomplaining
party:
"[T]he veryexistence ofmandatory legislation providing foraninternal tax,without
itbeing applied toaparticular imported product, should beregarded asfalling within
thescope ofArticle III:2, firstsentence".191
WearealsooftheviewthattheTobacco panel report merely confirms thisprinciple.
6.46 Moreover, inBananas III192,theAppellate Body confirmed thattheprinciples developed in
Superfund193were stillmuch applicable toWTO disputes andthatanymeasure which changes the
competitive relationship ofMembers nullifies anysuchMembers 'benefits under theWTO Agreement.
"Article III:2, firstsentence, cannot beinterpreted toprotect expectations onexport
volumes; itprotects expectations onthecompetitive relationship between imported
anddomestic products. Achange inthecompetitive relationship contrary tothat
provision mustconsequently beregarded ipsofacto asanullification orimpairment
ofbenefits accruing under theGeneral Agreement".194
Weconsider thatthisprinciple isalsoappropriate when dealing withtheapplication oftheobligations
contained inArticle IIofGATT which requires a"treatment nolessfavourable thanthat" provided
inaMember ’sSchedule. Inthepresent dispute weconsider thatthecompetitive relationship ofthe
190Throughout thepanel process, theterms "underpricing" and"underinvoicing" have been usedinterchangeably. In
thepresent Panel Report weshallrefer to"underpricing" without prejudice totheparties ’rights andobligations andwithout
addressing anylegal distinctions between thetwoterms.
191Panel Report onUnited States -Taxes onPetroleum andCertain Imported Substances ,adopted on17June1987, BISD
34S/136, para. 5.2.2.
192Bananas III,Appellate Body Report, Op.Cit., p.106, para. 252.
193Superfund ,Op.Cit., para5.1.9
194Ibid.WT/DS56/R
Page95
parties waschanged unilaterally byArgentina because itsmandatory measure clearly hasthepotential
toviolate itsbindings, thusundermining thesecurity andthepredictability oftheWTO system.
6.47 Wefind,therefore, thattheUnited States hasestablished apresumption thattheverynature
oftheminimum specific dutysystem maintained byArgentina violates theprovisions ofArticle IIof
GATT andthat,asshown above, thispresumption hasnotbeenrebutted byArgentina.
(c) Evidence based onaverage calculations
6.48 TheUnited States filedvarious charts andtables inaneffort toprove thatbased ontheaverage
import price ofcertain products inrelation withthetotalamount ofduties collected, onecanonly
conclude that,onmany occasions, duties above 35percentadvalorem musthavehadbeencollected.
More specifically, theUnited States submitted:
a) Afirstsetoftwocharts which identify 118HScategories oftextiles andapparel inwhich
Argentina ’sspecific duties, onaverage, aregreater than35percentadvalorem .TheUnited States
mentions thatitrequested from Argentina thedataonwhich thecharts arebased forthepurpose of
performing those calculations. Thelisted specific duties constitute more than35percentoftheaverage
oftransaction prices ofmerchandise imported ineachcategory. TheUnited States submits thatthe
exhibit makes plain that,attheleast, allmerchandise having alower actual value thantheaverage
aresubject toduties above 35percentadvalorem .Thedatawasthenbroken down intoproduct sectors
anddemonstrated graphically inanother exhibit. FortheUnited States, thatexhibit reflects howhigh,
inadvalorem terms, Argentina ’sspecific duties arewithrespect toavariety oftextile andapparel
groupings, ranging onaverage from 40.9percentto56.2percent. TheUnited States alsoadjusted
itscalculations contained inthese twofirstexhibits totakeintoaccount anewArgentine Resolution,
No.597/97,whichprovidesfivestagesofmodificationsofspecificdutiesincertaincategories.Applying
theArgentine datatothenewduties, theUnited States submits thattheduties collected arestillinexcess
of35percent, onaverage, withrespect to72lineitems.
b) Asecond setoftables contains calculations performed bytheUnited States fromdatathathad
beenprovided byArgentina totheEuropean Communities during theirconsultations. FortheUnited
States, theinformation contained inthatdocument isparticularly reliable, since itwascreated by
ArgentineofficialswhousedArgentinecustomsdatatocalculatetheadvaloremequivalentsfor35textile
lineitems. Thedocument consists offourpages andcovers fourdifferent types ofinformation: EC
imports toArgentina in1995; ECimports inthefirstseven months of1996; allother imports during
1995; andallother imports during thefirstseven months of1996. Thedocument identifies, foreach
lineitemthetotalkilograms oftextiles imported, theirtotalvalue, theaverage c.i.f.value, thespecific
duties charged, andtheadvalorem equivalent. Argentina ’scalculations show thatfor4outofthe
35lineitems, theECimports during 1995 and1996 exceeded 35percentadvalorem. Fortherest
oftheworld, thebound rateexceeds onaverage in1996 for22outofthe35textile andclothing
categories and,for26outof35for1995. Many oftheaverage percentages fortherestoftheworld
for1995 and1996 arewellover50percentadvalorem .Since theprices ofproducts within each
ofthe35HStariff headings vary, some imports areabove andsome werebelow theaverage prices.
However, given thelargenumber ofHScategories withanaverage greater than50percent,theUnited
States submits thattherenecessarily aremany individual transactions wellabove 35percentadvalorem .
6.49 Argentina argues thatasthese tables arebased onaverages theydonotconstitute evidence
ofeffective transactions. More specifically, themain counter-argument thatArgentina raises against
theprobative value ofthefirstsetofcharts andtables isthattheyarebased ondataprovided tothe
UnitedStatesforanotherpurpose:theyweregivensothattheUnitedStateswouldrealisethediscrepancy
between Argentine import prices andUSexport prices forthesame items, which suggests serious
underpricing. Another listwassubmitted totheUnited States sothatitcould notetheminor trade
importance ofthisissueforUStextiles exports. These datawerenotsupplied inorder fortheUnitedWT/DS56/R
Page96
States todetermine theaverage duties collected onimports andsuchdatacould notbeusedforthe
latter purpose. Argentina alsocontests theprobative value ofsuchcalculations because ofunacceptable
margins oferror based onthefactthatthedatawere rounded uptothenearest thousand, aclaim
contested bytheUnited States, which points outthatthenumbers wererounded totensorhundreds
ofdollars andthatsuchrounding updoesnotmake anydifference fortransactions worth more than
US$10,000. Regarding thesecond setofcharts andtables, Argentina submits thattheydonotoriginate
from Argentina andthatsuchdatawasnotprovided totheECduring theconsultations, andthatit
hadspecified during theconsultations thatthese datawereirrelevant forthepurpose ofassessing the
levelofduties imposed onimports.
6.50 Argentina alsoargues thatsincetheUnited States based itscalculations onnetweight whereby
Argentina ’sstatistics hadbeenestablished using gross weight, alltheUScalculations wereerroneous.
Inresponse, theUnited States provided further tables where thelevels ofduties were readjusted to
takeintoaccount distortions oftwotofifteen percentduetothedifference between netandgross weight.
These newtables showed thatinmany instances duties wellabove 35percentadvalorem werecollected.
TheUnited States referred thePanel tothesecond setofcharts andtables received from theECand
prepared byArgentina, which isbased onnetweight andtherefore could beusedtoassess whether
thespecific duties collected onimports wereeffectively above the35percentadvalorem .Finally,
totheArgentine claim thatArgentina didnotkeep"net" weight data, theUnited States filedacopy
ofthe1983 issue oftheINDEC statistical yearbook which made clearthattheArgentine authorities
didcollect netweight data. Argentina didnotinform thePanel ofanychange inthisregard.
6.51 AsArgentina didnotprovide anyaffirmative evidence tothecontrary, weconsider thatthis
USevidence provides reliable information that,onatariff linebasis, duties above thebound rateof
35percentadvalorem havebeenimposed. Weagree that,ifanaverage calculation shows duties
above 35percent,thisisevidence ofasufficient number oftransactions which weresubject toduties
imposed above the35percentadvalorem .TheUnited States wasabletodemonstrate thatArgentina
hadimposed andcollected duties ontheeffective price oftheimport transactions atlevels wellabove
thebound rateof35percentadvalorem .Inourview, thefactthatthedatawasprepared byArgentina
forother purposes isnotrelevant andtheUnited States responded adequately toArgentina ’sarguments
questioning thedata. Thus, theUSevidence based onaverages confirms ourfinding inparagraph 6.65.
(d) Evidence based onspecific transactions
6.52 Atthefirstmeeting ofthePanel andfollowing ourrequest, theUnited States provided the
Panel withnine(9)examples oftransactions where itclaimed thatduties above 35percentadvalorem
were collected onimports ontextiles, apparel andfootwear items. Thearguments oftheparties on
these particular shipments arefurther detailed inparagraphs 3.169 andfollowing oftheDescriptive
Partofthepresent Panel Report.
(1) Ashipment on9May1996 ofU.S. carpets inHScategory 5703.20 withac.i.f. value of
US$56,271.90, i.e.,theimposition ofspecific duties ofUS$20,531, ora36percentadvalorem
equivalent.
(2) Imports on4April 1996 ofthree types ofU.S.carpets inHSCategory 5703.30, forwhich
theimposition ofspecific duties resulted inthepayment ofduties of40,60and67percentadvalorem .
(3) Footwear imports produced inIndonesia indicating atotalc.i.f. value ofUS$15,722.53 and
atotalspecific dutyofUS$10,560.00, i.e.thespecific duties constituted anadvalorem equivalent
of67percent.WT/DS56/R
Page97
(4) Footwear imports produced inIndonesia indicating atotalc.i.f. value ofUS$23,046.20 and
atotalspecific dutyofUS$14,476.00, i.e.thespecific duties constituted anadvalorem equivalent
of63percent.
(5) Footwear imports produced inIndonesia indicating atotalc.i.f. value ofUS$7,444.33 and
atotalspecific dutyofUS$4,809.60, i.e.thespecific duties constituted anadvalorem equivalent of
65percent.
(6) Footwear imports produced inIndonesia indicating atotalc.i.f. value ofUS$94,846.13 and
atotalspecific dutyofUS$56,909.70, i.e.the specific duties constituted anadvalorem equivalent of
60percent.
(7) Footwear imports produced inIndonesia indicating atotalc.i.f. value ofUS$30,690.17 and
atotalspecific dutyofUS$19,576.20, i.e.the specific duties constituted anadvalorem equivalent of
64percent.
(8) Woven cotton fabric imports indicating atotalc.i.f.value ofUS$19,384.01 andatotalspecific
dutyofUS$7,087.61, i.e.the specific duties constituted anadvalorem equivalent of37percent.
(9) Ashipment ofU.S.carpet resulted inpayment ofspecific duties ofUS$1775.00 onac.i.f.
value ofUS$2811.58, i.e.theimposition ofthespecific duties resulted inadutyequivalent to63per
centadvalorem.
6.53 Argentina challenges thevalidity ofthese invoices because thename oftheimporter andall
relevant datathatcould helpidentifying theimporter ortheexporter weredeleted. TheUSresponse
isthatithastoprotect theconfidentiality ofthepersons involved inthesetransactions. Argentina claims
thatthisinformation would beveryuseful initsattempt todealwiththeimmense import underpricing
problem itfaces. Inthiscontext, Argentina suggests thatthedifference between theUSaverage export
prices andthespecific invoice prices forsome ofthese items wassuchthatitaffected theprobative
value oftheUSevidence. Fortheseimports, Argentina alsoargues thatallinvoices related tofootwear
items should beexcluded ifthePanel doesnotreview thespecific duties imposed onfootwear items.
Argentina alsoopposes consideration oftheimports from Indonesia, stating thatonlyimports from
theUnited States arerelevant tothepresent case. Ontheninth example, Argentina submits thatthe
amount isverysmall, andemphasizes thatthetransaction value issaidtobeUS$1.90 although in1995,
theyearofthetransaction, theaverage price forexports from theUnited States toArgentina inthe
sametariffheading hadaunitvalue ofUS$2.79. Finally, Argentina generally argues thattheevidence
submitted bytheUnited States isnotthebestevidence, and,therefore, isnotreliable. However, we
notethatArgentina doesnotchallenge theaccuracy oftheamount ofduties imposed.
6.54 Attheendofthefirstmeeting ofthePanel, theUnited States argued thatthebestevidence
wasinpossession ofArgentina andtherefore requested Argentina toproduce allrelevant customs forms
involvingimportsinHSline-items5407.81(wovensyntheticfibrefabric),5703.20(carpets),and6110.30
(manmade fibresweaters) fortheperiod January-September 1996. TheUnited States saidthatitchose
these three categories inpartbecause Argentine customs datashowed thattheaverage dutypaidfor
these three groups ofimports fromtheUnited States was99,43and56percent,respectively, during
theperiod January-July 1996. Argentina didnotproduce these documents.
6.55 Justafewdaysbefore thesecond hearing ofthePanel, theUnited States senttoArgentina
some 90additional invoices andcustoms documents asfurther detailed inparagraph 3.179 ofthe
Descriptive Partofthispanel report. Thedocuments purport toshow examples inwhich Argentina
applied duties inexcess ofits35percentadvalorem tariff binding. Atthebeginning ofthesecond
hearing Argentina requested thePanel todisregard thisevidence asuntimely. Wenotethattherules
ofprocedures ofpanels donotprohibit thepractice ofsubmitting additional evidence afterthefirst
hearing ofthePanel. Until theWTO Members agree ondifferent andmore specific rulesonthisregard,WT/DS56/R
Page98
ourmainconcern istoensure that"dueprocess" isrespected andthatallparties toadispute aregiven
alltheopportunities todefend theirposition tothefullest extent possible. Inlightofthedifficulties
faced byArgentina inresponding tothisevidence onsuchashort notice, wedecided toaccept this
additional evidence ontheunderstanding thatArgentina would haveaperiod oftwoweeks toprovide
further comments ontheseadditional invoices andcustoms documents. Argentina informed thePanel
thatitwould notbesubmitting anyfurther comment.
6.56 TheUnited States submitted additional evidence ofinvoices ofshipments during 1996and1997
which involved seventy-eight instances where Argentina applied duties inexcess of35percentad
valorem .TheUnited States usedoneofthese invoices195todemonstrate itspoints butargued thatall
other invoices were similar andadded thatifrequested itwould provide additional comment onthe
other invoices.
6.57 Argentina raises aseries ofobjections tothisevidence:
- mostofthese invoices concern import transactions forwhich customs clearance wascarried
outmanually; consequently these invoices suffer from anumber offormal defects which ultimately
invalidate thesubstantive arguments theyareintended tosupport;
- most ofthese invoices represent only partofalarger shipment forwhich thecustoms
documentation hasnotbeensupplied.
- concerning thespecific invoice usedbytheUnited States during itsdemonstration, Argentina
argued thatthelegalbasisindicated fordetermining theadvalorem dutyapplied tothegoods andthe
legalbasis onwhich thethree percentstatistical taxwaslevied were erroneous;
- thevaluesdeclaredareconsiderablylowerthantheaverageexportpricesoflikegoodsoriginating
intheUnited States in1996;
- thealleged importer 'sregistration number andtaxidentification number (CUIT) aswellas
theimport registration number, andthename andregistration number ofthecustoms agent, hadbeen
shaded out;
- thegoods concerned areofItalian origin inallcases butone;
- there isnoreceipt from theBanco delaNación ofpayment ofduties which represents the
laststepinthecustoms clearance procedure forimported goods;
- there isnoevidence ofimport duties actually paidtoArgentine Customs byimporters;
- allofthetransactions occurred in1997 except one.
WenotethatArgentina doesnotdenythattheamounts ofduties soindicated werethose effectively
imposed, itsimply claims thatitwasfortheUnited States toprove thatfullpayment wasmade tothe
Customs Authorities.
6.58 Wedonotconsider thatthefactthattheUnited States submitted copies ofcustoms documents
affects theirprobative value. TheUnited States didtrytoobtain theoriginal copies inArgentina ’s
possession. Before aninternational tribunal, parties dohaveadutytocollaborate indoing theirbest
tosubmit totheadjudicatory bodyalltheevidence intheirpossession. Intheabsence oftheoriginals,
195Seepara. 3.179 andfollowing oftheDescriptive Part.WT/DS56/R
Page99
andaftercareful examination andconsideration oftheevidence, weconsider thatthecopies submitted
bytheUnited States constitute sufficient evidence toallow ustomake theconclusions wehavereached.
6.59 Argentina claims thatitisfacing aserious problem offrequent underpriced imports andthat
itneeds thenames oftheparties involved inthesaidtransactions inorder totrytodefeat suchillegal
practices. Wenotethedifficulties faced byArgentina butwemustalsolimitourselves totheclaims
presented tous.Wealsonotethataclaim ofunderpricing practices isnotalegaldefence toalleged
violations ofArticle IIofGATT. TheWTO Agreement offers specific means fortheimporting country
toredress suchpractices. Wenotealsothatitisoften thepractice indisputes suchasthisone,for
aparty toprotect commercial in-confidence information suchasthenames andother information of
theprivate entities involved. Finally, afterreviewing alltheevidence andarguments oftheparties,
weconsider thattheunderpricing arguments raised byArgentina (referred toinparagraph 6.53above)
donotaffect theprobative value oftheUSevidence.
6.60 Argentina claims thatinvoices representing imports fromIndonesia andItalyarenotadmissible
sincethecomplainant inthepresent dispute istheUnited States. Theissuebefore thePanel iswhether
Argentina ’smeasures leadtotheimposition ofduties above itsbound rateof35percentadvalorem ,
irrespective ofthesource.
6.61 ThefactthatArgentina challenged theadmissibility ofthecustoms documentation submitted
bytheUnited States onthebasis thatsome ofthecustoms clearance were carried outmanually, or
thatthere werecases where thewrong resolution196wasusedandthatmany ofthesetsofdocuments
wereincomplete doesnot,inourview, affect theprobative value oftheevidence provided bytheUnited
States. Argentina didnotquestion therateofdutyapplicable andthewaytheamount ofduties payable
wascalculated. Argentina alsoalluded tothepossibility offraud. Although thePanel understands
thedifficulties faced byArgentina, inadispute overtheapplication ofArticle IIofGATT, thesepoints
made byArgentina arenotrelevant. Therefore, weconsider, afterreview ofalltheevidence and
arguments andthefactthatArgentina didnotpresent anyconvincing evidence tothecontrary, that
there isapresumption, within themeaning given toitbytheAppellate Body, thatthese documents
areofficial andreflect theamount ofduties actually imposed. Moreover, wenotethatcustoms stamps
andsignatures canbefound onmany ofthese documents. Many ofthese stamps andsignatures were
from Argentine customs authorities andanumber ofthese forms hadastamp "Oficializado -Firma
ySello Despachante deAduana "onthem.
6.62 Concerning Argentina ’sclaim thatthere isnoevidence ofactual payment ofthesaidduties,
werecall thatwearenotfaced withadomestic recourse forreimbursement ofoverpayment. Thealleged
violation, andtheobligation under Article II,istonotimpose duties above thebound rateandArgentina
doesnotdenythatforeachofthe78examples there isareflection ofthecalculation ofspecific duties
inexcess of35percentequivalent advalorem .
6.63 Finally, Argentina raises thefactthatmostofthetransactions referred tointhesetofinvoices
submitted afewdaysbefore thesecond meeting ofthePanel197relate totransactions thattookplace
in1997implying thatthese should notbeadmissible since theytookplace aftertheconsultations were
initiated. Inthepresent dispute, thepurpose ofthepanel process istotrytounderstand thewaythe
Argentine tariff system functions. Theexamination of,amongst other elements, some applications
ofthistariff system isdone inthisperspective. Inourview, these 1997 transactions based onthe
resolutions andother legislation atissue, further confirm theevidence submitted bytheUnited States
fortransactions thattookplace inthepreceding years. Thisisalsowhywehavelooked attheinvoices
196Wenotealsothatthelevelofthespecific duties imposed pursuant totheresolution inforce atthetimeoftheimportation
andthatoftheexpired resolution referred toonthecustoms clearance were identical andthattheamount ofduties payable
forthisimported itemunder bothresolutions were alsoidentical.
197Seepara. 3.179 oftheDescriptive Part.WT/DS56/R
Page100
related tofootwear imports before 14February 1997. Werecall thatwearelooking atspecific
transactions inorder toassess whether theArgentine resolutions andregulations, asrevealed intheir
application, areinconsistent withArticle IIofGATT. Forthisreason, weconsider thattheseexamples
of1997 transactions arerelevant forourunderstanding oftheeffective functioning andapplication
oftheminimum specific dutysystem ontextiles andapparel andconstitute admissible andrelevant
evidence forthepresent dispute.
6.64 Weconsider, therefore, thatArgentina hasnotrebutted thepresumption raised bytheUnited
States totheeffect thatArgentine customs officials haveimposed duties, which inmany cases arewell
above 35percentadvalorem ,contrary toArgentine tariff bindings andcontrary toGATT Article II.
Argentina ’sarguments donotaffect theadmissibility andreliability oftheevidence submitted.
6.65 Inthelightoftheforegoing, wefindthattheUnited States hasprovided sufficient evidence
thatArgentina haseffectively imposed duties onimports oftextiles andapparel above 35percentad
valorem ,thatindeed thetotalamount ofduties collected annually ontheseitems leadstotheconclusion
thatduties above 35percentadvalorem ontheaverage transaction value havebeenimposed onthe
sameitems, andthatinanycase,aswefound inparagraph 6.47above, theverynature oftheminimum
specific dutysystem imposed inArgentina ontheitems atissuewillinevitably lead,incertain instances,
totheimposition ofduties above 35percentadvalorem .Inaddition, thefactthatArgentina isusing
minimum specific duties while theybound theirtariffs according toanadvalorem typeofduties, is
inconsistent withitsSchedule andwiththerequirements ofArticle IIofGATT. Therefore, weconsider
thatminimum specific duties imposed byArgentina ontextile andapparel imports constitute atreatment
ofthose imports thatislessfavourable thanthatprovided forinArgentina ’sSchedule andcontrary
toArticle IIofGATT.
3. THE DOMESTIC CHALLENGE PROCEDURE
6.66 Argentina denies thelegitimacy oftheUSclaims, butintheevent thatthePanel should agree
withtheUnited States inrespect ofthose claims, Argentina argues thatitsdomestic challenge procedure
isadefense against anyclaim thatithasviolated Article IIofGATT. Argentina notes thatunder
Article75.22oftheArgentineConstitution,internationallawtakesprecedenceoverdomesticlegislation.
Therefore, anyjudge inArgentina hasthepower todeclare, attherequest ofaninterested party, the
unconstitutionality ofanymeasure adopted inbreach ofrulescontained inaninternational treaty, such
astheWTO Agreement. Subsequent domestic lawcannot annul aninternational treaty, assuchlaw
islower inrank. Should animporter bevictim ofdomestic legislation orregulations thatwould violate
theprovisions oftheWTO Agreement, including Article IIofGATT andtheArgentina 'sSchedule,
Argentina argues thattheimporter should simply trigger thedomestic challenge procedure which is
quick andfree. Furthermore, allArgentine judges areobligated torecognise thesupremacy ofWTO
rules overaninconsistent Argentine measure suchasoneimposing duties above thebound rate.
6.67 Inourview, thisargument hastwomainflaws. First, although under theArgentine Constitution
theWTO Agreement takes precedence overanydomestic regulations inArgentina, Argentina states
thatitscustoms officials havenodiscretion andmustimpose theminimum specific duties eveniffound
tobeabove thebound rateof35percentadvalorem andnotwithstanding thefactthatsuchimposition
violates theWTO Agreement andtheArgentine Constitution.
6.68 Second, Article IIofGATT imposes anunconditional obligation onaWTO Member tooffer
toother Members treatment notlessfavourable thanthatprovided forinitsSchedule. AMember
violates thisobligation, regardless ofwhether thatMember provides aremedy forsuchviolation in
itsdomestic legalsystem. Notwithstanding howefficient suchdomestic court system maybe,until
thecourt system actstheMember isinviolation ofitsWTO obligations. Moreover, itisnotcertain
thattheviolationwilleverbecorrectedsincesuchcorrectionisconditionalonadecisionbytheArgentine
importer ortheholder oftheclearance documents toinitiate adomestic action. Theinevitable delayWT/DS56/R
Page101
anduncertainty insuchprocedure arefundamentally atvariance withtheWTO principles andtheaim
ofGATT/WTO tariffbindings which aretoprovide predictability andsecurity forinternational trade.198
Weagree withthestatement concerning thepurpose ofthecommitments made intariff bindings as
stated inBananas II:199
"135. ThePanelrecalledtheimportanceofsecurityandpredictabilityintheapplication
oftariffs bindings. Itnoted thatprevious panels andworking parties hademphasized
thattariffbindings justify reasonable expectations about market access andconditions
ofcompetition. [...]ThePanel [...]concluded that,indetermining whether treatment
accorded byatariff measure wasnolessfavourable thanthatprovided forinthe
Schedule, ithadtotakeintoaccount notonlytheactual consequences ofthatmeasure
forpresent imports butalsoitseffects onpossible future imports. Thisfollowed from
theprinciple recognized bymany previous panels thattheprovisions oftheGeneral
Agreement serve notonlytoprotect actual tradeflows butalsotocreate predictability
forfuture trade".
6.69 Consequently, wedonotaccept Argentina ’sdefense thatitsnational challenge process issuch
astoensure thatArgentina doesnotandwillnotviolate itsobligations pursuant toArticle IIofGATT.
C. THE STATISTICAL TAX
6.70 Argentina maintains anadvalorem taxofthree percentonimports, without aminimum or
maximum charge, tocover thecostofproviding thestatistical service intended toprovide areliable
basisforforeigntradeoperators.200AccordingtoArgentina,thisserviceisnotrenderedtoanyindividual
importer, ortothespecific importer associated withaparticular operation, buttoforeign tradeoperators
ingeneral andforeign trade asanactivity perse.201
6.71 TheUnited States claims thatthisstatistical taxisinviolation ofArticle VIIIofGATT.
Argentina responds thatitsstatistical taxispermitted under Article VIII. ForArgentina, Article VIII
should permit thecollection ofcosts notonlyfortheservices rendered totheindividual importer for
agiven transaction butalsoforallcosts (direct andindirect) incurred inproviding theservices.
Argentina addsthatthisthreepercenttaxisbound initsGATT 1994Tariff Schedule under theheading
"Other Duties andCharges". Although itstates thatasimilar taxhasbeeninplace since 1989202,
Argentina argues thatthisstatistical taxisnowpartofanoverall "package" offiscal commitments
ithasundertaken withtheInternational Monetary Fund ("IMF"). Consequently, Argentina argues
thatitsobligations under Article VIIIshould beinterpreted totakeintoaccount theexistence ofa
potential conflict ofrules which goesbeyond theframework ofapossible bilateral trade dispute.
6.72 Thisissue subsumes three questions:
a) Isanadvalorem statistical taxofthree percentimposed onimports compatible with
Article VIII?
198There isageneral ruleofinternational lawthatastatecannot plead provisions ofitsownlaw(ordeficiencies inthat
law)asadefence toaclaim against itforanalleged breach ofitsobligations under international law. Thus, intheFree
Zones ofUpper Savoy andtheDistrict ofGex,thePermanent Court ofInternational Justice said: "Itiscertain thatFrance
cannot relyonherownlegislation tolimitthescope ofherinternational obligations". (1932, PCIJ, Series A/B, caseNo.46,
p.167). AWTO Member cannot offer asadefence toaclaim ofviolation ofaWTO agreement, thatitsinternal system
provides foraremedy tosuchviolation tocertain individuals, either national orforeign, andthatnoviolation ofWTO has
therefore taken place.
199Bananas II,Op.Cit., para. 6.29 ofthepresent report.
200Asfurther described inparas. 2.19-2.21 oftheDescriptive Part.
201Seepara. 3.266 oftheDescriptive Part.
202Seepara. 2.19 oftheDescriptive Part.WT/DS56/R
Page102
b) What effect, ifany,doesArgentina ’srelationship withtheIMFhaveontheanswers
totheabove question?
c) Doesthefactthatthistaxwasbound assuchinArgentina ’sSchedule exempt Argentina
from therequirements ofArticle VIII?
1. ARTICLE VIIIOFGATT
6.73 Paragraph 1(a)ofArticle VIIIofGATT provides that
"[a]ll feesandcharges ofwhatever character [...]imposed byMembers onorin
connectionwithimportationorexportationshallbelimitedinamounttotheapproximate
costofservices rendered andshallnotrepresent anindirect protection todomestic
products orataxation ofimports orexports forfiscal purposes".
Article VIII:4(e) makes itclear thatfeesandcharges relating to"statistical services" fallwithin the
scope ofArticle VIII.
6.74 Themeaning ofArticle VIIIwasexamined indetail inthePanel Report onUnited States -
Customs Users Fee.203Thepanel found thatArticle VIII’srequirement thatthecharge be"limited
inamount totheapproximate costofservices rendered" is"actually adualrequirement, because the
charge inquestion must firstinvolve a'service 'rendered, andthenthelevel ofthecharge must not
exceed theapproximate costofthat'service ’".204According tothepanel report, theterm"services
rendered" means "services rendered totheindividual importer inquestion".205Inthepresent case
Argentina states thattheservice isnotrendered totheindividual importer, ortothespecific importer
associated withaparticular operation, buttoforeign trade operators ingeneral andforeign trade as
anactivity perse.
6.75 Anadvalorem dutywithnofixed maximum fee,byitsverynature, isnot"limited inamount
totheapproximate costofservices rendered". Forexample, high-price items necessarily willbear
amuch greater taxburden thanlow-price goods, yettheservice accorded tobothisessentially the
same. Anunlimited advalorem charge onimported goods violates theprovisions ofArticle VIIIbecause
suchacharge cannot berelated tothecostoftheservice rendered. Forexample, intheCustoms User
Feereport, thepanel examined theconsistency withArticle VIIIof0.22and0.17percentadvalorem
customs merchandise processing feeswithnoupper limits. Thepanel concluded that"theterm'cost
ofservices rendered '...inArticle VIII:1(a) must beinterpreted torefertothecostofthecustoms
processing fortheindividual entry inquestion andaccordingly thattheadvalorem structure ofthe
United States merchandise processing feewasinconsistent withArticle VIII:1(a) totheextent thatit
caused feestobelevied inexcess ofsuchcosts".206
6.76 TheReport oftheWorking Party onAccession oftheDemocratic Republic oftheCongo207
isalsorelevant tothepresent dispute:
"Members oftheWorking Party pointed outthatthestatistical taxofthree percent
advalorem applied bytheCongolese authorities onimports wasnotcommensurate
withtheservice rendered andwascontrary totheprovisions ofArticle VIII:1(a). The
representative oftheCongo recognized thatthistaxexceeded thecostoftheservice,
203Adopted on2February 1988, 35S/245.
204Customs Users Fee,Op.Cit., para. 69.
205Ibid., para. 80.
206Ibid., para. 86.
207Adopted on29June 1971, BISD 18S/89, para. 5.WT/DS56/R
Page103
andexplained thatthesurplus revenue from thetaxwould beemployed toward
improving theservice. Hisauthorities were prepared toconsider theadjustment of
thestatistical tax,inthelightoftheprovisions ofArticle VIIIassoonastheywere
inaposition toafford it.TheWorking Party tooknoteofthisstatement andinvited
theGovernment oftheDemocratic Republic oftheCongo tore-examine itspresent
method ofapplication ofthestatistical taxandtoreport totheCONTRACTING PARTIES
onthepossibilities ofbringing thetaxintolinewiththeprovisions ofArticle VIII:1(a)".
6.77 Argentina ’sstatistical taxislevied onanadvalorem basis withnoceiling. Asdescribed in
paragraph 6.70above, Argentina ’staxisclearly notrelated tothecostofaservice rendered tothe
specific importers concerned. Thetaxasassessed onmany goods isnotinproportion tothecostof
anyservice rendered. Thetaxpurportedly raises revenue forthepurpose offinancing customs activities
related totheregistration, computing anddataprocessing ofinformation onbothimports andexports.
While thegathering ofstatistical information concerning imports maybenefit traders ingeneral, Article
VIIIbarsthelevying ofanytaxorcharge onimporters tosupport therelated costs"fortheindividual
entry inquestion" since itwillalsobenefit exports andexporters.208
6.78 AstoArgentina ’sargument thatitwascollecting thistaxfor"fiscal" purposes inthecontext
ofitsundertakings withtheIMF, wenotethatnotonlydoesArticle VIIIofGATT expressly prohibit
suchmeasures forfiscal purposes butthatclearly ameasure forfiscal purposes willnormally lead
toasituation where thetaxresults incharges being levied inexcess oftheapproximate costs ofthe
statistical services rendered.
6.79 Inaddition, although itdoesnotargue thatitisrequired toimpose thisspecific taxinorder
tomeetitscommitments totheIMF, Argentina argues thatthetaxshould befound tocomply with
Article VIII,ifnecessary through alessstrict application oftherequirements ofArticle VIIIofGATT
thanwasadopted intheCustoms Users Fee.Wefindnoexception intheWTO Agreement thatwould
excuse Argentina ’scompliance withtherequirements ofArticle VIIIofGATT. Moreover, wesee
nothing intheAgreement Between theIMFandtheWTO209,theDeclaration ontheRelationship of
theWorld Trade Organization withtheInternational Monetary Fund andtheDeclaration onthe
Contribution oftheWorld Trade Organization toAchieving Greater Coherence inGlobal Economic
Policymaking thatsuggests thatweshould interpret Article VIIIasargued byArgentina.
6.80 Consequently, following theGATT practice onthesubject matter, weconclude thatArgentina ’s
statistical taxofthree percentadvalorem ,initspresent form, isinviolation ofArticle VIII:1(a) of
GATT totheextent itresults incharges being levied inexcess oftheapproximate costsoftheservices
rendered aswellasbeing ameasure designated forfiscal purposes.
2. EFFECT OFINCLUDING STATISTICAL TAX INTARIFF SCHEDULE
6.81 Argentina argues thatitsthree percentstatistical taxwasincluded initsSchedule LXIV and
istherefore notinviolation ofGATT rules. Theprovisions oftheWTO Understanding onthe
Interpretation ofArticle II:1(b) ofGATT 1994, dealing with'other duties andcharges ’,make clear
thatincluding acharge inaschedule ofconcessions innowayimmunizes thatcharge fromchallenge
asaviolation ofanapplicable GATT rule. TheUnderstanding provides:
"1. Inorder toensure transparency ofthelegalrights andobligations deriving from
paragraph 1(b)ofArticle II,thenature andlevelofany'other duties orcharges 'levied
onbound tariffitems, asreferred tointhatprovision, shallberecorded intheSchedules
ofconcessions annexed toGATT 1994 against thetariff itemtowhich theyapply.
208SeeCustoms User Fee,Op.Cit., paras. 84-86.
209Annex ItoWT/L/195, adopted bytheGeneral Council on7,8and13November 1996.WT/DS56/R
Page104
Itisunderstood thatsuchrecording doesnotchange thelegalcharacter of'other duties
orcharges ’.
[...]
5. Therecording of'otherduties orcharges 'intheSchedules iswithout prejudice
totheirconsistency withrights andobligations under GATT 1994 other thanthose
affected byparagraph 4.AllMembers retain therighttochallenge, atanytime, the
consistency ofany'other dutyorcharge 'withsuchobligations.
6. Forthepurposes ofthisUnderstanding, theprovisions ofArticles XXII and
XXIIIofGATT1994aselaboratedandappliedbytheDisputeSettlementUnderstanding
shallapply".
ThisprovisionisconsistentwithGATTandWTOjurisprudencedealingwithconflictsbetweennon-tariff
provisions included intheMember ’sSchedules andgeneral GATT andWTO rules.210
6.82 Therefore, weconsider thatthefactthatArgentina ’sstatistical taxisincluded initsSchedule
isnotadefence toitsinconsistency withtheprovisions ofArticle VIIIofGATT.
6.83 Consequently, forallthereasons mentioned above, wefindthattheArgentine statistical tax
ofthree percentadvalorem isinconsistent withtheprovisions ofArticle VIIIofGATT inthatitis
not"limited inamount totheapproximate costofservices rendered".
D. ARTICLE 7OFTHE ATC
6.84 TheUnited States claims thatbecause Argentina hasviolated Articles IIandVIIIofGATT
withrespect totextiles andapparel, ithasalsoviolated Article 7oftheATC. TheUnited States claims
thataviolation ofanyprovisions ofanyoftheWTO agreements inthesector oftextiles andapparel
would necessarily constitute aviolation ofArticle 7oftheATC.
6.85 Argentina ’sresponse istwofold: First, Argentina argues thatsince ithasnotviolated any
provision ofanyoftheWTO covered agreements, itcannot besaidtoviolate Article 7oftheATC;
second, Argentina claims thattheprovisions ofArticle 7areonlyapplicable tothemeasures notified
pursuant toArticle 7.Since ithasnotnotified anddoesnotmaintain anyquantitative restrictions or
non-tariff measures andithasrespected itstariffs reduction commitments, Article 7isnotapplicable.
6.86 Theparties andthird parties haveentered intolongandwell-argued debates astowhether
Article 7covers onlyactions andobligations covered bytheATC, i.e.,quantitative restrictions, or
whether thepurpose ofArticle 7istoensure thatmeasures other thanquantitative restrictions such
astariffs, non-tariff barriers, licensing provisions andintellectual property provisions arenotused
inamanner which undermines market access inthetextile andapparel sector forallWTO Members.
6.87 Wehavedecided toexercise judicial economy andnotaddress theUSclaim related totheATC.
Such decision isconsistent withthefindings oftheAppellate Body report intheShirts andBlouses
case.211Wedonotseehowafinding onArticle 7oftheATC would helptheparties toresolve their
dispute. Itwould notprovide Argentina withanyfurther guidance astohowitshould reform its
measures found tobeinconsistent withtheprovisions ofArticles IIandVIIIofGATT. Indeed, even
ifwefound thattheArgentine measures alsoviolated theprovisions ofArticle 7oftheATC, such
210SeePanel Report onUnited States -Restrictions onImports ofSugar ,adopted on22June1989, BISD 36S/331 and
Bananas III,Op.Cit.
211Shirts andBlouses ,Appellate Body Report, Op.Cit., pp.17-20.WT/DS56/R
Page105
finding would addnothing totheconclusions wereached concerning theviolations ofArticles IIand
VIIIofGATT. Accordingly, weconsider thatafinding onArticle 7oftheATC isnotnecessary,
noruseful forthepresent dispute.
VII. CONCLUSIONS
7.1 Inthelightofthefindings above, weconclude that
(a) theminimum specific duties imposed byArgentina ontextiles andapparel are
inconsistent withtherequirements ofArticle IIofGATT;
(b) thestatistical taxofthree percentadvalorem imposed byArgentina onimports is
inconsistent withtherequirements ofArticle VIIIofGATT.
7.2 ThePanel recommends thattheDispute Settlement Body request Argentina tobring itsmeasures
intoconformity withitsobligations under theWTO Agreement.