Document: WT/DS207/RW Page C-1 ANNEX C REBUTTALS FROM PARTIES Contents Page Annex C-1 Rebuttal by Argentina (17 May 2006) C-2 Annex C-2 Rebuttal by Chile (24 May 2006) C-52
Date: 17 May 2006
Document codes: WT/DS207/RW
Complainant: Argentina
Respondent: Chile
Third parties: Australia, Brazil, Canada, China, Colombia, Costa Rica, EU, Ecuador, El Salvador, Guatemala, Honduras, Japan, Nicaragua, Paraguay, Peru, Thailand, Venezuela, U.S.
Dispute stage: Implementation & Compliance
Agreements cited: Art. XIX:1, II  GATT 1994Art. 4  AgricultureArt. 2, 3, 4, 5, 6, 12  Safeguards

ANNEX C

REBUTTALS FROM PARTIES

Contents Page
Annex C-1 Rebuttal by Argentina (17 May 2006) C-2
Annex C-2 Rebuttal by Chile (24 May 2006) C-52

TABLE OF REPORTS CITED

Short title Full title and reference
Chile – Price Band System Appellate Body Report " Chile – Price Band System and Safeguard
Measures Relating to Certain Agricultural Products" ,
adopted 23 October 2002.
Chile – Price Band System Panel Report " Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products" , adopted
23 October 2002.
US – Shrimp
(Article 21.5 – Malaysia)
Appellate Body Report " United States – Import Prohibition of Certain
Shrimp and Shrimp Products – Recourse by Malaysia to Article 21.5 of
the DSU", , adopted 22 October 2001.
Canada – Aircraft
(Article 21.5 – Brazil)
Appellate Body Report " Canada – Measures Affecting the Export of
Civilian Aircraft". Recourse by Brazil to Article 21.5 of the DSU,
, adopted 21 July 2000.
EC – Bed Linen
(Article 21.5 – India)
Appellate Body Report "European Communities – Anti-Dumping Duties
on Imports of Cotton-Type Bed Linen from India – Recourse by India to
Article 21.5 of the DSU", , adopted 8 April 2003.
US – Certain EC Products
(Article 21.5 – EC)
Panel Report " United States – Countervailing Measures on Certain EC
Products – Recourse by the European Communities to Article 21.5 of
the DSU", , adopted 17 August 2005.
Korea – Dairy Products Appellate Body Report "Korea – Definitive Safeguard Measures on
Imports of Certain Dairy Products" , adopted
14 December 1999.

A. INTRODUCTION
1. The Government of the Argentine Republic thanks the members of the Panel for enabling it to
submit for their consideration its Rebuttal of the arguments put forward by the Government of Chile
in its written submission of 3 May 2006 (hereinafter "Chile's First Written Submission").
2. Argentina takes this opportunity to reiterate th at, as follows from its written submission of
19 April 2006 (hereinafter "Argentina's First Writte n Submission"), Chile has failed to implement the
recommendations and rulings of the Dispute Settlement Body (DSB), and that the Price Band System
(PBS) which Chile applies to imports of wheat and wheat flour, as modified by Law 19.897 and
Exempt Decree No. 831/2003 (hereinafter the "amended PBS") – that is to say, the measure taken to
comply – is inconsistent with the agreements concerned in this dispute.
3. First of all, Argentina will address Chile's claims relating to the inconsistency of the amended
PBS with Article 4.2 of the Agreement on Agriculture (Section B).
4. In this connection, Argentina will demonstrate to the Panel that Chile is seeking to show that
it has complied with the recommendations and rulin gs of the DSB by putting its own construction on
what the DSB said. At the same time, Chile fails to show that the amended PBS is a measure
consistent with the Agreement on Agriculture.
5. In this respect, Argentina reaffirms that, as de monstrated in its First Written Submission, the
amended PBS is a border measure similar to a "var iable import levy" and a "minimum import price"
within the meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture.
1
6. Argentina reiterates that "this is because the wa y in which the system is designed and the way
it operates in its overall nature are sufficiently sim ilar to the characteristics of these two categories of
prohibited measures as to make the amended PBS, with its particular characteristics, a 'similar border
measure'".2
7. Thus, Argentina will make it clear to the Panel th at Chile has been unable to refute that "the
particular configuration and interaction of the specific characteristics of Chile's price band system
generate certain market access conditions that lack transparency and predictability and disconnect the
Chilean market from international price trends in a way that insulates the Chilean market from the
transmission of international prices and prevents enhanced market access for imports of wheat and
wheat flour", in a manner inconsistent with Article 4.2 of the Agreement on Agriculture.
3
8. Secondly, Argentina will explain why the arguments re lating to the factor of 1.56 applicable
to wheat flour and the claim concerning the second sentence of Article II:1(b) of the GATT 1994 can
and should be examined by this Panel (Section C).
9. Thus, Argentina requests the Panel to examine th e arguments relating to the factor of 1.56
applicable to wheat flour inasmuch as these argu ments help to show that the amended PBS is a
measure inconsistent with Article 4.2 of the Agreement on Agriculture.
10. Moreover, Argentina requests the Panel to find that the amended PBS is in breach of the
second sentence of Article II:1(b) of the GATT 1994, given that it was not recorded in the
corresponding column of Chile's Schedule of concessions (No. VII) but is nevertheless being applied.

1 Argentina's First Written Submission, paragraph 71.
2 Argentina's First Written Submission, paragraph 72.
3 Argentina's First Written Submission, paragraph 73.

11. Finally, Argentina presents its conclusions (Section D) and requests the Panel to find that the
measure taken to comply – that is to say, the am ended PBS – is inconsistent, both in itself and as
applied, with Article 4.2 of the Agreement on Agriculture, the second sentence of Article II:1(b) of the
GATT 1994, and Article XVI.4 of the Marrakesh Agreement Establishing the World Trade
Organization.
B. THE
 AMENDED PBS IS IN BREACH OF ARTICLE 4.2 OF THE AGREEMENT ON
AGRICULTURE
12. In its First Written Submission, Argentina show ed that the amended PBS is a border measure
similar to a "variable import levy" and a "minimum import price" within the meaning of footnote 1 to
Article 4.2 of the Agreement on Agriculture, because the way in which the system is designed and the
way it operates in its overall nature are suffici ently similar to the characteristics of these two
categories of prohibited measures as to make the ame nded PBS, with its particular characteristics, a
"similar border measure".4
13. Argentina has shown, on the basis of evidence, that the amended PBS causes insulation from
the international market by disconnecting the Chilean market from the transmission of international
prices and impeding enhanced access to the Chilean market for imports of wheat and wheat flour, and
that it is neither transparent nor predictable as only ordinary customs duties can be.5
14. In its First Written Submission, Chile fails to refute any of the claims and evidence put
forward by Argentina. Below, Argentina presents its analysis of the defence offered by Chile, seeking
to organize Chile's arguments according to how they presumably should correspond to the Argentine
claims.
1. Scope of the present proceedings under Article 21.5 of the DSU
15. Chile devotes an entire section to an attempt to "demonstrate" that the changes introduced by
Law 19.897 and its Regulations reflect the findings and conclusions of the Appellate Body. Thus,
Chile claims to have complied with the recomme ndations and rulings of the Dispute Settlement
Body.
6
16. However, the changes made to the Price Ba nd System do not make it consistent with
Article 4.2 of the Agreement on Agriculture and consequently Chile has not implemented the
recommendations and rulings of the Dispute Settlement Body.
17. Argentina cannot agree with Chile's contention that:
"… The recommendations and rulings are ther efore those which establish not only the
framework of compliance, but also the framework for possible Article 21.5
compliance review proceedings …" 7
18. This is incorrect. In a compliance review proceeding under Article 21.5 of the DSU it is not
simply a question of whether the Member has comp lied with the recommendations of the DSB. It is
also a question of whether the measures taken to comply are consistent with the covered agreements.

4 Argentina's First Written Submission, Section C.I.
5 Argentina's First Written Submission, Sections C.I.2 and C.I.3.
6 Chile's First Written Submission, Section IV.
7 Chile's First Written Submission, paragraph 77.

19. This was established by the Appellate Body when it held that panels established under
Article 21.5 of the DSU are not merely called upon to assess whether "measures taken to comply"
implement specific "recommendations and rulings" adopt ed by the DSB in the original dispute but,
"more frequently" should assess the " consistency with a covered agreement " of the implementing
measures:
"We addressed the function and scope of Artic le 21.5 proceedings for the first time in
Canada – Aircraft (Article 21.5 – Brazil) . There, we found that Article 21.5 panels
are not merely called upon to assess whether 'measures taken to comply' implement
specific 'recommendations and rulings' adopted by the DSB in the original dispute.

We explained there that the mandate of Artic le 21.5 panels is to examine either the
'existence' of 'measures taken to comply' or, more frequently, the ' consistency with a
covered agreement' of implementing measures …" 8
20. Moreover, Chile misinterprets the findings a nd conclusions of the Pa nel and the Appellate
Body when it suggests that there were only "specific aspects" of the PBS that had to be brought into
conformity.9
21. Chile disregards the fact that, as follows from a simple reading of the recommendations and
rulings in the reports of both the Panel and the Appellate Body adopted by the DSB, its obligation was
to bring its inconsistent Price Band System into conformity with the Agreement on Agriculture.
22. Thus, the Panel stated that:
"We recommend that the Dispute Settlement Body request Chile to bring its PBS into
conformity with its obligations under the Agreement on Agriculture ".10 (Underlining
added).
23. In its turn, the Appellate Body:
"… recommends that the DSB request Chile to bring its price band system, as found,
in this Report and in the Panel Report as modi fied by this Report, to be inconsistent
with the Agreement on Agriculture , into conformity with its obligations under that
Agreement".11 (Underlining added)
24. Thus, it is clear that in these – as in the origin al – proceedings the various components of the
PBS are not being called into questi on in isolation, but rather that the issue before the DSB is – and
was – the system as a whole, the system as such.
25. In its First Written Submission, Argentina exam ined the various components of the amended
PBS in order demonstrate analytically and mathemati cally that, in structure and design, the modified
system is a measure similar to a variable import levy or a minimum import price, that is to say, a
measure of the kind that has been required to be converted into ordinary customs duties. It is the
combination of these components that makes it a measure inconsistent in its totality with Article 4.2
of the Agreement on Agriculture.

8 EC – Bed Linen (Article 21:5 – India), Appellate Body Report, paragraph 79 (footnotes omitted).
9 Chile's First Written Submission, paragraph 88.
10 Chile – Price Band System, Panel Report, paragraph 8.3.
11 Chile – Price Band System, Appellate Body Report, paragraph 289.

26. The same analysis was made by the Appellate B ody in the original proceedings in arriving at
the conclusion that the original PBS was inconsistent with Article 4.2 of the Agreement on
Agriculture:
"We emphasize that we reach our conclusion on the basis of the particular
configuration and interaction of all these specific features of Chile's price band
system …
We, therefore, uphold the Panel's finding, in paragraph 7.47 of the Panel Report, that
Chile's price band system is a 'border measure' 'similar to' 'variable import levies' and
'minimum import prices ' within the meaning of footnote 1 and Article 4.2 of the
Agreement on Agriculture".12
27. In the rest of this Section B, Argentina will c onsider Chile's claims and show that Chile has
failed to refute the arguments and evidence submitted by Argentina to the effect that the amended
PBS causes insulation from the international market, is not transparent or predictable, and is a border
measure similar to a variable import levy and a minimum import price. Finally, Argentina will show
that, contrary to what Chile claims, the ame nded PBS has not produced any improvement in the
conditions of access to the Chilean market.
2. The amended PBS causes insulation from the international market
"… [T]oday … the duties or rebates assessed are valid for two months (i.e., six times
a year), and during that period are completely disconnected from what may occur in
the reference, or any other, markets … In other words, the duty or rebate, or its non-
applicability, is determined independently of the commercial transaction prices …" 13
28. Argentina has shown that the amended PBS cau ses insulation from the international market,
in a manner inconsistent with Article 4.2 of the Agreement on Agriculture.14
29. Chile maintains that, according to the Appellate Body, insulation may result from a lack of
transparency and predictability, but does not constitut e a feature challengeable as such that could, on
its own, lead to a finding of inconsistency.15
30. Once again, Chile fails to understand the findings of the Appellate Body.
31. According to the Appellate Body, the distortion of the transmission of world market prices is
a feature challengeable as such. This is shown in various passages of its report where the Appellate
Body specifically examines the way in which the original PBS insulated the Chilean market from
world market price developments.16
32. Moreover, it is especially clear from its conclu sions, where the Appellate Body finds that the
insulation and lack of transparency and predictab ility are separate and cumulative violations of the
PBS.
33. In this connection, in the paragraph already cited by Argentina, the Appellate Body stated:

12 Chile – Price Band System, Appellate Body Report, paragraphs 261 and 262.
13 Chile's First Written Submission, paragraphs 180 and 181.
14 Argentina's First Written Submission, Section C.2.
15 Chile's First Written Submission, paragraph 100.
16 Chile – Price Band System, Appellate Body Report, paragraphs 250 and 251, inter alia.

"We emphasize that we reach our conclusion on the basis of the particular
configuration and interaction of all these specific features of Chile's price band
system. In assessing this measure, no one feature is determinative of whether a
specific measure creates intransparent and unpredictable market access conditions.
Nor
 does any particular feature of Chile's price band system, on its own, have the
effect of disconnecting Chile's market from international price developments in a way
that insulates Chile's market from the tr ansmission of international prices, and
prevents enhanced market access for imports of certain agricultural products."17
34. In short, the insulation from international ma rkets caused by the amended PBS is a feature
that gives rise to an inconsistency on its own.
2.1 The amended PBS tends to "overcompensate" for the effect of decreases in international
prices on the domestic market when the reference prices are set below the price band
floor18
35. In an attempt to discredit the evidence submitted by Argentina in support of its claim that the
amended PBS tends to "overcompensate" for the effect of decreases in international prices on Chile's
domestic market when the reference prices are set below the price band floor, Chile argues that the
reference to the overcompensating effect of th e PBS is wrong and overcompensation cannot, on its
own, be inconsistent with Article 4.2 of the Agreement on Agriculture .
19 It then adds that these
references do not form part of the conclusions:
"The references cited by Argentina, in pa rticular paragraph 260 of the Appellate
Body's Report, are out of context and do not correspond to the reasoning followed by
the Appellate Body, and are hence not part of its conclusions. They are actually part
of the Appellate Body's analysis of whet her the Panel took proper account of the fact
that the total amount of duties that may be levied as a result of Chile's price band
system is 'capped' at the level of the tariff rate of 31.5 per cent ad valorem bound in
Chile's Schedule."
20
(footnote: Paragraph 253 of the Appellate Body Report)
36. Chile's argument is very odd and without foundation.
37. First of all , contrary to what Chile says, paragra ph 260 of the Appellate Body Report is an
integral part of its conclusions. This follows fro m its place in that report. In fact, paragraph 260
summarizes the findings relating to Article 4.2 of the Agreement on Agriculture , and the whole of
Section VIII.B of the report relating to "Assessment of Chile's Price Band System in the Light of
Article 4.2 and Footnote 1" ends no more than two paragraphs after pa ragraph 260, with the
upholding of the Panel's finding in paragraph 262.
38. Secondly, Chile appears not to have read paragrap h 261, that is, the paragraph immediately
following paragraph 260. That paragraph begins as follows:
"We emphasize that we reach our conclusion
 on the basis of the particular
configuration and interaction of all these specific features of Chile's price band
system." (Underlining added)

17 Chile – Price Band System, Appellate Body Report, paragraph 261 (underlining added).
18 Argentina's First Written Submission, Section C.I.2.2.
19 Chile's First Written Submission, paragraph 165.
20 Chile's First Written Submission, paragraph 166.

39. Clearly, the words "conclusion" and "these specific features" can only refer to paragraph 260.
If they did not, then the beginning of paragraph 261 would not make sense. Therefore, contrary to
what Chile maintains, the overcompe nsation constitutes, on its own, a violation of Article 4.2 of the
Agreement on Agriculture.
40. Furthermore, Chile seeks to discredit the Argentine argument by trying to explain that after
the entire panel proceeding and the appeal proceeding – during which Chile had ample opportunity to
explain the operation of the PBS – the Appella te Body misconstrued how the PBS operated.
21 There
have not been many instances in the history of the WTO dispute settlement system of a Member
alleging, as a defence, that the Appellate Body erre d in its analysis. If this was the case, then Chile
probably failed to explain the operation of the origin al PBS correctly or simply did not understand its
own measure.
41. Chile bases its argument on the fact that the band floor and ceiling and the reference price are
expressed at the same market level. As Argentin a will show, the floor and ceiling prices are not FOB
prices, despite the fact that the law and the decr ee say that they are. They are two figures chosen
arbitrarily and without the use of any criterion. They could be CIF, FOB or ex-works. It is simply not
known and there is no way of knowing, unless Chile were to make more transparent its reasons for
setting the floor and ceiling of the band at US$128 and US$148 per tonne, respectively.
42. This is shown by the fact that the FOB price for Argentine bread wheat has been both higher
and lower than these two prices. One need do no mo re than note the reference prices (based on the
average FOB prices for bread wheat, Argentine port) established by Chile over the period of
implementation of the PBS. For example, between 16 of April and 15 June 2004, the reference price
was US$165 per tonne, and between 16 February and 15 April 2005 US$108.64 per tonne. Chile must
have been aware of this since the figures were its own official data (ODEPA).22
43. In short , Argentina has shown, on the basis of evidence, that the amended PBS tends to
"overcompensate" for the effect of decreases in in ternational prices on the domestic market when the
reference prices are set below the price band floor. This is clear from the analysis made by Argentina
in Section C.I.2.2 of its First Written Submission, which includes actual examples of the
overcompensation produced by th e amended PBS. Chile has been unable to refute any of the
Argentine arguments.
2.2 The amended PBS does not merely moderate the effect of fluctuations in world market
prices on Chile's market because it does not ensure that the entry price of imports to
Chile falls in tandem with falling world market prices
44. Chile seeks to show that, as a consequence of the PBS, Chilean import prices for wheat and
wheat flour follow a pattern similar to that of the FOB price and that, therefore, there is no insulation
from the international market. Chile argues that, be ing established for a "sufficiently long" period of
time, the specific duties of the am ended PBS allow international price variations to be transmitted to
the price of wheat:
"If the objective was to maintain a price level, the alteration would imply a permanent
change in relative prices in order to prevent domestic market conditions from varying
(price level) in the event of a change in external or import prices prior to entry.
Conversely, if the duties ensure that relativ e prices remain stable, this means that the
border measure allows external variations to be transmitted to the domestic market,

21 Chile's First Written Submission, paragraph 169.
22 See Exhibit ARG-6.

albeit to a different extent. That is to sa y, if international prices rise so do domestic
prices, and if the former decline, so will the latter.
In Chile today, the mere fact that the duties and rebates, or the non-application
thereof, are established for a sufficiently long period of time provides certainty that
any variations in international prices that may occur over this period will be
transmitted to domestic wheat prices.
Thus, the conclusion is that, if the floor price is not a minimum price, if the specific
duties and their method of application do not continuously entail import price
corrections and if import prices, as Argentina shows in Exhibits ARG-11 and ARG-
12, follow a pattern similar to that of the f.o.b. price of wheat, Chile's wheat import
duties – even if they do undergo variations – do not constitute a variable duty within
the meaning of Article 4.2 of the Agreement on Agriculture."
23
45. It is worth noting that Chile makes special reference to Exhibits ARG-11 and ARG-12, since
it is precisely these exhibits that clearly show how Chile's statement that "import prices... follow a
pattern similar to that of the f.o.b. price of wheat"
24 is without foundation.
46. Exhibits ARG-11 and ARG-12 contain a table a nd a chart, respectively, which show what
happened, in the case of wheat, with the impos ition of specific duties as from 16 December 2004.
They show how – at the same time as FOB prices, Argentine port, were falling – the Chilean entry
price, with the imposition of specific duties, ro se substantially, thereby demonstrating a total
disconnection from international price developments.
47. From 1 December 2004 the FOB price of bread wheat, Argentine port, fell steadily, a trend
which was to be maintained until approximately 4 January 2005. Specifically, the initial FOB price on
1 December was US$119 per tonne, whereas at the e nd of the trend, on 4 January 2005, the price
stood at US$109 per tonne.
48. If we consider the trend in the Chilean entry price as a consequence of the operation of the
PBS, we observe the exact opposite: the entry price rose. In fact, from 1 December the Chilean entry
price for Argentine bread wheat was tending to fall wh ich, since the band was not active, reflected the
falling trend in FOB prices, Argentine port. However, when the band was activated on
16 December 2004 and specific duties were impos ed, the Chilean entry price rose suddenly from
US$149.94 per tonne to approximately US$162.93 per tonne. This happened as a result of the
operation of the amended PBS itself and the imposition of specific duties.
49. Moreover, on 16 February 2005 Chile established a new reference price below the band floor
and lower than that in force during the previous two-month period. Therefore specific duties higher
than during the previous period were imposed. On the basis of the FOB price for bread wheat,
Argentine port, corresponding to a shipment arriving in Chile on 15 February, the reference price for
that date (and the two previous months) was US $114.50 per tonne. The Chilean entry price on that
date, when specific duties of US$14.30 were imposed, was US$153.81 per tonne.
50. On the next day, 16 February 2005, Chile est ablished a new reference price at US$108.64 per
tonne, 5.12 per cent less than the previous figure. However, the FOB price for Argentine bread wheat
did not change and, therefore, neither did the CIF value. Nonetheless, when the specific duties
resulting from the PBS were applied, the Chilean entry price rose from US$153.81 to US$160.01 per
tonne.

23 Chile's First Written Submission, paragraphs 142 to 144.
24 Chile's First Written Submission, paragraph 144.

51. In conclusion, it is clear from Exhibits AR G-11 and ARG-12 that, contrary to the Chilean
claims, the import prices for wheat do not follow a pa ttern similar to that of the FOB price of wheat

In particular, on 16 December 2004, the entry price rose whereas the FOB price fell, and on
16 February 2005, whereas the FOB price remained steady, the entry price increased. However much
Chile would have the Panel believe the opposite, the natural tendency of the amended PBS is to move
in the opposite direction to international price tr ends. And it could not be otherwise since the PBS
would make no sense if that were not its purpose.
52. If Chile wanted import prices to follow the same pattern as FOB prices, it need only apply an
ordinary customs duty. Chile knows this, but Chile does not apply an ordinary customs duty precisely
in order to avoid the effects of ordinary customs duties and be able to insulate the Chilean market
from international market developments. It is pure logic.
53. In this connection, it is astonishing that Chile should assert that the duties resulting from the
PBS are unaffected by changes in world prices:
"... the duty or rebate, or the non-applica tion thereof, operates in such a way as to
allow the transmission of international price variations to the domestic market. That
is to say, once the duty has been fixed, traders can capture the benefits of decreases in
international prices, because changes in world prices do not affect the duty that they
are required to pay."25 (Underlining added)
54. Chile's description of its amended PBS is simply wrong. The specific duties remain
unchanged only during the two months stipulated in Decree 831/2003. At the end of these two
months, the specific duty will necessarily change because the reference price will have changed.
Whenever, while situated below the band floor, th e prices on the markets of concern (Argentine
bread wheat or Soft Red Winter No. 2, Gulf of Mexico) vary, the specific duty applied will
necessarily change. That is to say, as the FOB prices on the two markets of concern fall the specific
duty will increase.
55. As Argentina explained in its previous submissi on, this is a simple mathematical conclusion
that follows from the PBS formula, according to which:
Specific duty26 = ( Band floor
price - Reference price ) * ( 1 +
General ad valorem
tariff in force,
Customs Tariff

 = ( US$128 - Reference price ) * ( 1 + 6% )

56. Moreover, this can be seen from the ODEPA data themselves.27 As the reference prices varied
due to changes in the prices on the markets of concern, the specific duties changed.
57. Chile attempts to show that because the duties remain the same for two months, international
prices are transmitted. However, there is no such transmission. The duty established for two months
has an inherent defect: it is the product of an in itial disconnection which arises on the first day of the
period (for example, 16 December 2004). To this initial disconnection there must be added the
disconnection that inevitably occurs at the end of these two m onths (for example, 16 February 2005),
when a new reference price and the resulting specifi c duty are established. This was demonstrated by
Argentina in Sections C.2.2 and C.2.4 of its submission.

25 Chile's First Written Submission, paragraph 152.
26 In accordance with Article 14 of Dec. 831/2003. See Exhibit ARG-2.
27 See Exhibit ARG- 6, in particular the periods 16/Dec/04 – 15/Feb/05 and 16/Feb/05 – 15/Apr/05.

58. It is paradoxical that what Chile refers to as a feature of the amended PBS that helps to
transmit international price developm ents (i.e., the fact that the duty is unaffected by international
price changes during the two-month period) is preci sely a feature that insulates the Chilean market
from international prices.
59. In fact, the specific duties do not vary for two months because, as Chile accepts without
discussion, "the duty applies on all import transactions , without the slightest variation and regardless
of the amount of the transaction."28
60. As the Appellate Body held with respect to the original PBS, "[t]he Reference Price used in
the context of the Chilean PBS is clearly disc onnected from the actual transaction value... " 29, and as
Argentina explained in its submission and Chile confir med, this statement is fully applicable to the
amended PBS.30
61. Moreover, in an attempt to demonstrate "the connection of Chilean wheat prices to the
international grain market", 31 Chile submits a graph (unnumbere d) supposedly derived from the
values provided by Argentina in Exhibit ARG-11 whic h form the basis of the chart that Argentina
attached as Exhibit ARG-12.
62. According to Chile:
"The graph below shows the trends in Chil ean wheat prices and in f.o.b. prices of
Argentine bread wheat from January 2004 to February 2006. The price curves
indicate that, first, Chilean wheat prices have varied and, second, the variation is very
similar to that of export prices of Argentine wheat, confirming the connection of
Chilean wheat prices to the international grain market.

28 Chile's First Written Submission, paragraph 93.
29 Chile – Price Band System, Appellate Body Report, paragraph 248.
30 Argentina's First Written Submission, paragraphs 220 to 223.
31 Chile's First Written Submission, paragraph 154.
Domestic and International Prices of Wheat
(US$/tonne)
100
120
140
160
180
200
220
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
2004 2005 2006
Bread wheat, f.o.b. Argentine port Wheat, wholesale price

This graph is an exact illustration of the points made by Argentina in Exhibit ARG-
11, with the series of f.o.b., c.i.f. and c.i. f.-plus-duties prices, and in Exhibit ARG-12,
which shows the prices in graph form. What clearly emerges is that the entry price of
wheat exhibits the same behaviour as its f.o.b. price, which demonstrates price
transmission and therefore the connection be tween the Chilean and the international
market."
32
63. There are several flaws in Chile's reasoning.
64. Firstly, contrary to what Chile claims, this graph cannot be "an exact illustration of the points
made by Argentina in Exhibit ARG-11". The Chilean graph is based on monthly (apparently average)
prices, whereas Exhibit ARG-11 is based on daily prices. Therefore, the Chilean graph is a reworking
(recalculation) of information ostensibly provided by Argentina.
65. Secondly, Exhibit ARG-12, contrary to what Chile maintains, does not plot all the prices in
Exhibit ARG-11, but merely reproduces a graph based on prices calculated for the period extending
from 1 November 2004 to 29 April 2005, i.e., a pe riod much shorter than the total period of
implementation of the amended PBS, within which specific duties were applied.
66. Therefore, the Chilean graph does not represent only the periods in which the bands were
activated, or the periods relevant for the analysis , but the trend in FOB prices for Argentine bread
wheat and the Chilean entry price from December 2003 to February 2006. In fact, as follows from
Exhibit ARG-6, specific duties were applied be tween December 2004 and April 2005, due to the
prices recorded by wheat on the markets of concer n from the entry into force of the amended PBS.
33
This is the relevant period for observing the beha viour of the amended PBS. As distinct from the
Chilean graph, Exhibit ARG-12 plots only the period of application of specific duties.
67. As regards what Chile seeks to show, the evid ence provided by Chile itself demonstrates the
disconnection between the entry price and the FOB price that arises when the specific duties are
activated.
68. A careful study of the graph submitted by Chile reveals that during the period of application
of specific duties, the entry price follows a trajectory opposite to that of the FOB price in at least three
of the four periods of concern in which specific duties are applied.
69. According to the Chilean graph:
• Between December 2004 a nd January 2005, the FOB price fell while the entry price
rose;
• between January and February 2005, the FOB price rose while the entry price
remained stable;
• between February and March 2005, the FOB price rose while the entry price fell.
70. Moreover, in March and April 2005, the entry pr ice rose more than proportionally relative to
the FOB price, that is to say, increased more steeply.
71. If, moreover, we consult the chart in Exhibit ARG-12 and the table in Exhibit ARG-11 to see
what happens to the entry price on 16 December 20 04 and 16 February 2005, we observe that as a

32 Chile's First Written Submission, paragraphs 154 and 155.
33 Rebates were also applied from December 2003 to August 2004.

consequence of the specific duties resulting from th e amended PBS the Chilean entry price for wheat
does not vary in the same way as the FOB price for the same product.34
72. In short, both from the evidence submitted by Chile itself and from that provided by
Argentina it is clear that, while th e specific duties were being activated during the periods in question
the Chilean entry price was never "very similar" to the variation of the FOB price as Chile claims and,
in at least three of the four periods, the entry price varied in the opposite direction to the FOB price.
73. To this there should be added the overcompensa tion effectively produced and the fact that the
amended PBS does not merely moderate the effect of fluctuations in world market prices on Chile's
market because it does not ensure that the entry price of imports to Chile falls in tandem with falling
world market prices, the cogency of both these arguments having been demonstrated in the
corresponding sections, charts and tables.35
2.3 The floor and ceiling of the amended PBS insulate Chile's market from international
price developments and are not transparent, having been determined once only for the
entire period extending from 16 December 2003 to 15 December 2014 and having been
established as from 2007 on the basis of fixed coefficients
74. Chile's confirmation that the reduction in floor and ceiling prices was scheduled "irrespective
of international price levels" is enlightening:
"The scheduled reduction of the floor and ceiling prices is a scenario under which,
irrespective of international price levels , the amount of the specific duties will
increasingly diminish compared to those currently being established, just as the
probability of duties actually being assessed will increasingly diminish." 36
(Underlining added)
75. Thus, Chile confirms the Argentine claim to the effect that the amended PBS "…impedes
even more the transmission of international pri ce developments to the domestic market…since the
floor and ceiling prices of Chile's price bands no l onger vary with either world market prices or
historical prices…" 37
76. Chile maintains that given the way in which the bands are established in the amended PBS
"Chile has … taken due account of the observations made by the Appellate Body". According to
Chile:
"With the entry into force of Law No. 19.897, Chile abolished the calculation formula
that included discarding the highest 25 per cent as well as the lowest 25 per cent of
world prices over the past five years, while maintaining the values in effect in 2003
until 2007, gradually reducing the leve l of protection from 2007 onwards and
culminating with the application of duties or rebates in 2014.
Pursuant to this Law, all prices are set as f. o.b., meaning that today there is no price
or value that converts an f.o.b. price to a c.i.f. basis, and it is no longer necessary to
add 'import costs', which makes the system a great deal more transparent.

34 Argentina's First Written Submission, Section C.I.2.4.
35 Argentina's First Written Submission, Section C.I.2.2.
36 Chile's First Written Submission, paragraph 186.
37 Argentina's First Written Submission, paragraph 190.

Chile has thus taken due account of the observations made by the Appellate Body."
38
77. At the very least, Chile's argument is hard to fo llow. Chile claims that the Panel accepts that
because Chile established the band floor and ceiling without the use of any criterion in fixed form
from 2003 to 2014, adjusting both parameters by mean s of a fixed coefficient (0.985) the basis for
calculating which Chile is unable to explain, Chile "has…taken due account of the observations made
by the Appellate Body". The way in which Chile established the floor and ceiling of the band is not
transparent. The fact that the floor and ceiling prices of the band feature in Decree 831/2003 does not
mean that they were established transparently or justifiably.
78. Thus, Chile is simply evading the subs tance of the issue raised by Argentina , that is to say,
that the floor and ceiling of the amended PBS in sulate Chile's market from international price
developments and are not transparent, having been determined once only for the entire period
extending from 16 December 2003 to 15 December 2014 and having been established as from 2007
on the basis of fixed coefficients. Chile has not said how it calculated the factor of 0.985 or explained
the basis for it in the legislation establishing the amended PBS. Moreover, nowhere in its submission
does Chile address these issues.
79. The way in which the floor and ceiling are esta blished in the amended PBS has transformed
the PBS into a more rigid and inflexible system. As Brazil points out:
"… the 11-year period has the side effect of aggravating the distortion of domestic
price vis-à-vis international ones. While such a long period may afford some
predictability, the new PBS is more rigid a nd inflexible, given that, in practice, the
Chilean market will be insulated from fluc tuations in the world prices for eleven
years. Should there be a significant downwa rd movement in the international wheat
prices, the 0.985 factor may not be sufficient to account for the necessary reductions
in the lower and upper thresholds of the price bands. Hence, in spite of the application
of the 0.985 multiplier, one of the main el ements of the PBS (the bands themselves)
will remain virtually unchanged for more than a decade, preventing the fluctuation of
international prices from being transmitted to the Chilean market."
39
80. Furthermore, in Section C.I.2.5 Argentina explained how the floor and ceiling of the amended
PBS insulate Chile's market from international pri ce developments and are not transparent. Argentina
cites those arguments as Chile has not rebutted any of the claims raised therein.
2.4 The reference prices insulate Chile's market from international price developments by
remaining unchanged for two months, by being established on the basis of the average of
the daily prices recorded on only two predet ermined markets and in being unrelated to
the transaction price
81. In paragraph 117 of its submission, Chile argues that the reference prices of the amended PBS
do not impede the transmission of international pri ce developments to the domestic market since it is
not "possible to inflate or increase the amount of the specific duties":
"... as a result of the changes introduced in 2003 all values used are expressed in f.o.b.
terms, that is, the reference prices are not conve rted to a c.i.f. basis. Thus, at no stage
is it possible to inflate or increase the amount of the specific duties, so the

38 Chile's First Written Submission, paragraphs 108 to 110.
39 Chile – Price Band System … Recourse to Article 21.5 of the DSU, Third Party Submission by
Brazil, paragraph 15.

transmission of international price devel opments to the domestic market is not
impeded as the Appellate Body asserts."
82. However, Chile appears not to have read Argen tina's arguments in which it is shown that in
remaining unchanged for two months, in being estab lished on the basis of the average of the daily
prices recorded on only two predetermined markets and in being unrelated to the transaction price, the
reference prices insulate Chile's market from international price developments. 40 The corresponding
Argentine arguments hold true regardless of whether or not the reference prices are converted to a
CIF basis.
83. Also in relation to the changes introduced into the reference pr ices of the amended PBS, in
paragraph 180 Chile seeks to argue that there cannot be overcompensation and that "the objective is
not to maintain a parity price" [ sic], simply because duties are now assessed six times a year rather
than 52 times a year as in the original PBS:
"A further point which demonstrates that there cannot be overcompensation and that
the objective is not to maintain a parity pr ice is that today – unlike under the former
PBS when duties were assessed once a week (i.e. 52 times a year) – the duties or
rebates assessed are valid for two months (i .e. six a year), and during that period are
completely disconnected from what may o ccur in the reference, or any other,
markets."
84. The argument speaks for itself: Chile says that now the PBS is not "so" inconsistent as before.
Now the PBS is inconsistent "only" 6 times a year. There is no basis for this in the WTO Agreements
or, more particularly, in the DSU or the Agreement on Agriculture.
85. A measure taken to comply is not "less" incons istent because it is applied on fewer occasions
than the original measure. There is no basis for making a claim of this kind.
86. In particular, the last part of the paragraph c ited "... the duties or rebates assessed are valid for
two months (i.e. six a year), and during that peri od are completely disconnected from what may occur
in the reference, or any other, markets", simply verifies and confirms what Argentina maintained in its
First Written Submission, namely, that under the "new " PBS the reference prices used to calculate the
specific duty for wheat and wheat flour are set 6 tim es a year, that is, with a period of validity of
2 months during which the transmission of world market prices is disconnected.41
87. In its First Written Submission, Argentina offered evidence of this disconnection, which Chile
now confirms, illustrating the development of the reference prices and the prices for wheat f.o.b.
Argentine port and f.o.b. Gulf of Mexico, respec tively, during the period of implementation of the
amended PBS and clearly showing, for each period, the disconnection produced. 42 The reference
prices insulate Chile's market from international price developments.
88. In conclusion , as will be clear to the Panel, Chile has also been unable to refute the
arguments and evidence put forward by Argentina in Section C.I.2.6 in confirmation of the fact that
the amended PBS causes insulation from the intern ational market, in a manner inconsistent with
Article 4.2 of the Agreement on Agriculture.

40 Argentina's First Written Submission, Section C.I.2.6.
41 Argentina's First Written Submission, paragraph 206.
42 Argentina's First Written Submission, paragraph 208 and Exhibits ARG-15, 16, 17 and 18.

3. The amended PBS is neither transparent nor predictable
89. With respect to the requiremen t that the amended PBS be transparent and predictable, Chile
completely distorts Argentina's position and makes its own reading of the Appellate Body and Panel
reports adopted by the DSB.
90. Chile maintains that:
"... to allow Argentina's argument that the conclusions of the Appellate Body are to
be interpreted in a broad and comprehens ive manner would give rise to generic and
unspecific obligations and create uncertainty for Chile as to what it was required to
do within the reasonable period of time a nd expose it to censure for failing to take
measures which it was unaware it was required to adopt."
43
91. Chile's interpretation of the Argentine position is simply wrong . Nowhere in its submission
does Argentina maintain that "the conclusions of th e Appellate Body are to be interpreted in a broad
and comprehensive manner [that] would give rise to generic and unspecific obligations". In fact, Chile
is unable to cite a single such paragraph in the Argentine submission because there are none.
92. In offering the only example that it can find of the alleged Argentine position, Chile misreads
paragraph 201 of Argentina's First Written Submission, maintaining that:
"[I]n paragraph 200 of its First Written Submission, Argentina transcribes two
paragraphs of the Appellate Body repor t (234 and 247) which, in its opinion,
constitute grounds for claiming that any lack of transparency leads to the conclusion
that the PBS is inconsistent with Article 4.2 of the Agreement on Agriculture."
(Original footnote: First Written S ubmission by the Argentine Republic,
paragraph 201).44
93. Once again, Chile's claim with respect to the alleged Argentine position is mistaken.
94. First of all , nowhere in its submission does Argentin a claim that paragraphs 234 and 247 of
the Appellate Body Report would serve as a basis for alleging that any lack of transparency leads to
the conclusion that the PBS is inconsistent with Article 4.2 of the Agreement on Agriculture . Once
again, Chile is unable to indicate the relevant para graph of Argentina's submission in which this claim
might be found, because there is no such paragraph.
95. Secondly, paragraphs 200 and 201 of Argentina's su bmission do not interpret the conclusions
of the Appellate Body in a broad and comprehensive manner, as Chile maintains.
96. In those paragraphs Argentina stated that:
"200. The Appellate Body noted how the way in which the bands were established in
the original PBS was inconsistent with Article 4.2 of the Agreement on Agriculture:
'... This lack of transparency and…predictability are liable to restrict
the volume of imports... This lack of transparency and predictability
will also contribute to distorting the prices of imports by impeding

43 Chile's First Written Submission, paragraph 78.
44 Chile's First Written Submission, paragraph 81.

the transmission of international prices to the domestic market
(Appellate Body Report, paragraph 234)'

'In addition to the lack of transpar ency and the lack of predictability
that are inherent in how Chile's price bands are established, we see
similar shortcomings in the way the other essential element of Chile's
price band system … is determin ed (emphasis added). (Appellate
Body Report, paragraph 247)'.
201. Clearly, by not explaining the origin of the factor of 0.985 or the reasons for
choosing it, Chile has failed to satisfy th e established transparency requirements. As
the Appellate Body pointed out, the lack of transparency preven ts enhanced market
access for imports of agricultural products , contrary to the object and purpose of
Article 4 of the Agreement on Agriculture (footnote: Appellate Body Report,
paragraph 258)."
97. Chile is particularly interested in paragraph 247, in connection with which it notes that:
"… Argentina omits the phrase 'the refe rence price' from its transcription of
paragraph 247. What is the significance of that phrase? It limits the issue the
Appellate Body takes in the following paragr aphs with the lack of transparency and
predictability to that particular aspect of the PBS in force at that time".
45
98. Chile appears to overlook the part of the para graph which Chile itself transcribes. Chile itself
points out that:
"… paragraph 247 [of the Appellate Body Re port]…begins by stating that 'In addition
to the lack of transparency and the lack of predictability that are inherent in how
Chile's price bands are established,... ' necessar ily refers to the conversion to a c.i.f.
basis, plus import costs, of f.o.b. prices and to the fact that there was no legislation or
regulation indicating how to calculate those import costs."
46
99. That is to say, paragraph 247 begins by referring to the lack of transparency and predictability
of the way in which the price bands (i.e., the fl oor and ceiling) were established, as explained in
paragraph 246 of the Appellate Body Report. When pa ragraphs 246 and 247 are read in conjunction it
is clear that in this passage the Appellate Body w as referring to the way in which the price bands (i.e.,
the floor and ceiling) were established. Star ting from paragraph 247, the Appellate Body begins to
refer to the lack of transparency and predictability of the reference prices. But in paragraph 246 and at
the beginning of 247 it refers specifically to the lack of transparency and predictability in the way in
which the bands (i.e., the floor and ceiling) are established.
100. Paragraph 200 of Argentina's First Written Submission forms part of Section C.I.2.5(b) which
is entitled "The floor and ceiling of the amended PB S insulate the Chilean market from international
price developments and are non-transparent insofar as from 2007 they will be established on the basis
of fixed coefficients", that is to say, it refers, inter alia, to the lack of transparency of the floor and
ceiling of the amended PBS, which are nothing other than the floor and ceiling of the bands.

45 Chile's First Written Submission, paragraph 85.
46 Chile's First Written Submission, paragraph 84.

101. In paragraphs 199 to 201 Argentina explains wh y the way in which the bands (i.e., the floor
and ceiling) are established is non-transparent, na mely, because of the failure to explain in the
legislation either the origin of the method or the r easons for choosing the factor of 0.985 by which the
floor and ceiling of the band are to be multiplied from 2007.
102. Thus, there can be no doubt that Argentina is applying the findings of the Appellate Body
with respect to the transparency and predictability of the floor and ceiling of the original PBS to the
way in which those parameters are established in the amended PBS.
103. Finally, the Appellate Body's conclusions have not been interpreted "in a broad and
comprehensive manner", as Chile would have the Panel believe. Argentina has interpreted those
conclusions fairly.
104. As Argentina has already pointed out, what Chile is seeking to do is simply to avoid
addressing the substance of the issue raised by Argentina , that is to say, that the floor and ceiling of
the amended PBS insulate Chile's market from international price developments and are non-
transparent, having been determined once only for the entire period extending from
16 December 2003 to 15 December 2014 and havi ng been established as from 2007 on the basis of
fixed coefficients. As the Panel will have been able to confirm, Chile has explained neither how the
factor of 0.985 was calculated nor what basis there is for it in the legislation that established the
amended PBS.
105. In relation to the Argentine claim that the amended PBS is neither transparent nor predictable,
in paragraph 114 of its submission Chile acknowledges that, thanks to the change in price, the
importer (and hence the exporter) does not know in advance the amount of the specific duties payable:
"With the entry into force of Law No. 19.8 97, the reference price ceased to constitute
one of the elements needed by importers to ascertain the amount of duty payable

upon import." (Underlining added)
106. This merely confirms what Argentina previous ly demonstrated in Section C.I.3.2, namely,
that both in the old and in the new PBS, the exporter cannot reasonably predict what the amount of the
specific duties will be.
107. In paragraph 115, Chile maintains that, given the choice of markets of concern in the
amended PBS (Argentine bread wheat and Soft Red Wi nter No. 2), the reference prices are now more
transparent. Chile reasons as follows:
"Today, the mechanism for calculating the reference price is set forth in the
Regulations, as are the most relevant mark ets to be considered. The Regulations
stipulate that the most relevant markets are ' Argentine bread wheat' for the period 16
December to 15 June of the following year and ' Soft Red Winter No. 2 ' wheat for the
period 16 June to 15 December. The refe rence price will correspond to the average
daily prices recorded in those markets (f. o.b., Argentine port and f.o.b., Gulf of
Mexico port, respectively) over a period of 15 days counted back from the 10th day
of the month in which the relevant decree is published. Chile has therefore taken due
account of the Appellate Body's observation."
108. Argentina has explained how the way in which the markets of concern were established is
non-transparent. Once again, the f act that the decree specifies the markets of concern and says how

the reference prices are to be calculated does not m ean that their establishment is transparent. Chile
has not explained how or on what basis the markets and quantities of concern were selected.47
109. Likewise, the fact that the system – in Chile's words – may have become "more transparent"
because "…pursuant to this Law (19.897), all prices are set as f.o.b.…" 48 (which, as Argentina has
already explained, is not the case) does not ma ke the amended PBS a measure consistent with
Article 4.2 of the Agreement on Agriculture.
110. Moreover, Chile transcribes paragraph 258 of the Appellate Body Report and states:
"... Argentina itself recognizes that the lack of transparency is not general, but
pertains to certain characteristics, and the Appellate Body confirms that only specific
characteristics of the PBS are concerned."
49
111. Let us take a look then at the specific character istics to which the Appellate Body referred in
its report.
112. First of all, the Appellate Body noted that the Pa nel, in paragraphs 7.44 and 7.61 of its report,
had described Chile's price band system as having an "intrinsically unstable, intransparent and
unpredictable nature …" and "a considerable lack of transparency and unpredictability".50
113. The Panel's observations and findings in these paragraphs were not questioned by the
Appellate Body and were adopted by the DSB.
114. Now let us see what "specific characteristics" the Panel was referring to in these paragraphs.
115. The Panel held that "several crucial stages of the operation of the Chilean PBS" were
characterized by a considerable lack of transparency and predictability. 51 That is more comprehensive
than the specific features to which Chile refers in its submission. Among these crucial stages the Panel
mentions:
• How the reference price was arrived at;
• how the PBS values (i.e., the band floor and ceiling) were arrived at;
• how the "usual import costs" added to the f.o.b. prices were calculated.

116. The Appellate Body referred to the lack of tr ansparency and predicta bility in the following
aspects of the PBS:
• The way in which the price bands are established in Chile (paragraphs 246 and 247);
• the way in which the reference prices are determined (paragraph 247);
• the fluctuation of the duties resulting from Chile's price band system (paragraph 259).

117. In conclusion, contrary to what Chile claims in paragraphs 66 and 85 of its submission, the
Panel and then the Appellate Body did not limit "the issue [taken] with the l ack of transparency and

47 Argentina's First Written Submission, Section C.I.2.6.b, paragraph 214 ff.
48 Chile's First Written Submission, paragraph 109.
49 Chile's First Written Submission, paragraph 87.
50 Chile – Price Band System, Appellate Body Report, paragraph 240.
51 Chile – Price Band System, Panel Report, paragraph 7.44 (emphasis added).

predictability" solely to the aspects in which the PB S was similar to a variable import levy and to the
reference prices.
118. What Chile is unwilling to accept, although demonstr ated by the actual reports themselves, is
that, in having taken issue, on grounds of their l ack of transparency and predictability, with such
fundamental and central aspects of the PBS as the elements mentioned, the Panel and the Appellate
Body addressed most, if not all, of the "specific features of the PBS", or at least the fundamental ones.
There is simply no support for Chile's argument.
119. In fact, what the Appellate Body recommended is that:
"… the DSB request Chile to bring its price band system, as found, in this Report and
in the Panel Report as modified by this Report, to be inconsistent with the Agreement
on Agriculture, into conformity with its obligations under that Agreement."
52
120. However, there is an even more serious asp ect to Chile's reasoning. According to that
reasoning, the transparency and predictability requi red by the Appellate Body and the Panel are only
applicable to certain specific elements of the PBS (not clearly defined by Chile in its submission). If
the Panel were to accept this argument, the logical consequence would be that transparency and
predictability would not be required of the rest of the amended PBS which, according to Chile, was
not the subject of findings on the part of the Pane l and the Appellate Body. This outcome would not
be consistent with the spirit of Article 4 of the Agreement on Agriculture.
121. The standards of transparency and predictability do not apply partially as Chile suggests, but
are requirements derived from Article 4 of the Agreement on Agriculture itself with respect to the
measure taken to comply as a whole.
122. As Argentina pointed out earlier, throughout its submission Chile appears to "forget" that the
task of a panel in an Article 21.5 proceeding is not only to determine the existence of measures taken
to comply with the recommendations and rulings of the DSB but also the consistency of those
measures with a covered agreement.
123. As noted by the Appellate Body in paragraph 258 of its report, the lack of transparency and
the unpredictability of the PBS are contrary to the object and purpose of Article 4 of the Agreement on
Agriculture.
124. Consequently, even in the very unlikely event of some "specific features of the PBS" not
having been included in the criticism of the system by the Panel and the Appellate Body for its lack of
transparency and predictability in the original proceedings, the amended PBS can be called into
question in its totality for not being transparent or predictable and the obligations of transparency and
predictability established by the DSB with respect to Article 4.2 of the Agreement on Agriculture
apply to it in full.
125. In Section V.4 of its submission, Chile attempts to argue that a wheat trader can predict the
future specific duty for wheat on the basis of the prices foreseen in financial derivatives such as
futures contracts.53 According to Chile:
"... what is necessary in order to foresee the amount of the specific duty is a wheat
trader's own skills in predicting prices and negotiating sales or purchases …" 54

52 Chile – Price Band System, Appellate Body Report, paragraph 289.
53 Chile's First Written Submission, paragraphs 156 to 163.

126. Chile tries to reassure the Panel by maintaini ng that this prediction is not "complex" and
"a matter of course" for traders:
"… Although this may appear complex, it is a matter of course for traders and the
market in general."55

"It is practically impossible for wheat traders not to know or not to use such
information in order to conduct their busin esses, as Argentina appears to contend in
its submission."56
127. In this connection, it should be recalled that in this dispute the Appellate Body held that:
"... an exporter is less likely to ship to a market if that exporter does not know and
cannot reasonably predict what the amount of duties will be."57
128. For its part, in Section C.I.3.2 of its First Wr itten Submission, Argentina showed that – under
the amended PBS – it is perfectly possible for an e xporter of wheat and wheat flour not to know and
not to be able to predict what the amount of du ties payable on arrival at the Chilean customs office
will be. Therefore, in these circum stances an exporter will be less lik ely to ship wheat or wheat flour
to the Chilean market.
129. Even if this were not evidence enough, there ar e further problems involved in not being able
to predict the amount of the duties and what an exporter may expect.
130. If an exporter decides to export wheat to Chile in March 2007, the first thing he has to do, in
addition to dealing with his own business, is to find out the dates on the basis of which the reference
price in effect in March 2007 is going to be established. As stipulated in Article 7 of
Decree 831/2003, "the reference price for wheat sha ll be the average of the daily prices recorded on
the markets indicated in Article 8, during a period of 15 days reckoned retrospectively from the 10th
of the month in which the respective decree is published".
58
131. The next step is to ascertain the market of concern for this period, in accordance with the
provisions of Article 8 of Decree 831/2003. In this example, it is bread wheat, Argentine port. Here
the exporter will encounter his first problem, since Decree 831/2003 does not say which Argentine
port is of concern for the purposes of calculating the reference price.
132. The exporter will not be able to find out th e daily price quoted for bread wheat, "Argentine
port" as a basis for establishing the market of concern for the first half of the year, since prices vary
depending on the Argentine port chosen. 59 As Argentina shows in Exhibit ARG-4, there are at least
4 (four) different prices quoted for Argentine bread wheat (Port of Buenos Aires, Port of Bahía
Blanca, Port of Quequén, and Port of Rosario).
133. According to Chile, the exporter must ascertain th e future price of bread wheat in (one of)
these Argentine ports for this period and then calcu late the period average to obtain the presumed
future reference price.

54 Chile's First Written Submission, paragraph 162 (emphasis added).
55 Chile's First Written Submission, paragraph 158.
56 Chile's First Written Submission, paragraph 161.
57 Chile – Price Band System, Appellate Body Report, paragraph 234.
58 See Exhibit ARG-2.
59 Argentina's First Written Submission, paragraph 219.

134. Thus, another of the problems faced by the expor ter in estimating the future amount of duties
payable is the fact that future prices are precisely that: future
 and are therefore estimates rather than
solid data. That is to say, there could be varia tions due to circumstances unknown at the time that
could cause these future prices of July 2006 to differ from the prices actually made in the future
between 27 January and 10 February 2007.
135. Therefore, as the estimated future referenc e price could differ fro m the reference price
determined in the future , there could be a difference between the amount of the specific duties
estimated and those actually established in the fu ture. Consequently, the relationship between the
specific duty and the transaction value, in the presence of a variation in the amount of the duties, will
necessarily
 differ from that which would have existed if there had been no such variation.
136. Chile cannot maintain that this is the transparen cy and predictability required by Article 4 of
the Agreement on Agriculture . The amended PBS simply is neither transparent nor predictable, since
it is not an ordinary customs duty.
137. In conclusion, as will be clear to the Panel, Chile h as been unable to rebut the arguments and
evidence submitted by Argentina, thereby confirmi ng that the amended PBS is non-transparent and
unpredictable, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture.
4. The amended PBS is a measure similar to a variable import levy
"Variable duties directly affect trade relations, altering relative prices (relationship
between domestic market prices and interna tional market prices), in addition to the
effects resulting from the application of ordinary duties."
138. This statement would appear to have been ta ken from Argentina's submission regarding the
way in which the amended PBS operates. In fact, however, it comes from paragraph 141 of Chile's
submission.
139. According to Chile, it is clear that "… specifi c duties cannot constitute a variable levy, as
their purpose is not to sustain prices – whether entry prices, c.i.f. prices or domestic market prices "60
(underlining added). Thus, Chile contradi cts the actual provisions of Law 19.897 and
Decree No. 831/2003 which state:
"… The amount of such duties and rebates shall be established … in terms which,
when applied to the price levels atta ined by the products in question on the
international markets, allow domestic market stability".61 (Emphasis added)
140. In its submission Chile refers to paragraph 23 3 of the Appellate Body Report, the relevant
part of which states that variability is inherent in a measure if the measure incorporates a scheme or
formula that causes and ensures that levies change automatically and continuously.
141. "Forgetting" that Argentina has shown how the amended PBS meets each of these
requirements, Chile summarily concludes that:
"The obvious conclusion to be drawn from the Appellate Body's analysis is that the
changes introduced by Chile have put an end to the variability of the duties".62

60 Chile's First Written Submission, paragraph 133.
61 See Law 19897, Art. 1, second paragraph and Decree 831/2003 Art. 1, second paragraph,
Exhibits ARG-1 and ARG-2, respectively.
62 Chile's First Written Submission, paragraph 92.

142. As the sole justification for this conclusion Chile adds that:
"… Under Law 19.897, however, a specific dut y (or rebate, or neither) is fixed by
legal directive in the form of a decree issu ed by the Ministry of Finance and remains
unchanged for two months, during which the duty applies on all import transactions,
without the slightest variation and regardless of the amount of the transaction, until it
is changed or cancelled by a more recent administrative act."63
143. Leaving aside its virtual "confession" that the duties resulting from the PBS are unrelated to
the transaction value and therefore insulate Chile's market from in ternational price developments,
Chile bases all its reasoning on the fact that the duties remain unchanged for a period of two months
"until…changed or cancelled by a more recent administrative act".
144. First of all, the phrase "... until … changed or cancelled by a more recent administrative act"
is somewhat misleading since decrees, under the Chilean legislation, are issued in binding form and
have been issued continuously since the amended PBS first came into force.
64
145. Secondly, the fact that the specific duties vary not weekly but every two months does not
mean that those duties are no longer variable levi es. As Argentina maintained in its First Written
Submission, in the right circumstances, every two months an exporter is guaranteed to face a specific
duty different from that established during the prev ious two-month period. Moreover, in the longer
term, what the exporter experiences is the continuous variability of the duties.65
146. Thirdly, Chile appears to disregard the fact that th e time factor, that is to say the period of
time during which the specific duties remain unchange d, is not one of the necessary and sufficient
conditions or additional features which, according to the Appellate Body, characterize variable import
levies.66 Argentina also notes that, in its submission, it showed how the amended PBS meets each and
every one of the requirements for the amended PBS to be similar to a variable import levy.67
147. Later, Chile contends that the specific duties cannot constitute a variable levy as their purpose
is not to sustain prices and they do not have the ch aracteristic of gradually "adjusting" so as to prevent
a decline in domestic prices or even to raise them :
"The above demonstration that the floor price and the regime as a whole are neither
similar nor equivalent to a minimum import price (and hence are not inconsistent with
Article 4.2 of the Agreement on Agriculture) therefore clearly shows that specific
duties cannot constitute a variable levy, as their purpose is not to sustain prices –
whether entry prices, c.i.f. prices or domestic market prices."
68
"A variable duty may be the kind of duty which is used to sustain a domestic or a
minimum entry price, as can be deduced from the A ppellate Body's Report , and the
characteristic of which would be to gradually 'adjust', with greater or lesser regularity,
so as to prevent a decline in domestic pr ices or even to raise them." (emphasis
added)69

63 Chile's First Written Submission, paragraph 93.
64 See Argentina's First Written Submission, paragraphs 263 and 264 and Exhibits ARG-5 and ARG-6.
65 See Argentina's First Written Submission, paragraphs 266 to 270 and Exhibits ARG-21, ARG-22,
ARG-23 and ARG-24.
66 Chile – Price Band System, Appellate Body Report, paragraphs 233 and 234.
67 Argentina's First Written Submission, Section C.3.
68 Chile's First Written Submission, paragraph, 133.
69 Chile's First Written Submission, paragraph, 139.

148. Firstly, as Argentina has previously pointed out, it is Law 19.897 itself and Decree 831/2003
that give it to be understood that the objective of the amended PBS is to support prices, insofar as they
state that "[t]he amount of such duties and reba tes shall be established … in terms which, when
applied to the price levels attained by the pr oducts in question on the international markets, allow
domestic market stability" (emphasis added).
70
149. Secondly, the Appellate Body did not establish that "… [a] variable duty may be the kind of
duty which is used to sustain a domestic or a minimum entry price …".
150. In this dispute, the Appellate Body has clearly defined the necessary, sufficient and additional
features that characterize variable import levies. These features do not include the sustaining of entry
prices, c.i.f. prices or domestic market prices or price "adjustment", as Chile maintains.
151. On the contrary, the Appellate Body found as follows:
"… at least one feature of 'variable import levies' is the fact that the measure itself—
as a mechanism—must impose the variability of the duties. Variability is inherent
in a measure if the measure incorporates a scheme or formula that causes and
ensures that levies change autom atically and continuously. Ordinary customs duties,
by contrast, are subject to discrete cha nges in applied tariff rates that occur
independently, and unrelated to such an underlying scheme or formula …"
71
(emphasis added)

"… [T]he presence of a formula causing automatic and continuous variability of
duties is a necessary , but by no means a sufficient, condition for a particular
measure to be a 'variable import levy' with in the meaning of footnote 1. 'Variable
import levies' have additional features that undermine the object and purpose of
Article 4, which is to achieve improve d market access conditions for imports of
agricultural products by permitting only the application of ordinary customs duties.
These additional features include a lack of transparency and a lack of predictability
in the level of duties that will result from such measures . This lack of transparency
and this lack of predictability are liable to restrict the volume of imports. As
Argentina points out, an exporter is less likely to ship to a market if that exporter
does not know and cannot reasonably predict what the amount of duties will be . This
lack of transparency and predictability will also contribute to distorting the prices of
imports by impeding the transmission of international prices to the domestic
market".
72 (footnotes omitted, emphasis added)
152. Argentina has correctly interpreted the featur es identified by the Appellate Body in this
dispute and shown how the amended PBS is charac terized by each of them and hence that the
amended PBS is a measure similar to a variable import levy.73
153. Chile attempts to call into question Argentin a's demonstration that the amended PBS is
similar to a variable levy – in paragraphs 134 to 1 37 of its submission – on the basis of a very simple

70 See Law 19897, Art. 1, second paragraph, an d Decree 831/2003 Art. 1, second paragraph,
Exhibits ARG-1 and ARG-2, respectively.
71 Chile – Price Band System, Appellate Body Report, paragraph 233.
72 Chile – Price Band System, Appellate Body Report, paragraph 234.
73 Argentina's First Written Submission, Section C.I.3.

argument, namely, by showing that its MFN tariff had a variability of 67 per cent from 1984. Chile
asks whether this variability alone could mean that the duty constitutes a variable levy and adds:
"The obvious reply is no, which implies that this analysis – like the one regarding the
variability of duties in Argentina's report (footnote: First Written Submission by
Argentina, Section C.I.3), raises two problems – one of methodology and the other of
interpretation. In the latter case, as menti oned earlier, the fact of having a duty which
varies, or has varied, may be a necessary but is not a sufficient condition to affirm
that such a duty qualifies as a variable levy. As regards methodology, the statistics
calculated are merely measures of dispersion to show the distribution of sample data
according to the mean (average). In other words, they serve to illustrate the statistical
distribution of a set of values but by no me ans to prove that the duties are variable
levies, as Argentina seeks to establish."
74 (footnote omitted)
154. For Argentina, too, the obvious reply is no, but for totally different reasons which Chile
seems to ignore: basically because the reduction in Chile's general ad valorem (MFN) tariff was not
the result of a scheme or formula that caused and ensured that the tariff would change automatically
and continuously.75
155. In this respect, in Section C.I.3 of its subm ission, Argentina showed how the amended PBS
possesses all of the features which, according to the Appellate Body, identify a variable import levy:
 (a) A formula that causes import duties to vary;
 (b) a formula that causes import duties to vary automatically;
 (c) a formula that causes import duties to vary continuously;
 (d) lack of transparency and predictability of the duty level.

156. Chile appears not to understand the Argentine argument. The dispersion (standard deviation)
analysis to which Argentina refers is used only
 to show that the amended PBS contains a formula that
causes import duties to vary continuously, i.e., requirement "c" above , and does not constitute the
basis for all of Argentina's reasoning concerning variable levies as Chile claims.76
157. As Chile points out, the existence of a duty th at varies or has varied, even though a necessary
condition, is not sufficient for it to be described as a variable levy. It is one feature that must be
present as a necessary condition, but it is not sufficient.
158. Therefore, Argentina showed, over the entire length of Section C.I. 3, how the amended PBS
fulfils all the conditions set by the Appellate Body including, among other requirements ¸ a formula
that causes import duties to vary continuously.
159. In conclusion, as will be clear to the Panel, Chile h as failed to rebut the Argentine allegation
that the amended PBS is a measure similar to a variable import levy.

74 Chile's First Written Submission, paragraph 137.
75 Chile – Price Band System, Appellate Body Report, paragraph 233 "…[A]t least one feature of
'variable import levies' is the fact that the measure itself – as a mechanism – must impose the variability of the
duties. Variability is inherent in a measure if the meas ure incorporates a scheme or formula that causes and
ensures that levies change automatically and continuously".
76 Argentina's First Written Submission, paragraph 269, and Exhibits ARG-21 and ARG-22.

5. The amended PBS is a measure similar to a minimum import price
160. Chile begins its plea that the PBS does not constitute a minimum entry price [ sic] by arguing
that, in paragraphs 99 to 124 of its submission, Ar gentina claims to show that FOB prices are higher
than CIF prices:
"Although Argentina's submission seeks to demonstrate the opposite, in the normal
course of international trade f.o.b. pric es, which are the unit values for exported
goods at the port of origin, are always lower than c.i.f. prices
, which are the unit
values for imported goods at the port of destination, for the same trade transaction.
The difference between the f.o.b. price and the c.i.f. price in a trade transaction is that
the latter also includes at least frei ght and transport insurance charges."
77 (original
underlining, footnote omitted)
"As the floor and the reference price are variables expressed at f.o.b. level, the
purpose of calculating specific duties is obviously not to maintain an entry price;
since neither the floor price nor the reference price at any given point in time can be
higher than, or equal to, the c.i.f. price for a specified trade transaction." 78
(underlining added)
161. Firstly, it is astonishing how Chile seeks to distort what Argentina said in its First Written
Submission. Argentina would prefer to think of it as an error of interpretation, but this is not easy to
accept considering the detailed explanations which Ar gentina offered in paragr aphs 99 to 124 of its
submission and which Chile never refutes.
162. For example, let us see what Argentina said in those paragraphs:
"... the CIF price tends to be greater than the FOB price"79;
"... the chances of the reference price being higher than the CIF price by more than
US$7.2453 per tonne are minimal basically because of the effective difference in the
calculation of the reference price and the CIF. The reference price, as under the old
PBS, is calculated on an FOB basis. The CI F, as its name implies ("Cost, Insurance,
Freight") consists of the FOB plus freight and insurance"80; (underlining added)
"… during all that time the CIF price per tonne of wheat not only was not less than
the reference price but always higher than the reference price [calculated on an FOB
basis]"81;
"... Argentina has shown that, in the case of wheat, the chances of the CIF price being
lower than the reference price are minima l and, in the case of wheat flour, almost
nil."82
163. Clearly, Argentina tried to demonstrate the exact opposite of what Chile alleges, namely, that
the CIF price is naturally higher than the FOB price.

77 Chile's First Written Submission, paragraph 122.
78 Chile's First Written Submission, paragraph 126.
79 Argentina's First Written Submission, paragraph 107.
80 Argentina's First Written Submission, paragraph 10 8. Argentina points out that the FOB price to
which Chile refers is the reference price.
81 Argentina's First Written Submission, paragraph 110.
82 Argentina's First Written Submission, paragraph 124.

164. Secondly, what Argentina shows in paragraphs 99 to 124 of its submission is that the specific
duties resulting from the amended PBS tend to elevate the entry price of imports to Chile above the
price band floor, now US$128 per tonne. For this purpose it uses the amended PBS formula,
concluding that for the entry price to be less than US$128 per tonne – i.e., less than the floor price –
an improbable condition must be fulfilled, namely, that th e reference price must be higher than the
CIF price by more than US$7.2453 per tonne or, what amounts to the same thing, the CIF must be
lower than the reference price by more than US$7.2453 per tonne.83
165. Argentina having shown that the chances of this condition being satisfied are minimal, it is
very difficult, with the PBS active (that is to say, when specific duties are being applied), for the entry
price per tonne of wheat to be lower than the ba nd floor. Thus, Argentina has shown that the specific
duties resulting from the amended PBS tend to elevate the entry price of imports to Chile above the
price band floor, as the Appellate Body found in rela tion to the original PBS and as confirmed by
Chile with respect to the amended PBS.84
166. In fact, the Chilean assertion provides very useful support for Argentina's argument. Chile
asserts that FOB prices are always lower than CIF prices: "... in the normal course of international
trade fob. prices…are always lower than c.i.f. prices "85 (original underlining).
167. This relieves Argentina of the need to provide further mathematical proof. As follows from
the PBS formula, for the amended PBS not to elevate the entry price of imports to Chile above the
price band floor the above-mentioned condition must be satisfied, i.e., the reference price (calculated
on an FOB basis) must be higher than the CIF price of an individual export transaction by more than
US$7.2453 per tonne or, what amounts to the same th ing, the CIF price of that transaction must be
lower than the reference price by more than US$7.2453 per tonne.
168. If this condition is not met, the amended PBS will mathematically elevate the entry price of
imports to Chile above the price band floor. If, as Chile argues, FOB prices are always lower
 than CIF
prices, this condition cannot be fulfilled so that the amended PBS will always tend to elevate the entry
price of imports to Chile above the price band floor.
169. Consequently, Chile's arguments confirm Argentina's claim, namely, that the amended PBS
constitutes a measure similar to a minimum import price.
170. In paragraphs 128 to 132 of its First Written Submission, Chile seeks to show that the
amended PBS is not a minimum import price or does not tend to elevate the entry price above the
band floor, because in almost 50 per cent of cases the FOB value plus specific duties was lower than
the band floor:
"Using the same data as those supplied by Argentina (footnote omitted) – for the
period 1 November 2004 to 29 April 2005 – we can see that the sum of the f.o.b.
prices plus the specific duties, over the onl y four-month period in which they were
applied, is below the f.o.b. floor price for 46 per cent of the 81 days covered by
Argentina. In other words, the evidence s hows that it is impossible to maintain the
floor price. The following examples, b ased on the data from Argentina's exhibits,
serve to illustrate the above.

83 Argentina's First Written Submission, paragraph 104.
84 Argentina's First Written Submission, paragraph 114.
85 Chile's First Written Submission, paragraph 122.

 Example 1
 Example 2
Date 20 January 2005 10 February 2005
 f.o.b. value (106) +
specific duty (7.82)
= 113.82
f.o.b. value (107) +
specific duty (14.3)
= 121.3
Band floor price 128 128
UNDERESTIMATION
by

US$14.18/ton

US$6.7/ton"
86

171. First of all , Chile is getting the analysis wrong. According to Chile, the sum of the f.o.b.
prices plus the specific duties, over the only four-month period in which they were applied, was below
the f.o.b. floor price for 46 per cent of the 81 days covered by Argentina. However, it makes no sense
to compare the FOB price plus the specific duties with the band floor.
172. The relevant comparison as far as this disput e is concerned is with the behaviour of the entry
price of wheat imports to Chile. The Appellate Body held that:
"… specific duties resulting from Chile's pri ce band system tend... to elevate the entry
price of imports to Chile above the lower threshold of the relevant price band …" 87
173. As Argentina repeatedly made clear in the course of its First Written Submission 88, the entry
price of wheat imports to Chile – under the amen ded PBS – is equal to the result of the following
sum: CIF value plus the amount of total duties in absolute terms. Total duties include ad valorem
duties (which, under Chile's General Customs Tariff, amount to 6 per cent of the CIF), plus specific
duties (equal to the band floor price less the refere nce price multiplied by 1 (one) plus the general ad
valorem tariff in force as published in the Customs Tariff).89
174. More graphically90:
Entry price of
wheat under the
amended PBS
= CIF value + Total duties in absolute terms
 = CIF value + Ad valorem duties +

Specific duty

 = CIF value + CIF
value * 6% + Specific duty

86 Chile's First Written Submission, paragraph 130.
87 Chile – Price Band System, Appellate Body Report, paragraph 260.
88 Argentina's First Written Submission, paragraph 100 ff.
89 According to Brazil, "…the new PBS contributes to distorting the prices of imports even more,
inasmuch as a new coefficient is adde d to the formula used to calculate the duty level… In the current system,
the specific duty level is magnified by the introduction of a new unexpected multiplier consisting of 1 plus the
general ad valorem duty in force". Chile – Price Band System … Recourse to Article 21.5 of the DSU, Third
Party Submission by Brazil, paragraph 16.
90 Argentina's First Written Submission, paragraph 101.

175. Mathematically, this can be expressed as follows91:
EP = CIF + 6% CIF + [ (FP – RefP) * (1+6%) ]
where:

EP = entry price for wheat imports to Chile under the amended PBS
RefP = reference price
FP = floor price of the band in force
CIF = Cost, Insurance, Freight

176. In other words, in paragraphs 128 to 132, Chile "forgets" to include in its analysis at least two
significant factors that make up the entry price to which the Appellate Body referred:
 (1) the difference between the FOB price and th e CIF price, that is, insurance and freight;
 (2) the ad valorem duties (6 per cent of MFN).

177. If Chile had included these two factors in its an alysis, the result would have been different:
during 100 per cent
 of the time in which specific duties we re being applied between December 2004
and April 2005, the entry price was above the band floor , in the terms expressed by the Appellate
Body. This is clear from Exhibits ARG-11 and ARG-12 to which Chile referred.
178. Therefore, as Argentina showed in Section C. I.2.1 of its submission, under the amended PBS
the findings of the Appellate Body with respect to th e original PBS are confirmed, that is, the specific
duties resulting from the amended PBS tend to elevate the entry price of imports to Chile above the
price band floor.
179. Secondly, in footnote 72 to paragraph 130 of its submission, Chile states:
"Strictly speaking, this calculation is based on the data from Table ARG-11 adjusted
according to those from Table ARG-16. Acco rding to the official source (SAGPyA),
some of the data in Table ARG-11 are incorrect."
180. Chile claims to adjust the data from the tabl e in Exhibit ARG-11 according to those from the
table in Exhibit ARG-16, on the grounds that data from the table in Exhibit ARG-11 are incorrect
"according to the official source".
181. There is nothing "incorrect" about the table in Exhibit ARG-11. A time adjustment has been
made to the FOB prices in Exhibit ARG-11 on the basis of the explanation given in footnote 104 to
Table I of the Argentine submission. As explained in that footnote:
"ODEPA does not provide daily FOB prices for bread wheat, Argentine port (only
monthly prices). The historical FOB price for Argentine bread wheat reported by
Argentina's Ministry of Agriculture, Livestock, Fisheries and Food (SAGPyA) is
taken instead. In order to make the an alysis as accurate as possible, the price
indicated in the table for 15 December 2004 corresponds to the Argentine FOB price
in effect 15 days previously, since that is the approximate time taken by a cargo ship
to sail from Argentina to Chile, including dockside loading and unloading times …"
182. Thus, the table in Exhibit ARG-11 reflects the reality that the FOB price reported by
SAGPyA is the FOB price for a date "X" of shipment in Argentina. When the consignment arrives in

91 Argentina's First Written Submission, paragraph 102.

Chile, this will be the FOB price for Chilean cu stoms purposes, which may differ from the FOB price
at that point in the Argentine port.
183. For example, in Exhibit ARG-16 the FOB price for 1 November 2004 is US$119 per tonne. It
is clear from Exhibit ARG-11 that this is the FO B price for Chilean customs purposes approximately
15 days later, on 16 November. In other words, the shipment that left Argentina on 1 November at
US$119 per tonne FOB price continues to be valued at US$119 per tonne FOB price plus costs in
order to arrive at the CIF price. Nevertheless, on 16 November, the FOB price in Argentina was
US$115 per tonne, as may be seen from Exhibit ARG-16. In other words, there is nothing incorrect
about Exhibit ARG-11 as Chile suggests.
184. On the other hand, in Exhibit ARG-16 Argentina did not make a time adjustment, since the
purpose of that exhibit is different from that of Exhibit ARG-11. Thus, Exhibit ARG-16 is intended to
show the disconnection between the FOB price of Argentine bread wheat and the reference price
established by Chile on the same day , for each day of the period of implementation of the amended
PBS. To make things clearer for the Panel, in E xhibit ARG-30 Argentina gives details of the exhibits
in which a time adjustment has been made.
185. It is not clear from paragraphs 171 to 182 of Chile's First Written Submission whether Chile
is seeking to refute Argentina's demonstration of the tendency of the specific duties resulting from the
amended PBS to elevate the entry price of imports to Chile above the price band floor
(i.e., Section C.I.2.1 of the Argentine submission) ; whether it is seeking to refute Argentina's
demonstration of overcompensation (i.e., Section C.I.2.2 of the Argentine submission); or whether it
is seeking to refute Argentina's demonstration th at the entry price of imports to Chile, under the
amended PBS, is higher than it would be if Chile were to apply a minimum import price at price band
floor level (i.e., Section C.I.2.3 of the Argentine submission).
186. This pervasive lack of clarity in Chile's Firs t Written Submission is aggravated by the fact
that in these paragraphs there is no reference to the Argentine submission.
187. Nevertheless, it may be concluded, on the basi s of the observations made at the end of
paragraph 179 of its submission, that Chile is re ferring to Argentina's dem onstration of the tendency
of the specific duties resulting from the amended PBS to elevate the entry price of imports to Chile
above the price band floor (i.e., Section C.I.2.1 of Argentina's First Written Submission), and of the
fact that the entry price of imports to Chile – under the amended PBS – is higher than it would be if
Chile were to apply a minimum import price at price band floor level (i.e., Section C.I.2.3 of
Argentina's First Written Submission).
188. In other words, Chile is attempting to rebut two different Argentine arguments through a
single argument of its own.
189. The basis of Chile's reasoning – contained in paragraphs 175 to 179 of its submission – is that
the specific duty resulting from the PBS is less th an the duty that would be required to establish a
minimum entry price.
190. Mathematically, this argument can be expressed as follows, again in Chile's own terms:
Duty to maintain an import cost, or parity or
entry price (minimum price) Specific duty resulting from the PBS
SD = b * (FOBfloor - FOBrp)92 > SD = (1+ 0.06) * (FOBfloor – FOBrp)

92 Chile's First Written Submission, paragraph 176.

191. This would be so because, according to Chile,
"if 'b' is larger than the ad valorem duty, a specific duty calculated solely on the basis
of f.o.b. values and Chile's ad valorem duty [sic] would unquestionably be lower than
a duty obtained using import costs"93 (underlining added).
192. There are several problems with this reasoning.
193. Firstly, once again, Chile describes its own PBS in correctly. Strictly speaking, the specific
duty is not calculated "solely" on the basis of [lite rally, does not solely include] f.o.b. values and the
ad valorem tariff. In fact, it "includes" nothing. The specific duty is calculated simply on the basis of
the difference between the floor price and the re ference price multiplied by 1 plus 0.06, i.e., the
ad valorem tariff.94
194. Secondly, as Argentina previously pointed out, there is no "FOB floor" price in the legislation
on which the amended PBS is based. 95 The PBS legislation merely refers to "floor and ceiling
values".96 Not even in the definitions of Article 2 of Decree 831/2003 is there any mention of it being
a question of FOB values.97 These are merely arbitrary values chos en without the use of any criterion.
There is no indication of their being either FOB or CIF.
195. To avoid questions being raised, Chile incl uded the following sentence in Article 4 of
Decree 831/200398:
"The floor and ceiling values and the refe rence prices for which the regulations
provide shall be expressed in FOB terms in United States dollars." (Emphasis added)
196. This is not enough to show that FOB values are involved; that would require Chile to produce
the evidence on which it based its choice of floor and ceiling values.
197. Thirdly, for the following reasons, Chile gets the definition of the duty established on the
basis of a minimum import price completely wrong.
198. In this same dispute, the Panel held that a minimum price scheme operates in relation to the
actual transaction value of the imports. 99 The Appellate Body incorporated this aspect of minimum
import prices in its report. 100 In its reasoning, Chile calculat es the duty resulting from a minimum
price on the basis of the differen ce between the band floor and the reference price.101 The reference
price – which has nothing to do with the transaction va lue – is simply an average price on a market of
concern.
199. Then, as also noted by the Appellate Body in this dispute and in accordance with Argentina's
observations in its First Written Submission 102, the establishment of a minimum import price at price

93 Chile's First Written Submission, paragraph 178.
94 Argentina's First Written Submission paragraphs 100 ff.
95 See Law 19.897, Art. 1 paragraphs 3, 4 and 5, and Decree 831/2003, Arts. 2, 4, 6, 13, 14, Exhibits
ARG-1 and ARG-2, respectively.
96 See Law 19.897, Art. 1 paragraphs 3, 4 and 5, and Decree 831/2003, Arts. 2, 4, 6, 13, 14, Exhibits
ARG-1 and ARG-2, respectively.
97 See Exhibit ARG- 2.
98 See Exhibit ARG- 2.
99 Chile – Price Band System, Panel Report, paragraph 7.36(e).
100 Chile – Price Band System, Appellate Body Report, paragraph 237.
101 Chile's First Written Submission, paragraph 176.
102 Argentina's First Written Submission, paragraph 161.

band floor level would mean that if the entry price of a particular product (i.e., the CIF price plus
ad valorem duties) were lower than that threshol d (US$128 per tonne or the corresponding amount)
an additional charge equivalent to the difference would be imposed, so that the product in question
entered the Chilean market at the band floor price (currently US$128 per tonne).
103
200. The formula that follows from this definition is:
 Duty resulting from
 minimum import price = floor price – (CIF value + ad valorem duties)

 Duty resulting from
 minimum import price = floor price – (CIF value * 1.06)

201. The formula outlined by Chile bears no relation either to the definition of minimum import
price or to that of the charge resulting from the imposition of a minimum import price, as established
in this dispute.
202. Chile has determined a factor "b " that includes a set, both loose and broad, of variable costs
"such as" the ad valorem duty, inspection costs, the commission payable to agents handling the
transaction, and credit interest due.
104 The multiplication of this factor "b" by the difference between a
floor value and a reference price has no basis in or relation to a minimum import price.
203. Thus, Chile employs confused reasoning, based on definitions other than those established by
the Appellate Body.
204. If Chile had used the formula in the Appellate Body report, it would have arrived at the same
conclusion as that reached by the Appellate Body with respect to the original PBS and by Argentina
with respect to the amended PBS, namely, that th e entry price of imports to Chile, under the amended
PBS, is higher than it would be if Chile were to apply a minimum import price at price band floor
level. In Section C.I.2.3 of its submission, Argen tina demonstrated this with the aid of concrete
examples and charts based on Chile's own data.
105
205. In conclusion, as will be clear to the Panel, Chile h as failed to rebut Argentina's claim that
the amended PBS is a measure similar to a minimum im port price, inconsistent with Article 4.2 of the
Agreement on Agriculture.
6. The amended PBS has not produced any impr ovement in the conditions of access to the
Chilean market
206. In the first part of Section V.6 of its subm ission – specifically in paragraphs 183 to 185 –
Chile repeats an argument already familiar at th is stage, namely, that simply because under the
amended PBS specific duties were allegedly applie d on fewer occasions than they would have been
under the original PBS there has been an improveme nt in the conditions of access of wheat to the
Chilean market. The same reasoning is applied to rebates. Thus, under the amended PBS, since
16 December 2003, more rebates are said to have been granted than would have been during the same
period if the original PBS had been applied so th at, in Chile's view, the favourable conditions for
imports are more extensive.

103 Chile – Price Band System, Appellate Body Report, paragraph 236.
104 Chile's First Written Submission, paragraph 175.
105 Argentina's First Written Submission, paragraphs 159 to 173, and Exhibit ARG-10.

207. Chile argues:
"In conclusion, the period of application of duties under the new regime was shorter
by 10 weeks, while that of rebates w as longer by 8 weeks, which represents an
effective increase in favourable conditions fo r grain imports compared to what might
have occurred under the mechanism prior to modification."106
208. Firstly, this amounts to saying that exporters of wh eat and wheat flour to Chile should not be
concerned about the distorting effects of the amended PBS, since under the amended PBS the
distorting effects resulting from the application of specific duties occurred "only" 17 times, whereas
under the original PBS they would have occurred 27 times. Chile claims that this represents an
improvement in conditions of access.
209. Once again, it can only be said that the access cond itions continue to be unfavourable despite
the duties allegedly being applied on fewer occasions than in the case of the original PBS. Chile's
reasoning has no basis in the WTO Agreements a nd, in particular, not in the DSU or the Agreement
on Agriculture. A measure taken to comply is not "less" in consistent because the inconsistency occurs
less frequently than in the case of the original measure. There is no basis for drawing such a
conclusion.
210. Secondly, it is interesting to note the table whic h Chile itself introduces in paragraph 183.
This table confirms that the amended PBS is very similar to the original PBS. The period between
16 December 2003 and 13 January 2004, during which the amended PBS was not applied, was
57 weeks long. This means that the PBS was applie d for 52 weeks (out of a total of 109). Following
the same reasoning, the original PBS would not have been applied during 55 weeks, that is to say it
would have been applied during 54.
211. To sum up, the original PBS would have been applied for 50 per cent of the time, whereas the
amended PBS was applied for 48 per cent of the time. Clearly, the two systems are very similar and,
therefore, the degrees of distortion they cause are also similar.
212. In Exhibit CHL-7, as evidence which, it claims , supports this reasoning, Chile submits a table
that summarizes how the application of the original PBS would have compared with the application of
the amended PBS. Chile begins by failing to comply with the minimum requirement of indicating the
source of its data, as Argentina did with all the information it provided.
213. Moreover, it is impossible to verify whether th e calculations relating to the alleged behaviour
of the old PBS from 16 December 2003 are consistent or not. There is no means of knowing what
were the calculations that led Chile to determine the reference prices that would have been established
under the original PBS. It is precisely these prices th at form the basis for determining whether the old
PBS would have been applied or not. Therefore, Exhibit CHL-7 is not based on verifiable evidence
and has no foundation.
214. To sum up, in the table in Exhibit CHL-7 whic h Chile offers as alleged evidence there is no
indication of the source of the data. Nor is there an y indication of the basis for the calculation of such
a key variable as the reference prices of the original PBS.
215. Even if this table were based on evidence, Chile considers the "new" PBS to be different and
less distortive because it was applied for 48 per cent of the time whereas the old PBS would have been
applied for 50 per cent of the time. That does not seem to be much of a difference.

106 Chile's First Written Submission, paragraph 185.

216. As if this were not enough, in Chile's opinion, wheat and wheat flour exporters should rejoice
because they have faced distortions resulting fro m specific duties for "only" 17 weeks. These are
Chile's grounds for arguing that the amended PB S has improved conditions of access. Chile's
argument is without foundation. The amended PBS continues to be inconsistent.
Effect of the scheduled reduction in floor and ceiling prices

217. In paragraphs 186 to 192 of its submission, Chile seeks to argue that as the floor and ceiling
prices will be reduced in the future, the amount of the duties will be lower and the probability of their
being assessed will also diminish:
"The scheduled reduction of the floor and ceiling prices is a scenario under which,
irrespective of international price levels , the amount of the specific duties will
increasingly diminish compared to those currently being established, just as the
probability of duties actually being assessed will increasingly diminish."
107
218. Chile's argument is simply wrong . The reality is that neither the amount of the specific duties
nor the probability of their being assessed is "irrespec tive of international price levels" and indeed the
opposite is true: the amount of the specific duties and the probability of their being assessed do
depend on international price levels.
219. Law 19.897 and Decree 831/2003 refer to precisely that, i.e., the dependence of the amount of
the specific duties on international price levels.108
220. Over and above the provisions of the legislati on governing the amended PBS itself, this is
clear from the following simple example:
221. According to the "History of application of the amended PBS"109, between 16 December 2004
and 15 December 2005 the PBS floor price for wh eat was (and is) US$128 per tonne. The reference
price between 16 December 2004 and 15 February 2005 was established at US$114.50 per tonne. This
gave a specific duty of US$14.30 per tonne.
222. In accordance with Art. 6 of Decree 831/2003, between 16 December 2011 and
15 December 2012 the PBS floor price for wheat will be US$118 per tonne. If the reference price is
established at US$103.7 per tonne during any two months of that year, the specific duty during that
period will be US$14.30 per tonne, the same as es tablished on 16 December 2004. Even if the
reference price is less than US$103.7 per tonne, th e specific duty will naturally be higher and not
lower, as Chile argues.
223. When this reasoning is applied to the example given by Chile in paragraphs 187 and 188 of its
submission, it becomes clear that the Chilean example has no foundation. Chile argues:
"Although this may be self-evident, we sha ll nevertheless use the calculation formula
to explain matters. If we take the curren t floor price of US$128/tonne and the floor
price of US$114/tonne that will apply in 201 4, with an identical reference price
 of,
say, US$110/tonne, the results are as follows:

107 Chile's First Written Submission, paragraph 186.
108 See Law 19.897, Art. 1 paragraphs 3, 4 and 5, and Decree 831/2003, Arts. 2, 4, 6, 13, 14, Exhibits
ARG-1 and ARG-2, respectively: "The amount of such duties and rebates shall be established … in terms
which, when applied to the price levels attained by the products in question on the international markets, allow
domestic market stability" (emphasis added).
109 Exhibit ARG-6.

SP2006 = 1.06 * (128 – 110) = 19.08
SP2014 = 1.06 * (114 – 110) = 4.24
The specific duty in 2014, us ing the same reference price , would be US$4.24/tonne
compared to the current specific duty, using that same reference price, of
US$19.08/tonne. In other words, the specific duty in 2014 will be 78 per cent lower
than the duty that would be calculated for this year." (underlining added)
224. To spot the flaws in this argument it is only necessary to consider the basic assumption,
namely, that in no less than eight years' time (2014) the reference price will be the same as it is today
(2006), or US$110 per tonne, according to the example.
225. The fact is that there is no evidence for determining today that in eight years' time the
reference price will be the same. At the very l east, it is a rash assertion. In all probability, the
reference price will change, as has always happened since the establishment of the amended PBS.
226. As previously explained, the amount of the spec ific duties will depend on the future levels of
international or reference prices. With this in mind, we can reformulate Chile's second equation so
that the reference price changes:
SP
2014 = 1.06 * (114 – 94.92) = 19.08
227. It is now "self-evident" that if the reference price is US$94.92 per tonne in 2014, the amount
of the specific duties will be the same as in 2006 or, in accordance with the Chilean example,
US$19.08, or 0 per cent (zero per cent) lower than in 2006.
228. It is therefore clear that the amount of the specific duties and the probability of their being
assessed depend on international price levels. It is by no means sure that these amounts and the
probability of their being assessed will increasingly diminish, as Chile argues. The Chilean argument
is incorrect and without foundation.
229. In paragraph 191, Chile returns to an argument th at is no longer sustainable at this stage,
namely, that according to the historical wheat pr ice series the probability of wheat prices standing
below US$114 per tonne (i.e., the floor price in 2014) is 23.9 per cent, as compared with 46.1 per cent
for the probability of prices lying below US$128 per tonne:
"Over the period January 1986-March 2006 (per iod of application of the price band
policy [sic]), the price of Argentine bread wheat stood 112 times (months) below the
current floor of 128, i.e. on 46.1 per cen t of the occasions considered. The price
stood under 114, namely the floor for 2014, 58 times (months), i.e. on 23.9 per cent
of the occasions considered. In other wo rds, the probability of specific duties being
applied in the year 2014 becomes lower and lower."
230. The problems presented by arguments of this kind are set out below.
231. First of all, as Argentina has already pointed out, th e amended PBS is not "less" inconsistent
because the inconsistency will arise on fewer occasions in the future than at present. There is no basis
for making an assertion of this kind.
232. Secondly, according to Chile's reasoning, there is a more than 46 per cent probability, while
the floor is situated at US$128 per tonne, of wh eat and wheat flour expor ters experiencing the
distortions caused by specific duties. That is not encouraging for exporters planning to export wheat

and wheat flour to Chile up to December 2007. We r ecall that until then the floor price will remain at
US$128 per tonne. Therefore, the probability indicated by Chile is not at all encouraging.
233. Thirdly, Chile indicates neither the source of its information nor the numerical basis for the
calculations made to arrive at the conclusion reached in this paragraph. Chile simply fails to provide
any evidence at all.
234. Fourthly, even if Chile's reasoning had any validit y, Chile's calculations are wrong. Chile
takes only the lowest future floor price of all those scheduled under Decree 831/2003,
i.e., US$114 per tonne, corresponding to 2014. Chile should have incorporated in its calculations a
weighting that takes into account the time during which the price of Argentine bread wheat lay below
the future floor prices not considered by Chile: 1 26, 124, 122, 120, 118 and 116 US$ per tonne. As
these prices are all higher than US$114 per tonne, the percentage should logically be higher than the
23.9 per cent calculated by Chile.
235. Argentina reiterates that the way in which the floor and ceiling of the amended PBS are
established has transformed the PBS into a more rigid and inflexible system.
110
236. Chile concludes by referring to a process of gradual reduction of border protection of wheat:
"Both of the above results – that is, th e reduction of duties by 2014 and the lesser
probability of duty assessment – demonstrate that the current policy has an in-built
process of gradual reduction of border protection of wheat."111 (original underlining)
237. To sum up , Chile wrongly disregards the fact that the level of specific duties resulting from
the PBS obviously depends on international price leve ls, attempting to argue that in 8 (eight) years
time the reference price will be the same as it is at present. Moreover, Chile repeats the argument that
the amended PBS will be "less" inconsistent in th e future because the inconsistency will arise on
fewer occasions than at present, while basing its case on calculati ons made without providing the
source of the evidence and without including most of the relevant period of application of the
amended PBS up to 2014.
238. Moreover, Chile chooses to disregard the fact th at by keeping the floor and ceiling inflexible
the amended PBS insulates the domestic market fro m international price developments. This is the
basis for its concluding that the amended PBS ("th e current policy") has an in-built process of gradual
reduction of border protection of wheat. Chile's conclusion has no basis in fact or in law.

110 As Brazil has pointed out:
"… the 11-year period has the side effect of aggravating the distortion of domestic prices vis-à-vis
international ones. While such a long period may afford some predictability, the new PBS is more rigid and
inflexible, given that, in practice, the Chilean market will be insulated from fluctuations in the world prices for
eleven years. Should there be a sign ificant downward movement in the international wheat prices, the 0.985
factor may not be sufficient to account for the necessary reductions in the lower and upper thresholds of the
price bands. Hence, in spite of the application of the 0.985 multiplier, one of the main elements of the PBS (the
bands themselves) will remain virtually unchanged for more than a decade, preventing the fluctuation of
international prices from being transmitted to the Chilean market". Chile – Price Band System … Recourse to
Article 21.5 of the DSU, Third Party Submission by Brazil, paragraph 15.
111 Chile's First Written Submission, paragraph 192.

C. THE ARGUMENT RELATING TO THE FACTOR OF 1.56 APPLICABLE TO WHEAT
FLOUR AND THE CLAIM RELATING TO THE SECOND SENTENCE OF
ARTICLE II:1(B) OF THE GATT 1994 FALL WITHIN THE TERMS OF REFERENCE OF
THE PRESENT PANEL
239. In Part III of its First Written Submission, Chile suggests that Argentina's claims relating to
the factor of 1.56 applicable to wheat flour and the second sentence of Article II:1(b) of the
GATT 1994 lie outside the Panel's terms of reference.
240. In this way, Chile avoids responding to the Arge ntine assertion that the factor of 1.56 used to
multiply the duties and rebates determined for whea t in order to calculate the duties and rebates
applicable to wheat flour is not transparent a nd insulates the entry price for wheat flour from
international price developments to an even greater extent than that for wheat, this being a specific
feature of the amended PBS that prevents enhanced access to the Chilean market, in a manner
inconsistent with Article 4.2 of the Agreement on Agriculture.
112
241. Similarly, in this way Chile avoids having to argue against the contention that, pursuant to the
Understanding on the Interpretation of Article II:1(b) of the GATT 1994 , the amended PBS is in
breach of the second sentence of Article II:1(b) of the GATT 1994, since it was not recorded in the
appropriate column of Chile's Schedule of concessions (No. VII), but is nevertheless being applied.113
242. Argentina's argument relating to the factor of 1.56 applicable to wheat flour and Argentina's
claim relating to the second sentence of Article II: 1(b) of the GATT 1994 lie within the terms of
reference of the present Panel, and Chile has been unabl e to refute that the factor of 1.56 is a specific
feature of the amended PBS that prevents enhanced access to Chile's market, in a manner inconsistent
with Article 4.2 of the Agreement on Agriculture , and that the amended PBS is in breach of Article
II:1(b) of the GATT 1994, second sentence.
243. Below, Argentina will deal separ ately with Chile's claims concerning (i) the factor of 1.56
applicable to wheat flour and (ii) the second sentence of Article II:1(b) of the GATT 1994,
respectively.
1. Argentina's argument relating to the factor of 1.56 applicable to wheat flour lies within
the terms of reference of the present Panel
(a) The questioning of the factor of 1.56 applicable to wheat flour is an argument, not a claim
244. Chile maintains that Argentina's arguments relati ng to the factor of 1.56 applicable to wheat
flour lie outside the terms of reference of the present Panel, since they concern "a claim which
Argentina could have raised and pursued in the original dispute, but failed to"
114 Chile therefore
requests that the Panel dismiss the claim raised by Ar gentina relating to the factor of 1.56, given that
it is not properly before the Panel.115
245. In support, Chile cites the case US – Countervailing Measures on Certain EC Products
(Article 21.5 – EC) , arguing that claims relating to aspects of an original measure which were not
raised in the original proceedings are inadmissible. According to Chile:

112 Argentina's First Written Submission, Section C.I.2.7.
113 Argentina's First Written Submission, Section C.II.
114 Chile's First Written Submission, paragraph 62.
115 Chile's First Written Submission, paragraph 63.

"The arguments and precedents mentioned in the previous section, which highlight
the conclusions of the Panel in the dispute US – Countervailing Measures on Certain
EC Products (Article 21.5 - EC) , are reproduced in full, given that that dispute dealt
precisely with the inadmissibility of entertaining claims relating to aspects not of a
'measure taken to comply' but of the origin al measure, and which were not raised in
the original proceedings."
116
246. Chile's argument is mistaken. Chile appears not to understand the difference between "claims"
and "arguments".
247. In fact, Argentina's questioning of the factor of 1.56 is not a claim, it is an argument.
248. A claim is a claim that the respondent party has violated, or nullified or impaired the benefits
arising from, an identified provision of a particular agreement. An argument is adduced by a
complaining party to demonstrate that the respondi ng party's measure does indeed infringe upon the
identified provision. Arguments supporting a claim are set out and progressively clarified in the first
written submissions, the rebuttal submissions and the panel meetings.
249. This was made clear by the Appellate Body in Korea — Dairy Products :
"By ' claim' we mean a claim that the respondent party has violated, or nullified or
impaired the benefits arising from, an identif ied provision of a particular agreement.
Such a claim of violation must, as we have already noted, be distinguished from the
 arguments adduced by a complaining party to demonstrate that the responding party's
measure does indeed infringe upon the identified treaty provision. Arguments
supporting a claim are set out and progressively clarified in the first written
submissions, the rebuttal submissions and the first and second panel meetings with
the parties. In European Communities – Hormones , we emphasized the substantial
latitude enjoyed by panels in treating the ar guments presented by either of the parties
and said:
[…] nothing in the DSU limits the faculty of a panel freely to use
arguments submitted by any of the parties -- or to develop its own
legal reasoning -- to support its own findings and conclusions on the
matter under its consideration" (footnotes omitted, original
emphasis).
117
250. In the present proceedings, Argentina has raised claims with respect to the inconsistency of
the amended PBS with the second pa ragraph of Article 4 of the Agreement on Agriculture, the second
sentence of Article II:1(b) of the GATT 1994 , and paragraph 4 of Article XVI of the Marrakesh
Agreement Establishing the World Trade Organization.
251. However, Argentina's questioning of the factor of 1.56, included in the PBS for the purpose of
assessing the duties applicable to imports of wheat flour, is an additional argument which shows that
the amended PBS is inconsiste nt with Article 4.2 of the Agreement on Agriculture . There is no
question of a "claim".
252. The claim to which the Argentine argument con cerning the factor of 1.56 refers is that
relating to the inconsistency of the amended PBS with Article 4.2 of the Agreement on Agriculture .

116 Chile's First Written Submission, paragraph 61.
117 WT/DS98/AB/R, paragraph 139

Chile has not argued that this claim does not lie w ithin the terms of reference of the present Panel.
Therefore the Panel can rule on the Argentine arguments relating to the factor of 1.56.
253. Consequently, the cases cited by Chile in its First Written Submission, namely, EC – Bed
Linen (Article 21.5 – India ) and US - Countervailing Measures on Cert ain EC Products (Article 21.5
– EC), are not applicable as regards the factor of 1.56, insofar as these cases concern the admissibility
in Article 21.5 proceedings of claims made during the original proceedings with respect to unchanged
aspects of the measure to be taken or claims whic h were not made during the original proceedings
with respect to unchanged aspects of the measure to be taken, but could have been invoked during
those proceedings.
254. Therefore the Panel is fully competent to accept and make free use of the arguments
submitted by Argentina with respect to the factor of 1.56 in order to show the inconsistency of the
amended PBS with the second paragraph of Article 4 of the Agreement on Agriculture, since it is not a
question of an independent claim but of an argum ent in support of a claim. Thus, Chile's argument
that Argentina's claim relating to the factor of 1.56 applicable to wheat flour falls outside the terms of
reference of the present Panel should be dismissed.
(b) Even if the Panel were to find that the Arge ntine arguments relating to the factor of 1.56
applicable to wheat flour constitute a new "cla im", those arguments fall within the terms of
reference of the present Panel
255. If the Panel were to find that the Argentine argum ents relating to the factor of 1.56 applicable
to wheat flour constitute a "claim" and not an "a rgument", as Argentina maintains, these arguments
would fall within the terms of reference of the present Panel.
256. Argentina has shown that the factor of 1.56 used to multiply the duties and rebates determined
for wheat in order to calculate the duties and rebate s applicable to wheat flour is not transparent and
insulates the entry price for wheat flour from international price developments to a greater extent than
that for wheat, being a specific feature of the am ended PBS that prevents enhanced access to Chile's
market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture.118
257. In its First Written Submission, Chile was una ble to rebut the arguments and evidence put
forward by Argentina. It merely argues that the questioning of the factor of 1.56 is a new claim by
Argentina that falls outside the Panel's terms of reference.
258. However, Argentina's arguments relating to the f actor of 1.56 applicable to wheat flour fall
within the terms of reference of the present Panel.
259. In fact, the Argentine arguments relating to th e factor of 1.56 constitute new arguments. This
is acknowledged by Chile when it observes, in relation to the factor of 1.56:
"Quite simply no mention is made of it in Argentina's submissions
. Neither,
therefore, was it the subject of a ruling by either the original Panel or the Appellate
Body"119 (original underlining).
260. Argentina points out that, within the framew ork of the current Article 21.5 proceedings,
Argentina is entitled to submit new arguments in order not to undermine the utility of the review
envisaged under Article 21.5 of the DSU since, if it were not allowed to do so, the present Panel

118 Argentina's First Written Submission, Section C.I.2.7.
119 Chile's First Written Submission, paragraph 60.

would be unable to examine fully the c onsistency of the amended PBS with the Agreement on
Agriculture.
120
261. In EC – Bed Linen (Article 21.5 – India), which Chile cites, the Appellate Body held that:
"… This implies that an Article 21.5 panel is not confined to examining the 'measures
taken to comply' from the perspective of the claims, arguments, and factual
circumstances relating to the measure th at was the subject of the original
proceedings. Moreover, the relevant facts bearing upon the 'measure taken to comply'
may be different from the facts relevant to the measure at issue in the original
proceedings. It is to be expected, therefor e, that the claims, arguments, and factual
circumstances relating to the 'measure ta ken to comply' will not, necessarily, be the
same as those relating to the measure in the original dispute. Indeed, a complainant in
Article 21.5 proceedings may well raise new claims, arguments, and factual
circumstances different from those ra ised in the original proceedings …" 121
(underlining added, footnotes omitted)
262. Contrary to what Chile says, the fact that th ere was "… no finding of inconsistency (or of
consistency) forcing Chile to amend that particular aspect of the PBS …" 122 does not prevent the
present Panel from considering Argentina's new arguments relating to the factor of 1.56. The factor in
question forms part of both the new measure itself and its application. It should be borne in mind that
this factor is a fundamental and essential part of the amended PBS applicable to imports of wheat
flour.
263. Argentina's new arguments concerning the factor of 1.56 will make it easier for the present
Panel to fulfil its task of considering the amended PB S in its totality. In this connection, the Appellate
Body has held that:
"When the issue concerns the consistency of a new measure 'taken to comply' the task
of a panel in a matter referred to it by th e DSB for an Article 21.5 proceeding is to
consider that new measure in its totality . The fulfilment of this task requires that a
panel consider both the measure itself and the measure's application …" 123
(underlining added)
264. Below, Argentina refers to Chile's observa tions in paragraph 55 of its First Written
Submission where it cites the panel report in US – Countervailing Measures on Certain EC Products
(Article 21.5 – EC).124
265. In that paragraph Chile stated that:
"The Panel Report in US – Countervailing Measures on Certain EC Products
(Article 21.5 – EC) stated that accepting the EC's claim (with regard to likelihood of
injury) would amount to providing it with 'a second chance to raise a claim that it

120 Canada – Aircraft (Article 21.5 – Brazil), Appellate Body Report, paragraph 41.
121 EC – Bed Linen (Article 21.5 – India), Appellate Body Report, paragraph 79.
122 Chile's First Written Submission, paragraph 62 (underlining added).
123 US – Shrimp (Article 21.5 – Malaysia), paragraph 87 (WT/DS58/AB/RW).
124 Although this paragraph corresponds to Chile's arguments relating to Article II:1(b), second
sentence, of the GATT 1994, in paragraph 61 of its submission – which corresponds to the arguments relating to
the factor of 1.56 – Chile indicates that it is reproducing in full the arguments and precedents mentioned in that
section, which highlight the conclusions of the Panel in the dispute US – Countervailing Measures on Certain
EC Products (Article 21.5 – EC).

failed to raise in the original proceedings'. 125 The Panel was concerned that to allow
such a possibility could undermine the prin ciples of fundamental fairness and due
process, which would raise 'serious issues regarding (the United States') due process
rights'.
126 It therefore concluded that the new claims by the EC were not properly
before the Panel."
266. The paragraphs that Chile cites from this di spute do not fit Argentina's new arguments with
respect to the factor of 1.56. These new arguments re late to an aspect of the measure taken to comply
that has changed with respect to the original measure. This is because under the amended PBS the
factor of 1.56 is applied on a basis completely different from that on which it was applied under the
original PBS.
267. What Argentina is submitting for the Panel's consid eration is the factor of 1.56 which, in the
amended PBS, is a changed aspect relative to the PBS in its original form, and which constitutes a
specific feature of the measure taken to comply that prevents enhanced access to Chile's market, in a
manner inconsistent with Article 4.2 of the Agreement on Agriculture.127
268. Therefore, the new arguments relating to the factor of 1.56 can be examined by an
Article 21.5 panel and fall within the terms of reference of the present Panel.
269. In its arguments, Chile "forgets" to cite those paragraphs in which that panel held that an
Article 21.5 panel can consider new claims concer ning aspects of the measure taken to comply that
have changed relative to the original measure.
270. In that case, the affirmative likelihood-of-subsid ization re-determinations of the Section 129
determination – measure taken to comply – were based on different reasoning and different factual
circumstances than those in the original sunset review. 128 Here the weight given in the re-
determination to the subsidy programmes to which the evidence related was necessarily different than
in the original sunset review.
271. Therefore, despite the fact that the USDOC's affirmative likelihood-of-subsidization re-
determination was maintained in the Section 129 determination, it was included in the terms of
reference of the Article 21.5 panel, inasmuch as the United States had revised the likelihood-of-
subsidization determination by changing the legal and factual basis of the conclusion concerning the
continuation or repetition of the subs idy. Thus, the new claims relating to the evidence referred to an
aspect of the measure taken to comply that had changed as compared with the original measure.
Consequently, the panel arrived at the conclusi on that the USDOC's affirmative likelihood-of-
subsidization re-determination was included in its terms of reference.
272. In fact, the panel in US – Countervailing Measures on Cert ain EC Products (Article 21.5 –
EC) held that:

125 US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , Panel Report
(WT/DS212/RW), paragraph 7.74.
126 US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , Panel Report
(WT/DS212/RW), paragraph 7.76.
127 This is why Argentina is challenging the utility of Exhibits CHL-5 and CHL-6, insofar as they relate
to the original PBS, that is to say, a measure different from the amended PBS.
128 In this connection, in paragraph 7.69 of its report, the Panel in US – Countervailing Measures on
Certain EC Products (Article 21.5 – EC) considered that:
"... the affirmative likelihood-of-sub sidization determination in the orig inal sunset reviews rested only
upon the continuation of the benefit from pre-privatiz ation, non-recurring subsidies, while the affirmative
likelihood-of-subsidization determination in the UK and Spain Section 129 determinations rested only upon
subsidy programmes other than pre-privatization non-recurring programmes."

"... the relative importance of the evidence concerning non-pre-privatization subsidies
and Glynwed's sale of relevant production facilities has changed as a consequence of
the new basis for the affirm ative likelihood-of-subsidization re-determinations. In
Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body explained that an
Article 21.5 panel should be able to consid er new claims where 'the relevant facts
bearing upon the "measure taken to comply" may be different from the relevant facts
relating to the measure at issu e in the original proceedings'.
129 In this dispute, the
affirmative likelihood-of-subsidization re-determinations are now based on different
reasoning and different factual circumstances than those in the original sunset
review…Thus, the weight given in the re-determination to the subsidy programmes to
which the evidence relates is necessarily different than in the original sunset review.

In addition, the European Communities c ould not have meaningfully raised the
treatment of evidence in the original proceedings because the basis
 for the affirmative
likelihood-of-subsidization determination in the original sunset review was different
than that in the affirmative likelihood-of-subsidization re-determination set out in the
Section 129 determinations."130
273. Therefore, despite the fact that the factor of 1.56 was formally maintained in the amended
PBS, the Argentine arguments relating to the factor of 1.56 are included in the terms of reference of
the present Panel inasmuch as Chile has changed the b asis to which that factor is applied and hence
the result of its application.
274. If both the basis and the duties resulting from the application of the factor of 1.56 in the
amended PBS are necessarily different from the basis and the duties resulting from the application of
the factor of 1.56 in the original PBS, then the relative weight of the factor of 1.56 has also changed in
the measure taken to comply.
275. In this respect, it should be recalled that the specific duty or rebate for wheat, which
constitutes the basis of calculation to which the factor of 1.56 is applied to arrive at the specific duty
or rebate for wheat flour, is calcul ated from the difference between the floor or ceiling price and the
reference price by multiplying that difference by 1 plus the ad valorem tariff. Given that Chile has
changed both the way in which the floor and ceiling prices are calculated
131 and the way in which the
reference prices are established132, as well as the method of calculating the specific duties 133, the basis
to which the factor of 1.56 is applied and the r esults of its application have necessarily changed. The
application of the factor of 1.56 in the amended PB S results in a different amount of duties and forms
part of both the measure itself and its method of application.
276. In other words, the consequences of applying the factor of 1.56 in the amended PBS are
different from the consequences of applying it in the original PBS.
277. In conclusion, just as the panel in US – Countervailing Measures on Certain EC Products
(Article 21.5 – EC) held that the claims relating to the Section 129 affirmative likelihood-of-
subsidization re-determination fe ll within the panel's terms of reference because the basis for that re-

129 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , paragraph. 41 (original
footnote).
130 Panel Report on US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) ,
paragraphs 7.69 and 7.70 (underlining added).
131 Argentina's First Written Submission, Section B.3.3.
132 Argentina's First Written Submission, Section B.3.4.
133 Argentina's First Written Submission, Section B.3.5.2.

determination was different from that for the affirmat ive determination in the original sunset review,
the arguments relating to the factor of 1.56 fall within the terms of reference of the present Panel since
the basis on which that factor is calculated is also different from that in the original PBS.
278. Thus, the new arguments relating to the factor of 1.56 relate to an aspect of the measure taken
to comply that has changed with respect to the original measure. Consequently, the Panel should
conclude that Argentina's arguments concerning the factor of 1.56 fall within its terms of reference.
279. In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body held that Article 21.5
proceedings involve not the original measure but rather a new and different measure which was not
before the panel and it was natural, therefore, that , as the relevant facts bearing upon the "measure
taken to comply" were different from the relevant facts relating to the original measure, the claims,
arguments and factual circumstances pertinent to the "measure taken to comply" would not
necessarily be the same as those which were pertinent in the original dispute:
"... in carrying out its review under Article 21.5 of the DSU, a panel is not confined to
examining the 'measures taken to comply ' from the perspective of the claims,
arguments and factual circumstances that related to the measure that was the subject
of the original proceedings. Although th ese may have some relevance in proceedings
under Article 21.5 of the DSU, Article 21.5 proceedings involve, in principle, not the
original measure, but rather a new and different measure
 which was not before the
original panel. In addition, the relevant facts bearing upon the 'measure taken to
comply' may be different from the relevant facts relating to the measure at issue in the
original proceedings. It is natural, therefore, that the claims, arguments and factual
circumstances which are pertinent to the 'measure taken to comply' will not,
necessarily, be the same as those which were pertinent in the original dispute.
Indeed, the utility of the review envisage d under Article 21.5 of the DSU would be
seriously undermined if a panel were restricted to examining the new measure from
the perspective of the claims, arguments and factual circumstances that related to the
original measure, because an Article 21.5 panel would then be unable to examine
fully the 'consistency with a covered agreem ent of the measures taken to comply', as
required by Article 21.5 of the DSU."
134 (Underlining added)
280. As the panel found in EC – Bed Linen (Article 21.5 – India) , in Canada – Aircraft
(Article 21.5 – Brazil) Canada had implemented the recommendation of the DSB by adopting a new
and different measure. In the Article 21.5 proceeding, Brazil made claims regarding that measure that
it had not made in the original dispute. Canada objected to claims raised by Brazil against the new
measure on the grounds that no similar claims had b een raised against the original measure. Had
Canada's objection been upheld, Br azil would have been barred from making claims that could not
have been raised in the original proceedings .135 The Appellate Body agreed with the panel's
conclusion.136
281. In the present dispute the situation is similar. The factor of 1.56 – as a changed aspect of the
measure taken to comply – was not before the original panel. As pointed out above, the relevant facts
bearing upon the factor of 1.56 are obviously different from the relevant facts relating to the factor of
1.56 in the original PBS. It is therefore natura l that Argentina should present arguments and factual
circumstances pertinent to the factor of 1.56 in the amended PBS that are different from those that
were pertinent to the factor of 1.56 in the original PBS.

134 WT/DS70/AB/RW, paragraph 41.
135 WT/DS141/RW, paragraph 6.48.
136 WT/DS141/AB/RW, paragraph 88.

282. In the present Article 21.5 proceedings, Argen tina, like Brazil in Canada – Aircraft, puts
forward arguments relating to the factor of 1.56 that it did not raise
 in the original dispute. Chile, like
Canada in that dispute, challenges these arguments claiming that they should have been raised in the
original proceedings. If the Panel were to uphold th e Chilean challenge, Argen tina, like Brazil in that
dispute, would not have the opportunity to put fo rward arguments that could not have been raised in
the original proceedings, as the factor of 1.56 is a changed aspect of the measure taken to comply.
283. Moreover, Chile's due process rights have not been unduly impaired in these proceedings
since in changing the factual basis on which the fact or of 1.56 would be applied and hence the results
of applying it Chile could have anticipated 137 that new arguments relating to that factor would be
raised.
284. In this connection, that panel held that:
"… The United States itself introduced the i ssue of treatment of evidence by revising
the entire likelihood-of-subsidization determ ination and by changing the legal basis
of the affirmative conclusion of like lihood of continuation or recurrence of
subsidization. The United States therefore could have anticipated a claim on the
USDOC's treatment of evidence. Accordingly, the Panel concludes that the European
Communities' claim on evidence falls within this Panel's mandate." 138 (Underlining
added)
285. Furthermore, Argentina's arguments relating to the factor of 1.56 were not brought up at a late
stage of the Article 21.5 proceedings. Thus, due process has not been adversely affected, as shown by
the fact that Chile was able to rebut these arguments in its First Written Submission.
286. In the light of the above, should the Panel c onsider that the arguments put forward by
Argentina in relation to the factor of 1.56 constitute a new claim, Argentina respectfully requests that
the Panel consider the said arguments, since they fall within the terms of reference of the present
Panel, and find that the factor of 1.56 is a specifi c feature of the amended PBS that impedes enhanced
access to Chile's market, in a manner inconsistent with Article 4.2 of the Agreement on Agriculture.
139
2. The Argentine claim relating to the second sentence of Article II:1(b) of the GATT 1994
falls within the Panel's terms of reference
287. As already pointed out by Argentina 140, the amended PBS infringes the second sentence of
Article II:1(b) of the GATT 1994 inasmuch as it constitut es "other duties or charges" not recorded in
the appropriate column of Chile's Schedule of concessions (No. VII).
288. In its First Written Submission, Chile could not – and cannot – refute the arguments put
forward by Argentina. It merely argued that the Argentine claim in relation to the second sentence of
paragraph 1(b) of Article II of the GATT 1994 falls outside the Panel's terms of reference.
289. However, the Argentine claim relating to th e second sentence of Article II:1(b) of the
GATT 1994 falls within the terms of reference of the present Panel.

137 Report by the Panel on US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) ,
paragraph 7.71.
138 Report by the Panel on US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) ,
paragraph 7.71.
139 Argentina's First Written Submission, Section C.I.2.7.
140 Argentina's First Written Submission, Section C.II.

290. First of all , Chile itself expressly acknowledges that th is claim was not raised by Argentina
during the original proceedings .141 Argentina did not submit claims or evidence relating to this
provision in the original proceedings. This is a new claim which Argentina is entitled to raise in the
context of the current Article 21.5 proceedings.
291. Secondly, the Argentine claim relating to the sec ond sentence of Article II:1(b) of the
GATT 1994 falls within the Panel's terms of referen ce since it is a new claim with respect to a new
measure.
292. In fact, as Chile itself has stated on at least two occasions, the amended PBS is a "new"
PBS.142
293. Chile seeks to apply the findings in EC – Bed Linen (Article 21.5 – India) to the present
case.143 However, in trying to apply this case to th e present dispute Chile makes two mistakes. In
EC – Bed Linen (Article 21.5 – India), the Appellate Body held that India raised the same claim that it
had raised in the original proceedings in respect of an unchanged component of the measure taken to
comply. Chile has not understood the Appellate Body's finding in that case. The Appellate Body held
that:
"... Here, India did not raise a new claim before the Article 21.5 Panel; rather, India
reasserted in the Article 21.5 proceedings the same claim that it had raised before
the original panel in respect of a component of the implementation measure which
was the same as in the original measure. This same claim was dismissed by the
original panel, and India did not appeal that finding."144 (Underlining added)
294. In these Article 21.5 proceedings, the situation is completely different.
295. Firstly, as Chile acknowledges, the Argentine cl aim relating to the second sentence of
Article II:1(b) of the GATT 1994 is a new claim th at Argentina never raised in the original
proceedings.145 This is not in dispute.
296. In addition , Argentina could never have made this claim during the initial stage of the
present dispute, as Chile maintains 146, since the amended PBS is a measure different from the PBS
which formed the subject of the original proceed ings. As Chile has pointed out, this is a "new"
PBS.147

141 Chile's First Written Submission, paragraph 48: "…Argentina was unable to prove that it had raised
(let alone pursued) a claim relating to this second sentence…Argentina did not in fact ever raise the claims it
now wishes to bring".
142 See Status Reports submitted by Chile WT/DS207/15/Add.1, of 28 October 2003, third paragraph:
"We repeat that the new price band system…" and WT/DS207/15/Add.3, of 14 January 2004, second paragraph:
"…the new price band system entered into force on 16 December 2003…" (underlining added).
143 Chile's First Written Submission, paragraph 51.
144 WT/DS141/AB/RW, paragraph 80.
145 Chile's First Written Submission, paragraph 48: "... Argentina, however, never questioned whether a
measure contrary to Article 4.2 of the Agreement on Agriculture could thereby be inconsistent with the second
sentence of Article II:1(b) of the GATT 1994". See also Chile's First Written Submission, paragraph 56: "In this
dispute, we find ourselves in the very same situation: a claim which Argentina could have raised and pursued in
the original dispute, but failed to do so... "
146 Chile's First Written Submission, paragraphs 50 and 56.
147 See Status Reports submitted by Chile WT/DS207/15/Add.1, of 28 October 2003, third paragraph:
"We repeat that the new price band system…" and WT/DS207/15/Add.3, of 14 January 2004, second paragraph:
"…the new price band system entered into force on 16 December 2003…" (underlining added).

297. In EC – Bed Linen (Article 21.5 – India) , the claim raised by India in the Article 21.5
proceedings had been raised by India during the original proceedings, had not been pursued and was
dismissed
 by the original panel.
298. On the other hand, in the present proceedings there has been no previous finding during the
original proceedings, either by the Panel or by Appellate Body, "dismissing" the claim which
Argentina is now raising.148
299. Later in EC – Bed Linen (Article 21.5 – India) , the Appellate Body noted that India was
seeking to challenge an aspect of the original measure which had not changed:
"We conclude, therefore, that, in these Artic le 21.5 proceedings, India has raised the
 same claim under Article 3.5 relating to 'o ther factors' as it did in the original
proceedings. In doing so, India seeks to cha llenge an aspect of the original measure
which has not changed , and which the European Communities did not have to
change, in order to comply with the DSB recommendations and rulings to make that
measure consistent with the Euro pean Communities' WTO obligations." 149
(Underlining added)
300. In the present case, the Argentine is raising a di fferent claim in respect of the second sentence
of Article II:1(b) of the GATT 1994.
301. First of all , this claim relates to the whole of the amended PBS, that is to say, the amended
PBS in its totality rather than to one aspect in particular.
302. Consequently, the PBS being a "new measure", with this new claim Argentina necessarily
cannot be challenging an aspect of the original measure which has not changed.
303. Secondly, as Chile itself acknowledges, the Argentine claim challenges a "n ew" PBS, that is
to say, a new measure.
304. In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body held that Article 21.5
proceedings involve not the original measure but rather a new and different measure which was not
before the panel and it was natural, therefore, that , as the relevant facts bearing upon the "measure
taken to comply" were different from the relevant facts relating to the original measure, the claims,
arguments and factual circumstances pertinent to the "measure taken to comply" would not
necessarily be the same as those which were pertinent in the original dispute.150
305. As the panel found in EC – Bed Linen (Article 21.5 – India) , in Canada – Aircraft
(Article 21.5 – Brazil), Canada had implemented the recomme ndation of the DSB by adopting a new
and different measure. In the Article 21.5 proceeding, Brazil made claims regarding that measure that
it had not made in the original dispute. Canada objected to claims raised by Brazil against the new
measure on the grounds that no similar claims had b een raised against the original measure. Had
Canada's objection been upheld, Br azil would have been barred from making claims that could not

148 The Appellate Body did not rule on the consistency of the PBS with the second sentence of
Article II:1(b) of the GATT 1994, but on the inconsistency of the Panel's finding relating to the second sentence
of Article II:1(b) of the GATT 1994 with its obligations under Article 11 of the DSU.
149 WT/DS141/AB/RW, paragraph 87.
150 Canada – Aircraft (Article 21.5 – Brazil), Appellate Body Report, paragraph 41 (underlining
added).

have been raised in the original proceedings .151 The Appellate Body agreed with the panel's
conclusion.152
306. In the present dispute the situation is similar. The amended PBS is a new measure that was
not before the original panel. As pointed out a bove, the relevant facts bearing upon the amended PBS
are obviously different from the relevant facts relating to the original PBS. It is therefore natural that
Argentina should present arguments and factual circum stances pertinent to the amended PBS that are
different from those that were pertinent to the original PBS.
307. In the present Article 21.5 proceedi ngs, Argentina, like Brazil in Canada – Aircraft , raises
claims relating to the second sentence of Article II: 1(b) of the GATT 1994 in respect of the amended
PBS that it did not raise in the original dispute. Chile, like Ca nada in that dispute, challenges the
claims raised by Argentina against the amende d PBS arguing that no claims relating to the second
sentence of Article II:1(b) of the GATT 1994 were ra ised against the original PBS. If the Panel were
to uphold the Chilean challenge, Argentina, like Brazil in that dispute, would not have the opportunity
to raise claims that could not have been raised in the original proceedings, because the amended PBS
is a new measure.
308. In addition, Chile is wrong to cite as a precedent paragraph 96 of the Appellate Body report
in EC – Bed Linen (Article 21.5 – India) .153 In that paragraph the Appellate Body said that India
would be being given a second chance to establish so mething which it had claimed but not proved in
the original proceedings.
309. In the present Article 21.5 proceedings there w ould be no "second chance" to establish what
was claimed but not proved in the original proceed ings since, as Chile states and agrees: "Argentina
did not in fact ever raise the claims it now wishes to bring" 154 and, consequently, this is the "first
chance" to establish a new claim wh ich, as we have argued, Argentin a is entitled to raise. The claim
relating to the second sentence of Article II:1(b) of the GATT 1994 is a new claim and, therefore, falls
within the terms of reference of the present Article 21.5 Panel.
310. In US – Countervailing Measures on Certai n EC Products (Article 21.5 – EC), cited by Chile
in paragraph 55 of its First Written Submission, the Panel found as follows:
"The circumstances of the present case illust rate the potential procedural unfairness
… [T]he United States could only rebut the arguments in the European Communities'
Second written submission during the sole mee ting with the parties. Consequently,
important facts and issues continued to surface quite late into the Article 21.5
proceedings…" 155
311. In the present case, as Chile acknowledges 156, the claim in respect of the second sentence of
Article II:1(b) of the GATT 1994 did not surface late into the present Article 21.5 proceedings in such
a way as to raise "serious issues regarding [Chile's] due process rights". This is shown by the fact that
Chile was able to put forward arguments against this claim in its First Written Submission.157

151 WT/DS141/RW, paragraph 6.48.
152 EC – Bed Linen (Article 21.5 – India), Appellate Body Report, paragraph 88.
153 Chile's First Written Submission, paragraph 54.
154 Chile's First Written Submission, paragraph 48.
155 Report by the Panel on US – Countervailing Measures on Certain EC Products (Article 21.5 –
EC), footnote 294, second paragraph.
156 Chile's First Written Submission, paragraph 46.
157 Chile's First Written Submission, paragraph 46 ff.

312. In the light of the above, Argentina respectfu lly requests that the Panel rule on the claim
raised by Argentina concerning the inconsistenc y of the amended PBS with the second sentence of
Article II:1(b) of the GATT 1994 since, being proper ly before the present Panel, it falls within its
terms of reference. Argentina therefore respectfully requests that the Panel find that the amended PBS
is in breach of the second sentence of Article II:1(b) of the GATT 1994.
D. CONCLUSIONS
313. Chile has not implemented the rulings and recommendations of the DSB in this dispute and
its measure taken to comply, namely, the amended PBS, is not consistent with its obligations within
the framework of the WTO.
314. Through procedural arguments, without legal b asis or valid precedent, Chile seeks to prevent
the Panel from examining two key aspects of the measure taken to comply, namely, the consistency of
the factor of 1.56, i.e., the very essence of the amended PBS as applied to wheat flour, and the fact
that Chile did not include the price band system in the corresponding schedule, thereby infringing a
basic obligation, namely Article II of the GATT 1 994, relating to the consis tency of the internal
trading system itself.
315. In addition, without producing evidence or we ll-founded arguments, and without refuting any
of the arguments put forward by Argentina in its First Written Submission, Chile seeks to argue that
the amended PBS is transparent and predictabl e and does not insulate Chile's market from
international market developments.
316. This is Chile's only basis for arguing that it has implemented the recommendations and
rulings of the DSB.
317. The fact is that Chile should have abolished its inconsistent price band system applied to
wheat and wheat flour, as it did in the case of edible vegetable oils. This is what the Appellate Body
established when it held that a finding that Ch ile's PBS as such was a measure prohibited by
Article 4.2 meant that the duties resulting from the application of that system could no longer be
levied:
"... [A] finding that Chile's price band system as such is a measure prohibited by
Article 4.2 would mean that the duties r esulting from the application of that price
band system could no longer be levied—no matter what the level of those duties may
be. Without a price band system, there could be no price band duties."
158
318. By not abolishing the PBS as it applies to wheat and wheat flour – as it should have done
according to the Appellate Body – Chile has for ced Argentina to resort to the WTO's dispute
settlement mechanism for a sec ond time. The result is that Chile has evaded its multilateral
responsibilities by maintaining a border measure other than an ordinary customs duty which it did not
even include in its Schedule. Thus, three and a ha lf years after the DSB adopted the Appellate Body
and Panel reports, that is to say, after Chile was required to bring its system into conformity, the
dispute remains unsettled and Argentina's bene fits under the WTO Agreements are still being
impaired.
319. Chile's declared objective in maintaining an inconsistent measure in force, despite the express
recommendations of the WTO, has been to provide unlawful protection for wheat and wheat flour. In
its First Written Submission, Argentina included evidence that this protection was acknowledged by

158 Chile – Price Band System, Appellate Body Report, paragraph 190 in fine.

the very Chilean officials who were involved in approving the amended PBS. 159 In addition, in its
First Written Submission, Chile acknowledged the existe nce of this protection: "... the current policy
[sic] has an in-built process of gradual reduction of border protection of wheat " (original underlining).
This border protection is in addition to that afforded by ordinary customs duties.
320. For these reasons, Argentina respectfully requests the Panel to reject Chile's arguments in
their totality and to find that Chile's pri ce band system, as amended in accordance with
Law No. 19.897 and Supreme Decree No. 831/2003, in itself and in its specific application to imports
of wheat and wheat flour:
– Is inconsistent with Article 4.2 of the Agreement on Agriculture , since it is a border
measure similar to a variable import levy and a minimum import price;
– is inconsistent with the second sentence of Article II:(1)(b) of the GATT 1994, since
it constitutes "other duties or charges" not recorded in the corresponding column of
Chile's Schedule of concessions (No. VII);
– is in breach of Article XVI.4 of the Marrakesh Agreement Establishing the World
Trade Organization since, while it remains in for ce, Chile is not ensuring the
conformity of its laws, regulations and ad ministrative procedures with its obligations
under the WTO Agreements.
321. Consequently, Argentina respectfully request s the Panel to find that Chile has not
implemented the recommendations and rulings of the DSB and is continuing to infringe its obligations
within the framework of the WTO.

159 Argentina's First Written Submission, footnotes 75, 87, 110 and 146.