BRAZIL - COUNTERVAILING DUTIES ON IMPORTS OF DESICCATED COCONUT AND COCONUT MILK POWDER FROM SRI LANKA
Document: Request for Consultations by Sri Lanka
Date: 5 March 1996
Document codes: WT/DS30/1; G/SCM/D2/1; G/AG/W/19
Complainant: Sri Lanka
Respondent: Brazil
Dispute stage: Consultation
Agreements cited: Art. I, II, VI  GATT 1994

BRAZIL - COUNTERVAILING DUTIES ON IMPORTS OF
DESICCATED COCONUT AND COCONUT MILK POWDER
FROM SRI LANKA
Request for Consultations by Sri Lanka
The following communication, dated 23 February 1996, from the Permanent Mission of Sri Lanka
to the Permanent Mission of Brazil and to the Dispute Settlement Body, is circulated in accordance
with Article 4.4 of the DSU.
I refer to the bilateral consultations our two countries had in Geneva, in your Mission on
20 October 1995, following our Diplomatic Note No. UN/GATT/15 dated 1 September 1995, and
the prompt response of your Mission thereto on the above subject, copies of which are attached herewith
for your easy reference.
As you are aware, these consultations were held following a formal complaint by Sri Lanka
seeking bilateral consultations with your Government under Article XXII of GATT 1994, concerning
the imposition of excessive countervailing duties levied by the Government of Brazil on the import
of desiccated coconut and coconut milk powder from Sri Lanka amounting to 81.4 per cent and 175.8 per
cent respectively, with effect from 21 August 1995.
At these consultations, Sri Lanka brought to the notice of Brazil that the countervailing action
by Brazil on the products under reference was in violation of Sri Lanka's rights under the WTO which
highlighted the following facts:
1. Sri Lanka and Brazil are both signatories tothe WTO Agreement and consequently, Sri Lanka's
trade relationship with Brazil in a multilateral context is basically governed by such multilateral
instruments as the GATT 1994 which is an integral part of WTO. Accordingly, Sri Lanka's
legal rights in the Multilateral Trading System emanate from international legal instruments
such as GATT 1994.
2. Brazil, byitsimpositionof countervailingdutiesondesiccatedcoconutandcoconutmilkpowder
in August 1995, has violated the cardinal tenet and the basic principle of the multilateral trading
system as embodied in GATT Article I, namely Most-Favoured-Nations principle.
3. Brazil by imposition of countervailing duties on the two products under reference has clearly
violated Article II of GATT 1994, dealing with tariff bindings since these countervailing duties
are in excess of bound tariff.

4. Violations of Article I and II cannot be justified under Article VI of GATT 1994, since
Article 13(a) of the WTO Agreement on Agriculture is an integral part of the WTO Agreement
and its domestic support measures like those given to Sri Lanka coconut industry fully conform
to the provisions of Annex II to this Agreement.
5. Brazilian actionhas therefore resultedin a clear nullification and impairment of benefit accruing
to Sri Lanka from the WTO Agreement.
Your Government's response to the views presented by Sri Lanka at these consultations was
that imposition of countervailing duties by Brazil is fully covered by legal protection accorded to it
by the Tokyo Round Agreement on Subsidies and Countervailing Measures.
Sri Lanka considers the consultations it has had so far with Brazil as being useful as it has
enabled both countries to understand initially each others perceptions on the matter. However, Sri Lanka
feels that in order to arrive at a mutually acceptable solution, it is essential that additional consultations
should be held urgently in view of the grave situation experienced by the coconut export industry in
Sri Lanka as a result of the Brazilian countervailing duty action.
In view of the above, I shall therefore be grateful if you will kindly convey to your authorities
Sri Lanka's desire to hold additional bilateral consultations under Article XXIII:1 of GATT 1994, and
to propose an early date for the conduct of such consultations.

Note Verbale from the Permanent Mission of Sri Lanka to the
Permanent Mission of Brazil dated 1 September 1995
The Permanent Mission of the Democratic Socialist Republic of Sri Lanka presents its
compliments to the Permanent Mission of Brazil to the United Nations in Geneva, and has the honour
to state with profound regret, that the Government of Sri Lanka is deeply concerned to learn from
the Brazilian Government Public Notice dated 21 August 1995, that Brazil has imposed excessively
high countervailing duties on the import of Sri Lankan desiccated coconut and coconut milk powder
amounting to 81.4 per cent and 175.8 per cent respectively, with effect from 21 August 1995. It is
the firm conviction of the Government of Sri Lanka that drastic countervailing action by Brazil on
the above two Sri Lankan export products is totally unjustifiable and unreasonable in view of its adverse
impact on Sri Lanka's export of these products to Brazil.
The Permanent Mission of the Democratic Socialist Republic of Sri Lanka avails itself of this
opportunity to emphatically state the view of the Government of Sri Lanka that consequent on this
drastic countervailing action by Brazil, Sri Lanka's export trade flow in desiccated coconut and coconut
milk powder to Brazil will come to a grinding halt, thereby negatively affecting Sri Lanka's overall
level of export trade with Brazil, due to its virtual dependence solely on these two products. Moreover,
such a scenario of a complete stoppage of Sri Lanka's exports of these products to Brazil will, certainly,
not augur well, not only for the continued development of the trade relations between the two countries,
but also for the very existence of bilateral trade relations and such an unfavourable situation is best
avoided, in the larger interests of the bilateral trading relationship between Sri Lanka and Brazil.
In view of above considerations, the Permanent Mission of the Democratic Socialist Republic
of Sri Lanka wishes to convey the request of the Government of Sri Lanka that Brazilian authorities
favourably consider the immediate withdrawal of the above mentioned countervailing duties on
Sri Lanka's desiccated coconut and coconut milk powder. Pending any action for removal of these
countervailing duties, the Government of Sri Lanka is willing to enter into urgent bilateral consultations
in terms of Article XXII of GATT 1994 of the WTO Agreement with the Brazilian authorities, with
a view to exploring all possibilities of amicably resolving this issue early, thereby obviating any need
for Sri Lanka to have recourse to its multilateral remedy within the framework of the World Trade
Organization in Geneva, of which both Sri Lanka and Brazil are Members. The Government of
Sri Lanka may be most reluctantly compelled to seek its multilateral remedy, in the WTO, if this issue
could not be resolved bilaterally through mutual consultations.
Letter from the Permanent Mission of Brazil to the
Permanent Mission of Sri Lanka dated 11 September 1995
The Permanent Mission of Brazil to the United Nations Office and other International
Organizations in Geneva presents its compliments to the Permanent Mission of the Democratic Socialist
Republic of Sri Lanka to the United Nations Office, Geneva, and has the honour to acknowledge receipt
of its Note Verbale ref: UN/GATT/15, dated 1 September 1995, in which the Permanent Mission
of Sri Lanka conveys the concern of its Government with "the Brazilian Government Public Notice
dated 21 August 1995"inwhichalleged excessive countervailingdutiesonimporteddesiccated coconut
and coconut milk from Sri Lanka were imposed.
Complying withthe requestof urgentbilateralconsultationsunderArticle XXII ofGATT1994,
as requested by the Permanent Mission of Sri Lanka in the aforementioned Note Verbale, the Permanent
Mission of Brazil informs the said Mission that it is ready to enter into formal consultations under
that GATT 1994 Article.