UNITED STATES - STANDARDS FOR REFORMULATED AND CONVENTIONAL GASOLINE
Document: Original: English UNITED STATES - STANDARDS FOR REFORMULATED AND CONVENTIONAL GASOLINE Status Report by the United States The followingcommunication, dated 9 January1997,from the Permanent Mission of the United States to the Permanent Missions of Brazil and Venezuela and to the Dispute Settlement Body is circulated at the request of the United States.
Date: 10 January 1997
Document codes: WT/DS2/10; WT/DS2/R; WT/DS2/AB/R
Complainant: Venezuela
Respondent: U.S.
Third parties: Australia, Canada, EU, Norway
Dispute stage: Appellate Body
Agreements cited: Art. I, III  GATT 1994Art. 2  Technical Barriers to Trade (TBT)

UNITED STATES - STANDARDS FOR REFORMULATED
AND CONVENTIONAL GASOLINE
Status Report by the United States
The followingcommunication, dated 9 January1997,from the Permanent Mission of the United
States to the Permanent Missions of Brazil and Venezuela and to the Dispute Settlement Body is circulated
at the request of the United States.
Status Report Regarding Implementation of the Recommendations and Rulings in
the Dispute Regarding
Panel report () and Appellate Body report ()
On 19 June 1996, the United States informed the Dispute Settlement Body (“ DSB” ) of its
intention to meet its obligations under the WTO with respect to this dispute. At that time, the United
States also advised the DSB that a “ reasonable period of time” would be required to complete the
rulemaking process and that we would be meeting with Venezuela and Brazil to discuss this matter
further. Since that time meetings have been held with both parties on numerous occasions to explain
the rule making process and the time periods involved. In July 1996, the United States and the
Government of Venezuela reached agreement on 15 months as a reasonable period for implementation.
Therefore, as provided for in Article 21:6 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes, this first report on the status of our implementation is being presented.
The U.S. Environmental Protection Agency (EPA) has initiated a process which will examine
any and all options for compliance. This examination has been and will continue to be an open process.
In evaluating options, a key criterion will be fully protecting public health and the environment.
To begin the implementation process, the U.S. Environmental Protection Agency issued a notice,
that was signed on 20 June 1996 and published in our Federal Register on 28 June 1996, offering all
interested parties an opportunity for input and setting out the considerations that will guide them and
the issues that must be addressed. In particular, parties were invited to propose implementation options
and to provide information relevant to the assessment of options. A copy of the notice is attached.
The closing date for comments in response to EPA’ s invitation for comment was
26 September 1996. A broadrange of responseswas received from interested parties,includingforeign
refiners, domestic refiners, gasoline marketers, service station dealers, an agricultural association and
regional air management associations. These submissions are available for public inspection at EPA’ s
headquarters in Washington, D.C.. After the submissions were received, EPA staff synopsized the

various responses and briefed senior management. The next step in the process was for various units
within EPA to review and assess all the submissions.
At present EPA is continuing its assessment of submissions and is evaluating options for
compliance. These deliberations are a multi-step process, involving several different parts of EPA
as well as review and consideration by a number of management levels.
Attachment

ENVIRONMENTAL PROTECTION AGENCY (EPA)
40 CFR Part 80
[FRL-5528-2]
World Trade Organization (WTO) Decision on Gasoline Rule (Reformulated and Conventional Gasoline)
61 FR 33703
DATE: Friday, June 28, 1996
ACTION: Invitation for Public Comment.
SUMMARY: EPA is initiating a process to identify and evaluate any and all options available to meet
U.S. internationalobligations,inresponsetoa recent decisionbythe WorldTrade Organization(WTO).
The WTO decision concerns one aspect of rules issued under the Clean Air Act for conventional and
reformulated gasoline. In particular it relates to the baseline used in these programs to determine the
requirements for imported gasoline. EPA's goal is to identify any and all feasible options consistent
with EPA's commitment to fully protect public health and the environment. Comments are invited
from all interested parties on these matters.
DATES: Comments must be received on or before September 26, 1996.
ADDRESSES: Interested parties may submit written comments (in triplicate if possible) for EPA
consideration. The comments are to be addressed to: EPA Air and Radiation Docket, Attention: Docket
No. A-96-33, Room M-1500, Mailcode 6102, U.S. EPA, 401 M Street, S.W., Washington, D.C.
20460.The docket is open for publicinspection from 8:00a.m. until5:30 p.m. Monday through Friday,
except on governmental holidays. As provided in 40 CFR Part 2, a reasonable fee may be charged
for copying docket materials. Should a commenter wish to provide confidential business information
to EPA, such information should not be included with the information sent to the docket. Materials
sent to the docket should, however, indicate that confidential business information was provided to
EPA.
FOR FURTHER INFORMATION CONTACT: Karen Smith, U.S. EPA, 401 M Street, S.W. (Mailcode
6406J), Washington, D.C. 20460, telephone (202) 233-9674.
SUPPLEMENTARY INFORMATION: The World Trade Organization recently adopted the report
of its Appellate Body concerning one aspect of rules issued under the Clean Air Act for conventional
and reformulated gasoline. The dispute initiated by Venezuela and Brazil involves the baseline used
to set the emissions requirements in these programs for imported gasoline. The WTO concluded that
EPA's rules in this matter were inconsistent with U.S. obligations under the General Agreement on
Tariffs and Trade (GATT) because they unjustifiably discriminated against imported gasoline. It is
important to note that the Clean Air Act was not at issue in this dispute.
The U.S Government is disappointed with the results of this decision, but is gratified that it
fully recognized a country's right to adopt appropriate measures to protect public health and the
environment. In addition, the WTO decision clearly recognizes that clean air is an exhaustible natural
resource, and that conservation of this resource is covered by the provisions of Article XX(g) of the
GATT.
EPA is initiating a process to identify and evaluate all options available to the agency in
responding to this decision. EPA's goal is to identify any and all feasible options consistent with EPA's
commitment to fully protect public health and the environment, and at the same time consistent with
the obligations of the United States under the WTO. Before deciding what course to take, EPA intends
to fully evaluate all options identified in this public process. This invitation for public comment is
designed to inform EPA's evaluation of the options.

The following description of the relevant regulatory provisions and related issues is provided
to help the public in preparing comments. As noted above, the conventional gasoline program contains
emissions requirements designed to ensure that gasoline does not degrade in quality from 1990 levels
in ways that would adversely affect the levels of air pollution from motor vehicles. The Clean Air
Act calls for conventional gasoline produced or imported by a refiner or importer to stay as clean as
it was in 1990. See section 211(k)(8) of the Act. To meet this requirement, EPA regulations require
that domestic refiners establish a baseline that reflects the quality of the gasoline they produced in 1990.
The emission requirements for conventional gasoline are keyed to these individual baselines. For the
conventional gasoline program, see 40 CFR 80.90 -93, 80.101(b). Individual baselines play a limited
role in the reformulated gasoline program. From 1995 through 1997, certain of the emission requirements
for reformulated gasoline are expressed in terms of individual baselines. After that date, individual
baselines are not used in the RFG program. See 40 CFR 80.41(h), (j).
Based on the limited ability of importers and domestic blenders to determine the quality of
the gasoline they produced or imported in 1990, in almost all cases they are assigned the statutory
baseline instead of an individual baseline. The statutory baseline was designed to approximate the national
average for 1990 gasoline quality. There is no provision in the regulations under which a foreign refiner
may establish an individual baseline, nor are they assigned the statutory baseline. Imported gasoline
is regulated through the importer, not the foreign refiner, and foreign refinery modelling information/data
may not be used by an importer to establish an importer baseline.
The rulemaking record for the conventional and reformulated gasoline program contains
information regarding the environmental, cost, verification and enforcement issues associated with
setting the baseline rules for domestic and imported gasoline. For further discussion of these matters,
see 59 FR 7716 (February 16, 1994); 59 FR 22800 (May 3, 1994).
One baseline issue considered during the rulemakings noted above involves allowing foreign
refiners to petition EPA for approval of an individual baseline for a foreign refinery. This issue was
alsoraisedduringthe WTOdisputesettlementproceedings.In thisrespect,the AppellateBodyidentified
two omissions of the United States: (1) the United States had not sufficiently explored ways of
overcoming its administrative concerns with respect to imported gasoline and (2) the United States
had considered the costs of compliance with the statutory baseline for domestic refiners but had not
adequately considered them for foreign refiners. It is important to note that EPA is inviting comment
on all feasible options that the agency should consider. Commenters should not limit themselves to
consideration of individual baselines for foreign refiners. EPA is interested in evaluating any alternative
approach that would achieve the environmental benefits associated with these gasoline programs while
treating domestic and imported gasoline in a manner consistent with U.S. obligations under the WTO.
Some of the issues that are relevant to individual baselines and may also be relevant to other
options include the following:
How would EPA be able to accurately establish a reliable and verifiable individual baseline
for a foreign refiner? This would include consideration of the technical problems associated with
determining the quality and volume for gasoline imported into the U.S. from a foreign refinery in 1990,
determining the refinery of origin for gasoline imported in 1990, and consideration of the role of
independent verification in establishing an accurate baseline.
How would EPA be able to adequately monitor compliance and enforce any baseline
requirements? This would include consideration of the ability to audit and inspect both foreign and
domestic facilities, and the ability to enforce against foreign refiners and importers.

How would EPA be able to effectively determine the refinery of origin of imported gasoline,
so as to determine the appropriate baseline to apply to the imported product? This would include
considerationof the kindof trackingand segregationneeded toensure effective determinationof refinery
of origin.
Commenters should address these issues to the extent relevant to the option(s) they are addressing.
Commenters should identify the potential environmental impacts from implementation of any
suggested option. For example, for those commenters that might propose individual baselines, this
would include consideration of the number of foreign refiners that could seek and be able to establish
an individual baseline, the individual baseline levels that could be established, the volume of imported
gasoline that could be subject to such a baseline, the areas of the country in which this gasoline would
be used, the length of time that a foreign refiner could use an individual baseline, and the regulatory
programs in which such a baseline was allowed, e.g. conventional or reformulated gasoline.1
In addition, EPA invites any other comments relevant to the two issues raised by the appellate
body in its report as omissions on the part of the United States-exploring adequately the means of
mitigating the administrative problems identified in EPA's earlier rulemaking, and considering the
costs for foreign refiners that might result from the use of the statutory baseline for imports.
A key criterion in evaluating any options presented in response to this notice will be fully
protecting the publichealth and the environment.The reformulated and conventional gasoline programs
are important components in the strategy for achieving that goal. EPA invites comment that would
allow EPA to better quantify or characterize potential environmental impacts of any options proposed
by commenters, as well as feasible options to address any such potential impacts.
As noted above, EPA's goal in inviting public comment is to obtain information that will help
the agency identify any and all feasible options consistent with EPA's commitment to fully protect
public health and the environment, and at the same time consistent with the obligations of the United
States under the WTO. EPA requests that commenters provide information and analysis on the public
health and environmental impact associated with any option presented for consideration. Commenters
should also identify the economic and other impacts associated with any suggested option, and discuss
the relationship of the option to the United States' obligations under the WTO.
Dated: June 20, 1996.
Mary D. Nichols,
Assistant Administrator for Air and Radiation.
[FR Doc. 96-16541 Filed 6-27-96; 8:45 am]
BILLING CODE 6560-50-P
1 Commenters should be aware that EPA is currently prohibited by law from taking any further action on
its May 1994 proposed rule that would have allowed the establishment of individual baselines for foreign refiners
for use in the federal reformulated gasoline program. Omnibus Consolidated Recissions and Appropriations Act
of 1996, Pub. L. No. 104-134, section 101(e), 142 Cong. Rec. H3922 (daily ed. April 25, 1996); 59 Fed. Reg.
22800 (May 3, 1994).