ARGENTINA - MEASURES AFFECTING IMPORTS OF FOOTWEAR, TEXTILES, APPAREL AND OTHER ITEMS AB-1998-1
Document: Appellate Body ARGENTINA - MEASURES AFFECTING IMPORTS OF FOOTWEAR, TEXTILES, APPAREL AND OTHER ITEMS AB-1998-1 Report of the Appellate Body
Date: 27 March 1998
Document codes: WT/DS56/AB/R
Complainant: U.S.
Respondent: Argentina
Third parties: EU, Hungary, India
Dispute stage: Appellate Body
Agreements cited: Art. 1  Customs valuationArt. II, VII, VIII, X  GATT 1994Art. 7  Textiles and ClothingArt. 2, 3, 4, 5, 6, 7, 8  Customs valuation

ORGANIZATION Appellate Body
ARGENTINA - MEASURES AFFECTING IMPORTS OF FOOTWEAR,
TEXTILES, APPAREL AND OTHER ITEMS
AB-1998-1
Report of the Appellate Body

APPELLATE BODY
Argentina - Measures Affecting Imports of
Footwear, Textiles, Apparel and Other
Items
Argentina, Appellant
United States, Appellee
European Communities, Third Participant
AB-1998-1
Present:
El-Naggar, Presiding Member
Feliciano, Member
Matsushita, Member
I. Introduction: Statement of the Appeal
1. Argentina appeals from certain issues of law covered and legal interpretations developed in
the Panel Report, Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other
Items1 (the "Panel Report"). The Panel was established to consider a complaint by the United States
against Argentina concerning certain measures maintained by Argentina affecting imports of textiles,
apparel, footwear and other items, in particular, measures imposing specific duties on various textile,
apparel or footwear items allegedly in excess of the bound rate of 35 per cent ad valorem provided
in Argentina's Schedule LXIV2 and measures imposing a statistical tax of 3 per cent ad valorem on
imports from all sourcesother than MERCOSUR countries. The relevant factual aspects of Argentina's
import regime for textiles, apparel and footwear are described in the Panel Report, in particular, at
paragraphs 2.1 to 2.21.
2. Argentina approvedthe resultsof the UruguayRound of multilateraltrade negotiationsthrough
Law No. 24.425, promulgated on 23 December 1994, and the bound rate of 35 per cent ad valorem
included in its Schedule LXIV became effective on 1 January 1995. This binding was generally
applicable to imports, with a number of exceptions that are not relevant in this case. In parallel,
1, 25 November 1997.
2See Argentina's Schedule LXIV, Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations,
done at Marrakesh, 15 April 1994.

Argentina maintained a regime of Minimum Specific Import Duties ("DIEM")3 as from 1993 in respect
of textiles, clothing and footwear through a series of resolutions and decrees commencing with Resolution
No. 811/93 of 29 July 19934 (concerning textiles and apparel) and Resolution No. 1696/93 of 28
December 19935 (concerning footwear), with subsequent extensions and modifications.6 The DIEM
were revoked in respect of footwear on 14 February 1997 through Resolution No. 225/97 of the
Argentine Ministry of Economy and Public Works and Services, and the Panel decided not to review
the consistency with the WTO Agreement of the DIEM with respect to footwear.7 In addition, Argentina
imposed, from 1989 to 1994, a 3 per cent ad valorem tax which related to the collection of statistical
information by the Argentine customs service regarding imports and exports.8 Through Presidential
Decree No. 2277/94 adopted on 23 December 19949, the tax was reduced to zero per cent, but was
set again at 3 per cent on 22 March 1995 pursuant to Presidential Decree No. 389/95 in respect of
certain import transactions. The tax is set out in Argentina's Schedule LXIV, under the heading "other
duties and charges", at 3 per cent ad valorem.
3. The Panel Report was circulated to the Members of the World Trade Organization (the "WTO")
on 25 November 1997. The Panel reached the following conclusions:
(a) the minimum specific duties imposed by Argentina on textiles
and apparel are inconsistentwith the requirements of Article II
of GATT;
(b) the statistical tax of three per cent ad valorem imposed by
Argentina on imports is inconsistent with the requirements of
Article VIII of GATT.10
3In Spanish, Derechos de Importación Específicos Mínimos.
4Boletín Oficial de la República Argentina, No. 27.692 of 2 August 1993.
5Boletín Oficial de la República Argentina, No. 27.797 of 30 December 1993.
6As further described in Panel Report, paras. 2.7-2.18, these extensions and modifications are found in: Presidential
Decree No. 2275/94 of 23 December 1994, Boletín Oficial de la República Argentina, No. 28.050 of 30 December 1994;
Resolution No. 304/95 (textiles and apparel) and 305/95 (footwear) of the Ministry of Economy and Public Works and Services
of 22 September 1995; Presidential Decree No. 998/95 of 28 December 1995, Boletín Oficial de la República Argentina,
No. 28.301 of 29 December 1995; Resolution Nos. 103/96 of 6 September 1996 and 23/97 of 7 January 1997 of the Ministry
of Economy and Public Works and Services, Boletín Oficial de la República Argentina, No. 28.561 of 10 January 1997
(footwear); and Resolution Nos. 299/96 of 20 February 1996, 22/97 of 7 January 1997, Boletín Oficial de la República
Argentina, No. 28.561 of 10 January 1997 and 597/97 of 14 May 1997 of the Ministry of Economy and Public Works and
Services, Boletín Oficial de la República Argentina, No. 28.650 of 20 May 1997 (textiles and apparel).
7Panel Report, para. 6.15.
8Boletín Oficial de la República Argentina, No. 26.652 of 12 June 1989.
9Boletín Oficial de la República Argentina, No. 28.050 of 30 December 1994.
10Panel Report, para. 7.1.

The Panel made the following recommendation:
The Panel recommends that the Dispute Settlement Body request
Argentina to bring its measures into conformity with its obligations
under the WTO Agreement.11
4. On 21 January 1998, Argentina notified the Dispute Settlement Body12 (the "DSB") of its intention
to appeal certain issues of law covered in the Panel Report and legal interpretations developed by the
Panel, pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (the "DSU"), and filed a Notice of Appeal with the Appellate Body, pursuant
to Rule 20 of the Working Procedures for Appellate Review. On 2 February 1998, Argentina filed
an appellant's submission.13 On 16 February 1998, the United States filed an appellee's submission
pursuant to Rule 22 of the Working Procedures for Appellate Review. That same day, the European
Communities filed a third participant's submission pursuant to Rule 24 of the Working Procedures
forAppellateReview. The oralhearing, provided for inRule 27 of the WorkingProcedures forAppellate
Review, was held on 23 February 1998. At the oral hearing, the participants and the third participant
presented their arguments and answered questions from the Division of the Appellate Body hearing
the appeal.
II. Arguments of the Participants and the Third Participant
A. Claims of Error by Argentina - Appellant
5. Argentina appeals certain aspects of the legal findings and conclusions of the Panel. With respect
to Article II of the GATT 1994, Argentina requests that we reverse the Panel's findings in paragraph 6.32
and declare that the Panel erred in concluding that Argentina had acted inconsistently with Article II
"in all cases" in which Argentina applied the DIEM. With respect to the statistical tax, Argentina
asks us to reverse the Panel's findings in paragraph 6.80 of the Panel Report. Finally, Argentina makes
certain procedural claims under Article 11 of the DSU.
11Panel Report, para. 7.2.
12WT/DS56/8, 21 January 1998.
13Pursuant to Rule 21(1) of the Working Procedures for Appellate Review.

6. With respect to the Panel's finding in paragraph 6.32 of the Panel Report concerning Article II
of the GATT 1994, Argentina submits that the Panel erred in law in interpreting the obligation set
out in Article II:1(a) and II:1(b) of the GATT 1994 and the Understanding on the Interpretation of
Article II:1(b) of the GATT 1994 as prohibiting a Member from applying a type of duty other than
that which is bound, without taking into account whether the level of protection ensuing from the
application of that duty is, or is not, higher than the bound level of protection.
7. According to Argentina, an international legal obligation may be derived only from a formal
source creating international law. As regards the WTO, the only obligations by which Members are
boundare thosewhichflowfromthe MarrakeshAgreement Establishingthe WorldTrade Organization14
(the "WTO Agreement") and instrumentsagreed uponunderitsprovisions,as wellas amendments under
Article X and authoritative interpretations under Article IX. There have been no amendments under
Article X nor any authoritative interpretations under Article IX. The relevant provision in the WTO
Agreement is Article II of the GATT 1994 and the Understanding on the Interpretation of Article II:1(b)
of the GATT 1994.
8. Argentina asserts that Article II of the GATT 1994 must be interpreted in conformity with
Articles 31 and 32 of the Vienna Convention on the Law of Treaties15 (the "Vienna Convention"). The
correct interpretation of Article II of the GATT 1994 should be based on the actual text of Article II,
in particular paragraphs 1(a) and 1(b), and on the Understanding on the Interpretation of Article II:1(b)
of the GATT 1994, as well as on GATT practice. The texts of Article II:1(a) and II:1(b) should be
read in conjunction with each other. Article II:1(a) lays down a general obligation, and Article II:1(b)
defines the scope of that obligation.
9. In Argentina's view, the Panel goes beyond the GATT 1994 in giving an "extensive"
interpretation of the scope of the obligation, thereby adding requirements that are not provided for
in the GATT 1994 itself. The commitment to accord "treatment no less favourable" does not
automatically imply an obligation to apply a "specific type of duty". To assimilate the interpretation
of the "duty set forth and provided in the Schedule" with the notion of "bound only ad valorem" and
to infer that changing this results in "less favourable" treatment not only finds no support in the text
of the provisions, but is also not supported by the Understanding on the Interpretation of Article II:1(b)
of the GATT 1994. The object and purpose of Article II:1(a) and (b) can only be to accord treatment
14Done at Marrakesh, Morocco, 15 April 1994.
15Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.

no lessfavourable thanthatprovidedfor inthe NationalSchedule. Lessfavourable treatment isaccorded
when a duty exceeding that set forth in the National Schedule is applied.
10. It is further argued by Argentina that in Article II of the GATT 1994, the bound duty represents
a ceiling on the level of protection; the legal obligation deriving from this Article is not to exceed
the said ceiling or bound maximum level of protection; and Members are free to choose the form or
type of duty applied provided the maximum level of protection of the said binding is not exceeded.
Thus, a difference in the form of duty applied does not necessarily constitute a violation of the bound
level.
11. Argentina submits that the Panel has sourced the alleged obligation to apply a type of duty
identical to that recorded in the National Schedule in "past GATT practice" and not in a rule or provision
contained in Article II of the GATT 1994 or the Understanding on the Interpretation of Article II:1(b)
of the GATT 1994. The Panel erred in law in interpreting the "legal history and experience" as
mandatory "practice", and this subsequently led to the error of placing it on the same footing as "other
decisions of the CONTRACTING PARTIES of the GATT 1947".16 The Panel can only have arrived
at its conclusion that there is an obligation beyond the literal meaning of the text by means of
interpretation. In terms of "uniformity", "undisputed nature", "repetition" and "continuity", Argentina
stresses that "GATT practice" is deficient. Certain GATT working party reports and panel reports,
including those cited by the Panel, are contradictory precedents which, in certain cases, lead to an
interpretation different from that adopted by the Panel itself.
12. Argentina submits that the Panel concluded that Argentina had violated Article II by applying
the DIEM after examining only 12417 tariff lines out of 940 tariff lines relevant to this dispute. The
Panel, therefore, erred in law in considering that Argentina infringed its obligations under Article II
of the GATT 1994 in all cases in which it applied the DIEM.
13. We are also asked to reverse the Panel's finding in paragraph 6.80 of the Panel Report that
the statistical tax of 3 per cent ad valorem is in violation of Article VIII:1(a) of the GATT 1994. The
Panel is said to have erred in failing to take into account Argentina's obligations to the International
Monetary Fund (the "IMF") in its interpretation of Article VIII of the GATT 1994. Argentina contends
16Paragraph 1(b)(iv) of the language of Annex 1A incorporating the GATT 1994 into the WTO Agreement.
17This includes evidence with regard to six tariff lines in the documentation submitted by the United States prior to the
second meeting with the Panel. We note that Argentina challenges the Panel's acceptance of this evidence under Article 11
of the DSU. See Part VI of this Report.

that its agreement with the IMF includes an undertaking to impose a tax in the form of a statistical
tax. This undertaking is contained in a document entitled "Memorandum on Economic Policy"18, referred
to by Argentina as a "Memorandum of Understanding" between Argentina and the IMF. Argentina
asserts that, by its acquiescence, the United States helped to create Argentina's obligation with the
IMF, and the United States cannot now deny the binding nature, i.e. its legal effects with regard to
Article VIII of the GATT 1994, of that obligation.
14. It is also submitted by Argentina that the Panel disregarded its duty under Article 11 of the
DSU by not making an objective assessment of the matter before it. Paragraph 5.3 of the Panel Report
ignores an obvious fact and appears to contradict all the reasons given by the Panel regarding burden
of proof when dealing with the matter of the DIEM. The Panel's conclusion that the statistical tax
was inconsistent with Article VIII of the GATT 1994 does not meet the requirement laid down in
Article 12.7 of the DSU that a panel report shall set out "the findings of fact, the applicability of relevant
provisionsand the basic rationale behind any findings and recommendations that it makes." The Panel's
failure to accede to the request by the United States to consult the IMF regarding the existence of this
obligation led to another error in law because the Panel, in effect, ignored relevant opinions that could
have helped to form a more complete judgement.
15. In Argentina's view, the Panel also erred in law by excluding from its consideration subsequent
legislative developments -- namely, the Agreement Between the International Monetary Fund and the
World Trade Organization (the "Agreement Between the IMF and the WTO") drawn up on the basis
of the Declarationonthe Contributionofthe WorldTrade Organizationto AchievingGreaterCoherence
in Global Economic Policymaking (the "Declaration on Coherence") -- and by reaching its conclusion
on the statistical tax solely on the basis of Article VIII of the GATT 1994. Argentina argues that the
interpretation of the Agreement Between the IMF and the WTO is covered by the DSU as it is a legislative
development in the terms of Article V.1 of the WTO Agreement, and the WTO Agreement is included
in Appendix 1 of the DSU. Argentina asserts that under paragraph 5 of the Declaration on Coherence,
the WTO is to cooperate with the IMF and should avoid "the imposition on governments of cross-
conditionality or additional conditions". If the Declaration on Coherence had been taken into account,
the Panel would have had to consider the existence of a cross-obligation within the meaning of
paragraph 5 of that Declaration. According to Argentina, this is made even more explicit in paragraph 10
of the WTO-IMF Agreement. Thus, the issue at stake is not one of making exceptions, but of interpreting
the WTO Agreement in the light of its content.
18Exhibit S to the United States' first written submission to the Panel.

16. Argentina states that the Panel has placed Article VIII of the GATT 1994 in a "legal limbo",
isolated from related agreements and other relevant rules and principles of public international law.
The Panel undertook only a partial analysis of the arguments put forward by Argentina, disregarded
subsequent legislative developments, and did not take into account previous practice. Referring to
the Director-General's Report on implementation of the agreements between the WTO and the IMF
and the World Bank19 and the discussions on this Report at the General Council meeting of
10 December 1997, Argentina argues that the Panel should have considered the need to ensure that
the decisions adopted by these bodies are mutually supportive in the context of the provisions endorsed
in the Declaration on Coherence.
17. It is further claimed by Argentina that the Panel did not comply with its obligation under
Article 11 of the DSU on two counts. First, the Panel accepted certain evidence submitted by the United
States to the Panel on 21 July 1997, two days before the second meeting of the parties (ten days after
the expiry of the time-limit for submitting the respective rebuttals). Argentina states that it objected
to the admission of such evidence into the record and drew attention to the impossibility of responding
to the evidence within the two-week period granted by the Panel. This evidence related to transactions
carried out using the manual customs clearance system and not the MARIA computerized system.
The names of the importers, customs identification numbers and, sometimes, the description of the
items imported were deleted, thereby making it impossible to verify any of the information submitted
within the period granted by the Panel. For Argentina, the Panel's position is difficult to reconcile
with "due process", considering that the submission of evidence after the time-limit has expired alters
the balance of rightsand obligationsduring examinationof the case and, combined withthe impossibility
of rebuttal within a tight time-limit, disadvantages one party, in this case Argentina. Second, the Panel
failed to fulfil its obligation torender an objective assessment of the matter by not acceding to the request
of both parties to the dispute to seek information and consult with the IMF so as to obtain its opinion
on specific aspects of the statistical tax. The DSU gives panels different tools to fulfil the obligation
under Article 11, and one of these is the right to "seek information" provided in Article 13 of the DSU.
The Panel did not make use of this means, which would have allowed it to verify the information
provided by the parties, which information could have altered the Panel's conclusion regarding the
statistical tax. Argentina further argues that the Panel failed to fulfil a general obligation governing
procedure in any international dispute, namely to elucidate a fact or investigate an objective claim that
both parties to the dispute have expressed as a concern, in order to establish the truth regarding the
point raised.
19Agreements between the WTO and the IMF and the World Bank, Report by the Director-General on Implementation
of the Agreements, WT/GC/W/68, 13 November 1997. Annex I to Argentina's appellant's submission.

B. Arguments by the United States - Appellee
18. The United States endorses the findings and conclusions of the Panel in paragraph 6.32 and
argues that the Panel correctly concluded, on the basis of the evidence before it, that the application
of the DIEM violated Article II of the GATT 1994. The United States also endorses paragraph 6.80
of the Panel Report and argues that the Panel acted consistently with Article 11 of the DSU.
19. With respect to Article II of the GATT 1994, the United States believes that the Panel correctly
found that Argentina’ s specific duties are inconsistent with its ad valorem binding, and that the Panel's
interpretation of Article II is consistent with principles of public international law, previous decisions
of the Appellate Body and prior GATT practice, and gives full meaning to the text of this provision.
20. The United States contends that one of the fundamental objectives of the GATT 1994,expressed
in the preamble, is to achieve "the substantial reduction of tariffs". To ensure that tariff concessions,
once made, have the full force and effect intended, Article II provides that duty rates identified in a
WTO Member’ s Schedule are maximum limits that may not be exceeded. This is made clear in
Article II:1(b) of the GATT 1994. Article II:1(a) goes further; it obligates WTO Members to provide
the quality of "treatment" provided for in its Schedule. Paragraphs (a) and (b) of Article II:1 together
guarantee WTO Members that their exports will not be subjected to duties greater than the amount
established in relevant Schedules. They also guarantee that WTO Members will not be able to manipulate
the administration of duties so as to collect excessive tariffs. In this way, Article II ensures the security
and predictability of tariff concessions.
21. A basic submission of the United States is that Argentina’ s DIEM afford "treatment less
favourable" in violation of Article II because they impair the value of the concessions Argentina made
during the Uruguay Round. The DIEM necessarily have the potential to exceed Argentina’ s bound
rate of 35 percent ad valorem for some covered items in the future, in view of the fundamental difference
between ad valorem and specific duties, the disparate ways each affects imported merchandise and
the manner in which Argentina fixes the rates of its specific duties.
22. According to the United States, Argentina incorrectly equates the restriction against imposing
duties in excess of a bound rate under Article II:1(b) with the broader requirement of Article II:1(a)
to afford WTO Members "treatment no less favourable" in respect of goods bound in a Schedule.
IfArgentina'sviewwere tobe accepted,the"treatmentnolessfavourable" requirementof Article II:1(a)
would mean nothing more than a commitment to refrain from imposing duties in excess of a bound

rate. In the view of the United States, such a reading would reduce Article II:1(a) to "redundancy
or inutility" contrary to the Appellate Body's statements in United States - Standards for Reformulated
and Conventional Gasoline.20 In advancing its interpretation of its Schedule, Argentina essentially
seeks to achieve what other WTO Members were required to negotiate for during the Uruguay Round.
23. In contrast, the Panel’ s interpretation gives effect to all relevant parts of the GATT 1994.
It gives effect not only to Article II:1(b) -- i.e., by determining that Argentina’ s specific duties, as
applied, exceed Argentina’ sboundrate -- butalsoto ArticleII:1(a), byacknowledgingthatthe inevitable
potential to exceed the bound rate inherent in Argentina’ s tariff regime affords less favourable treatment
to low-price future imports. It also preserves the value of Schedules of other WTO Members that
reserved the right to apply both ad valorem and specific duties. The Panel’ s decision thus assures
the "security and predictability" that Article 3.2 of the DSU demands. The Panel gave proper weight
to prior GATT practice. In the view of the United States, the principles established in a number of
GATT decisions clearly support the Panel’ s decision.
24. The United States contends that the Panel correctly concluded that Argentina failed to meet
its burden of rebutting the presumption raised by the United States that all of Argentina's specific duties
on textiles and apparel violate Article II of the GATT 1994 and that Argentina should conform the
measures imposing them to the requirements of Article II.
25. The United States sees no merit in Argentina's argument that the Panel did not adequately
consider its contention that the IMF requires Argentina to levy the statistical tax and that this purported
requirement establishes an exception to the prohibition contained in Article VIII of the GATT 1994.
Argentina failed to establish that the IMF ever imposed or approved such a requirement, and this failure
to present the requisite evidence cannot be remedied by Argentina on appeal. Moreover, there is no
provision in the WTO Agreement that would create the exception to Article VIII that Argentina seeks.
The fiscal character of the statistical tax runs counter to Article VIII, which prohibits the "taxation
of imports ... for fiscal purposes." This prohibition is unqualified. Argentina’ s statistical tax is not
an exchange action and is thus outside the scope of Article XV of the GATT 1994. The Agreement
between the IMF and the WTO does not address, and does not affect, the substantive obligations of
Members under the WTO Agreement, or the extent to which the IMF may authorize an exchange control
action that is inconsistent with a provision of the GATT 1994. Furthermore, the Declaration on the
Relationship of the World Trade Organization with the International Monetary Fund (the "Declaration
20Adopted 20 May 1996, WT/DS2/AB/R, p. 23.

on the Relationship of the WTO with the IMF") does not establish any exception to Article VIII of the
GATT 1994. The same is true for the Declaration on Coherence.
26. With respect toArticle 11 of the DSU, the UnitedStates submits thatthe real question Argentina
raises is not whether the Panel has failed to discharge its duty under Article 11, but whether the Panel
abused its discretion in accepting the additional examples from the United States by causing such
significant prejudice as to deny Argentina fundamental fairness or due process. The United States
believes that the Panel did not abuse its discretion in admitting such additional examples which were
submitted as part of a claim within the Panel’ s terms of reference and as part of the natural process
of progressively clarifying the parties’ positions. Furthermore, Argentina did not demonstrate that
it has suffered prejudice from the Panel’ s acceptance of the evidence in question. At any rate, exclusion
of the evidence Argentina now challenges would not alter the outcome of the dispute.
27. The United States also contends that the Panel did not abuse its discretion in not consulting
with the IMF. Given that Argentina did not have plausible arguments on the law or facts, the Panel
was under no obligation to inquire with the IMF. Furthermore, panels have considerable discretion
in determining how they would proceed, and the WTO has not established guidelines regarding factual
discovery.
C. Arguments by the European Communities - Third Participant
28. With respect to Article II of the GATT 1994, the European Communities submits that it was
not necessary, in order to resolve the case before it, for the Panel to have made the finding in
paragraph 6.32 of the Panel Report and that violation of Article II of the GATT 1994 exists in respect
of all import transactions where duties are imposed which exceed the binding. Argentina’ s admitted
methodology used to establish the DIEM leads to duties in excess of the bindings for all products priced
belowthe "representative price". With respect to Argentina'sstatisticaltax, the European Communities
endorses the Panel’ s finding in paragraph 6.80 of the Panel Report. The European Communities also
makes certain comments with respect to Argentina's claims under Article 11 of the DSU.
29. In coming to the conclusion that the Argentine system of DIEM must violate Article II of the
GATT 1994 in all cases, the Panel acknowledged that the wording of Article II does not explicitly
address the question of whether there is an obligation to use the particular type of duty referred to
in the Schedule. The Panel relied instead on past GATT practice. In the view of the European
Communities, GATT practice is only relevant for the purpose of interpreting WTO obligations and

cannot constitute a source of obligations in itself. The Panel appears to have treated the past GATT
practice to which it refers as a source of law. The past practice referred to by the Panel, according
to the European Communities, is far from persuasive.
30. The European Communities believes that the Panel should have taken the wording and context
of Article II of the GATT 1994 as its starting point. Article II:1(a) may fulfil a role similar to that
of Article III:1. Article II:1(a) "articulates a general principle" which "informs" the rest of Article II.
The relevant obligation in Article II:1(a) and II:1(b) is to give treatment "no less favourable" than that
provided for in the Schedule and to exempt products of other contracting parties from duties "in excess
of those" in the Schedule. The Schedules set out the rates of duty and a duty type. The reference to
a type of duty can be explained by the fact that it is necessary to establish a basis for calculation of
the amount of duty which can be imposed in each case and not as a commitment to impose duties in
that form only.
31. The EuropeanCommunities contendsthatnoprovisionof ArticleII containsobligationsrelating
to the type as opposed to the amount of the duty. Accordingly, the Schedules only bind the amount
of the duty which may be imposed in any case, not the type of duty. The European Communities knows
of no case where a Member has reserved, in its Schedule, the right to impose a different type of duty
even though an overall limit on the amount of duty payable under the other type of duty would not
be exceeded. Evenif itwere consideredthat the type of duty was also boundindependently of the binding
of the amount, it would still be necessary to show that the change in the type of duty led to "treatment
less favourable" than that resulting from the type of duty referred to in the Schedule.
32. Paragraph 6.31 of the Panel Report suggests that a change in the type of duty "undermines
the stability and predictability of Members’ Schedules." The European Communities does not consider
that this is a matter covered by Article II of the GATT 1994. Another possible basis for a conclusion
that the change in the type of the duty leads to "treatment less favourable" than that resulting from
the type of duty provided for in the Schedule is suggested in paragraphs 6.46 and 6.47 of the Panel
Report. The European Communities does not believe that change in competitive relationships is a
correct test to apply in this case. The wording of Article II:1(a) of the GATT 1994 makes it clear
that the obligation not to exceed the tariff binding applies to each individual import transaction and
that it is not possible for a Member to compensate higher duties on some transactions, or on some
tariff lines, with lower duties elsewhere.

33. In respect of the statistical tax, the European Communities agrees with Argentina that it is not
sufficient for the Panel to state that "there is no evidence that Argentina was requested by the
International Monetary Fund ("IMF") to impose an import tax that would violate the provisions of
the WTO Agreement" in order to conclude that there can be no question of conflicting obligations.
An obligation can also arise if Argentina made the commitment without it having been requested.
However, the only document on which Argentina relies, in arguing that it is under an obligation to
the IMF to maintain a 3 per cent statistical tax, is the Memorandum on Economic Policy. In the view
of the European Communities, this is a unilateral communication to the IMF, not an agreement, which
mentions only a 3 per cent temporary import surcharge on certain imports. That this document did
notcreate an obligation tomaintain the 3 per cent statisticaltax is alsoindicated bythe fact that Argentina
reduced the tax to 0.5 per cent and replaced it with a general increase in tariffs of 3 per cent.
34. The European Communities agrees with the Panel that Argentina's argument that it was under
a conflicting obligation to the IMF should be rejected. An obligation of Argentina to the IMF in relation
to a statistical or import tax, assuming it to exist, will, in accordance with the principle of pacta tertiis
nec nocent nec prosunt, not in itself be of any consequence to the WTO, the United States or the
European Communities. The conditions for the operation of the principle of acquiescence in international
law are not met in the present case. A legal basis within the WTO Agreement itself is necessary for
the alleged obligation to have the effect of excusing the violation of Article VIII of the GATT 1994.
35. According to the European Communities, the Declaration on Coherence may be relevant for
the purpose of interpreting the procedural provisions of the WTO Agreement, but cannot provide an
exception to any of the substantive WTO obligations invoked in this case. The Declaration on the
Relationship of the WTO with the IMF forms part of the context of the WTO Agreement to be taken
into account in its interpretation. The Agreement Between the IMF and the WTO is not a covered
agreement for the purpose of the DSU. In any event, it does not contain any provision relevant to
this dispute. In the view of the European Communities, the arguments of Argentina in respect of this
Agreement amount to an allegation that the Panel failed to fulfil a procedural obligation to consult the
IMF.
36. If Argentina were to seek to justify the 3 per cent statistical tax/import surcharge as a balance
of payments measure, it would need to invoke Articles XII and XVIII of the GATT 1994 and notify
the Committee on Balance-of-Payments Restrictions under Articles XII:4 or XVIII:12 of the GATT 1994.
There is no indication that any of this has been done and there is, therefore, no basis to review the
Panel’ s finding that the measure is inconsistent with Article VIII of the GATT 1994.

37. With regard to Article 11 of the DSU, the European Communities contends that it was not
necessary for the Panel to have evidence based on invoices that duties exceeding the bound levels were
imposed. TheEuropeanCommunities stressesthe importance ofrespectingthe principlesof due process
in panel proceedings, but does not consider it necessary or appropriate to comment on the submission
and use of the evidence submitted by the United States prior to the second meeting of the Panel.
Article 13 of the DSU entitles a panel to seek information from any body, including the IMF, if it
considers this necessary. There was no need for the Panel to seek the opinion of the IMF on the
existence of an obligation toward it by Argentina to maintain the 3 per cent statistical duty since that
would not have been relevant for deciding whether or not there was a violation of Article VIII of the
GATT 1994.
III. Issues Raised in this Appeal
38. The appellant, Argentina, raises the following issues in this appeal:
(a) Whether the application by a Member of a type of duty other than the type provided
for in that Member's Schedule is, in itself, inconsistent with Article II of the
GATT 1994;
(b) Whether the Panel erred in concluding that Argentina had acted inconsistently with
its obligations under Article II of the GATT 1994 "in all cases" in which Argentina
applied the DIEM;
(c) Whether the Panel erred in its application of Article VIII of the GATT 1994 to the
3 per cent ad valorem statistical tax by not taking into account commitments that
Argentina states it made to the IMF; and
(d) Whether the Panel acted inconsistently with Article 11 of the DSU in: (i) admitting
certain evidence submitted by the UnitedStates two daysprior to the second substantive
meeting of the Panel with the parties, and granting Argentina only two weeks to respond;
and (ii) not seeking information from, and consulting with, the IMF so as to obtain
its opinion on specific aspects of the matter concerning the statistical tax imposed by
Argentina.

IV. Interpretation of Article II of the GATT 1994
A. The Type of Duty
39. Article II:1 of the GATT 1994 states, in pertinent part:
(a) Each Member shall accord to the commerce of the other
Members treatment no less favourable than that provided for in the
appropriate Part of the appropriate Schedule annexed to this Agreement.
(b) The products described in Part I of the Schedule relating
to any Member, which are the products of territories of other Members,
shall, on their importation into the territory to which the Schedule
relates, and subject to the terms, conditions or qualifications set forth
in that Schedule, be exempt from ordinary customs duties in excess
of those set forth and provided therein.
40. With respect to Article II, the Panel found, inter alia:
6.31 We note that the past GATT practice is clear: a situation
whereby a contracting party applies one type of duties while its
Schedule refers to bindings of another type of duties constitutes a
violation of Article II of GATT, without any obligation for the
complaining party to submit further evidence that such variance leads
to an effective breach of bindings. ... As a guarantee for predictability
and to ensure the full respect of the negotiations under Article II, GATT
practice has generally required that once a Member has indicated the
type(s) of duties in specifying its bound rate, it must apply such type(s)
of duties. Accordingly, faced with such a variance in the type [of]
duties applied by Argentina from that reflected in its Schedule, we
consider that we do not have to examine the effects of that variance
on possible future imports. Indeed, such a variance undermines the
stability and predictability of Members' Schedules.
6.32 We, therefore, find that Argentina, in using a system of specific
minimum tariffs although it has bound its tariffs at ad valorem rates
only, is violating the provisions of Article II of GATT and that the
United States does not have to provide further evidence that the
resultant duties exceed the bound tariff rate. Such a variance between
Argentina’ sScheduleanditsappliedtariffsconstitutesalessfavourable
treatment to the commerce of the other Members than that provided
for in Argentina’ s Schedule, contrary to the provisions of Article II
of GATT.21
21Panel Report, paras. 6.31-6.32.

41. Argentina appeals from paragraphs 6.31 and 6.32 of the Panel Report, arguing that the Panel
erred in its interpretation that Article II of the GATT 1994 does not permit a Member to apply a type of
duty other than that provided for in that Member's Schedule. Argentina maintains that the Panel should
have taken intoaccount whether the level of protectiontodomestic productsensuingfrom the application
of the actual duty imposed is, or is not, higher than the level of protection resulting from the duty bound
in the Member's Schedule. In Argentina's view, a Member is free to choose the type of duty applied,
provided that the maximum level of protection specified in that Member's Schedule is not exceeded.
42. In paragraphs 6.31 and 6.32 of the Panel Report, the Panel holds that any variance between the
type of duty provided for in a Member's Schedule and the type of duty actually applied by that Member
"constitutes a less favourable treatment to the commerce of the other Members"22 than that provided for
inthe Member's Schedule, and therefore isinconsistentwithArticleII of the GATT1994. Furthermore,
the Panel asserts that the complaining party "does not have to provide further evidence that the resultant
duties exceed the bound tariff rate."23 We note that the Panel did not base its finding on a textual analysis
of either paragraph (a) or (b) of Article II:1 of the GATT 1994. It observes that "[t]he wording of
Article II does not seem to address explicitly whether WTO Members have an obligation to use a
particular type of duty"24, and then asserts that "the wording of Article II must be interpreted in the light
of past GATT practice ...".25 The Panel relies heavily on what it characterizes as "past GATT practice",
without undertaking any analysis of the ordinary meaning of the terms of Article II in their context and
in the light of the object and purpose of the GATT 1994, in accordance with the general rules of treaty
interpretation set out in Article 31 of the Vienna Convention. After citing three working party reports26,
the adopted report of the Panel on Newsprint27 and the unadopted panel report in EEC - Import Regime
for Bananas28 ("Bananas II"), the Panel declared that "... the past GATT practice is clear: a situation
whereby a contracting party applies one type of duties while its Schedule refers to bindings of another
type of duties constitutes a violation of Article II of GATT ...".29
22Panel Report, para. 6.32.
23Ibid.
24Panel Report, para. 6.24.
25Ibid.
26Working Party Report, Rectifications and Modifications of Schedules, adopted 24 October 1953, BISD 2S/63, para. 8;
Working Party Report, Transposition of the Schedule XXXVII - Turkey, adopted 20 December 1954, BISD 3S/127; and
Working Party Report, Fourth Protocol on Rectifications and Modifications, adopted 3 March 1955, BISD 3S/130.
27Adopted 20 November 1984, BISD 31S/114.
28DS38/R, 11 February 1994, unadopted.
29Panel Report, para. 6.31.

43. We are not persuaded that "the past GATT practice is clear". The three working party reports
cited by the Panel did not arise in the context of dispute settlement cases brought pursuant to
Article XXIII of the GATT 1947, unlike some working party reports in GATT history that resulted
from complaints made under Article XXIII.30 We also note that these three working party reports did
not result in the CONTRACTING PARTIES giving a ruling or making recommendations, pursuant
to Article XXIII:2 of the GATT 1994, on whether a variance in the type of duty applied by a contracting
party from the type of duty provided for in its Schedule constituted an infringement of Article II:1
of the GATT 1947.31 The Panel also referred to the report of the Panel on Newsprint that did not,
on its facts, deal with the application by a contracting party of a specific duty rather than an ad valorem
duty provided for in its Schedule.32 Finally, the Panel relied extensively on the unadopted panel report
in Bananas II. In our Report in Japan - Taxes on Alcoholic Beverages33, we agreed with that panel
that "unadopted panel reports ‘ have no legal status in the GATT or WTO system ...’ ", although we
believe that "‘ a panel could nevertheless find useful guidance in the reasoning of an unadopted panel
report that it considered to be relevant’ ". In the case before us, the Panel's use of the Bananas II panel
report appears to have gone beyond deriving "useful guidance" from the reasoning employed in that
unadopted panel report. The Panel, in fact, relies upon the Bananas II panel report.
30See, for example, Australian Subsidy on Ammonium Sulphate, adopted 3 April 1950, BISD II/188.
31As the Panel observed in paragraph 6.26 of the Panel Report, we note that the working party report in Transposition
of Schedule XXXVII - Turkey, adopted 20 December 1954, BISD 3S/127, stated in paragraph 4:
The obligations of contracting parties are established by the rates of duty appearing
in the schedules and any change in the rate such as a change from a specific to an
ad valorem duty could in some circumstances adversely affect the value of the
concessions to other contracting parties. Consequently, any conversion of specific
into ad valorem rates of duty can be made only under some procedure for the
modification of concessions.
This working party report, which examined a proposal by Turkey to change into ad valorem duties the specific duties provided
for in its Schedule, did not address whether or not such a modification would be inconsistent with Article II of the GATT
1947.
32We note that the Panel on Newsprint, adopted 20 November 1984, BISD 31S/114, stated in paragraph 50:
... under long-standing GATT practice, even purely formal changes in the tariff
schedule of a contracting party, which may not affect the GATT rights of other
countries, such as the conversion of a specific to an ad valorem duty without an
increase in the protective effect of the tariff rate in question, have been considered
to require renegotiations.
It should be noted that the issue before the Panel on Newsprint was not whether a change in the type of customs duty applied
by a contracting party from a specific duty to an ad valorem duty was consistent with Article II of the GATT 1947, but whether
a reduction in a tariff-rate quota from 1.5 million tonnes to 0.5 million tonnes was consistent with Article II of the GATT 1947.
For this reason, we consider the above statement to be obiter.
33Adopted 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, pp. 14-15.

44. The legal issue before us here is whether the application by a Member of a type of duty other
than that provided for in its Schedule is, in itself, inconsistent with Article II of the GATT 1994. We
now turn to an examination of this question, first, in the light of the terms of Article II:1 of the
GATT 1994 and, second, in the context of Argentina's DIEM system at issue in this case.
45. The terms of Article II:1(a) require that a Member "accord to the commerce of the other
Members treatment no less favourable than that provided for" in that Member's Schedule. Article II:1(b),
first sentence, states, in part: "The products described in Part I of the Schedule ... shall, on their
importation into the territory to which the Schedule relates, ... be exempt from ordinary customs duties
in excess of those set forth and provided therein." Paragraph (a) of Article II:1 contains a general
prohibition against according treatment less favourable to imports than that provided for in a Member's
Schedule. Paragraph (b) prohibits a specific kind of practice that will always be inconsistent with
paragraph (a): that is, the application of ordinary customs duties in excess of those provided for in
the Schedule. Because the language of Article II:1(b), first sentence, is more specific and germane
to the case at hand, our interpretative analysis begins with, and focuses on, that provision.
46. A tariff binding in a Member's Schedule provides an upper limit on the amount of duty that
may be imposed, and a Member is permitted to impose a duty that is less than that provided for in
its Schedule. The principal obligation in the first sentence of Article II:1(b), as we have noted above,
requires a Member to refrain from imposing ordinary customs duties in excess of those provided for
inthatMember's Schedule. However, the textof ArticleII:1(b), firstsentence, doesnotaddresswhether
applying a type of duty different from the type provided for in a Member's Schedule is inconsistent,
in itself, with that provision.
47. In accordance with the general rules of treaty interpretation set out in Article 31 of the
Vienna Convention, Article II:1(b), first sentence, must be read in its context and in light of the object
and purpose of the GATT 1994. Article II:1(a) is part of the context of Article II:1(b); it requires
that a Member must accord to the commerce of the other Members "treatment no less favourable than
that provided for" in its Schedule. It is evident to us that the application of customs duties in excess
of those provided for in a Member's Schedule, inconsistent with the first sentence of Article II:1(b),
constitutes "less favourable" treatment under the provisions of Article II:1(a). A basic object and purpose
of the GATT 1994, as reflected in Article II, is to preserve the value of tariff concessions negotiated
by a Member with its trading partners, and bound in that Member's Schedule. Once a tariff concession

is agreed and bound in a Member's Schedule, a reduction in its value by the imposition of duties in
excess of the bound tariff rate would upset the balance of concessions among Members.
48. We turn next to examine whether, by applying the DIEM instead of the ad valorem duties
provided for in its Schedule, Argentina has acted inconsistently with Article II:1(b), first sentence,
of the GATT 1994.
49. As we understand it, the Argentine methodology of determining the DIEM is, first, to identify
a representative international price for each relevant tariff category of textile and apparel products.
Once this representative international price has been established, Argentina then multiplies that price
by the bound rate of 35 per cent, or by the actually applied rate of less than 35 per cent34, to arrive
at the DIEM for the products in that category. Customs officials are directed, in a specific transaction,
to collect the higher of the two values: the applied ad valorem rate or the DIEM.35
50. To grasp the meaning and implications of the Argentine system, it is important to keep in mind
that for any specific duty, there is an ad valorem equivalent deduced from the ratio of the absolute
amount collected to the price of the imported product. Thus, the ad valorem equivalent of a specific
duty varies with the variation in the price of imports. It is higher for low-priced products than for
high-priced products. To illustrate, a specific duty of $10 collected on all imported products in a certain
tariff category, is equivalent to 10 per cent ad valorem if the price of the imported product is $100;
however, it is equivalent to 20 per cent ad valorem if the price is only $50.
51. Thus, under the Argentine system, whenever the amount of the specific duty is determined
by applying the bound rate of 35 per cent to the representative international price in a certain tariff
category, the ad valorem equivalent of the specific duty is greater than 35 per cent for all imports at
prices below the representative international price; it is less than 35 per cent for all imports at prices
above the representative international price. Therefore, collecting the higher of the two values means
applying the bound tariff rate of 35 per cent ad valorem to the range of prices above the representative
international price, and applying the minimum specific import duty with an ad valorem equivalent of
more than 35 per cent to the range of prices below the representative international price.
34Argentina's response to questioning at the oral hearing.
35As the Panel observed, Resolution No. 811/93 of 29 July 1993, expressly stated in Article 3 that "the specific import
duties established by Article 1 of this decision shall operate as a minimum of the corresponding ad valorem import duty".
See Panel Report, para. 6.19 and footnote 171.

52. In cases where the amount of the DIEM is determined by applying a rate of less than 35 per
cent -- for example, 20 per cent -- to the representative international price in a certain tariff category,
the result would be as follows. For the range of prices above the representative international price,
the ad valorem equivalent of the specific duty would be less than 20 per cent. With respect to the
range of prices below the representative international price, a distinction should be made between two
zones. As to a certain zone of prices immediately below the representative international price, the
ad valorem equivalent of the specific duty would be greater than 20 per cent but less than 35 per cent.
However, for products at prices below that zone, the ad valorem equivalent of the specific duty would
be greater than 35 per cent.36
53. In the light of this analysis, we may generalize that under the Argentine system, whether the
amount of the DIEM is determined by applying 35 per cent, or a rate less than 35 per cent, to the
representative international price, there will remain the possibility of a price that is sufficiently low
to produce an ad valorem equivalent of the DIEM that is greater than 35 per cent. In other words,
the structure and design of the Argentine system is such that for any DIEM, no matter what ad valorem
rate is used as the multiplier of the representative international price, the possibility remains that there
is a "break-even" price below which the ad valorem equivalent of the customs duty collected is in excess
of the bound ad valorem rate of 35 per cent.
54. We note that it is possible, under certain circumstances, for a Member to design a legislative
"ceiling" or "cap" on the level of duty applied which would ensure that, even if the type of duty applied
differs from the type provided for in that Member's Schedule, the ad valorem equivalents of the duties
actually applied would not exceed the ad valorem duties provided for in the Member's Schedule.
However, no such "ceiling" exists in this case. The measures at issue here, as we have already noted,
specifically and expressly require Argentine customs officials to collect the greater of the ad valorem
or the specific duties applicable, with no upper limit on the level of the ad valorem equivalent of the
specific duty that may be imposed. Before the Panel, Argentina argued that its domestic challenge
procedure (recurso de impugnación), in combination with the precedence and direct effect of international
treaty obligations in the Argentine national legal system, operated as an effective legislative "ceiling"
to ensure that a duty in excess of the bound rate of 35 per cent ad valorem could never actually be
36See Panel Report, para. 3.125.

imposed. The Panel did not accept this argument37, and Argentina has not appealed from that finding
of the Panel. In this case, therefore, there is no effective legislative "ceiling" in the Argentine system
which ensures that duties in excess of the bound rate of 35 per cent ad valorem will not be applied.
55. We conclude that the application of a type of duty different from the type provided for in a
Member's Schedule is inconsistent with Article II:1(b), first sentence, of the GATT 1994 to the extent
that it results in ordinary customs duties being levied in excess of those provided for in that Member's
Schedule. In this case, we find that Argentina has acted inconsistently with its obligations under
Article II:1(b), firstsentence, of the GATT1994, because the DIEM regime, byitsstructureand design,
results, with respect to a certain range of import prices inany relevant tariff category to whichit applies,
in the levying of customs duties in excess of the bound rate of 35 per cent ad valorem in Argentina's
Schedule.
56. We modify the Panel's findings in paragraphs 6.31 and 6.32 of the Panel Report accordingly.
B. Violation of Article II "In All Cases"
57. Argentina claims that the Panel erred in finding that it had infringed its obligations under
Article II of the GATT 1994 "in all cases" in which it applied the DIEM. Argentina argues that the
United States submitted evidence with respect to only 118 out of the approximately 940 relevant tariff
categories in the Nomenclatura Común MERCOSUR ("N.C.M.").38 Argentina further asserts that,
had evidence in respect of the remaining tariff categories been examined, it would have shown that
the application of the DIEM, on average over all tariff categories, had not exceeded the maximum
level of binding in Argentina's Schedule.39 On another ground, Argentina appeals the Panel’ s late
admission into evidence of certain invoices and customs documents submitted by the United States
relating to specific import transactions in six additional tariff categories.40 We examine this separate
ground of appeal in Part VI of this Report.
37Panel Report, para. 6.69.
38We note that the Panel appears to use the terms "category", "HS category", "line-item" and "tariff line" interchangeably.
(See e.g. Panel Report, paras. 6.48, 6.52 and 6.54.) We also note that the parties, in their submissions to the Panel, sometimes
used these terms interchangeably. (See e.g. pp. 8-10 of the United States' second written submission to the Panel.) In this
Report, we use the term "tariff category" to refer to the relevant 6 or 8-digit subheading in the Nomenclatura Común
MERCOSUR("N.C.M.") applied by Argentina through Decree No. 2275/94 of 23 December 1994, as subsequently modified.
39Argentina's appellant's submission, paras. 70-72.
40Argentina's appellant's submission, paras. 106-110.

58. The Panel concluded that:
In the light of the foregoing,we find thatthe United States has provided
sufficient evidence that Argentina has effectively imposed duties on
imports of textiles and apparel above 35 per cent ad valorem, that
indeed the totalamount of dutiescollected annuallyonthese items leads
to the conclusion that duties above 35 per cent ad valorem on the
average transaction value have been imposed on the same items, and
that in any case, as we found in paragraph 6.47 above, the very nature
of the minimum specific duty system imposed in Argentina on the items
at issue will inevitably lead, in certain instances, to the imposition of
duties above 35 per cent ad valorem.41
59. We note that the Panel did not make a finding that Argentina had infringed its obligations under
Article II of the GATT 1994 "in all cases" in which it applied the DIEM. In fact, the Panel stated that:
As Argentina did not provide any affirmative evidence to the contrary,
we consider that this US evidence provides reliable information that,
on a tariff line basis, duties above the bound rate of 35 per cent
ad valorem have been imposed. We agree that, if an average
calculation shows duties above 35 per cent, this is evidence of a
sufficient number of transactions which were subject to duties imposed
above the 35 per cent ad valorem. The United States was able to
demonstrate that Argentina had imposed and collected duties on the
effective price of the import transactions at levels well above the bound
rate of 35 per cent ad valorem.42
60. It is our understanding that Argentina is objecting to the Panel's conclusion that the application
of the DIEM is inconsistent with Argentina's obligations under Article II of the GATT 1994 to the
extent that this conclusion was based on the Panel's examination of evidence relating to only 118, or
at most 124, tariff categories out of approximately 940 relevant tariff categories for textile and apparel
products. We note that Argentina did not challenge the methodology employed by the Panel in examining
the evidence submitted by the United States identifying 118 tariff categories which led it to conclude,
onthe basisof statisticaldata relatingtothe averagevalue of transactions,thatthe advaloremequivalents
of Argentina'sspecific dutiesexceeded 35 per cent advalorem ina "sufficient number of transactions".43
41Panel Report, para. 6.65.
42Panel Report, para. 6.51.
43Ibid.

61. The real issue posed here by Argentina is whether the United States had adduced sufficient
evidence to establish a prima facie case of inconsistency with Article II:1 of the GATT 1994 for all
tariff categories covered by Chapters 51 to 63 of the N.C.M.. As we have noted above, the Panel
stated that the statistical data submitted by the United States on the average import price of certain
products in relation to the total amount of duties collected, "... provides reliable information that, on
a tariff linebasis, dutiesabove the boundrate of 35 per cent ad valorem have been imposed."44 (emphasis
added) Furthermore, the Panel agreed with the United States that, "... if an average calculation shows
duties above 35 per cent, this is evidence of a sufficient number of transactions which were subject
to duties imposed above the 35 per cent ad valorem."45 (emphasis added) The Panel also noted that
Argentina had not submitted "any affirmative evidence to the contrary".46 Argentina, in other words,
did not successfully overcome the prima facie case established by the United States. We cannot find
any error of law in the findings of the Panel based on the evidence submitted by the United States on
average calculations relatingto 118 tariff categories out of approximately 940tariff categories for textile
and apparel products.
62. As noted above, the Panel stated that "... the very nature of the minimum specific duty system
imposed in Argentina on the items at issue will inevitably lead, in certain instances, to the imposition
of duties above 35 per cent ad valorem."47 (emphasis added) This reference to "in certain instances"
indicates that the Panel did not conclude that there was infringement "in all cases". We recall our
finding that the DIEM regime, by its structure and design, results in the application of specific duties
with ad valorem equivalents exceeding 35 per cent for all textile and apparel products imported at prices
below the relevant "break-even" prices in the relevant tariff categories.48 At the same time, products
imported at prices above such "break-even" prices will be subject to a duty equivalent to 35 per cent
or less ad valorem. This proposition holds for all relevant tariff categories relating to textile and apparel
products to which the DIEM are applied. It is the result of Argentina requiring its customs officials
to collect the higher of two values: the applicable ad valorem duty or the DIEM. It follows that, under
such a system, the rate of duty applicable to any import transaction depends on the position of the
imported product within the prevailing price range in any relevant tariff category. Thus, some
44Ibid.
45Ibid.
46Ibid.
47Panel Report, para. 6.65.
48See paras. 51-53 of this Report. We note that this "break-even" price will be the representative international price
when the DIEM are calculated on the basis of the 35 per cent bound ad valorem rate. However, when the DIEM are calculated
on the basis of a lower, applied rate, the "break-even" price will be lower than the representative international price.

transactions will fall within a price range where the application of the DIEM results in ad valorem
equivalents exceeding 35 per cent. Other transactions, on the other hand, will fall within a price range
where the application of the DIEM results in ad valorem equivalents less than, or equal to, 35 per cent.
We agree with Argentina, therefore, that the application of the DIEM does not result in a breach of
Article II for each and every import transaction in a given tariff category. At the same time, however,
we agree with the Panel that there are sufficient reasons to conclude that the structure and design of
the DIEM will result, with respect to a certain range of import prices within a relevant tariff category,
in an infringement of Argentina's obligations under Article II:1 for all tariff categories in Chapters 51
to 63 of the N.C.M..
63. For these reasons, we find no legal basis on which to reverse the Panel's findings in
paragraph 6.65 of the Panel Report.
V. The Statistical Tax and Argentina's Stated Commitments to the IMF
64. At the time the Panel proceeding commenced, there was in effect in Argentina an ad valorem
tax of 3 per cent on imports, without a minimum or a maximum charge, which was called a "statistical
tax" and was described as designed to cover the cost of providing a statistical service intended to provide
a reliable data base for foreign trade operators.49 In respect of this statistical tax, the Panel found as
follows:
Consequently, following the GATT practice on the subject matter, we
conclude that Argentina’ s statistical tax of three per cent ad valorem,
in its present form, is in violation of Article VIII:1(a) of GATT to the
extent it results in charges being levied in excess of the approximate
costs of the services rendered as well as being a measure designated
for fiscal purposes.50
65. Argentina does not appeal the Panel’ s finding that the statistical tax is inconsistent with the
substantive requirements of Article VIII of the GATT 1994. Rather, Argentina submits that the Panel
erred inlaw in failingtotake intoaccount Argentina’ sobligationstothe IMF inthe Panel'sinterpretation
of Article VIII. Argentina refers to the Memorandum on Economic Policy51, that forms part of the
49According to Argentina's statement at the oral hearing on 23 February 1998, this ad valorem statistical tax was modified
to 0.5 per cent in December 1997.
50Panel Report, para. 6.80
51Exhibit S to the United States' first written submission to the Panel.

panel record in this case, as a "Memorandum of Understanding" between Argentina and the IMF.
Argentina states that this "Memorandum of Understanding" is a "simplified agreement" which includes
an "undertaking" or an "obligation" on its part to collect a specified amount in the form of a statistical
tax.52 This obligation is said to be set out or reflected in the statement on page 7 of the Memorandum
on Economic Policy that the fiscal measures to be adopted by Argentina include "... increases in import
duties, including a temporary 3 per cent surcharge on imports".53
66. Argentina argues that in failing to consider its arguments about its obligations to the IMF and
in failing to provide any reasons for not taking these arguments into account, the Panel disregarded
its duty to make "an objective assessment of the matter" under Article 11 of the DSU. It is furthermore
contended that the Panel, in ruling that the statistical tax is not consistent with Article VIII of the
GATT 1994, failed to comply with the requirement in Article 12.7 of the DSU that "a panel shall set
out ... the basic rationale behind any findings and recommendations that it makes."54 Argentina argues
still further that the Panel erred in law in failing to consider certain "subsequent legislative
developments" -- namely, the Agreement Between the IMF and the WTO and the Declaration on
Coherence.55 Paragraph 10 of the Agreement Between the IMF and the WTO and paragraph 5 of the
Declaration on Coherence require, in the view of Argentina, that "the imposition on governments of
cross-conditionality or additional conditions"56 must be avoided.57
67. In the "Findings" section of the Panel Report, the Panel said:
We find no exception in the WTO Agreement that would excuse
Argentina's compliance with the requirements of Article VIII of GATT.
Moreover, we see nothing in the Agreement Between the IMF and
the WTO, the Declaration on the Relationship of the World Trade
OrganizationwiththeInternationalMonetary FundandtheDeclaration
on the Contribution of the World Trade Organization to Achieving
Greater Coherence in Global Economic Policymaking that suggests
that we should interpret Article VIII as argued by Argentina.58
53Argentina's appellant's submission, para. 82, and response of Argentina to questioning at the oral hearing.
54Argentina's appellant's submission, paras. 80-87.
56Declaration on Coherence, para. 5.
57Argentina's appellant's submission, paras. 95-96.
58Panel Report, para. 6.79.

68. In Part V of its Report, under the heading "Interim Review", although not in its "Findings"
section,the Panel offers some explanationas towhyitdidnotaddressArgentina'sarguments concerning
cross-conditionalities or conflicts between Argentina's commitments to the IMF and its obligations
under the WTO Agreement. The Panel stated:
We see no reason to address this wider issue since, in the situation
before the Panel, there is no evidence that Argentina was requested
by the International Monetary Fund ("IMF") to impose an import tax
that would violate the provisions of the WTO Agreement. Moreover,
we see nothing in the Agreement Between the IMF and the WTO, the
Declaration on the Relationship of the World Trade Organization with
the International Monetary Fund and the Declaration on the
Contribution of the World Trade Organization to Achieving Greater
Coherence in Global Economic Policymaking that suggests that we
should change our approach.59 (emphasis added)
69. Implicit in the above statement is the Panel's belief that Argentina had not successfully shown
that it was required under an agreement with the IMF to impose the statistical tax.60 Indeed, the Panel
does not appear to have been convinced that Argentina had a legally binding agreement with the IMF
at all. From the panel record in this case, it does not appear possible to determine the precise legal
nature of this Memorandum on Economic Policy, nor the extent to which commitments undertaken
by Argentina in this Memorandum constitute legally binding obligations. We note that page 7 of the
Memorandum on Economic Policy refers to "a temporary 3 percent surcharge on imports", which
is not necessarily the same thing as the 3 per cent statistical tax levied on imports. Argentina did not
show an irreconcilable conflict between the provisions of its "Memorandum of Understanding" with
the IMF and the provisions of Article VIII of the GATT 1994. We thus agree with the Panel's implicit
finding that Argentina failed to demonstrate that it had a legally binding commitment to the IMF that
would somehow supersede Argentina's obligations under Article VIII of the GATT 1994.
70. We also agree with the Panel that there is nothing in the Agreement Between the IMF and the
WTO, the Declaration on the Relationship of the WTO with the IMF or the Declaration on Coherence
which justifies a conclusion that a Member's commitments to the IMF shall prevail over its obligations
under Article VIII of the GATT 1994. The 1994 Declaration on Coherence is a Ministerial decision
that articulates the objective of promoting increased cooperation between the WTO and the IMF in
59Panel Report, para. 5.3.
60We note that the Panel’ s statement in paragraph 6.79 of the Panel Report that Argentina "... does not argue that it
is required to impose this specific tax in order to meet its commitments to the IMF" is not, strictly speaking, accurate, as
it does not reflect Argentina’ s arguments before the Panel or before the Appellate Body in this appeal. See Panel Report,
para. 3.276, and Argentina's appellant's submission, paras. 73-105.

order to encourage greater coherence in global economic policy-making. This objective is more explicitly
recognized in the treaty language of the WTO Agreement in Article III:5, which states:
Witha view to achieving greater coherence in global economic
policy-making, the WTO shall cooperate, as appropriate, with the
International Monetary Fund and with the International Bank for
Reconstructionand Development anditsaffiliatedagencies. (emphasis
added)
71. In furtherance of the WTO's mandate to "cooperate, as appropriate" with the IMF, the Agreement
Between the IMF and the WTO was concluded in 1996.61 This Agreement provides for specific means
of administrative cooperation between the two organizations. It provides for consultations and the
exchange of information between the WTO Secretariat and the staff of the IMF in certain specified
circumstances, and grants to each organization observer status in certain of the other's meetings.62
72. The Agreement Between the IMF and the WTO, however, does not modify, add to or diminish
the rights and obligations of Members under the WTO Agreement, nor does it modify individual States'
commitments to the IMF. It does not provide any substantive rules concerning the resolution of possible
conflicts between obligations of a Member under the WTO Agreement and obligations under the Articles
of Agreement of the IMF or any agreement with the IMF. However, paragraph 10 of the Agreement
Between the IMF and the WTO contains a direction to the staff of the IMF and the WTO Secretariat
to consult on "issues of possible inconsistency between measures under discussion".
73. In the 1994 Declaration on the Relationship of the WTO with the IMF, Ministers reaffirmed
that, unless otherwise provided for in the Final Act Embodying the Results of the Uruguay Round of
Multilateral Trade Negotiations, "the relationship of the WTO with the International Monetary Fund,
with regard to the areas covered by the Multilateral Trade Agreements in Annex 1A of the WTO
Agreement, will be based on the provisions that have governed the relationship of the CONTRACTING
PARTIES to the GATT 1947 with the International Monetary Fund." We note that certain provisions
of the GATT 1994, such as Articles XII, XIV, XV and XVIII, permit a WTO Member, in certain
specified circumstances relating to exchange matters and/or balance of payments, to be excused from
61Done at Singapore, 9 December 1996.
62Excluding the DSB and dispute settlement panels, except where "matters of jurisdictional relevance to the Fund are
to be considered". The WTO may invite a member of the staff of the Fund to attend a meeting of DSB "when the WTO,
after consultation between the WTO Secretariat and the staff of the Fund, finds that such a presence would be of particular
common interest to both organizations." Agreement Between the IMF and the WTO, para. 6.

certain of its obligations under the GATT 1994. However, Article VIII contains no such exception
or permission.
74. We agree, therefore, with the Panel that there is "nothing in the Agreement Between the IMF
and the WTO, the Declaration on the Relationship of the World Trade Organization with the International
Monetary Fund and the Declaration on the Contribution of the World Trade Organization to Achieving
Greater Coherence in Global Economic Policymaking"63 that modifies Argentina's obligations under
Article VIII of the GATT 1994. We also agree with the Panel that there is "... no exception in the
WTO Agreement that would excuse Argentina's compliance with the requirements of Article VIII of
GATT."64 There does not appear to be anything in the WTO Agreement or in the other legal instruments
cited by Argentina that would relieve a Member from its obligations under Article VIII of the
GATT 1994. For these reasons, we uphold the Panel's findings in paragraphs 6.79 and 6.80 of the
Panel Report.
VI. Objective Assessment of the Matter under Article 11 of the DSU
75. Argentina makes two claims under Article 11 of the DSU. It submits that the Panel acted
inconsistently with Article 11 in: (i) admitting certain evidence submitted by the United States two
days before the second substantive meeting of the Panel with the parties, and granting Argentina only
two weeks to respond; and (ii) not seeking information from, and consulting with, the IMF to obtain
its opinion on specific aspects of the matter relating to the statistical tax imposed by Argentina.65 We
examine each of these arguments in turn.
76. Article 11 of the DSU states in part:
The function of panels is to assist the DSB in discharging its
responsibilities under this Understanding and the covered agreements.
Accordingly, a panel should make an objective assessment of the matter
before it, including an objective assessment of the facts of the case
and the applicability of and conformity with the relevant covered
agreements, and make such other findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in
the covered agreements. ...
63Panel Report, para. 6.79.
64Ibid.
65Argentina's appellant's submission, paras. 106-114.

A. Admission of Certain Evidence
77. Argentina submits that the Panel acted inconsistently with Article 11 of the DSU by admitting
certain evidence offered by the United States two days before the second substantive meeting of the
Panel with the parties. This evidence consisted of approximately 90 invoices and customs documents
purporting to show specific cases in which Argentina had applied duties in excess of its 35 per cent
ad valorem tariff binding.66 At the second substantive meeting of the Panel with the parties, Argentina
requested the Panel to reject this evidence on the grounds that it had been submitted too late in the
panel process and that, because of the blacking-out of certain information from these documents, it
would be impossible for Argentina to respond to this evidence. These documents related to customs
operationsortransactionscarriedoutusingthe manual customsclearance systemratherthanthe MARIA
computerized system which, Argentina states, made it impossible to verify the information within the
time period granted by the Panel.67 The Panel ruled that it would admit this evidence, but allowed
Argentina two weeks to respond to it.
78. Paragraph 6.55 of the Panel Report reads, in part, as follows:
We note that the rules of procedures of panels do not prohibit the
practice of submitting additional evidence after the first hearing of the
Panel. Until the WTO Members agree on different and more specific
ruleson thisregard, ourmain concern is toensure that"due process" is
respected and that all parties to a dispute are given all the opportunities
to defend their position to the fullest extent possible. In light of the
difficulties faced by Argentina in responding to this evidence on such
a short notice, we decided to accept this additional evidence on the
understanding that Argentina would have a period of two weeks to
provide further comments on these additional invoices and customs
documents. Argentina informed the Panel that it would not be
submitting any further comment.
79. Article 11 of the DSU does not establish time limits for the submission of evidence to a panel.
Article 12.1 of the DSU directs a panel to follow the Working Procedures set out in Appendix 3 of
the DSU, but at the same time authorizes a panel to do otherwise after consulting the parties to the
dispute. The Working Procedures in Appendix 3 also do not establish precise deadlines for the
66See Panel Report, paras. 3.179 and 6.55.
67Argentina's appellant's submission, paras. 107-108.

presentation of evidence by a party to the dispute.68 It is true that the Working Procedures "do not
prohibit" submissionof additionalevidence after the first substantivemeeting of a panel with the parties.
It is also true, however, that the Working Procedures in Appendix 3 do contemplate two distinguishable
stages in a proceeding before a panel. Paragraphs 4 and 5 of the Working Procedures address the
first stage in the following terms:
4. Before the first substantive meeting of the panel with the
parties, the parties to the dispute shall transmit to the panel written
submissions in which they present the facts of the case and their
arguments.
5. At its first substantive meeting with the parties, the panel shall
ask the party which has brought the complaint to present its case.
Subsequently, and still at the same meeting, the party against which
the complaint has been brought shall be asked to present its point of
view.
The second stage of a panel proceeding is dealt with in paragraph 7 which states:
7. Formal rebuttals shall be made at a second substantive meeting
of the panel. The party complained against shall have the right to take
the floor first to be followed by the complaining party. The parties
shall submit, prior to that meeting, written rebuttals to the panel.
Under the Working Procedures in Appendix 3, the complaining party should set out its case in chief,
including a full presentation of the facts on the basis of submission of supporting evidence, during
the first stage. The second stage is generally designed to permit "rebuttals" by each party of the
arguments and evidence submitted by the other parties.
80. As noted above, however, the Working Procedures in their present form do not constrain panels
with hard and fast rules on deadlines for submitting evidence. The Panel could have refused to admit
the additional documentary evidence of the United States as unseasonably submitted. The Panel chose,
instead, to admit that evidence, at the same time allowing Argentina two weeks to respond to it.
Argentina drew attention to the difficulties it would face in tracing and verifying the manually processed
customs documents and in responding to them, since identifying names, customs identification numbers
68As we have observed in two previous Appellate Body Reports, we believe that detailed, standard working procedures
for panels would help to ensure due process and fairness in panel proceedings. See European Communities - Regime for
the Importation, Sale and Distribution of Bananas, adopted 25 September 1997, WT/DS27/AB/R, para. 144; India - Patent
Protection for Pharmaceutical and Agricultural Chemical Products, adopted 16 January 1998, WT/DS50/AB/R, para. 95.

and, in some cases, descriptions of the products had been blacked out. The Panel could well have
granted Argentina more than two weeks to respond to the additional evidence. However, there is no
indication in the panel record that Argentina explicitly requested from the Panel, at that time or at any
later time, a longer period within which to respond to the additional documentary evidence of the United
States. Argentina also did not submit any countering documents or comments in respect of any of
the additional documents of the United States.
81. Accordingly, while another panel could well have exercised its discretion differently, we do
not believe that the Panel here committed an abuse of discretion amounting to a failure to render an
objective assessment of the matter as mandated by Article 11 of the DSU.
B. Consultation with the IMF
82. Argentina also argues that the Panel failed to make "an objective assessment of the matter",
as required by Article 11 of the DSU, by not acceding to the request of the parties to seek information
from, and consult with, the IMF so as to obtain its opinion on specific aspects of the matter concerning
thestatisticaltax.69 The DSUgivespanelsdifferent meansorinstrumentsforcomplyingwithArticle 11;
among these is the right to "seek information and technical advice" provided in Article 13 of the DSU.
Argentina maintains that the Panel did not make use of this right, which would have allowed it to verify
the information provided by the parties, and which might have altered the Panel's findings regarding
the statistical tax.70
83. During the panel proceedings, the United States argued that Argentina had not demonstrated
that the imposition of a 3 per cent statistical tax was required, or even requested, by the IMF, and
invited the Panel to consult with the IMF to ascertain whether it had asked Argentina to impose the
tax.71 In its appellant's submission, Argentina states that it too requested "consultations" with the IMF
by the Panel.72
84. The only provision of the WTO Agreement that requires consultations with the IMF is
Article XV:2 of the GATT 1994. This provision requires the WTO to consult with the IMF when
70Argentina's appellant's submission, paras. 111-112.
71Opening statement of the United States at the first meeting of the Panel with the parties, p. 8 and second submission
of the United States to the Panel, pp. 25-26. Also see Panel Report, para. 3.281.

dealing with "problems concerning monetary reserves, balances of payments or foreign exchange
arrangements".73 However, this case does not relate to these matters. Article 13.1 of the DSU gives
a panel "... the right to seek information and technical advice from any individual or body which it
deems appropriate." (emphasis added) Pursuant to Article 13.2 of the DSU, a panel may seek
information from any relevant source and may consult experts to obtain their opinions on certain aspects
of the matter at issue. This is a grant of discretionary authority: a panel is not duty-bound to seek
information in each and every case or to consult particular experts under this provision. We recall
our statement in EC Measures Concerning Meat and Meat Products (Hormones) that Article 13 of
the DSU enables a panel to seek information and technical advice as it deems appropriate in a particular
case, and that the DSU leaves "to the sound discretion of a panel the determination of whether the
establishment of an expert review group is necessary or appropriate."74 Just as a panel has the discretion
to determine how to seek expert advice, so also does a panel have the discretion to determine whether
to seek information or expert advice at all.
85. As in the WTO Agreement, there are no provisions in the Agreement Between the IMF and
the WTO that require a panel to consult with the IMF in a case such as this. Under paragraph 8 of
this latter Agreement, in a case involving "exchange measures within the Fund's jurisdiction", the IMF
"shall inform in writing the relevant WTO body (including dispute settlement panels) ... whether such
measures are consistent with the Articles of Agreement of the Fund." This case does not, however,
involve "exchange measures within the Fund's jurisdiction". Paragraph 8 also provides that the IMF
"may communicate its views in writing on matters of mutual interest to the [WTO] or any of its organs
or bodies (excluding the WTO's dispute settlement panels) ..." (emphasis added). Evidently, the IMF
has not been authorized to provide its views to a WTO dispute settlement panel on matters not relating
to exchange measures within its jurisdiction, unless it is requested to do so by a panel under Article 13
of the DSU.
86. In this case, we find that the Panel acted within the bounds of its discretionary authority under
Articles 11 and 13 of the DSU in deciding not to seek information from, nor to consult with, the IMF.
While it might perhaps have been useful for the Panel to have consulted with the IMF on the legal
character of the relationship or arrangement between Argentina and the IMF in this case, we believe
that the Panel did not abuse its discretion by not seeking information or an opinion from the IMF.
73Furthermore, Article XV:2 states that, in such consultations, the WTO "... shall accept all findings of statistical and
other facts presented by the Fund relating to foreign exchange, monetary reserves and balances of payments, and shall accept
the determination of the Fund as to whether action by a Member in exchange matters is in accordance with the Articles of
Agreement of the International Monetary Fund ...".
74Adopted 13 February 1998, WT/DS26/AB/R, WT/DS48/AB/R, para. 147.

For these reasons, we findthat the Panel didnot violateArticle 11of the DSU bynot seekinginformation
from, and consulting with, the IMF so as to obtain its opinion on specific aspects of the matter concerning
the statistical tax imposed by Argentina.
VII. Findings and Conclusions
87. For the reasons set out in this Report, the Appellate Body:
(a) modifies the Panel's findings in paragraphs 6.31 and 6.32 of the Panel Report by
concluding that the application of a type of duty different from the type provided for
in a Member's Schedule is inconsistent with Article II:1(b), first sentence, of the
GATT 1994to the extentthat itresultsinordinary customsduties beingleviedin excess
of those provided for in that Member's Schedule. In this case, Argentina has acted
inconsistently with its obligations under Article II:1(b), first sentence, of the
GATT 1994, because the DIEM regime, by its structure and design, results, with respect
to a certain range of import prices in any relevant tariff category to which it applies,
in the levying of customs duties in excess of the bound rate of 35 per cent ad valorem
in Argentina's Schedule;
(b) concludes that the Panel did not err in finding that Argentina had acted inconsistently
with its obligations under Article II of the GATT 1994 "in all cases" in which Argentina
applied the DIEM, and, therefore, upholds the findings of the Panel in paragraph 6.65
of the Panel Report;
(c) upholds the findings of the Panel in paragraphs 6.79 and 6.80 of the Panel Report;
and
(d) concludes that the Panel did not violate Article 11 of the DSU in: (i) admitting certain
evidence submitted by the United States two days prior to the second substantive meeting
of the Panel with the parties, and granting Argentina two weeks to respond; and (ii)
not seeking information from, and consulting with, the IMF so as to obtain its opinion
on specific aspects of the matter concerning the statistical tax imposed by Argentina.

Signed in the original at Geneva this 11th day of March 1998 by:
Said El-Naggar
Presiding Member
_________________________ _________________________
Florentino Feliciano Mitsuo Matsushita
Member Member