PERU – ADDITIONAL DUTY ON IMPORTS OF CERTAIN AGRICULTURAL PRODUCTS
Document: AB-2015-3 Report of the Appellate Body
Date: 20 July 2015
Document codes: WT/DS457/AB/R
Complainant: Guatemala
Respondent: Peru
Third parties: Argentina, China, El Salvador, EU, India, U.S., Brazil, Ecuador, South Korea, Honduras, Colombia
Dispute stage: Appellate Body
Agreements cited: Art. 4.2  AgricultureArt. II:1, XI:1, X:1, X:3(a)  GATT 1994Art. 1, 2, 3, 5, 6, 7  Customs valuationArt. 3.8  Dispute Settlement Understanding (DSU)

PERU – ADDITIONAL DUTY ON IMPORTS OF CERTAIN
AGRICULTURAL PRODUCTS

AB-2015-3
Report of the Appellate Body

5.4.3.1 Interpretation of "similar border measures" ............................................................ 52 
5.4.3.2 Application of "similar border measures" ................................................................. 54 
5.4.4 Guatemala's request for completion of the legal analysis ........................................... 56 
6 FINDINGS AND CONCLUSIONS .................................................................................. 59 

List of Annexes

ANNEX A
NOTICES OF APPEAL
Contents Page
Annex A-1 Peru's Noti ce of Appeal A-2
Annex A-2 Guatemala's Notice of Other Appeal A-4
ANNEX B
ARGUMENTS OF THE PARTICIPANTS
Contents Page
Annex B-1 Executive summary of Peru's appellant's submission B-2
Annex B-2 Executive summary of Guatemala's other appellant's submission B-7
Annex B-3 Executive summary of Pe ru's appellee's submission B-9
Annex B-4 Executive summary of Guatemala's appellee's submission B-10
ANNEX C
ARGUMENTS OF THE THIRD PARTICIPANTS
Contents Page
Annex C-1 Executive summary of Brazil's third participant's submission C-2
Annex C-2 Executive summary of Colombia's third participant's submission C-3
Annex C-3 Executive summary of the European Union's third participant's submission C-4
Annex C-4 Executive summary of the United States' third participant's submission C-6

ABBREVIATIONS USED IN THIS REPORT
Abbreviation Description
ACP African, Caribbean, and Pacific Group of States
c.i.f. cost, insurance, and freight
Customs Valuation
Agreement
Agreement on Implementation of Article VII of the General Agreement
on Tariffs and Trade 1994
Doha Ministerial Decision Doha WTO Ministerial 2001: Ministerial Declarations and Decisions
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of
Disputes
Enabling Clause GATT 1979 Decision on Differential and More Favourable Treatment,
Reciprocity, and Fuller Participation of Developing Countries, L/4903,
28 November 1979, BISD 26S, p. 203
f.o.b. free on board
FTA Free Trade Agreement between Peru and the Republic of Guatemala
de Guatemala), 6 December 2011
GATS General Agreement on Trade in Services
GATT 1947 General Agreement on Tariffs and Trade 1947
GATT 1994 General Agreement on Tariffs and Trade 1994
ILC International Law Commission
ILC Articles International Law Commission, Articles on Responsibility of States for
Internationally Wrongful Acts, adopted by the ILC at its fifty-third
session, in 2001, published in Yearbook of the International Law
Commission, 2001, Vol. II, Part Two
Lomé Convention The Fourth ACP-EC Co nvention of Lomé, Decision of the
CONTRACTING PARTIES of 9 December 1994, L/7604, 19 December
1994; extended by EC – The Fourth ACP-EC Convention of Lomé,
Extension of Waiver, Decision of the WTO General Council of
14 October 1996, WT/L/186
Lomé Waiver EC – The Fourth ACP-EC Convention of Lomé, Extension of Waiver,
Decision of the WTO General Council of 14 October 1996, WT/L/186,
18 October 1996
Panel Report Panel Report, , WT/DS457/R
PRS price range system
SCM Agreement Agreement on Subsidies and Countervailing Measures
TBT Agreement Agreement on Technical Barriers to Trade
USD United States dollars
Vienna Convention Vienna Convention on the Law of Treaties, done at Vienna, 23 May
Working Procedures Working Procedures for Appellate Review, WT/AB/WP/6, 16 August
2010
WTO World Trade Organization
WTO Agreement Marrakesh Agreement Establishing the World Trade Organization

CASES CITED IN THIS REPORT
Short Title Full Case title and citation
Australia – Apples Appellate Body Report, Australia – Measures Affecting the Importation of Apples
from New Zealand, WT/DS367/AB/R, adopted 17 December 2010, DSR 2010:V,
p. 2175
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon,
WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, p. 3327
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres,
WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377
Canada – Aircraft
(Article 21.5 – Brazil)
Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft – Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/AB/RW,
adopted 4 August 2000,:IX, p. 4299
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive
Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000,
DSR 2000:VI, p. 2985
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, p. 449
Canada – Renewable Energy/
Canada – Feed-in Tariff
Program
Appellate Body Reports, Canada – Certain Measures Affecting the Renewable
Energy Generation Sector / Canada – Measures Relating to the Feed-in Tariff
Program, WT/DS412/AB/R / WT/DS426/AB/R 24 May 2013
Canada – Wheat Exports and
Grain Imports
Appellate Body Report, Canada – Measures Relating to Exports of Wheat and
Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004,
DSR 2004:VI, p. 2739
Chile – Price Band System Appellate Body Report, Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products, WT/DS207/AB/R, adopted 23 October
2002, DSR 2002:VIII, p. 3045 (Corr.1, DSR 2006:XII, p. 5473)
Chile – Price Band System Panel Report, Chile – Price Band System and Safeguard Measures Relating to
Certain Agricultural Products, WT/DS207/R, adopted 23 October 2002, as
modified by Appellate Body Report WT/DS207AB/R, DSR 2002:VIII, p. 3127
Chile – Price Band System
(Article 21.5 – Argentina)
Appellate Body Report, Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products – Recourse to Article 21.5 of the DSU
by Argentina, WT/DS207/AB/RW, adopted 22 May 2007, DSR 2007:II, p. 513
Chile – Price Band System
(Article 21.5 – Argentina)
Panel Report, Chile – Price Band System and Safeguard Measures Relating to
Certain Agricultural Products – Recourse to Article 21.5 of the DSU by
Argentina, WT/DS207/RW and Corr.1, adopted 22 May 2007, upheld by
Appellate Body Report WT/DS207/AB/RW, DSR 2007:II, p. 613
China – GOES Appellate Body Report, China – Countervailing and Anti-Dumping Duties on
Grain Oriented Flat-Rolled Electrical Steel from the United States,
WT/DS414/AB/R, adopted 16 November 2012, DSR 2012:XII, p. 6251
China – Rare Earths Appellate Body Reports, China – Measures Related to the Exportation of Rare
Earths, Tungsten, and Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R /
WT/DS433/AB/R, adopted 29 August 2014
China – Raw Materials Appellate Body Reports, China – Measures Related to the Exportation of Various
Raw Materials, WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R, adopted
22 February 2012, DSR 2012:VII, p. 3295
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos
and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001,
DSR 2001:VII, p. 3243
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September
1997, DSR 1997:II, p. 591

Short Title Full Case title and citation
EC – Bananas III
(Article 21.5 – Ecuador II) /
EC – Bananas III
(Article 21.5 – US)
Appellate Body Reports, European Communities – Regime for the Importation,
Sale and Distribution of Bananas – Second Recourse to Article 21.5 of the DSU
by Ecuador, WT/DS27/AB/RW2/ECU, adopted 11 December 2008, and Corr.1 /
European Communities – Regime for the Importation, Sale and Distribution of
Bananas – Recourse to Article 21.5 of the DSU by the United States,
WT/DS27/AB/RW/USA and Corr.1, adopted 22 December 2008,
DSR 2008:XVIII, p. 7165
EC – Export Subsidies on
Sugar
Appellate Body Report, European Communities – Export Subsidies on Sugar,
WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005,
DSR 2005:XIII, p. 6365
EC – Fasteners (China) Appellate Body Report, European Communities – Definitive Anti-Dumping
Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R,
adopted 28 July 2011, DSR 2011:VII, p. 3995
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products
(Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998,
DSR 1998:I, p. 135
EC and certain member
States – Large Civil Aircraft
Appellate Body Report, European Communities and Certain Member States
– Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted
1 June 2011, DSR 2011:I, p. 7
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the
Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July
1998, DSR 1998:V, p. 2031
EC – Selected Customs
Matters
Appellate Body Report, European Communities – Selected Customs Matters,
WT/DS315/AB/R, adopted 11 December 2006, DSR 2006:IX, p. 3791
Japan – Alcoholic
Beverages II
Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I,
p. 97
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of
Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000,
DSR 2000:I, p. 3
Korea – Various Measures on
Beef
Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled
and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January
2001, DSR 2001:I, p. 5
Mexico – Corn Syrup
(Article 21.5 – US)
Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the
DSU by the United States, WT/DS132/AB/RW, adopted 21 November 2001,
DSR 2001:XIII, p. 6675
Turkey – Textiles Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing
Products, WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, p. 2345
US – Anti-Dumping and
Countervailing Duties (China)
Appellate Body Report, United States – Definitive Anti-Dumping and
Countervailing Duties on Certain Products from China, WT/DS379/AB/R, adopted
25 March 2011, DSR 2011:V, p. 2869
US – Carbon Steel (India)

Appellate Body Report, United States – Countervailing Measures on Certain
Hot-Rolled Carbon Steel Flat Products from India, WT/DS436/AB/R, adopted 19
December 2014
US – Clove Cigarettes Appellate Body Report, United States – Measures Affecting the Production and
Sale of Clove Cigarettes, WT/DS406/AB/R, adopted 24 April 2012, DSR 2012:
XI, p. 5751
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application of
Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009,
DSR 2009:III, p. 1291
US – COOL Appellate Body Reports, United States – Certain Country of Origin Labelling
(COOL) Requirements, WT/DS384/AB/R / WT/DS386/AB/R, adopted 23 July
2012, DSR 2012:V, p. 2449
US – COOL
(Article 21.5 – Canada and
Mexico)
Appellate Body Reports, United States – Certain Country of Origin Labelling
(COOL) Requirements – Recourse to Article 21.5 of the DSU by Canada and
Mexico, WT/DS384/AB/RW / WT/DS386/AB/RW, adopted 29 May 2015

Short Title Full Case title and citation
US – Countervailing and
Anti-Dumping Measures
(China)
Appellate Body Report, United States – Countervailing and Anti-Dumping
Measures on Certain Products from China, WT/DS449/AB/R and Corr.1,
adopted 22 July 2014
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III,
p. 1619
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April
2005, DSR 2005:XII, p. 5663 (Corr.1, DSR 2006:XII, p. 5475)
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain
Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August
2001, DSR 2001:X, p. 4697
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia,
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX,
p. 4051
US – Large Civil Aircraft
(2nd complaint)
Appellate Body Report, United States – Measures Affecting Trade in Large Civil
Aircraft (Second Complaint), WT/DS353/AB/R, adopted 23 March 2012, DSR
2012:I, p. 7
US – Oil Country Tubular
Goods Sunset Reviews
Appellate Body Report, United States – Sunset Reviews of Anti-Dumping
Measures on Oil Country Tubular Goods from Argentina, WT/DS268/AB/R,
adopted 17 December 2004, DSR 2004:VII, p. 3257
US – Section 211
Appropriations Act
Appellate Body Report, United States – Section 211 Omnibus Appropriations
Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, p. 589
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998,
DSR 1998:VII, p. 2755
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty
Determination with Respect to Certain Softwood Lumber from Canada,
WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, p. 571

US – Softwood Lumber VI
(Article 21.5 – Canada)
Appellate Body Report, United States – Investigation of the International Trade
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the
DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1,
DSR 2006:XI, p. 4865
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on
Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R,
WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R,
WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003,
DSR 2003:VII, p. 3117
US – Tuna II (Mexico) Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, adopted
13 June 2012, DSR 2012:IV, p. 1837
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton,
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3
US – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on
Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R,
adopted 19 January 2001, DSR 2001:II, p. 717
US – Zeroing (EC) Appellate Body Report, United States – Laws, Regulations and Methodology for
Calculating Dumping Margins ("Zeroing"), WT/DS294/AB/R, adopted 9 May
2006, and Corr.1, DSR 2006:II, p. 417

APPELLATE BODY

Peru, Appellant/Appellee
Guatemala, Other Appellant/Appellee

Argentina, Third Participant
Brazil, Third Participant
China, Third Participant
Colombia, Third Participant
Ecuador, Third Participant
El Salvador, Third Participant
European Union, Third Participant
Honduras, Third Participant
India, Third Participant
Korea, Third Participant
United States, Third Participant
AB-2015-3

Appellate Body Division:

Bhatia, Presiding Member
Graham, Member
Zhang, Member

1 INTRODUCTION
1.1. Peru appeals certain issues of law and legal interpretations developed in the Panel Report,

1 (Panel Report). The Panel was
established to consider a complaint by Guatemala 2 with respect to a measure taken by Peru
affecting imports of certain agricultural products.
1.2. In its request for the establishment of a panel, Guatemala identified the measure at issue in
this dispute as the additional duties imposed by Peru on imports of a number of agricultural
products (certain types of milk, maize, rice, and sugar). As described by Guatemala, these duties
are determined using a mechanism known as the "Price Range System" (PRS) ( Sistema de Franja
de Precios ), which operates on the basis of: (i) a fl oor price and a ceiling price, respectively
reflecting averages of international prices over a recent past period of 60 months for each of the
specified products; and (ii) a cost, insurance, and freight (c.i.f.) reference price, reflecting the
average international price over a recent past period of two weeks for each of the specified
products. An additional duty is applied if the reference price of the specified product is lower than
the floor price. If the reference price is above the floor price but below the ceiling price,
no additional duty is applied. If the reference price exceeds the ceiling price, the applicable tariff is
reduced.3
1.3. The factual aspects of this dispute are set forth in greater detail in paragraphs 2.1 to 2.3,
7.30 to 7.42, and 7.97 to 7.167 of the Panel Report.
1.4. Guatemala claimed before the Panel that the additional duties imposed as a result of Peru's
PRS are inconsistent with Article 4.2 of the Ag reement on Agriculture because they constitute
variable import levies and minimum import prices, or similar border measures. Moreover,
Guatemala claimed that the duties at issue are du ties or charges inconsistent with the second
sentence of Article II:1(b) of the General Ag reement on Tariffs and Trade 1994 (GATT 1994).
Guatemala also claimed that Peru had acted inconsistently with Articles X:1 and X:3(a) of the
GATT 1994 respectively by: (i) failing to publish certain essential elements of the measure at
issue; and (ii) administering the PRS in a manner that is not reasonable. In addition, Guatemala
raised alternative claims under Articles 1, 2, 3, 5, 6, and 7 of the Agreement on Implementation of
Article VII of the General Agreement on Tariffs and Trade 1994 (Customs Valuation Agreement), in
the event that the Panel were to consider the duties resulting from the PRS to be ordinary customs
duties. Finally, Guatemala requested the Panel to suggest, under the second sentence of

1 WT/DS457/R, 27 November 2014.
2 Request for the Establishment of a Panel by Guatemala, WT/DS457/2, 13 June 2013.
3 Panel Report, paras. 2.2 and 7.99.

Article 19.1 of the Understanding on Rules and Pr ocedures Governing the Settlement of Disputes
(DSU), that Peru completely dismantle the measure at issue and eliminate the duties resulting
from the PRS and the PRS itself.
4
1.5. In response, Peru requested the Panel to fi nd that Guatemala had not initiated these dispute
settlement proceedings in good faith, contrary to Guatemala's obligations under Articles 3.7
and 3.10 of the DSU, because Guatemala had allege dly accepted the maintenance of the PRS in a
free trade agreement (FTA) signed between Peru and Guatemala on 6 December 2011. 5 Peru also
asserted that the duties resulting from the PRS are: (i) ordinary customs duties within the
meaning of the first sentence of Article II:1(b) of the GATT 1994; and (ii) outside the scope of
Article 4.2 of the Agreement on Agriculture and the second sentence of Article II:1(b) of the
GATT 1994. Peru contended that it had complied with the obligations under Articles X:1 and X:3(a)
of the GATT 1994, and that Guatemala's claims under the Customs Valuation Agreement must be
rejected because that Agreement does not apply to specific duties. Finally, in the event that the
Panel were to find that the measure at issue is not WTO-consistent, Peru contended that this
would generate an inconsistency between the covered agreements of the World Trade Organization
(WTO) and the FTA between Peru and Guatemala, and that, in such a case, the terms of the FTA
should prevail.
6
1.6. In the Panel Report, circulated to WTO Members on 27 November 2014, the Panel found that:
a. there is no evidence that Guatemala had brought these dispute settlement proceedings
in a manner contrary to good faith, and, therefore, there was no reason for the Panel to
refrain from assessing the claims put forward by Guatemala
7;
b. the duties resulting from the PRS constitute "variable import levies" or, at the least,
share sufficient characteristics with variable import levies to be considered a border
measure "similar" to a "variable import levy" within the meaning of footnote 1 of
Article 4.2 of the Agreement on Agriculture
8;
c. the duties resulting from the PRS do not constitute "minimum import prices" and do not
share sufficient characteristics with minimum import prices to be considered a border
measure "similar" to a "minimum import price" within the meaning of footnote 1 of
Article 4.2 of the Agreement on Agriculture9;
d. by maintaining measures that constitute "variable import levies" or, at the least, are
border measures "similar" to a "variable import levy", and which are thus "measures of
the kind which have been required to be converted into ordinary customs duties", Peru is
acting inconsistently with its obligations under Article 4.2 of the Agreement on
Agriculture
10;
e. the additional duties resulting from the PRS constitute "other duties or charges …
imposed on or in connection with the importation", within the meaning of the second
sentence of Article II:1(b) of the GATT 1994; and, in applying measures that constitute
"other duties or charges", without having reco rded them in its Schedule of Concessions,
Peru is acting inconsistently with its obligations under the second sentence of
Article II:1(b) of the GATT 1994
11; and
f. inasmuch as the FTA between Peru and Guatemala had not entered into force, it was not
necessary for the Panel to rule on whether the parties could, by means of the FTA,

4 Panel Report, paras. 3.1-3.3.
5 Free Trade Agreement between the Republic of Peru and the Republic of Guatemala (Tratado de libre
6 Panel Report, paras. 3.5-3.7.
7 Panel Report, para. 8.1.a.
8 Panel Report, para. 8.1.b.
9 Panel Report, para. 8.1.c.
10 Panel Report, para. 8.1.d.
11 Panel Report, para. 8.1.e.

modify as between themselves their rights and obligations under the WTO covered
agreements.12
1.7. In the light of these findings, the Panel did not consider it necessary to rule on Guatemala's
claims that:
a. Peru's actions are inconsistent with its obligations under Article X:1 of the GATT 1994
because Peru had failed to publish certain elements of the measure at issue that
Guatemala considers essential
13; and
b. Peru's actions are inconsistent with its obligations under Article X:3(a) of the GATT 1994
because Peru administers the measure at issue in a manner that is not reasonable, given
that Peru fails to observe the requirements of its own legislation.
14
1.8. Moreover, the Panel did not consider it rele vant to address Guatemala's claims that Peru has
acted inconsistently with its obligations under Articles 1, 2, 3, 5, 6, and 7 of the Customs Valuation
Agreement inasmuch as these claims were made by Guatemala as alternative claims, in case
the Panel were to find that the additional duties resulting from the PRS are ordinary customs
duties.
15
1.9. The Panel thus found that, pursuant to Article 3.8 of the DSU, and to the extent that Peru has
acted inconsistently with the provisions of the Agreement on Agriculture and the GATT 1994, Peru
has nullified or impaired benefits accruing to Guatemala under those Agreements.16
1.10. With respect to Guatemala's request under the second sentence of Article 19.1 of the DSU,
the Panel did not consider it appropriate to suggest that the proper way of implementing its
recommendation would be through the elimination of the underlying mechanism for calculating
the additional duties. Pursuant to Article 19.1 of the DSU, and having found that Peru is acting
inconsistently with the provisions of the Agr eement on Agriculture and the GATT 1994, the Panel
recommended that Peru bring the challenged meas ure into conformity with its obligations under
those Agreements.
17
1.11. On 25 March 2015, Peru notified the Dispute Settlement Body (DSB), pursuant to
Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the
Panel Report and certain legal interpretations developed by the Panel, and filed a Notice of Appeal
and an appellant's submission pursuant to Rules 20 and 21, respectively, of the Working
Procedures for Appellate Review 18 (Working Procedures). On 30 March 2015, Guatemala notified
the DSB, pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of
law covered in the Panel Report and certain legal interpretations developed by the Panel, and filed
a Notice of Other Appeal and an other appellant's submission pursuant to Rule 23 of the Working
Procedures. On 13 April 2015, Peru and Guatemala each filed an appellee's submission. 19 On
15 April 2015, Brazil, Colombia, the European Un ion, and the United States each filed a
third participant's submission.20 On the same day, Argentina, China, El Salvador, Honduras, and
India each notified its intention to appear at the oral hearing as a third participant. 21 On 22 May
2015, Ecuador and Korea also notified the Secretariat of their intention to appear at the oral
hearing.22

12 Panel Report, para. 8.1.f.
13 Panel Report, para. 8.2.a.
14 Panel Report, para. 8.2.b.
15 Panel Report, para. 8.3.
16 Panel Report, para. 8.4.
17 Panel Report, paras. 8.7-8.8.
18 WT/AB/WP/6, 16 August 2010.
19 Pursuant to Rules 22 and 23(4) of the Working Procedures.
20 Pursuant to Rule 24(1) of the Working Procedures.
21 Pursuant to Rule 24(2) of the Working Procedures.
22 Ecuador and Korea each submitted its delegation list for the oral hearing to the Appellate Body
Secretariat and the participants and third participants in this dispute. For the purposes of this appeal, we have
interpreted these actions as notifications expressing the intention of Ecuador and Korea to attend the oral
hearing pursuant to Rule 24(4) of the Working Procedures.

1.12. The oral hearing in this appeal was held on 26-27 May 2015. The participants and four of
the third participants (Argentina, Brazil, Colombia, and India) made oral statements. The
participants and the third participants respon ded to questions posed by the Members of the
Appellate Body Division hearing this appeal.
1.13. By letter dated 22 May 2015, the Chair of the Appellate Body notified the Chair of the DSB
that the Appellate Body would not be able to circulate its Report in this appeal within the 60-day
period stipulated in Article 17.5 of the DSU, or within the 90-day period pursuant to the same
provision, and informed the Chair of the DSB that the Appellate Body report in this appeal would
be circulated no later than 20 July 2015.
23
2 ARGUMENTS OF THE PARTICIPANTS
2.1. The claims and arguments of the particip ants are reflected in their executive summaries,
provided to the Appellate Body pursuant to its communication on "Executive Summaries of Written
Submissions in Appellate Proceedings" and "Guidelines in Respect of Executive Summaries of
Written Submissions in Appellate Proceedings".
24 The Notices of Appeal and Other Appeal, and the
executive summaries of the participants' claims and arguments, are contained in Annexes A and B
of the Addendum to this Report, WT/DS457/AB/R/Add.1.
3 ARGUMENTS OF THE THIRD PARTICIPANTS
3.1. The arguments of Brazil, Colombia, the Euro pean Union, and the United States are reflected
in their executive summaries, provided to the Appellate Body pursuant to its communication on
"Executive Summaries of Written Submissions in Appellate Proceedings" and "Guidelines in
Respect of Executive Summaries of Written Submissions in Appellate Proceedings"
25, and are
contained in Annex C of the Addendum to this Report, WT/DS457/AB/R/Add.1.
4 ISSUES RAISED IN THIS APPEAL
4.1. The following issues are raised in this appeal:
a. with respect to Articles 3.7 and 3.10 of the DSU:
i. whether Peru's arguments that Guatemala acted inconsistently with Articles 3.7 and
3.10 of the DSU are "new claims" that are no t within the scope of this appeal (raised
by Guatemala); and
ii. whether the Panel erred in finding that there was "no evidence that Guatemala
brought these proceedings in a manner contrary to good faith" under Articles 3.7 and
3.10 of the DSU, and that there was, theref ore, "no reason for the Panel to refrain
from assessing the claims put forward by Guatemala" (raised by Peru);
b. with respect to the additional duties resulting from the PRS in connection with
Guatemala's claim that the measure at issue constitutes a "variable import levy" within
the meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture:
i. whether the Panel erred in its assessment of the "variability" of the measure at issue
(raised by Peru);

23 WT/DS457/9. The Chair of the Appellate Body explained that the Appellate Body had faced a
substantial workload in the first half of 2015, with several appeals proceeding in parallel, and that there was
overlap in the composition of the Divisions hearing these different appeals during this period. The Chair added
that, due to scheduling issues arising from these circumstances and the number and complexity of the issues
raised in this and concurrent appeal proceedings, together with the demands that these concurrent appeals
placed on the WTO Secretariat's translation services, and the shortage of staff in the Appellate Body Secretariat,
the Appellate Body would not be able to circulate its report in this dispute within the timeframe provided for in
Article 17.5 of the DSU.
24 WT/AB/23, 11 March 2015.
25 WT/AB/23, 11 March 2015.

ii. whether the Panel erred in its assessment of the "additional features" of the measure
at issue (raised by Peru); and
iii. whether the Panel failed to make an obje ctive assessment of the matter before it,
contrary to Article 11 of the DSU, by failing to properly compare the measure with
"ordinary customs duties" and "variable import levies" when examining Guatemala's
claim under Article 4.2 of the Agreement on Agriculture (raised by Peru);
c. with respect to the additional duties resulting from the PRS in connection with
Guatemala's claim that the measure at issue is an "other duty or charge" inconsistent
with the second sentence of Article II:1(b) of the GATT 1994:
i. whether the Panel erred in finding that the additional duties are not "ordinary
customs duties" under the first sentence of Article II:1(b) of the GATT 1994 on the
basis of its finding under Article 4.2 of the Agreement on Agriculture (raised by
Peru); and
ii. whether the Panel failed to make an obje ctive assessment of the matter before it,
contrary to Article 11 of the DSU, by fa iling to examine evidence submitted in
connection with Guatemala's claim under Article II:1(b) of the GATT 1994 (raised by
Peru);
d. with respect to the interpretation of Article 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994 in accordance with Article 31 of the Vienna Convention:
i. whether Peru's arguments that the Panel should have taken into account the FTA
between Peru and Guatemala and ILC Articles 20 and 45 under Article 31(3) of the
Vienna Convention are within the scope of this appeal (raised by Guatemala);
ii. whether the Panel erred by failing to take into consideration the FTA between Peru
and Guatemala as a "subsequent agreement between the parties regarding the
interpretation of the treaty" under Article 31(3)(a) of the Vienna Convention (raised
by Peru); and
iii. whether the Panel erred by failing to take into consideration the FTA between Peru
and Guatemala and ILC Articles 20 and 45 as "relevant rules of international law
applicable in the relations between the parties" under Article 31(3)(c) of the Vienna
Convention (raised by Peru);
e. whether the Panel erred in finding that, since the FTA between Peru and Guatemala had
not entered into force, it was not necessary for the Panel to rule on whether the parties
could, by means of the FTA, modify as betw een themselves their rights and obligations
under the WTO covered agreements (raised by Peru);
f. with respect to the additional duties resulting from the PRS in connection with
Guatemala's claim that the measure at issue constitutes a "minimum import price" or a
"similar border measure" within the mean ing of footnote 1 of Article 4.2 of the
Agreement on Agriculture:
i. whether the Panel erred in its interpretation of "minimum import prices", within the
meaning of footnote 1 of the Agreement on Agriculture, by adopting an excessively
narrow legal standard (raised by Guatemala);
ii. whether the Panel erred in finding that Peru's measure does not constitute a
"minimum import price" within the mean ing of footnote 1 of the Agreement on
Agriculture (raised by Guatemala);
iii. whether the Panel erred in its interpretation of "similar border measures", within the
meaning of footnote 1 of the Agreement on Agriculture, by conflating the legal
standard for "minimum import prices" with the legal standard for border measures
"similar" to "minimum import prices" (raised by Guatemala); and

iv. whether the Panel erred in finding that Peru's measure is not a border measure
"similar" to a "minimum import price" within the meaning of footnote 1 of the
Agreement on Agriculture (raised by Guatemala).
5 ANALYIS OF THE APPELLATE BODY
5.1 Background and overview of the measure at issue
5.1. Peru maintains a price range system (PRS)
26 that may result in the imposition of additional
duties or rebates on certain types of imported rice, sugar, maize, and milk. Peru applies the PRS in
addition to the tariffs that, pursuant to Ar ticle II:1 of the GATT 1994, Peru has bound at
68% ad valorem for the products subject to the PRS. 27 The PRS operates on the basis of the
difference between (i) a floor price and a ceiling price and (ii) a reference price. The floor and
ceiling prices are, respectively, averages of international prices in a specified international
market
28 o v e r a r e c e n t p a s t p e r i o d o f 6 0 m o n t h s .29 The reference price is an average of
international price quotations in the same international market over a recent past period of
two weeks.
30
5.2. The PRS imposes an additional duty on th e transaction value of imports when the reference
price is below the floor price. 31 The amount of the additional du ty is based on the difference
between the floor price and the reference price.32 The additional duties resulting from the PRS plus
Peru's ad valorem duties may not exceed Peru's bound tariff rate.33 The PRS also provides for tariff

26 Panel Report, para. 7.115 (referring to Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4)). The
parties disagree over the year in which the PRS was established. Peru maintains that it established a system of
specific duties in 1991 and has applied it ever since, and that the PRS is merely a revised system. Guatemala
rejects this assertion and maintains that Supreme Decree No. 115-2001-EF, from 2001, tacitly repealed the
1991 system of specific duties and established the PRS. (Panel Report, para. 7.101)
27 Panel Report, para. 7.166. Except for three tariff lines for maize, to which a 6% ad valorem tariff is
applied, Peru does not impose an ad valorem tariff on the products subject to the PRS. (Panel Report,
28 The relevant international market for each product is specified in Supreme Decree No. 115-2001-EF.
(Panel Report, paras. 7.128 and 7.136)
29 Before calculating the floor price, a confidence interval is applied to the monthly average free on
board (f.o.b.) prices, which are adjusted for inflation. Outlier values above and below the confidence interval
are discarded. The floor price is determined by calculating a new average with the values recorded within the
confidence interval. (Panel Report, paras. 7.129-7.131) The ceiling price is obtained by adding to the floor price
the standard deviation used to determine the confidence interval. (Panel Report, para. 7.132) Floor and ceiling
prices, expressed in f.o.b. terms, are converted into c.i.f. terms by applying the freight and insurance costs
specified in Annex V to Supreme Decree No. 115-2001-EF. (Panel Report, para. 7.133; Annexes II and V to
Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4), pp. 204889-204890)
30 The reference prices are converted into c.i.f. terms by applying the freight and insurance costs
specified in Annex V to Supreme Decree No. 115-2001-EF. (Panel Report, para. 7.137; Article 5 and Annex V
to Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4), pp. 204888 and204890).
31 Panel Report, para. 7.140; Annex III to Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4),
p. 204889. The PRS divides the tariff lines into "marker products" and "associated products". "Marker products"
are defined as products whose international prices are used for calculating the floor, ceiling, and reference
prices, while "associated products" are defined as products obtained by processing or mixing of marker
products or those that are capable of replacing a marker product for industrial use or consumption. Each of the
current four "marker products" corresponds respectively to a specific tariff line for maize, rice, sugar, and milk.
Thus, pursuant to the PRS, the floor and reference prices, and ultimately the additional duty, are only
calculated for each of the "marker products". The same additional duty applicable for each "marker product" is
then applied to their respective "associated products". (Panel Report, paras. 7.121-7.122 and 7.125;
Annexes I, II, and III to Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4))
32 The precise amount of the additional duty is the difference between the floor price and the reference
price multiplied by a factor associated with import costs. (Panel Report, paras. 7.140-7.141; Annex III to
Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4), p. 204889)
33 Panel Report, para. 7.142 (referring to Article 4 of Supreme Decree No. 153-2002-EF of
26 September 2002 (Panel Exhibit GTM-5) p. 147).

rebates when the reference price is higher than the ceiling price. 34 A detailed description of the
Panel's understanding of the scope and content of the PRS is set forth in the Panel Report.35
5.3. Guatemala filed a complaint against Peru claiming that Peru maintains: (i) "variable import
levies" and "minimum import prices", or "similar border measures", prohibited under footnote 1 of
Article 4.2 of the Agreement on Agriculture; and (i i) "other duties or charges" inconsistent with
Article II:1(b) of the GATT 1994. The Panel found th at the additional duties resulting from the PRS
are: (i) "variable import levies", or at least a "similar border measure", inconsistent with
Article 4.2 of the Agreement on Agriculture; and (i i) "other duties or charges" inconsistent with
Article II:1(b) of the GATT 1994. Peru and Guatemala have appealed the Panel's findings.
5.4. Peru and Guatemala disagree on whether the measure at issue is limited to only the
additional duties resulting from the PRS, or whether it also includes the PRS calculation
methodology to determine the additional duties. 36 Peru suggests that the Panel could not have
examined the PRS calculation methodology be cause it was outside the Panel's terms of
reference.37 In its request for the establishment of a panel, Guatemala identified the measure at
issue as "[t]he additional duty imposed by Peru on imports of certain agricultural products". 38
Guatemala also explained that, inter alia , this additional duty "is determined by using a
mechanism known as the 'Price Band System'[,] which … operates on the basis of
two components: (i) a band made up of a floor price and a ceiling price … [and] (ii) a c.i.f.
reference price".39 The PRS calculation methodology is thus included in Guatemala's request for
the establishment of a panel. Moreover, as the addi tional duties result from the operation of the
PRS, it is clear that the PRS calculation methodology is a key component of the system. We
therefore consider that the measure before the Panel comprised both the additional duties
resulting from the PRS and the PRS calculation methodology. 40 We refer below to the measure at
issue as the "additional duties resulting from the PRS" or the "additional duties".
5.2 Good faith under Articles 3.7 and 3.10 of the DSU
5.5. Peru appeals the Panel's conclusion that there was "no evidence that Guatemala brought
these proceedings in a manner contrary to good faith" under Articles 3.7 and 3.10 of the DSU. 41
According to Peru, Guatemala waived in the FTA 42 its right to challenge the PRS through the
WTO dispute settlement mechanism, and Guatemala thus acted contrary to its good faith
obligations under Articles 3.7 and 3.10 when it initiated the present proceedings. We begin by first
addressing Guatemala's contention that Peru's arguments in respect of good faith under Article 3.7
and 3.10 constitute "new arguments" or "new claims " that are not within the scope of this appeal.
We then proceed to consider whether panels and the Appellate Body may review a Member's
"exercise of its judgement as to whether action under these procedures would be fruitful" under
Article 3.7. Thereafter, we determine whether the Panel erred in concluding that there was

34 The tariff rebate is the difference between the reference price and the ceiling price multiplied by a
factor associated with import costs, and may not exceed "the sum payable by the importer as the ad valorem
duty and additional tariff surcharge corresponding to each product". (Panel Report, paras. 7.143 and 7.145
(referring to Article 8 of Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4)))
35 See Panel Report, paras. 7.97-7.167.
36 Peru did not raise any issues, in this respect, under Article 6.2 of the DSU before the Panel, nor on
appeal. Rather, in its appellant's submission, Peru argues that, when examining the "variability" of the
measure at issue in the context of Guatemala's claim under Article 4.2 of the Agreement on Agriculture, the
Panel confused the measure at issue with the methodology used to calculate the additional duty. Peru contends
that the measure at issue is limited to only the additional duties resulting from the PRS. (Peru's appellant's
submission, paras. 248-250) We also note that the Panel did not make any explicit finding on whether the PRS
calculation methodology falls within its terms of reference.
37 Peru's appellant's submission, paras. 248-251.
38 Panel Report, para. 7.98 (referring to Request for the Establishment of a Panel by Guatemala,
WT/DS457/2, p. 1).
39 Request for the Establishment of a Panel by Guatemala, WT/DS457/2, p. 1. In its request, Guatemala
also referred to the fact that the floor, ceiling, and reference prices vary periodically as a result of the
application of certain formulas to the changing international prices for the products in question. (Request for
the Establishment of a Panel by Guatemala, WT/DS457/2, pp. 1-2).
40 We further explain below that the Panel had to examine the PRS calculation methodology in order to
assess whether the additional duties resulting from the PRS are "variable import levies" within the meaning of
footnote 1 of Article 4.2 of the Agreement on Agriculture. (See para. 5.43 of this Report)
41 Panel Report, para. 8.1.a.
42 Peru refers mainly to paragraph 9 of Annex 2.3 to the FTA between Guatemala and Peru.

no evidence that Guatemala acted inconsistently with its good faith obligations under Articles 3.7
and 3.10.
5.2.1 Whether Peru advances new claims, arguments, or defences on appeal
5.6. Guatemala contends that, while Peru raised its challenge under Articles 3.7 and 3.10 of the
DSU before the Panel as an issue of jurisdiction, Peru advances this argument on appeal as a
substantive claim. In particular, Guatemala asserts that Peru had argued before the Panel that
Articles 3.7 and 3.10 were relevant to the issue of whether the Panel was " procedurally barred
from engaging in a substantive consideration of the claims made by Guatemala".
43 Guatemala
notes that Peru now states on appeal that "Peru does not consider that Guatemala is procedurally
barred from bringing a WTO claim against the PRS".
44 Guatemala thus argues that, "independently
of the question of the Panel's jurisdiction to hear Guatemala's claims, Peru appears to be
advancing new and wholly different 'claims' of its own that Guatemala has acted inconsistently
with Articles 3.7 and 3.10". 45 Guatemala maintains that Peru is not appealing a finding by the
Panel; rather, Peru's new "claim" is not an issue of law covered in the Panel Report or a legal
interpretation developed by the Panel within the meaning of Article 17.6 of the DSU. 46 Guatemala,
therefore, contends that Peru's "claim" on appe al that Guatemala has acted inconsistently with
Articles 3.7 and 3.10 of the DSU is "outside the competence of the Appellate Body to consider".47
5.7. At the oral hearing, Peru maintained that its arguments on appeal do not raise issues
different from those presented before the Panel and addressed in the Panel Report. According to
Peru, it never questioned Guatemala's right to bring a case to the WTO, but instead pointed out
that Articles 3.7 and 3.10 impose certain requirements that need to be met before Guatemala's
case can be considered on the merits.
48
5.8. In previous disputes, the Appellate Body has considered that "new arguments are not per se
excluded from the scope of appellate review, simply because they are new ."49 While, in principle,
new arguments are not excluded from the scope of appellate review, the ability of the
Appellate Body to consider new arguments is circumscribed by its mandate under Article 17 of the
DSU to address " issues of law covered in the panel report and legal interpretations developed by
the panel".
50 Thus, the Appellate Body has found that it would not be able to consider new
arguments if such arguments required it "to solicit, receive and review new facts", or if a new
argument did "not involve either an 'issue of law covered in the panel report' or 'legal

43 Guatemala's appellee's submission, para. 322. (emphasis added)
44 Guatemala's appellee's submission, para. 323 (quoting Peru's appellant's submission, para. 41). Peru
argued before the Panel that "Guatemala is not acting in good faith by having recourse to the WTO dispute
settlement procedure". In Peru's view, Guatemala committed an "abuse of right" when it initiated the
WTO dispute settlement proceedings challenging the PRS, which Guatemala expressly accepted in the FTA.
Further, Peru contended that Guatemala frustrated the object and purpose of the FTA within the meaning of
Article 18 of the Vienna Convention on the Law of Treaties, which gives expression to the principle of good
faith. Thus, Peru asserted that "the conditions laid down by the DSU for initiating a dispute settlement
proceeding are not met in this case", and consequently "request[ed] the Panel not to continue with the analysis
of Guatemala's claims". (Panel Report, Annex B-3, First Part of the Executive Summary of the Arguments of
Peru, para. 3.9)
45 Guatemala's appellee's submission, para. 324. (emphasis added) Peru argues on appeal that: (i) the
presumption of good faith enjoyed by Members can be rebutted; (ii) the legal status of the FTA had
no relevance to the Panel's task of determining whether Guatemala's use of the WTO dispute settlement
system to nullify a provision in the FTA was consistent with Articles 3.7 and 3.10 of the DSU; (iii) the Panel
incorrectly limited its analysis to the situation in which Guatemala expressly waived its right to challenge the
PRS before the WTO dispute settlement system, when waivers may be made explicitly or by necessary
implication; and (iv) Articles 20 and 45 of the International Law Commission's Articles on Responsibility of
States for Internationally Wrongful Acts (ILC Articles) support the position that Members may waive their rights
expressly or by necessary implication, which Guatemala had done in this case. (Peru's appellant's submission,
paras. 50, 54, 59, 67, and 69-92)
46 Guatemala's appellee's submission, para. 324.
47 Guatemala's appellee's submission, para. 324.
48 Peru's response to questioning at the oral hearing.
49 Appellate Body Report, Canada – Aircraft, para. 211. (emphasis added)
50 Emphasis added. See Appellate Body Reports, Canada – Aircraft, para. 211; US – FSC, paras. 102-
103.

interpretations developed by the panel'".51 Further, these principles have a due process dimension,
in that a party must be given a fair opportunity to defend itself adequately.52
5.9. The questions before us in this respect are: (i) whether Peru's arguments on appeal relate to
issues of law covered in the Panel Report and legal interpretations developed by the Panel; and
(ii) whether these arguments require consideration of new facts. Before the Panel, Peru argued
that Guatemala had not acted in good faith by "expressly accepting the [PRS] of Peru in the
bilateral FTA and then resorting to the WTO dispute settlement system".
53 Peru further contended
that "[g]ood faith is a requirement for initiating proceedings under the DSU, in accordance with the
provisions of Articles 3.7 and 3.10 of the DSU".54 Peru recognized that the FTA has not yet entered
into force, and, therefore, referred to Article 18 of the Vienna Convention on the Law of Treaties 55
(Vienna Convention) to assert that signatories could not act contrary to the object and purpose of
a treaty prior to its entry into force. On the basis of its reading of Article 18 of the Vienna
Convention and Articles 3.7 and 3.10 of the DSU, Peru maintained that "a claim that is inconsistent
with good faith cannot proceed."
56 Peru, therefore, requested the Panel "not to continue with the
analysis of Guatemala's claims".57
5.10. In its Report, the Panel discussed the following issues: (i) the presumption of good faith on
the part of Guatemala in exercising its judgement as to whether the initiation of this procedure
would be fruitful in accordance with Article 3.7 of the DSU 58; (ii) how to determine whether a
Member initiated a procedure in a manner contrary to good faith within the context of Article 3.10
of the DSU
59, including whether Guatemala "expressly wa ived the right to bring a case with
respect to the PRS or recognized the consistency of that measure with the WTO agreements" 60;
and (iii) the implication of the fact that the FTA had not yet entered into force vis-à-vis Article 18
of the Vienna Convention.61 The Panel found, among other things, that: (i) Guatemala's good faith
was presumed62; (ii) Peru's argument that Guatemala undertook in the FTA not to challenge the
PRS was limited by the undisputed fact that the FTA was not yet in force 63; (iii) the Panel was "not
convinced that the violation by a Member of the obligation contained in Article 18 of the Vienna
Convention with respect to a treaty that does not form part of the WTO covered agreements can
constitute evidence of lack of the good faith required by Articles 3.7 and 3.10" 64; and
(iv) determining the object and purpose of the FTA would go beyond the Panel's terms of
reference.
65 The Panel concluded that it found no evidence that Guatemala acted inconsistently
with its good faith obligations under Articles 3.7 and 3.10, and thus there was no reason for it to
refrain from assessing Guatemala's claims.66
5.11. On appeal, while "Peru does not consider that Guatemala is procedurally barred from
bringing a WTO claim against the PRS", Peru argues that "Guatemala's actions – using the

51 Appellate Body Report, US – FSC, paras. 102-103. Similarly, in US – COOL (Article 21.5 – Canada and
Mexico), the Appellate Body noted its report in US – FSC and declined to consider a new argument on appeal
that would have required it "to address legal issues quite different from those which confronted the [p]anel and
which may well [have] require[d] proof of new facts". (Appellate Body Reports, US – COOL (Article 21.5 –
Canada and Mexico), para. 5.349 (quoting Appellate Body Report, US – FSC, para. 103.))
52 Appellate Body Report, US – Gambling, para. 270. Moreover, the Appellate Body has also ruled that,
on appeal, "due process requires that the legal basis of a claim be sufficiently clear to allow an appellee to
respond effectively." (Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 177) In US –
COOL (Article 21.5 – Canada and Mexico), the Appellate Body also held that "[c]onsideration of a defence
raised for the first time at interim review would give rise to due process concerns." Thus, a "defence raised for
the first time" that would "require[] examination of an issue for which [the parties] have [not] provided specific
evidence or arguments" should likewise be excluded. (Appellate Body Reports, US – COOL (Article 21.5 –
Canada and Mexico), para. 5.379)
53 Panel Report, Annex B-3, First Part of the Executive Summary of the Arguments of Peru, para. 3.3.
54 Panel Report, Annex B-3, First Part of the Executive Summary of the Arguments of Peru, para. 3.5.
55 Done at Vienna, 23 May 1969, UN Treaty Series, Vol. 1155, p. 331.
56 Panel Report, Annex B-3, First Part of the Executive Summary of the Arguments of Peru, para. 3.7.
57 Panel Report, Annex B-3, First Part of the Executive Summary of the Arguments of Peru, para. 3.9.
58 Panel Report, para. 7.75.
59 Panel Report, para. 7.80.
61 Panel Report, paras. 7.88-7.92.
62 Panel Report, para. 7.75.
63 Panel Report, para. 7.88.
64 Panel Report, para. 7.92.
65 Panel Report, para. 7.92.
66 Panel Report, paras. 7.96 and 8.1.a.

WTO dispute settlement system to nullify a provis ion of the FTA – were contrary to Guatemala's
good faith obligations under DSU Article 3.7 and 3.10".67 Peru contends, among other things, that:
(i) the presumption of good faith can be rebutted 68; (ii) Members may waive their rights explicitly
or by necessary implication 69; and (iii) the fact that the FTA has not yet entered into force is not
dispositive of the issue of good faith.70
5.12. Comparing Peru's arguments before the Panel and the Panel's consideration thereof with the
arguments raised by Peru on appeal, we find th at the arguments challenged by Guatemala as new
relate to the same legal issues that were before the Panel and were addressed in the Panel Report.
In particular, the questions both before the Panel and on appeal relate to the scope of Guatemala's
good faith obligations under the DSU, the content of the FTA and its effect on Guatemala's good
faith obligations, the legal significance of international instruments that have not yet entered into
force, and the extent to and manner in which Members may waive their rights to institute
WTO dispute settlement proceedings. Based on our review of the Panel Report and the
participants' submissions on appeal, we consider that, regardless of whether Peru's objections to
Guatemala's initiation of these proceedings befo re the Panel were viewed as procedural or
substantive, Peru's arguments on appeal relate to legal issues no different from those that were
before the Panel and are covered by the Panel's reasoning and findings in its Report. These
arguments relate to whether Guatemala acted inconsistently with its good faith obligations under
Articles 3.7 and 3.10 of the DSU when it instituted these proceedings after having allegedly waived
in the FTA, either explicitly or by necessary implication, its right to have recourse to WTO dispute
settlement. Thus, these arguments do not constitute new "claims", as Guatemala alleges, or a new
"defence" raised by Peru as the respondent.
5.13. In addition, while Guatemala contends that we would be required to consider new facts in
addressing Peru's arguments
71, it does not appear that Peru's arguments directly relating to good
faith under Articles 3.7 and 3.10 involve new factual elements.72
5.14. In the light of the above, we find that Peru's arguments on appeal that Guatemala acted
inconsistently with Articles 3.7 and 3.10 of the DS U pertain to issues of law covered in the Panel
Report and legal interpretations developed by the Panel. Since these arguments relate to the same
issues that were before and considered by the Panel, they do not constitute "new claims" or a
"new defence". Moreover, since Peru's arguments on good faith under Articles 3.7 and 3.10 relate
to the same legal issues and do not require us to solicit, receive, and review new facts, we are of
the view that such arguments do not adversely affect Guatemala's due process rights, and are
thus properly raised on appeal.
5.2.2 Whether panels and the Appellate Body have the authority to examine a Member's
exercise of its judgement under Article 3.7 of the DSU
5.15. Citing Appellate Body jurisprudence, the Panel stated that good faith must be presumed,
and in principle it is not for a panel to question a Member's exercise of its judgement as to whether
initiation of a procedure would be fruitful.
73 Thus, the Panel concluded that it "d[id] not find any
support either in the text of Article 3.7 of the DSU or in panel or Appellate Body reports that would

67 Peru's appellant's submission, para. 41. (fn omitted)
68 Peru's appellant's submission, para. 50.
69 Peru's appellant's submission, subheading III.b.1. On this matter, Peru also argues that
ILC Articles 20 and 45 (on "Consent" to an act of another state as precluding wrongfulness and the "Loss of the
right to invoke responsibility") provide additional support for Peru's contention that WTO Members may waive
their rights under the DSU both expressly and by necessary implication. (Peru's appellant's submission,
subheading III.b.1.b)
70 Peru's appellant's submission, subheading III.b.
71 Guatemala's appellee's submission, paras. 49-51 and 382.
72 According to Guatemala, these factual elements include statements or practice of WTO Members
within and outside the WTO; facts relating to the negotiating history or circumstances of the conclusion of the
Vienna Convention, or evidence of domestic practice and judicial decisions in the respective jurisdictions of
WTO Members, especially as far as ILC Articles 20 and 45 are concerned. (Guatemala's appellee's submission,
paras. 49 and 382) Guatemala, however, does not specifically identify any factual elements as far as Peru's
arguments regarding good faith and Articles 3.7 and 3.10 of the DSU are concerned.
73 Panel Report, para. 7.75 (referring to Appellate Body Report, Mexico – Corn Syrup (Article 21.5 –
US), para. 74).

allow it … to do anything other than presume that Guatemala duly exercised its judgement as to
whether the initiation of this procedure would be fruitful."74
5.16. Peru argues on appeal that, contrary to the Panel's ruling, dispute settlement panels have
the authority to determine whether WTO Members ha ve brought a claim contrary to the principle
of good faith. 75 In Peru's view, the presumption of good faith can be rebutted. 76 In response,
Guatemala contends that, while there may be exceptional cases in which it may be clear that a
Member failed to exercise its judgement, it is hard to envisage a situation in which a panel would
be in a position to conclude that a Member did so, and there is no basis in the DSU for panels to
engage in such an exercise.
77
5.17. Article 3.7 of the DSU reads in relevant part:
Before bringing a case, a Member shall exercise its judgement as to whether action
under these procedures would be fruitful. The aim of the dispute settlement
mechanism is to secure a positive solution to a dispute. A solution mutually acceptable
to the parties to a dispute and consistent with the covered agreements is clearly to be
preferred.
5.18. The Appellate Body has previously held that Members enjoy discretion in deciding whether
to bring a case, and are thus expected to be "large ly self-regulating" in deciding whether any such
action would be "fruitful".
78 The "largely self-regulating" nature of a Member's decision to bring a
dispute is "borne out by Article 3.3, which provid es that the prompt settlement of situations in
which a Member, in its own judgement , considers that a benefit accruing to it under the covered
agreements is being impaired by a measure taken by another Member is essential to the effective
functioning of the WTO". 79 Moreover, the Appellate Body has interpreted the first sentence of
Article 3.7 as "reflect[ing] a basic principle that Members should have recourse to WTO dispute
settlement in good faith, and not frivolously set in motion the procedures contemplated in the
DSU."
80
5.19. In our view, although the language of the first sentence of Article 3.7 of the DSU states that
"a Member shall exercise its judgement "81, the considerable deference accorded to a Member's
exercise of its judgement in bringing a dispute is not entirely unbounded. For example, in order to
ascertain whether a Member has relinquished, by virtue of a mutually agreed solution in a
particular dispute, its right to have recourse to WTO dispute settlement in respect of that dispute,
greater scrutiny by a panel or the Appellate Body may be necessary. This was the issue before the
Appellate Body in EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , where it
ascertained whether a Member had relinquished its right to have recourse to the WTO dispute
settlement mechanism. In that case, the Appellate Body had to determine whether that Member
was precluded from initiating compliance proceedings.
82 In this dispute, Peru alleges that
Guatemala waived in the FTA its right to have re course to WTO dispute settlement in respect of
the PRS, and consequently acted contrary to good faith when it initiated the present proceedings.
Thus, in assessing whether Guatemala acted in conformity with its good faith obligations under
Articles 3.7 and 3.10 of the DSU, we address below the issue of whether Guatemala has waived or
relinquished its right to challenge the PRS before the WTO dispute settlement mechanism.

74 Panel Report, para. 7.75.
75 Peru's appellant's submission, para. 44.
76 Peru's appellant's submission, para. 50.
77 Guatemala's appellee's submission, paras. 344-345.
78 Appellate Body Report, EC – Bananas III, para. 135.
79 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , para. 211.
(emphasis added)
80 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 73.
81 Emphasis added.
82 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US), para. 217.

5.2.3 Whether the Panel erred in finding th at there was no evidence that Guatemala
brought these proceedings in a manner contra ry to good faith under Articles 3.7 and
3.10 of the DSU
5.20. The Panel stated that it would base its an alysis on the question of "whether Guatemala,
before engaging in this procedure, expressly waived the right to bring a case with respect to the
PRS or recognized the consistency of that measure with the WTO agreements".83 The Panel did not
"consider it appropriate to make a general statement intended to cover all possible situations in
which it might be found that a Member engaged in a procedure in the absence of good faith". 84 It
did not find any reason to take other situations into consideration, given that no evidence
suggested that Guatemala had engaged in this procedure with the intention of causing injury to
another Member, or impairing its rights.
85 The Panel, however, did not ultimately examine whether
the FTA contained a waiver of Guatemala's right to initiate WTO dispute settlement proceedings.
Instead, the Panel reasoned that Peru's argume nt that paragraph 9 of Annex 2.3 to the FTA
contained Guatemala's undertaking not to challenge the PRS was limited by the undisputed fact
that the FTA was not in force.86 Further, the Panel stated that it was not convinced that an alleged
violation by a Member of Article 18 of the Vienna Convention – which imposes an obligation not to
defeat the object and purpose of a treaty not yet in force – with respect to a treaty that is not a
WTO covered agreement could constitute lack of good faith under Articles 3.7 and 3.10 of the
DSU.87
5.21. Peru argues on appeal that the Panel failed to interpret Articles 3.7 and 3.10 of the DSU
correctly when it limited its analysis to the situation in which Guatemala "expressly waived the
right to bring a case with respect to the PRS or recognized the consistency of that measure with
the WTO agreements". 88 According to Peru, rights under the WTO may be "waived (or modified)
expressly or by necessary implication, provided that the language in the FTA reveals clearly that
the parties intended to relinquish their rights." 89 Peru contends that Articles 20 and 45 of the
International Law Commission's Articles on Responsibility of States for Internationally Wrongful
Acts
90 (ILC Articles) provide additional support for this interpretation. 91 Peru asserts that
Guatemala "waived its right explicitly" when Guatemala agreed in the FTA that Peru may maintain
the PRS. 92 Peru further argues that, alternatively, Guatemala waived its rights by necessary
implication since the WTO-consistency of the PRS had been the "subject of disagreement" between
Peru and Guatemala, and they had agreed in the FTA that Peru may maintain its PRS, with the FTA
prevailing over WTO agreements in the event of an inconsistency.93
5.22. In response, Guatemala argues that the Pane l took account of the possibility that a waiver
of rights may be made explicitly or by necessary implication. 94 Thus, the basis of Peru's appeal is
merely its disagreement with how the Panel assessed the evidence in reaching the conclusion that
the FTA does not contain a waiver. 95 Moreover, Guatemala argues that Peru's arguments on the
ILC Articles relating to valid consent and waiver do not add anything to Peru's case, given the
absence of any dispute as to whether a waiver may be made both explicitly or by necessary
implication.96

84 Panel Report, para. 7.84.
85 Panel Report, para. 7.84.
86 Panel Report, para. 7.88.
87 Panel Report, para. 7.92.
89 Peru's appellant's submission, para. 67.
90 ILC Articles of Responsibility of States for Internationally Wrongful Acts, adopted by the ILC at its
fifty-third session, in 2001, published in Yearbook of the International Law Commission, 2001, Vol. II,
Part Two. See also UN Resolution 65/19 of 6 December 2010.
91 Peru's appellant's submission, para. 69.
92 Peru's appellant's submission, para. 89 (emphasis omitted). Peru contends that Guatemala had
agreed to the continued application of the PRS in paragraph 9 of Annex 2.3 to the FTA, which provides that
"Peru may maintain its Price Range System … with regard to the products subject to the application of the
system marked with an asterisk (*) in column 4 of Peru's Schedule as set out in this Annex".
93 Peru's appellant's submission, para. 92.
94 Guatemala's appellee's submission, paras. 368-369 and 381.
95 Guatemala's appellee's submission, para. 371.
96 Guatemala's appellee's submission, paras. 380-381.

5.23. Article 3.7 of the DSU reads, in relevant part:
Before bringing a case, a Member shall exercise its judgement as to whether action
under these procedures would be fruitful. The aim of the dispute settlement
mechanism is to secure a positive solution to a dispute. A solution mutually acceptable
to the parties to a dispute and consistent with the covered agreements is clearly to be
preferred.
5.24. Article 3.10 of the DSU reads, in relevant part:
It is understood that requests for conciliation and the use of the dispute settlement
procedures should not be intended or considered as contentious acts and that, if a
dispute arises, all Members will engage in these procedures in good faith in an effort
to resolve the dispute.
5.25. In this dispute, we are called upon to determine whether Guatemala acted contrary to good
faith under Articles 3.7 and 3.10 of the DSU on account of the alleged relinquishment of its right to
challenge the PRS before the WTO dispute settlement mechanism. In EC – Bananas III
(Article 21.5 – Ecuador II / Article 21.5 – US) , the Appellate Body determined whether the
Understandings on Bananas
97, which were notified to the DSB collectively as "a mutually agreed
solution"98, contained a waiver by the parties of their right to have recourse to compliance
proceedings under Article 21.5 of the DSU. 99 The Appellate Body held that "the relinquishment of
rights granted by the DSU cannot be lightly assumed", and that "the language in the
Understandings must clearly reveal that the parties intended to relinquish their rights".
100 Further,
the Appellate Body emphasized that "irrespective of the type of proceeding, if a WTO Member has
not clearly stated that it would not take legal action with respect to a certain measure, it cannot be
regarded as failing to act in good faith if it challenges that measure." 101 Thus, while we do not
exclude the possibility of articulating the relinquishment of the right to initiate WTO dispute
settlement proceedings in a form other than a waiv er embodied in a mutual ly agreed solution, as
in EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , any such relinquishment must
be made clearly. In any event, in our view, a Member's compliance with its good faith obligations
under Articles 3.7 and 3.10 of the DSU should be ascertained on the basis of actions taken in
relation to, or within the context of, the rules and procedures of the DSU. Thus, we proceed to
examine in this dispute whether the participants cl early stipulated the relinquishment of their right
to have recourse to WTO dispute settlement by means of a "solution mutually acceptable to the
parties" that is consistent with the covered agreements.
102
5.26. Contrary to what Peru claims 103, it does not appear that – for purposes of the DSU – the
FTA, and in particular paragraph 9 of Annex 2.3, constitutes a solution mutually acceptable to both
parties within the meaning of Article 3.7 of the DS U. Aside from the fact that Peru and Guatemala
negotiated the FTA before the initiation of the present dispute, the DSU emphasizes that "[a]
solution mutually acceptable to the parties to a dispute" must be "consistent with the covered

97 Understanding on Bananas between the European Communities and the United States signed on
11 April 2001 (WT/DS27/59, G/C/W/270; WT/DS27/58, Enclosure 1); and Understanding on Bananas between
the European Communities and Ecuador signed on 30 April 2001 (WT/DS27/60, G/C/W/274; WT/DS27/58,
Enclosure 2).
98 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , para. 8
(quoting European Communities – Regime for the Importation, Sale and Distribution of Bananas, Notification of
Mutually Agreed Solution, WT/DS27/58, 2 July 2001).
99 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , para. 217.
100 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , para. 217.
(fn omitted)
101 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , para. 228.
(emphasis added)
102 Article 3.5 of the DSU states that "[a]ll solutions to matters formally raised under the consultation
and dispute settlement provisions of the covered agreements, including arbitration awards, shall be consistent
with those agreements and shall not nullify or impair benefits accruing to any Member under those
agreements, nor impede the attainment of any objective of those agreements." The third sentence of
Article 3.7 provides that "[a] solution mutually acceptable to the parties to a dispute and consistent with the
covered agreements is clearly to be preferred."
103 Peru's appellant's submission, para. 51. Peru contends that the parties to the FTA had already
reached a "positive solution" within the meaning of Article 3.7 of the DSU when they agreed in the FTA that
Peru may maintain its PRS.

agreements". As we have found elsewhere in this Report 104, the additional duties resulting from
the PRS are inconsistent with Article 4.2 of the Ag reement on Agriculture and Article II:1(b) of the
GATT 1994. Moreover, as discussed in more detail in section 5.3.3.2, the participants have raised
conflicting arguments on how to read paragraph 9 of Annex 2.3 to the FTA, which provides that
"Peru may maintain its [PRS]", in the context of other relevant provisions of the FTA 105, so that
there appears to be ambiguity as to whether even the FTA itself, regardless of its legal status,
allows Peru to maintain the PRS if it is found to be WTO-inconsistent.
106
5.27. Further, Peru recognizes that Guatemala is not "procedurally barred from bringing a
WTO claim against the PRS ".107 Moreover, Article 15.3 of the FTA provides that, "[i]n the event of
any dispute that may arise under this Treaty or under another free trade agreement to which the
disputing Parties are party or the WTO Agreement, the complaining Party may choose the forum
for settling the dispute."
108 Thus, even from the perspective of the FTA, parties to the FTA have
the right to bring claims under the WTO covered agreements to the WTO dispute settlement
system.
5.28. Based on the foregoing discussion, we do not consider that a clear stipulation of a
relinquishment of Guatemala's right to have recourse to the WTO dispute settlement system exists
in this case in relation to, or within the context of, the DSU. We reach the above findings
irrespective of the status of the FTA as not being ratified by both parties.
109 Consequently, we do
not see how Guatemala could be considered as havi ng acted contrary to its good faith obligations
under Articles 3.7 and 3.10 of the DSU when it initiated these proceedings to challenge the
consistency of the PRS with the WTO covered agreements. Therefore, we uphold the Panel's
finding in paragraphs 7.96 and 8.1.a of the Pa nel Report, that there is "no evidence that
Guatemala brought these proceedings in a manner contrary to good faith".
5.3 Peru's appeal: Article 4.2 of the Agreem ent on Agriculture and Article II:1(b) of the
GATT 1994
5.29. Peru challenges the Panel's interpretation and application of Article 4.2 of the Agreement on
Agriculture and Article II:1(b) of the GATT 1994. We examine these aspects of Peru's appeal in
sections 5.3.1 and 5.3.2 below. In addition, Peru claims that the Panel erred in its interpretation of
Article 4.2 of the Agreement on Agriculture by fa iling to take into account the FTA between Peru
and Guatemala and ILC Articles 20 and 45, in accordance with Article 31(3) of the Vienna
Convention. We examine the aspects of Peru's appe al concerning the FTA and the ILC Articles in
section 5.3.3.

104 See sections 5.3.1and 5.3.2of this Report.
105Paragraph 9 of Annex 2.3 to the FTA provides:
Peru may maintain its Price Range System, established in Supreme Decree No. 1152001EF and
the amendments thereto, with regard to the products subject to the application of the system
marked with an asterisk (*) in column 4 of Peru's Schedule as set out in this Annex.
Article 1.3 of the FTA provides:
1. The Parties confirm their existing mutual rights and obligations under the WTO Agreement and
other agreements to which they may be parties.
2. In the event of any inconsistency between this Treaty and the agreements referred to in
paragraph 1, this Treaty shall prevail to the extent of the inconsistency, unless otherwise
provided in this Treaty.
106 While Article 3.7 of the DSU acknowledges that parties may enter into a mutually agreed solution, we
do not consider that Members may relinquish their rights and obligations under the DSU beyond the settlement
of specific disputes. In this respect, we recall that Article 23 of the DSU mandates that "[w]hen Members seek
the redress of a violation of obligations or other nullification or impairment of benefits under the covered
agreements or an impediment to the attainment of any objective of the covered agreements, they shall have
recourse to, and abide by, the rules and procedures of this Understanding."
107 Peru's appellant's submission, para. 41. (emphasis added)
109 Given our conclusion that Guatemala has not clearly waived its right to have recourse to these
dispute settlement proceedings, we see no reason to address further Peru's arguments that ILC Articles 20 and
45 provide additional support for its argument that a WTO Member may waive its rights under the DSU
explicitly or by necessary implication. In addition, in view of the ambiguity as to whether the FTA itself allows
Peru to maintain the PRS if it is found to be WTO-inconsistent, we also do not see a reason to engage further
with Peru's argument that, by agreeing in the FTA to the maintenance of the PRS and thereafter challenging it
in the present proceedings, Guatemala acted inconsistently with its obligation under Article 18 of the Vienna
Convention not to defeat the object and purpose of the treaty. We note that Peru has neither elaborated on the
object and purpose of the FTA, nor demonstrated how maintaining the PRS forms part thereof.

5.3.1 Article 4.2 of the Agreement on Agriculture – variable import levies
5.30. The Panel found that the additional duti es resulting from the PRS are "variable import
levies", or at least "similar border measures", within the meaning of footnote 1 of Article 4.2 of the
Agreement on Agriculture, and that, by maintaining them, Peru is acting inconsistently with
Article 4.2.
110 Peru challenges the Panel's findings, making three main claims of error. First, Peru
contends that the Panel erred in its assessment of the "variability" of the measure at issue. 111
Second, Peru contends that the Panel erred in its assessment of the "additional features" of the
measure at issue.112 Finally, Peru claims that the Panel acted inconsistently with Article 11 of the
DSU by failing to properly compare the measure at issue with "ordinary customs duties" and
"variable import levies" when examining Guatemal a's claim under Article 4.2 of the Agreement on
Agriculture.
113 Peru requests us "to reverse and declare moot and with no legal effect" the Panel's
finding that the additional duties resulting from the PRS constitute "variable import levies", or a
border measure "similar" to "variable import levies", within the meaning of footnote 1, and are
thus inconsistent with Article 4.2.
114 Below, we summarize the Panel's interpretation and
application of Article 4.2 of the Agreement on Agriculture at issue, and set out our understanding
of certain issues relating to the interpretation of Article 4.2. Thereafter, we examine each of Peru's
claims.
5.3.1.1 The Panel's findings
5.31. Article 4.2 and footnote 1 of the Agreement on Agriculture provide:
Members shall not maintain, resort to, or revert to any measures of the kind which
have been required to be converted into ordinary customs duties 1, except as
otherwise provided for in Article 5 and Annex 5.
Article 4.2 of the Agreement on Agriculture. Guatem ala argued that the additional duties resulting
from the PRS constitute prohibited "variable import levies", or a prohibited "similar border
measure", within the meaning of footnote 1 of Article 4.2 because the measure at issue:
(i) exhibits inherent variability; (ii) lacks transparency and predictability; and (iii) obstructs the
transmission of international price developments to Peru's domestic market.
116 Peru responded
that Article 4.2 is not applicable because the meas ure at issue is an ordinary customs duty, and is
thus permissible provided the additional duties do not exceed Peru's bound rate for the relevant
products. Peru also argued that the measure at issue does not exhibit characteristics of a "variable
import levy", or a "similar border measure".
117

110 Panel Report, paras. 7.352, 7.372, and 8.1.d.
111 Peru's appellant's submission, paras. 237-256.
112 Peru's appellant's submission, paras. 257-289.
113 Peru's appellant's submission, paras. 290-295.
114 Peru's appellant's submission, para. 297 (referring to Panel Report, paras. 7.316, 7.321, 7.324,
7.325, 7.328, 7.334-7.340, 7.345-7.347, 7.349, 7.350-7.352, 7.371-7.374, 7.526-7.528, 8.1.b, 8.1.d, and
8.1.f). In addition, should we find that the measure at issue is of the type prohibited by Article 4.2 of the
Agreement on Agriculture, Peru requests us to "find that the application of the Article 4.2 obligation in light of
the facts in this case must lead to the conclusion that Peru did not act inconsistently with this provision."
(Peru's appellant's submission, para. 298) We examine this aspect of Peru's request in section 5.3.3 below,
together with Peru's arguments concerning the impact that the FTA between Peru and Guatemala should have
in the assessment of Guatemala's claims under Article 4.2.
115 Emphasis added.
116 Panel Report, paras. 7.169-7.170, 7.172, 7.181, and 7.193.
117 Panel Report, paras. 7.211, 7.214-7.219, 7.224-7.226, 7.230-7.233, and 7.235-7.239.

5.33. The Panel began its analysis by setting out its understanding of "variable import levies" in
footnote 1 of the Agreement on Agriculture. 118 The Panel noted that "variability" within the
meaning of footnote 1 and Article 4.2 of the Agr eement on Agriculture requires that the measure
itself, as a mechanism, impose the variability of the duties, and that variability will be inherent in a
measure if it incorporates a scheme or formula that causes levies to change automatically and
continuously.119 Furthermore, the Panel noted that certain additional features may differentiate
"variable import levies" from "ordinary customs duties". These features include a lack of
transparency and predictability as co mpared to an ordinary customs duty. 120 The Panel noted that
the additional features "may help to determine th e type of measure in question when compared to
an ordinary customs duty, but [they do] not constitute a necessary condition for qualifying the
measure as a 'variable import levy'".
121
5.34. The Panel then turned to the relationship between "variable import levies" and "ordinary
customs duties". The Panel stated that, if a measure is a "variable import levy" or a "similar border
measure" that has been required to be converted into an "ordinary customs duty", it cannot be an
"ordinary customs duty". Thus, if a panel finds that a measure is one of those listed in footnote 1
of the Agreement on Agriculture, it may conclude that such a measure is not an ordinary customs
duty.
122
5.35. Turning to the measure at issue, the Panel noted that the PRS includes a series of steps and
mathematical formulas for calculating the ceiling and floor prices every six months, and the
reference prices every two weeks, and that they ma y result in the imposition of additional duties,
or granting of tariff rebates.
123 On this basis, the Panel found that the PRS, as a mechanism,
contains a scheme or formula that causes and ensures automatic and continuous revision of the
applicable duties or rebates 124, and thus the additional duties resulting from the PRS are "an
inherently variable measure".125 In addition, the Panel noted that the PRS exhibits a certain degree
of transparency and predictability in the way in which the additional duties are calculated, making
it possible for private operators to predict with a certain margin of error the additional duties for a
particular period. Nevertheless, the Panel found th at the PRS lacks transparency and predictability
regarding the level of duties when compared to the transparency and predictability afforded by
ordinary customs duties.
126 Finally, the Panel noted that the structure, design, and operation of the
PRS show that the resulting additional duties act in such a way that they may distort the prices of

118 Panel Report, paras. 7.273-7.281 (recalling the objectives of the Agreement on Agriculture and the
scope of Article 4.2 of the same Agreement; and quoting Appellate Body Report, Chile – Price Band System,
paras. 196, 200, 201, 212, 216, 217, 219, 221, and 227).
119 Panel Report, para. 7.287 (referring to Appellate Body Reports, Chile – Price Band System,
paras. 233-234; Chile – Price Band System (Article 21.5 – Argentina), paras. 155-158; and Panel Report, Chile
– Price Band System (Article 21.5 – Argentina), para. 7.28). The Panel also stated that "[a]n import levy that
shows the inherent variability resulting from a scheme or formula that causes and ensures that the measure
changes automatically and continuously is 'variable', not only in the sense that it varies or may vary, but even
more so because it is a measure 'highly inclined or likely to vary'." (Panel Report, para. 7.288. See also
paras. 7.316 and 7.320)
120 Panel Report, para. 7.291 (referring to Appellate Body Report, Chile – Price Band System,
para. 234).
121 Panel Report, para. 7.292. See also para. 7.290 (referring to Appellate Body Report, Chile – Price
Band System (Article 21.5 – Argentina), para. 156). In addition, the Panel addressed the meaning of "similar
border measures" in footnote 1 of the Agreement on Agriculture. Recalling the Appellate Body in past cases,
the Panel explained that it is necessary to examine whether a measure, in its particular features, including its
structure, design, and effects, shares sufficient features with the category of prohibited measures in footnote 1
to resemble, or be of the same nature or kind, and thus be prohibited by Article 4.2 of the Agreement on
Agriculture. (Panel Report, paras. 7.297-7.305)
122 Panel Report, paras. 7.306-7.307 (referring to Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), paras. 167 and 171).
123 The Panel also noted that it is undisputed that the additional duties resulting from the PRS are border
measures. (Panel Report, para. 7.315)
124 Panel Report, para. 7.321.
125 Panel Report, para. 7.325.
126 Panel Report, paras. 7.334 and 7.340. The Panel noted that "[t]he fact that specific additional duties
are applied on the basis of an average reference price which changes every fortnight, rather than on the value
or the volume of the imported goods, entails a systemic lack of transparency and predictability." (Panel Report,
para. 7.338)

imports subject to the PRS and limit the transmission of international prices to Peru's domestic
market127, and thus operate differently from ordinary customs duties.128
5.36. The Panel considered that the additional du ties resulting from the PRS constitute "variable
import levies" or a "similar border measure" and, therefore, a measure other than "ordinary
customs duties". Accordingly, the Panel concluded that, in maintaining this measure, Peru is acting
inconsistently with Article 4.2 of the Agreement on Agriculture.129
5.3.1.2 Article 4.2 of the Agreement on Agriculture
5.37. Peru's appeal requires us to interpret Article 4.2 of the Agreement on Agriculture. The
preamble of the Agreement on Agriculture states that a key objective of that Agreement is "to
establish a fair and market-oriented agricultural trading system", and to initiate a reform process
"through the negotiation of commitments on support and protection and through the
establishment of strengthened and more operationally effective GATT rules and disciplines".
130 The
preamble further states that, to achieve this objective, it is necessary "to provide for substantial
progressive reductions in agricultural support and protection … resulting in correcting and
preventing restrictions and distortions in world agricultural markets," through achieving "specific
binding commitments in [inter alia] market access".
131
5.38. Part III of the Agreement on Agriculture se rves to correct and prevent certain restrictions
and distortions of trade in agricultural products. It consists of Article 4 on market access and
Article 5 on special safeguard provisions. The Appellate Body has observed that "Article 4 of the
Agreement on Agriculture is appropriately viewed as the legal vehicle for requiring the conversion
into ordinary customs duties of certain market access barriers affecting imports of agricultural
products."
132 The Appellate Body has explained the origin and function of Article 4 as follows:
During the course of the Uruguay Round, negotiators identified certain border
measures which have in common that they restrict the volume or distort the price of
imports of agricultural products. The negoti ators decided that these border measures
should be converted into ordinary customs duties, with a view to ensuring enhanced
market access for such imports. Thus, they envisioned that ordinary customs duties
would, in principle, become the only form of border protection. As ordinary customs
duties are more transparent and more easily quantifiable than non-tariff barriers, they
are also more easily compared between trading partners, and thus the maximum
amount of such duties can be more easily reduced in future multilateral trade
negotiations. The Uruguay Round negotiators agreed that market access would be
improved – both in the short term and in the long term – through bindings and
reductions of tariffs and minimum access requirements, which were to be recorded in
Members' Schedules.
133

127 The Panel stated that, in the short term, the system is designed to prevent any fall in prices from
being transmitted to Peru's domestic market, as any change in international prices occurring during the
six months in which the floor price is in effect will not be reflected in the price at which imports may enter
Peru's market. If there is a fall in international prices, leading to a fall in the reference price, the PRS increases
the resulting additional duties in the same amount as the fall in the average reference price, thereby covering
the difference between the reference price and the floor price. In the medium term, the PRS may also distort
the transmission of international prices to the domestic market because a decrease in the floor price will be
much slower than that in the reference price and will be delayed by up to six months. If decreasing monthly
prices fall outside the confidence interval and are eliminated, it is even possible that none of them will be
incorporated into the floor price, whereas no value is omitted from the average reference price. (Panel Report,
paras. 7.345-7.346)
128 Panel Report, para. 7.349. At the end of its analysis, the Panel found that the additional duties
resulting from the PRS, by their structure, design, and operation, and in their particular features, share
sufficient features with "variable import levies" to be considered as a border measure "similar" to a "variable
129 Panel Report, paras. 7.352, 7.371-7.372, and 8.1.d.
130 Agreement on Agriculture, preamble, recital 2.
131 Agreement on Agriculture, preamble, recitals 3 and 4. See also Appellate Body Report, Chile – Price
Band System, para. 196.
132 Appellate Body Reports, Chile – Price Band System, para. 201; Chile – Price Band System
133 Appellate Body Report, Chile – Price Band System, para. 200.

5.39. Article 4.2 of the Agreement on Agricultur e prohibits Members from maintaining, resorting
to, or reverting to, "any measures of the kind which have been required to be converted into
ordinary customs duties". 134 Footnote 1 provides a list of measures covered by the obligation
under Article 4.2. The various measures identified in footnote 1 "have in common that they restrict
the volume or distort the price of imports of agricultural products" 135 and, therefore, frustrate a
key objective of the Agreement on Agriculture, namely, "to achieve improved market access
conditions for imports of agricultural products by permitting only the application of ordinary
customs duties".136 Some of the measures specifically identified in footnote 1 entail the payment of
duties at the border, while others do not. The mere fact that a measure results in the payment of
duties that take the same form as ordinary customs duties does not, by itself, mean that the
measure falls outside the scope of footnote 1.137 Thus, in order to determine whether a measure is
among the "measures of the kind which have been required to be converted into ordinary customs
duties", it may be necessary to conduct an in-depth examination of the design and structure of the
measure itself, as well as its operation, in the light of the relevant language in Article 4.2 and
footnote 1.138
5.40. Turning to the term "variable import levies", the Appellate Body has explained that a levy is
"variable" when it is "liable to vary". 139 This characteristic alone, however, would not suffice to
characterize a measure as a "variable import levy", given that an "ordinary customs duty" could
also fit this description. 140 Measures constituting "variable import levies" are "inherently" variable
because they "incorporate[] a scheme or formula that causes and ensures that levies change
automatically and continuously".
141 This is a necessary and key element of "variable import
levies".142 The presence of this underlying scheme or formula distinguishes "variable import levies"
from "ordinary customs duties", which may also be subject to variation, but through "discrete
changes in applied tariff rates that occur independently, and unrelated to such … scheme or
formula"
143, and usually as a result of separate administrative or legislative action.144
5.41. "Variable import levies" may also have additional features that compromise the objective of
the Agreement on Agriculture "to achieve improved market access conditions for imports of
agricultural products by permitting only the application of ordinary customs duties". 145 Such
additional features include "a lack of transparency and a lack of predictability in the level of duties
that will result from such measures" when compared to the level of transparency and predictability
of "ordinary customs duties".
146 These additional features are not independent or absolute
characteristics that a measure must display in order to be considered a "variable import levy" 147;

134 This requirement applies from the date of entry into force of the Marrakesh Agreement Establishing
the World Trade Organization (WTO Agreement), regardless of whether a Member in fact converted such
measures into ordinary customs duties. (See Appellate Body Reports, Chile – Price Band System, para. 212;
Chile – Price Band System (Article 21.5 – Argentina), para. 148)
135 Appellate Body Report, Chile – Price Band System, para. 200.
136 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 149.
137 Appellate Body Reports, Chile – Price Band System, para. 216; Chile – Price Band System
(Article 21.5 – Argentina), para. 149.
138 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 149.
139 Appellate Body Reports, Chile – Price Band System, para. 232; Chile – Price Band System
(Article 21.5 – Argentina), para. 155.
140 Appellate Body Reports, Chile – Price Band System, para. 232; Chile – Price Band System
(Article 21.5 – Argentina), para. 155.
141 Appellate Body Reports, Chile – Price Band System, para. 233; Chile – Price Band System
(Article 21.5 – Argentina), para. 155.
142 Appellate Body Report, Chile – Price Band System, para. 234.
143 Appellate Body Report, Chile – Price Band System, para. 233.
144 Appellate Body Reports, Chile – Price Band System, para. 233; Chile – Price Band System
(Article 21.5 – Argentina), para. 155. The Appellate Body further noted that the mere fact that the duties
resulting from the application of a measure take the form of ad valorem or specific rates, or are calculated on
the basis of value or volume of imports, does not, alone, imply that the underlying measure or scheme
generates "ordinary customs duties" and cannot be similar to one of the categories of measure identified in
footnote 1. (See Appellate Body Reports, Chile – Price Band System, paras. 274-279; Chile – Price Band
System (Article 21.5 – Argentina), para. 164)
145 Appellate Body Report, Chile – Price Band System, para. 234.
146 Appellate Body Reports, Chile – Price Band System, para. 234; Chile – Price Band System
(Article 21.5 – Argentina), para. 156.
147 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 156.

rather, the additional features may serve to confirm that a measure is "inherently variable". 148
Finally, the Appellate Body has stated that "variable import levies" may contribute to distorting the
prices of imports by impeding the transmission of international prices to the domestic market.
149
5.42. With this understanding in mind, we examine below Peru's claims of error in respect of the
Panel's interpretation of "variable import levies " in footnote 1 of Article 4.2 and the Panel's
application of this term to the measure at issue.
5.3.1.3 Peru's claim that the Panel erred in its assessment of the "variability" of the
measure at issue
5.43. Peru argues that the Panel's analysis of "variability" confuses the measure at issue – i.e. the
additional duties resulting from the PRS – with the methodology used to calculate the reference
price and the potential duty. 150 By contrast, Guatemala argues that drawing a distinction between
the additional duties and their calculation methodology would be inconsistent with the Panel's
terms of reference. 151 As explained above 152, we consider that the measure before the Panel
comprised both the additional duties resulting from the PRS and the PRS calculation methodology.
Moreover, "inherent variability" must be assessed on the basis of the overall configuration of a
measure and the extent to which the changes are automatic, continuous, and based on an
underlying mechanism or formula.
153 Thus, we consider that the Panel was in fact required to
examine the PRS calculation methodology when determining whether the additional duties
resulting from the PRS are "variable import levies".
5.44. Peru also argues that the additional duties at issue "do not necessarily change as a result of
the [PRS] calculation"154, and do not vary with any regularity. 155 According to Guatemala, the fact
that, in certain periods, the PRS did not give rise to a variable additional duty is not relevant to the
examination of the PRS and the resulting additional duties during the periods "when they were in
fact imposed".156
5.45. We first observe that Peru accepts that "[w]hat is inherent and automatic in the Peruvian
system is the operation of a formula that calcul ates the relevant values for the upper and lower
ranges and the reference prices." 157 We note that the PRS calculation methodology is a necessary
element in the calculation of the additional du ties resulting from the PRS. Duties that are
calculated based on an "inherently variable" system will themselves be "inherently variable".
5.46. Moreover, the Panel's finding of "variability " is not based on the frequency of change in the
duties at issue. Rather, the Panel based its finding on the fact that the PRS contains a scheme or
formula that causes and ensures automatic and continuous revision of the applicable duties. 158 In
addition, the Panel explicitly addressed the frequency of change, stating that "[t]he fact that the
result may be the same for some or several fortnightly periods as a result of applying the formulas
… does not mean that the PRS, as a mechanism, does not impose fortnightly variability of
duties."
159 The Appellate Body has noted that the freq uency of change effected by a measure may
be relevant in determining whether such measure is "variable", but "[n]o specific frequency of
change in resulting duties is required in order for a measure to be considered 'variable' within the

148 The Appellate Body has examined "transparency and predictability in tandem and in relation to the
level of resulting duties, observing that 'an exporter is less likely to ship to a market if that exporter does not
know and cannot reasonably predict what the amount of duties will be.'" (Appellate Body Report, Chile – Price
Band System (Article 21.5 – Argentina), para. 156 (quoting Appellate Body Report, Chile – Price Band System,
para. 234))
149 Appellate Body Reports, Chile – Price Band System, para. 234; Chile – Price Band System
(Article 21.5 – Argentina), para. 156.
150 Peru's appellant's submission, para. 248.
151 Guatemala's appellee's submission, para. 112.
153 Appellate Body Reports, Chile – Price Band System, para. 233; Chile – Price Band System
(Article 21.5 – Argentina), paras. 155 and 211.
154 Peru's appellant's submission, para. 250.
155 Peru's appellant's submission, paras. 249-251.
156 Guatemala's appellee's submission, para. 116. (emphasis omitted)
157 Peru's appellant's submission, para. 251.
158 Panel Report, para. 7.321.
159 Panel Report, para. 7.324.

meaning of footnote 1" of the Agreement on Agriculture. 160 That a measure produces duties that
vary with every transaction is not a necessary condition for a measure to be "variable".161
5.47. We also note Peru's objection to the Panel's statement that the variability imposed by the
PRS cannot be compared to the fact that "ordinary customs duties" may occasionally vary. Peru
argues that changes of both th e additional duties resulting fr om the PRS and "ordinary customs
duties" are neither constant nor mechanical. 162 Guatemala responds that the evidence submitted
by Peru reveals that the variation of the addition al duties resulting from the PRS is significantly
greater than the variation of "ordinary customs duties".163
5.48. In our view, the fact that a levy is "variable" is not sufficient for characterizing a measure as
a "variable import levy" because an "ordinary customs duty" could also fit this description. 164
Rather, "variable import levies" are distinct from "ordinary customs duties" because of the
presence of an underlying scheme or formula in the measure at issue that causes those levies to
change automatically and continuously. 165 Thus, we consider that the Panel was correct in stating
that the "variability imposed by the PRS, as a mechanism, which is the result of rules and formulas
that form part of the system and are applied au tomatically and continuously, cannot be compared
to the normal variability of ordinary customs duties".166
5.49. In addition, Peru contends that, while the Panel correctly identified the legal standard for
"variable import levies", the Panel relied "too heavily" on "inherent variability" in finding that the
measure is a "variable import levy". 167 Guatemala argues that "the Panel did not rely entirely on
the inherent variability" of the measure and that, in any event, inherent variability " is the key
criterion for the finding of a variable import levy". 168 In our view, Peru's argument does not find
support in the Panel Report. The Panel examined certain "additional features" of the measure at
issue to confirm its finding of "inherent variability". 169 Furthermore, the Panel found that "[t]he
PRS … contains a scheme or formula which causes and ensures automatic and continuous revision
of the applicable duties or rebates, from one fortnight to the next" and that it is thus "clear that
the PRS, as a mechanism, imposes the variability of the additional duties." 170 Such a finding of
"variability" based on an underlying formula "that causes and ensures that levies change
automatically and continuously"171 is a necessary and key element for a finding of "variable import
levies" within the meaning of footnote 1 of the Agreement on Agriculture. We, therefore, disagree
with Peru's argument that the Panel erred by "relying too heavily" on this aspect in its analysis.
5.50. Finally, Peru submits an argument that relates the Panel's findings concerning "variable
import levies" with those concerning "minimum import prices". Peru contends that the Panel's
finding, that the PRS floor price does not prevent the entry of imports priced below it 172, should

160 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 211.
161 Rather, "variability" must be assessed on the basis of the overall configuration of a measure and the
interaction of its specific features. (Appellate Body Report, Chile – Price Band System (Article 21.5 –
Argentina), para. 211)
162 Peru's appellant's submission, paras. 252-255 (referring to Panel Report, para. 7.324).
163 Guatemala refers to evidence concerning boneless bovine meat, and argues that an ordinary customs
duty that was changed "by discrete, discretionary and unannounced acts of the Peruvian authorities seven
times over the past 23 years" is not the same as "a duty generated by an automatic, fortnightly mathematical
formula that has changed over 400 times since 2001". (Guatemala's appellee's submission, para. 117)
164 Appellate Body Reports, Chile – Price Band System, para. 232; Chile – Price Band System
(Article 21.5 – Argentina), para. 155. Moreover, we recall that no specific frequency of change in resulting
duties is required in order for a measure to be considered "variable" within the meaning of footnote 1 of the
Agreement on Agriculture. (Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina),
para. 211)
165 In this context, the Appellate Body has noted that "ordinary customs duties" are subject to discrete
changes in applied tariff rates that occur independently from and unrelated to an underlying scheme or
formula, and as a result of separate administrative or legislative action. (See Appellate Body Reports, Chile –
Price Band System, para. 233; Chile – Price Band System (Article 21.5 – Argentina), para. 155)
166 Panel Report, para. 7.324.
167 Peru's appellant's submission, para. 247.
168 Guatemala's appellee's submission, para. 92. (emphasis original)
169 See Panel Report, paras. 7.326-7.349.
170 Panel Report, para. 7.321.
171 Appellate Body Reports, Chile – Price Band System, para. 233; Chile – Price Band System
(Article 21.5 – Argentina), para. 155.
172 Peru's appellant's submission, para. 240 (referring to Panel Report, para. 7.357). See also
paras. 237, 241, 242, and 245 (referring to Panel Report, paras. 7.361, and 7.366-7.369).

have led the Panel to conclude that the additional duties resulting from the PRS are not "variable
import levies", nor "similar border measures".173 Peru argues that the legal standards for "variable
import levies" and "minimum import prices" share common characteristics, in particular, the use of
a minimum or threshold price.
174 In contrast, Guatemala argues that the legal standard for
"variable import levies" does not require a mini mum-price component, and that "variable import
levies" and "minimum import prices" are two distinct concepts.175
5.51. We first note that Peru refers to a minimum or threshold price. The narrative of Peru's
argument – in particular , the reference to the Panel's finding that the floor price used in the PRS
does not act as a threshold preventing the entry of imports priced below it – suggests that Peru is
not referring to just any threshold, but to a particular one, i.e. a minimum threshold. The term
"variable import levies", within the meaning of footnote 1 of the Agreement on Agriculture,
however, has not been interpreted as necessarily comprising a minimum im port price threshold.
Rather, as explained above
176, "variable import levies" are import levies characterized as
"inherently variable" because they contain a mechanism that causes the levies to change
automatically and continuously. 177 A given measure may contain elements that are common to
both "variable import levies" and "minimum impo rt prices". A "variable import levy", however,
need not necessarily contain a certain minimum threshold for it to be characterized as "variable",
or more precisely as "inherently variable".178
5.52. On the basis of the foregoing, we find that Peru has not established that the Panel erred in
its assessment of the "variability" of the measure at issue.179
5.3.1.4 Peru's claim that the Panel erred in its assessment of the "additional features"
of the measure at issue
5.53. Peru claims that the Panel erred in its assessment of the "additional features" of the
measure at issue when finding that the additional duties resulting from the PRS constitute
"variable import levies" within the meaning of footnote 1 of Article 4.2 of the Agreement on
Agriculture.
5.54. With respect to the Panel's assessment of the transparency and predictability of the
measure at issue, Peru first contends that the Panel erred by conflating the ability to forecast
duties with transparency and predictability. 180 Guatemala disagrees and points out that, while the
rate of ordinary customs duties can change, such rates are fixed and thus predictable until such
change.
181 Given the structure, design, and operat ion of the PRS, and in particular the
recalculation of the potential additional duties every two weeks, we see no error in the Panel's
explanation that the PRS lacks transparency and pred ictability regarding the level of the additional

173 Peru's appellant's submission, para. 243.
174 Peru's appellant's submission, paras. 238 and 241 (referring to Appellate Body Report, Chile – Price
Band System, paras. 236-238, 246, 252, and 262; and Panel Report, Chile – Price Band System,
paras. 7.36(c) and 7.36(e)).
175 Guatemala's appellee's submission, paras. 100 and 104.
176 See paras. 5.40-5.41 above.
177 "Variable import levies" are also characterized by certain "additional features", which serve to
confirm the finding of "inherent variability".
178 To the extent that Peru's argument may be understood as referring to any threshold, we note that
the Panel explicitly referred to, inter alia, the fact that the PRS contains a "series of steps and mathematical
formulas for calculating the ceiling and floor prices" when concluding that the PRS "contains a scheme or
formula which causes and ensures automatic and continuous revision of the applicable duties or rebates".
(Panel Report, para. 7.321) Thus, the Panel found "inherent variability" on the basis of, inter alia, the existence
of a floor price threshold in the PRS. This floor price threshold, however, need not necessarily be akin to, or
operate as, a "minimum import price" for a finding of "variable import levies" within the meaning of footnote 1
of the Agreement on Agriculture.
179 See Panel Report, paras. 7.318-7.325.
180 Peru's appellant's submission, paras. 258-266. Peru submits that data and formulas are "beneficial",
as they enhance – rather than limit – predictability, particularly when compared to WTO-consistent ordinary
customs duties that "can change without warning". (Peru's appellant's submission, paras. 258-260)
181 Guatemala submits that, in practice, ordinary customs duties remain unchanged over large periods
of time. (Guatemala's appellee's submission, para. 119)

duties when compared to the transparency and predictability afforded by ordinary customs
duties.182
5.55. Moreover, Peru contends that any "variabili ty" of the measure is due to the fluctuations in
world market prices. As the Panel concluded that "such fluctuations may … become an additional
factor in lack of transparency and predictability ", Peru contends that the Panel incorrectly found
that the measure lacked transparency and predictability because of its alleged "inherent
variability".183 Guatemala responds that, while Peru may rely on international prices to adjust its
ordinary customs duties "through discrete and inde pendent acts of its authorities", Peru may not
"design import charges whose level depends mathematically on international prices and that are
updated periodically via an automatic mechanism".
184 The Panel concluded that the "inherent
variability" of the PRS relates to the "series of steps and mathematical formulas for calculating the
ceiling and floor prices … and the reference prices". 185 By contrast, in its analysis of transparency
and predictability, the Panel observed that, in the context of the PRS, the difficulty in estimating
future international prices leads to a lack of transparency and predictability when compared to the
level of transparency and predictability of ordinary customs duties. 186 We disagree with Peru's
argument that, in this part of the Panel's analysis, the Panel associated the lack of transparency
and predictability of the PRS with the "inherent variability" of the measure at issue.
187
5.56. With respect to the Panel's assessment of whether the measure at issue distorts the
transmission of international prices to Peru's market, Peru argues that the Panel failed to provide a
reasonable basis for its finding because the Panel relied solely on a theoretical analysis, and did
not include an empirical assessment of the "observable effects of the measure".
188 Guatemala
responds that there is nothing "theoretical" about the Panel's analysis, and that the Panel did not
ignore, but was simply not convinced by, the evidence presented by Peru. 189 The Panel examined
the declared objective of the PRS; the structure and design of the PRS, including the short-term
and medium-term effects; and statistical evidence on sugar and maize. 190 We note that a panel is
not required to focus its examination primarily on numerical or statistical data regarding the
effects of the measure in practice. Rather, where it exists, "evidence on the observable effects of
the measure should, obviously, be taken into consideration, along with information on the
structure and design of the measure." 191 The weight and significance to be accorded to such
evidence will depend on the circumstances of each case.192
5.57. In addition, Peru argues that the Panel's analysis appears to contradict the Panel's finding
that the measure at issue is not a minimum import price.193 By contrast, Guatemala considers that
a measure may "neutralize, distort, impede or cushion" the transmission of international prices
regardless of whether it also qualifies as a "minimum import price".
194 Peru's argument associates
elements of the Panel's examination of whether th e measure at issue is a "variable import levy"
with elements of the Panel's examination of whet her the measure at issue is a "minimum import

182 In addition, as noted by Guatemala, Peru appears to refer to two different concepts of "change",
when Peru compares a "change" in the level of ordinary customs duties with a "change" in the additional duties
resulting from the PRS. The change in the PRS that would, by its nature, correspond to the discretionary and
unannounced changes of an ordinary customs duty would be a modification of the PRS itself. We agree with
Guatemala that such change is distinct from the variation of the PRS additional duty, which results from the
application of the PRS formula and has no equivalent in a system of ordinary customs duties. (See Guatemala's
appellee's submission, para. 131)
183 Peru's appellant's submission, paras. 267-269 (referring to Panel Report, para. 7.336). (emphasis
omitted)
184 Guatemala's appellee's submission, para. 139.
185 Panel Report, para. 7.321. See also paras. 7.322-7.325.
186 See Panel Report, paras. 7.334-7.338 and 7.340.
187 We further note that the Appellate Body considered transparency and predictability in relation to the
level of resulting duties in Chile – Price Band System. (See Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), para. 156)
188 Peru's appellant's submission, para. 276 (referring to Appellate Body Report, Chile – Price Band
189 Guatemala's appellee's submission, paras. 148-149.
190 Panel Report, paras. 7.344-7.347.
191 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 189. (emphasis
added)
192 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 189.
193 Peru's appellant's submission, paras. 282-283.
194 Guatemala's appellee's submission, para. 156.

price". According to the Panel, the question of wh ether the measure at issue is a "variable import
levy" that distorts the transmission of international prices to the domestic market concerns the
issue of whether the measure "insulates domestic prices from international price developments
and thus impedes the transmission of world market prices to the domestic market."
195 Conversely,
the question of whether a measure qualifies as a "minimum import price" concerns the issue of
whether it "refers generally to the lowest price at which imports of a certain product may enter a
Member's domestic market".
196 Even if these questions address features of "variable import levies"
and "minimum import prices" that are related to each other, whether a measure falls within the
scope of one or of another measure listed in footnote 1 of the Agreement on Agriculture
nonetheless remains a separate question. Thus, we see no inconsistency in the Panel's analysis of
"variable import levies" and its analysis of "minimum import prices" in this regard.
5.58. Peru also contends that the Panel over looked the fact that the PRS is incapable of
preventing the transmission of international prices to the domestic market for all products covered
because it operates on the basis of only four "marker products".
197 Guatemala argues that, even
for "associated products", the PRS ensures that international price fluctuations are neutralized or
distorted. According to Guatemala, "a variable duty will always tend to distort the transmission of
price changes onto the destination market". 198 Even if we were to assume, as suggested by Peru,
that the prices of "associated products" and the relevant "marker product" are unrelated 199, Peru's
argument fails to explain how an import levy, varying according to the international price of
another agricultural product (i.e. the "marker product"), would not distort the transmission of
international prices of "associated products" to Peru's market, or how the effects of such levy could
nevertheless be considered equivalent to the impact of an "ordinary customs duty".
5.59. Finally, Peru contends that, in contrast to Chile's price band system, the PRS results in a
close correlation between international and domestic prices.
200 Guatemala responds that the
differences between the PRS and Chile's price band system identified by Peru are inaccurate and,
in any event, irrelevant. 201 Simply stating, as Peru does, that the PRS is less distortive than the
Chilean measure is insufficient to demonstrate that the PRS does not distort the transmission of
international prices to Peru's domestic market. The Panel examined in detail the elements of the
PRS, and specifically took into account the floor and reference prices when concluding that the
short-term and medium-term effects of the PRS distort the transmission of international prices to
the domestic market, differently from "ordinary customs duties".
202 Furthermore, as the Panel
found203, the use of a floor price updated every six months, and the use of a reference price
updated every two weeks, are key elements of a syst em that is designed to, and indeed does to a
certain extent, "neutralize" or dilute fluctuations in international prices. 204 As for Peru's argument
that the PRS results in a close correlation between international and domestic prices because it
lacks a minimum import price205, we have explained above206 that the issue of whether a measure
is a "variable import levy" that distorts the transmission of international prices to the domestic
market is separate from the issue of whether such measure also qualifies as a "minimum import
price".

195 Panel Report, para. 7.343.
196 Appellate Body Reports, Chile – Price Band System, para. 236; Chile – Price Band System
(Article 21.5 – Argentina), para. 152.
197 Peru stresses that the PRS operates on the basis of only four "marker products", and that, "among
[the] 47 tariff lines [subject to the PRS], the prices can vary significantly". (Peru's appellant's submission,
para. 284. See also para. 285)
198 Guatemala's appellee's submission, para. 158.
199 We note that Peru and Guatemala disagree on the extent to which the international price of the
relevant "marker product" can be said reasonably to represent the international price of the "associated
products". (See Peru's appellant's submission, para. 284; Guatemala's appellee's submission, para. 158)
200 Peru's appellant's submission, paras. 286-289. Peru argues that the PRS results in a close correlation
between international and domestic prices because: (i) the floor and ceiling prices are updated every six
months (twice as often as in Chile's price band system); (ii) the reference price is updated every two weeks;
and (iii) the PRS lacks a minimum import price (unlike Chile's price band system). (Peru's appellant's
submission, para. 288)
201 Guatemala's appellee's submission, paras. 162-163.
202 Panel Report, paras. 7.97-7.167, 7.344-7.347, and 7.349.
203 Panel Report, paras. 7.344-7.349.
204 Panel Report, paras. 7.344 and 7.346.
205 See fn 200.
206 See para. 5.51 above.

5.60. Overall, we consider that the term "variable import levies" 207, within the meaning of
footnote 1 of the Agreement on Agriculture, re fers to import levies characterized as being
"inherently variable". "Variable import levies" are also characterized by certain "additional
features"
208, which serve to confirm a finding of "inherent variability", and are not independent or
absolute characteristics that a measure must display in order to be considered a "variable import
levy".209 Peru's appeal assigns too prominent a role to the assessments of a lack of transparency
and predictability, and of distortion of the transm ission of international prices to the domestic
market, within the context of an analysis of whether a measure is a "variable import levy". Given
that the "additional features" are not independent or absolute characteristics that a measure must
display in order to be considered a "variable import levy", their assessment should not be given
more prominence in a panel's analysis than the determination of whether a measure can be
characterized as "inherently variable", which is a necessary and key element for a finding of
"variable import levy".
210 Peru's arguments do not suffice to show that the Panel erred in its
approach to resolving this issue. In particular, Peru's arguments do not undermine the fact that
the Panel's assessment of these additional featur es confirms the Panel's conclusion that the
additional duties resulting from the PRS are "inherently variable".
5.61. In the light of the foregoing, we find that Peru has not established that the Panel erred in its
assessment of the "additional features" of the measure at issue when it found that the additional
duties resulting from the PRS were "variable import levies", or at least a "similar border measure".
5.3.1.5 Peru's claim that the Panel acted inconsistently with Article 11 of the DSU
5.62. Peru claims that the Panel acted inconsistently with Article 11 of the DSU by failing to
properly compare the measure at issue with "ordinary customs duties" and "variable import levies"
when examining Guatemala's claim under Article 4.2 of the Agreement on Agriculture.211
5.63. We recall that the Panel found that the a dditional duties resulting from the PRS exhibit
"inherent variability", which cannot be compared to the fact that "ordinary customs duties" may
occasionally vary.212 In addition, the Panel noted that the PRS lacks transparency and predictability
regarding the level of the additional duties when compared to the transparency and predictability
of "ordinary customs duties". 213 Finally, the Panel noted that the structure, design, and operation
of the PRS show that the resulting additional duties act in such a way that they may distort the
prices of imports subject to the PRS and limit the transmission of international prices to Peru's
domestic market, and thus operate differently from ordinary customs duties.
214 On this basis, the
Panel considered that the additional duties resulting from the PRS constitute "variable import
levies" or a "similar border measure", inconsistent with Article 4.2 of the Agreement on

207 See paras. 5.40-5.41 above.
208 The Appellate Body has noted that these "additional features" include a lack of transparency and a
lack of predictability in the level of duties that will result from such measures when compared to the level of
transparency and predictability of ordinary customs duties. (See Appellate Body Reports, Chile – Price Band
209 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 156. The
Appellate Body has also observed that "variable import levies" contribute to distorting the prices of imports by
impeding the transmission of international prices to the domestic market. (Appellate Body Reports, Chile –
Price Band System, para. 234; Chile – Price Band System (Article 21.5 – Argentina), para. 156)
210 In Chile – Price Band System (Article 21.5 – Argentina), the Appellate Body also noted that Chile had
made extensive arguments regarding the alleged errors made by the panel in examining the "additional
features" of the measure at issue, and that "Chile seem[ed] to [have] assign[ed] too prominent a role to these
'additional features'." (Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 214)
In that case, the Appellate Body noted that those arguments rested on the mistaken assumption that the
"additional features" were independent criteria that, if satisfied, conclusively establish that the measure cannot
be a "variable import levy". Referring specifically to the assessment of "transparency" within the context of an
examination of whether the measure is "similar" to a "variable import levy", see Appellate Body Report, Chile –
Price Band System (Article 21.5 – Argentina), para. 220.
211 Peru's appellant's submission, paras. 290 and 295.
212 Panel Report, paras. 7.321-7.325. In particular, the Panel found that, since the PRS contains a series
of steps and mathematical formulas for calculating the ceiling and the floor prices every six months, and the
reference prices every fortnight, the PRS, as a mechanism, imposes the variability of the additional duties.
213 Panel Report, paras. 7.334 and 7.340.
214 Panel Report, paras. 7.343-7.349. At the end of its analysis, the Panel also found that, in any event,
the additional duties resulting from the PRS, by their structure, design, and operation, and in their particular
features, are border measures "similar" to a variable import levy. (Panel Report, para. 7.351)

Agriculture.215 The Panel further observed that, if a measure is a "variable import levy" or a
"similar border measure" that has been required to be converted into an "ordinary customs duty",
such measure cannot be, at the same time, an "ordinary customs duty". The Panel held that,
consequently, it is "not necessary … to make a separate additional finding as to whether or not the
measure is an ordinary customs duty."
216 In the light of these findings, the Panel concluded that
"the measure does not constitute an ordinary customs duty, and it is not necessary to undertake
further analysis in this regard."
217
5.64. Peru contends that the Panel's finding, that Peru's additional duties are "variable import
levies" or a "similar border measure", was based upon an incomplete analysis, given that the Panel
failed to identify the relevant characteristics of an ordinary customs duty on a number of
instances.
218 Peru submits that the Appellate Body's jurisprudence should not be understood as
meaning "that relevant characteristics of an ordinary customs duty need not be identified in order
to properly conduct a comparative analysis as to whether specific characteristics of a measure are
more similar to a variable import levy or to an ordinary customs duty".
219 Thereby, Peru argues
that the Panel's "attempted" comparative analysis of whether the measure at issue is more similar
to a "variable import levy" than to an "ordinary customs duty" fails to meet the required standard
under Article 11 of the DSU to make an objective assessment of the facts of the case.
220
5.65. Guatemala submits that the Panel did not fail to make an objective assessment of the
matter before it, and that we should reject Peru's claim under Article 11 of the DSU. 221 Guatemala
contends that Peru's arguments address the legal standard applied by the Panel rather than any
lack of objectivity in the Panel's assessment of the facts. Guatemala contends that, in any event,
Peru is simply attempting to re-argue the facts, asking us to replace the Panel's assessment of
facts, without explaining how the objectivity of the Panel's analysis was affected.222
5.66. In previous disputes, the Appellate Body ha s noted that a panel is required to "consider all
the evidence presented to it, assess its credibility, determine its weight, and ensure that its factual
findings have a proper basis in that evidence". 223 Within these parameters, "it is generally within
the discretion of the [p]anel to decide which evidence it chooses to utilize in making findings."224 A
claim that a panel has failed to conduct an "objective assessment of the matter before it" is "a
very serious allegation".225 An appellant may not effectively recast its arguments before the panel
under the guise of an Article 11 claim, but must identify specific errors226 that are so material that,
"taken together or singly" 227, they undermine the objectivity of the panel's assessment of the
matter before it. 228 A challenge under Article 11 of the DSU must "stand by itself and be
substantiated with specific arguments, rather than merely being put forth as a subsidiary

215 Panel Report, paras. 7.352, and 7.371-7.372.
216 Panel Report, para. 7.373 (referring to Appellate Body Report, Chile – Price Band System, paras. 167
and 171).
217 Panel Report, para. 7.374.
218 Peru's appellant's submission, paras. 290, 292, 294, and 295. Peru argues that, when examining the
inherent variability of the measure, the Panel merely asserted that the fortnightly variability of the PRS and the
normal variability of an ordinary customs duty cannot be compared. Peru also submits that the Panel failed to
identify the level of transparency and predictability of an ordinary customs duty. In addition, Peru contends
that the Panel failed to explain how the transmission of international market prices to the domestic market with
respect to the PRS is different from the transmission associated with ordinary customs duties. (Peru's
appellant's submission, paras. 294-295)
219 Peru's appellant's submission, para. 293.
220 Peru's appellant's submission, paras. 291-293.
221 Guatemala's appellee's submission, paras. 394 and 401.
222 Guatemala's appellee's submission, paras. 393-394.
223 Appellate Body Report, China – Rare Earths, para. 5.178 (quoting, inter alia, Appellate Body Report,
Brazil – Retreaded Tyres, para. 185).
224 Appellate Body Report US – COOL, para. 299 (quoting Appellate Body Report, EC – Hormones,
para. 135).
225 Appellate Body Report, China – Rare Earths, para. 5.227 (quoting Appellate Body Report,
EC – Poultry, para. 133).
226 Appellate Body Report, EC – Fasteners (China), para. 442.
227 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1318. See also
Appellate Body Report, EC – Fasteners (China), para. 499.
228 Appellate Body Report, China – Rare Earths, para. 5.179.

argument or claim in support of a claim of a panel's failure to construe or apply correctly a
particular provision of a covered agreement."229
5.67. In essence, Peru takes issue with the nature and scope of the comparative analysis
conducted by the Panel, under which the Panel alle gedly failed to identify the characteristics of
"ordinary customs duties", confining its analysis to an assessment of "variable import levies" and
"similar border measures" only. We note, however, that, in Chile – Price Band System (Article 21.5
– Argentina), the Appellate Body found that an "inconsistency with Article 4.2 [of the Agreement
on Agriculture] can be established when it is shown that a measure is a border measure similar to
one of the measures explicitly identified in footnote 1 [of the Agreement on Agriculture]". 230
Although a panel may undertake "[a] separate analysis of whether, or an additional demonstration
that, the measure is 'other than ordinary customs duties'", in order to confirm a finding of
inconsistency with Article 4.2, such analysis is "not indispensable for reaching a conclusion on the
categories listed in footnote 1".
231 Nevertheless, Peru claims that the Panel's failure to provide the
"other half" of the comparative analysis "by inadequately identifying the corresponding
characteristic of an ordinary customs duty am ounts to legal error and undermines the basis on
which the conclusions rest". 232 Peru's challenge does not concern the Panel's proper weighing and
appreciation of the evidence or the objectivity of the Panel's assessment of the matter before it.
Rather, Peru's challenge relates to the legal standard applied by the Panel under Article 4.2. 233
Peru has not explained the basis for requesting an additional examination of the Panel's
assessment of the matter before it in the context of an Article 11 claim.
5.68. For the foregoing reasons, we find that the Panel did not act inconsistently with Article 11 of
the DSU in its examination of Guatemala's claim under Article 4.2 of the Agreement on Agriculture.
5.3.2 Article II:1(b) of the GATT 1994 and Article 4.2 of the Agreement on Agriculture
5.69. We now turn to Peru's appeal in connection with the additional duties resulting from the PRS
and Article II:1(b) of the GATT 1994. Overall, Peru raises two claims of error concerning the
Panel's analysis of whether the additional duties are inconsistent with Article II:1(b). First, Peru
contends that the Panel erred in finding that the additional duties are not "ordinary customs
duties" under Article II:1(b) of the GATT 1994 on th e basis of its finding under Article 4.2 of the
Agreement on Agriculture.
234 Second, Peru claims that the Panel acted inconsistently with
Article 11 of the DSU by failing to examine evid ence submitted in connection with Guatemala's
claim under Article II:1(b) of the GATT 1994.235 Peru requests us to reverse and "declare moot and
with no legal effect" the Panel's findings that the additional duties resulting from the PRS
constitute "other duties or charges … imposed on or in connection with the importation", within the
meaning of the second sentence of Article II:1(b).
236 Peru further requests us to complete the

229 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 337 (referring to
Appellate Body Reports, US – Steel Safeguards, para. 498; Australia – Apples, para. 406). In case of similarly
overlapping claims of error in the application of a legal standard to the relevant facts of a case and under
Article 11 of the DSU, there is no basis to have a separate and additional examination of whether a panel has
conducted an objective assessment of the facts under Article 11 of the DSU. (Appellate Body Report, China –
Rare Earths, para. 5.174 (referring to Appellate Body Report, China – GOES, para. 184))
230 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 171.
231 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 171. In that case,
the Appellate Body rejected Chile's argument that the panel should have conducted an analysis as to whether
the measure constituted an "ordinary customs duty" in addition to its examination of whether the measure was
"similar" to a "variable import levy" or a "minimum import price". (Appellate Body Report, Chile – Price Band
System (Article 21.5 – Argentina), paras. 165-167 and 171)
232 Peru's appellant's submission, para. 294.
233 We recall that we have examined above Peru's challenges to the legal standard adopted by the Panel
under Article 4.2 of the Agreement on Agriculture, and the Panel's application of such standard in this case.
234 Peru's appellant's submission, paras. 308-315.
235 Peru's appellant's submission, paras. 316-324.
236 Peru's appellant's submission, para. 326 (referring to Panel Report, paras. 7.423, 7.425-7.426,
7.430-7.432, 7.526-7.528, 8.1.e and 8.1.f). (emphasis omitted) See also para. 309. In addition, should we
find that Article II:1(b) of the GATT 1994 does not permit the measure at issue, Peru requests us to "find that
the application of the … Article II:1(b) obligation in light of the facts in this case must lead to the conclusion
that Peru did not act inconsistently with this provision". (Peru's appellant's submission, para. 327) We examine
this aspect of Peru's request in section 5.3.3 below, together with Peru's arguments concerning the impact the
FTA between Peru and Guatemala should have in the assessment of Guatemala's claims under Article II:1(b).

legal analysis and find that Peru is acting consistently with its obligations under Article II:1(b) of
the GATT 1994.237 We examine each of Peru's claims below.
5.3.2.1 Peru's claim that the Panel erred in finding that the measure at issue is not an
"ordinary customs duty" under Article II:1(b) of the GATT 1994
5.70. Peru claims that the Panel erred in finding that the additional duties resulting from the PRS
are not "ordinary customs duties" under Article II:1(b) of the GATT 1994 on the basis of its finding
under Article 4.2 of the Agreement on Agriculture.238 While Peru argues that the Panel should have
examined separately whether the measure at issue is an "ordinary customs duty" under
Article II:1(b) of the GATT 1994 239, Guatemala contends that the Panel was correct to conclude
that the measure at issue is not an "ordinary customs duty" under Article II:1(b) of the
GATT 1994, having found that such measure falls und er the scope of footnote 1 of Article 4.2 of
the Agreement on Agriculture.
240
5.71. The question before us is whether the Panel erred by finding that the measure at issue is
not an "ordinary customs duty" under the first sentence of Article II:1(b) of the GATT 1994 on the
basis of the Panel's earlier finding that the measure at issue is a "variable import levy" or a
"similar border measure" within the meaning of footnote 1 of Article 4.2 of the Agreement on
Agriculture.
5.72. Article 4.2 of the Agreement on Agriculture and the first sentence of Article II:1(b) of the
GATT 1994 contain different obligations. Article 4.2 of the Agreement on Agriculture provides that
"Members shall not maintain, resort to, or revert to any measures of the kind which have been
required to be converted into ordinary customs duti es". The first sentence of Article II:1(b) of the
GATT 1994 provides that certain products shall "be exempt from ordinary customs duties in excess
of those set forth and provided" in the relevant Schedule of Concessions. We note that both
provisions refer to "ordinary customs duties".
5.73. As explained above
241, footnote 1 of the Agreement on Agriculture provides a list of
measures covered by the obligation under Article 4. 2 of the Agreement on Agriculture. The list in
footnote 1 includes "variable import levies", "minimum import prices", and "similar border
measures". We also recall that, with respect to f ootnote 1, the Appellate Body has stated that "the
structure and logic of footnote 1 make clear that variable import levies and minimum import prices
cannot be ordinary customs duties."
242 In the context of deciding the order of analysis in a case
with claims under both Article 4.2 of the Agr eement on Agriculture and Article II:1(b) of the
GATT 1994, the Appellate Body has stated that "t he term 'ordinary customs duties' should be
interpreted in the same way in both of these provisions." 243 I n t h i s d i s p u t e , b o t h P e r u a n d
Guatemala agree with the Panel's statement that "the term 'ordinary customs duties' must have
the same meaning in Article 4.2 of the Agreement on Agriculture and the [first] sentence of
Article II:1(b) of the GATT 1994."244
5.74. The Panel found that the additional duties resulting from the PRS constitute "variable import
levies" or a border measure "similar" to a "variable import levy" within the meaning of footnote 1
of the Agreement on Agriculture. 245 On this basis, the Panel concluded, when examining
Guatemala's claim under Article 4.2 of the Agreement on Agriculture, that the additional duties
cannot at the same time constitute an "ordinary customs duty", and stated that "it [was] not

237 Peru's appellant's submission, para. 328. Peru submits that the necessary facts and arguments are in
the record of the Panel proceedings should we decide to complete the legal analysis. (Peru's appellant's
submission, para. 324 (referring to Panel Report, paras. 7.212-7.239 and 7.377-7.394))
238 Peru's appellant's submission, paras. 308-315.
239 Peru's appellant's submission, para. 314.
240 Guatemala's appellee's submission, paras. 299-301 and 304.
241 See para. 5.39 above.
242 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 167.
243 Appellate Body Report, Chile – Price Band System, para. 188.
244 Peru's appellant's submission, paras. 311-312, and Guatemala's appellee's submission, para. 300
(both referring to Panel Report, para. 7.419); Peru's and Guatemala's responses to questioning at the oral
hearing.
245 Panel Report, paras. 7.371-7.372.

necessary to undertake further analysis in this regard". 246 In the context of its analysis under
Article II:1(b) of the GATT 1994, the Panel recalled the statement in Chile – Price Band System
that "the term 'ordinary customs duties' must have the same meaning" in both Article 4.2 of the
Agreement on Agriculture and the first sentence of Article II:1(b) of the GATT 1994.
247 The Panel
also recalled its earlier conclusion that the additional duties are not "ordinary customs duties" in
the context of Article 4.2 of the Agreement on Agriculture. 248 On the basis of the above
considerations, the Panel concluded that the addi tional duties at issue are "other duties or
charges" within the meaning of Article II:1(b) of the GATT 1994. 249 Given the Panel's finding that
the additional duties resulting from the PRS fall wi thin footnote 1 of the Agreement on Agriculture
and that "variable import levies" cannot be "ordinary customs duties" within the meaning of Article
4.2, we consider that the Panel was correct in finding that such additional duties are also not
"ordinary customs duties" within the meaning of the first sentence of Article II:1(b) of the
GATT 1994.
5.75. Contrary to Peru's argument, the Panel's approach and reasoning do not suggest that the
Panel found an inconsistency with Article II:1(b) of the GATT 1994 "by implication" from a finding
of inconsistency with Article 4.2 of the Agreement on Agriculture.
250 Article 4.2 prohibits "measures
of the kind which have been required to be conv erted into ordinary customs duties". In turn, the
first sentence of Article II:1(b) of the GATT 1994 provides that certain products shall "be exempt
from ordinary customs duties in excess of those set forth and provided" in the relevant Schedule of
Concessions. The second sentence of Article II:1(b), read together with the Understanding on the
Interpretation of Article II:1(b) of the GATT 1994, prohibits the imposition of "other duties or
charges" in excess of those recorded in the releva nt Member's Schedule of Concessions. In line
with the understanding that Article 4.2 of the Ag reement on Agriculture and Article II:1(b) of the
GATT 1994 contain "distinct legal obligations arising under … two different legal provisions"
251, the
Panel examined both provisions separately in diff erent sections of its Report, and did not make a
consequential finding of inconsistency with the second sentence of Article II:1(b) based on its
earlier finding under Article 4.2.
5.76. On the basis of the foregoing, we find that Peru has not established that the Panel erred in
finding that the measure at issue is not an "ordinary customs duty" under the first sentence of
Article II:1(b) of the GATT 1994.
5.3.2.2 Peru's claim that the Panel acted inconsistently with Article 11 of the DSU
5.77. Peru claims that the Panel acted inconsistently with Article 11 of the DSU by failing to
examine evidence relevant to the determination of whether Peru correctly scheduled the additional
duties resulting from the PRS as "ordinary customs duties" within the meaning of Article II of the

246 Panel Report, para. 7.374. See also para. 7.373. The Panel referred to the Appellate Body's
statement in Chile – Price Band System (Article 21.5 – Argentina) that, once it is shown that a measure falls
into one of the categories prohibited in footnote 1, a "separate analysis of whether, or an additional
demonstration that, the measure is 'other than ordinary customs duties' may also be undertaken to confirm
such a finding. However, these are not indispensable for reaching a conclusion on the categories listed in
footnote 1." (Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 171)
247 Panel Report, para. 7.419 (referring to Panel Report, Chile – Price Band System, para. 7.104; and
Appellate Body Report, Chile – Price Band System, para. 188). We also note the Appellate Body's statements in
Chile – Price Band System, para. 188 ("'[o]rdinary customs duties' should be interpreted in the same way in
both [Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994]"), and Chile – Price
Band System (Article 21.5 – Argentina), paras. 167 and 171.
248 Panel Report, para. 7.423.
249 Panel Report, para. 7.425. In its analysis under Article II:1(b) of the GATT 1994, the Panel noted
that "other duties or charges of any kind" correspond to a residual category of measures not falling under
"ordinary customs duties" or under the three categories of measures covered by Article II:2 of the GATT 1994.
(Panel Report, paras. 7.407-7.412) Thereafter, the Panel examined each of the three categories covered by
Article II:2 – namely: (i) internal taxes; (ii) anti-dumping duties; and (iii) fees or charges for services rendered
– and found that there is no relevant evidence that the additional duties resulting from the PRS correspond to
any of them. (Panel Report, paras. 7.413-7.418) In response to questioning at the oral hearing and in their
oral statements, the participants confirmed that Article II:2 of the GATT 1994 is not implicated in this appeal.
250 Peru's appellant's submission, para. 314.
251 Appellate Body Report, Chile – Price Band System, para. 188.

GATT 1994.252 Peru contends that, instead, the Panel found an inconsistency with the second
sentence of Article II:1(b) of the GATT 1994 "by im plication" of its finding of inconsistency with
Article 4.2 of the Agreement on Agriculture.253 Guatemala argues that, to the extent that the Panel
failed to consider any facts, this was a result of the Panel's use of the correct legal standard,
rather than any failure to conduct an objective assessment within the meaning of Article 11 of the
DSU.254 Thus, Guatemala submits that we need not complete the legal analysis in this regard.255
5.78. We have addressed above the standard articulated by the Appellate Body concerning a
panel's duty under Article 11 of the DSU 256 and, in particular, that a challenge under Article 11 of
the DSU must "stand by itself and be substantiate d with specific arguments, rather than merely
being put forth as a subsidiary argument or clai m in support of a claim of a panel's failure to
construe or apply correctly a particular provision of a covered agreement."257
5.79. We note that the Panel did not "deem it necessary" to rule on the impact of certain facts
submitted by Peru. 258 The Panel, however, made this statement following its understanding that:
(i) the term "ordinary customs duties" must have the same meaning in both Article 4.2 of the
Agreement on Agriculture and the first sentence of Article II:1(b) of the GATT 1994 259; and
(ii) "the structure and logic of footnote 1 make clear that variable import levies and minimum
import prices cannot be ordinary customs duties".
260 Thus, the Panel concluded that examination
of the evidence presented by Peru was not necess ary for its analysis of whether the measure at
issue is an "ordinary customs duty". To that en d, Peru's claim does not challenge any lack of
objectivity in the Panel's assessment of the facts, but the correctness of the Panel's legal analysis.
The Panel expressly acknowledged that "the parties differ as to whether there are elements in the
Peruvian legislation that could characterize the du ties resulting from the PRS as ordinary customs
duties"
261, but chose to rely only on those pieces of evidence that it considered relevant in the light
of the articulated legal standard. Moreover, we ob serve that Peru put forward an analogous claim
of error concerning the legal standard applied by the Panel when examining Guatemala's claim
under the second sentence of Article II:1(b) of the GATT 1994. We have rejected Peru's claim
above.
262 As we have noted, a challenge under Article 11 of the DSU should not merely be put

252 Peru lists three "relevant facts" that the Panel did not "deem necessary to examine": (i) "the specific
duties … were created in 1991, not in 2001", and were theref ore part of Peru's customs tariff at the time of the
Uruguay Round negotiations; (ii) during the Uruguay Round, the modalities agreed for the negotiation allowed
developing countries to schedule "ordinary customs duties" by setting a tariff ceiling, "which is precisely what
Peru did with respect to the tariff items subject to the specific duties"; and (iii) Peru confirmed, in the final
days of the negotiations, that "its specific duties were not 'other duties or charges' required to be scheduled as
such". (Peru's appellant's submission, para. 321.)
253 Peru's appellant's submission, paras. 319 and 322-323. Peru takes issue with the Panel's statement
that it "[did] not deem it necessary to rule on the impact of the elements of the Peruvian legislation on the
characterization of the duties resulting from the PRS as ordinary customs duties." (Peru's appellant's
254 Guatemala's appellee's submission, para. 307. See also paras. 308-309 (referring to Appellate Body
Report, US – Carbon Steel (India), para. 4.80). According to Guatemala, the Panel acknowledged that Peru had
made certain factual assertions relating to the measure at issue, but found that their examination was
unnecessary given its previous characterization of the measure as a "variable import levy". Guatemala submits
that any error in the Panel's approach would therefore be an error of law, not an inconsistency with Article 11
of the DSU. (Guatemala's appellee's submission, para. 400)
255 Guatemala's appellee's submission, paras. 310-311.
256 See para. 5.66 above.
257 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 337 (referring to
Appellate Body Reports, US – Steel Safeguards, para. 498; and Australia – Apples, para. 406.) In case of
similarly overlapping claims of error in the application of a legal standard to the relevant facts of a case and
under Article 11 of the DSU, there is no basis to have a separate and additional examination of whether a
panel has conducted an objective assessment of the facts under Article 11 of the DSU. (Appellate Body
Reports, China – Rare Earths, para. 5.174 (referring to Appellate Body Report, China – GOES, para. 184))
258 Panel Report, para. 7.423.
259 Panel Report, para 7.419 (referring to Panel Report, Chile – Price Band System, para. 7.104, and
Appellate Body Report, Chile – Price Band System, para. 188 (where the Appellate Body agreed that "'ordinary
customs duties' should be interpreted in the same way in both [Article 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994]").
260 Panel Report, para. 7.422 (emphasis omitted) (quoting Appellate Body Report, Chile – Price Band
System (Article 21.5 – Argentina), para. 167).
261 Panel Report, para. 7.423.
262 See paras. 5.70-5.76 above.

forth as a subsidiary argument or claim in support of a claim that a panel failed to construe or
apply correctly a particular provision.263
5.80. On the basis of the foregoing, we find that the Panel did not act inconsistently with Article
11 of the DSU in its examination of Guatemala's claim under Article II:1(b) of the GATT 1994.
Having found that the Panel did not err in finding that the measure at issue is not an "ordinary
customs duty" under the first sentence of Article II:1(b) of the GATT 1994, and having found that
the Panel did not act inconsistently with Article 11 of the DSU, we need not address Peru's request
to complete the legal analysis.
5.3.3 Relationship between WTO and FTA provisions
5.3.3.1 New arguments
5.81. Guatemala contends that Peru's arguments that the Panel erred in its interpretation of
Article 4.2 of the Agreement on Agriculture and Arti cle II:1(b) of the GATT 1994 by failing to take
into account Article 31(3) of the Vienna Convention were not raised before the Panel and are
accordingly not properly within the scope of the appeal.
264 Guatemala objects that it is confronted
for the first time on appeal with these arguments and with extensive supporting materials. 265
Guatemala thus requests us to exclude from the scope of this appeal these arguments, which,
according to Guatemala, would require us to consider new facts 266 and to address issues that are
not issues of law covered in the Panel Report or legal interpretations developed by the Panel.
Guatemala contends that our consideration of Ar ticle 31(3)(a) and (c) of the Vienna Convention,
either with respect to the FTA or ILC Articles 20 and 45, would thus be contrary to Article 17.6 of
the DSU
267 and would violate Guatemala's due process rights.268
5.82. At the oral hearing, Peru responded that the Appellate Body's jurisprudence does not
support the conclusion that all issues must be ra ised at each stage of the proceedings. Rather,
according to the jurisprudence, WTO Members have the right to raise new arguments on appeal,
provided these do not require the Appellate Body to solicit or review new facts.
5.83. In previous disputes, the Appellate Body has considered that, while in principle new
arguments are not excluded from the scope of appellate review, its ability to consider new
arguments is circumscribed by Article 17.6 of the DSU. 269 In particular, the Appellate Body has
found that it would be able to consider new arguments if: (i) they do not require it "to solicit,
receive and review new facts"
270; and (ii) they "involve either an 'issue of law covered in the panel
report' or 'legal interpretations developed by the panel'". 271 In any event, such consideration must
not compromise a party's due process rights to have a fair opportunity to defend itself
adequately.272
5.84. Peru claims on appeal that the Panel e rred in the interpretation of Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994 because it failed to take into
account the FTA between Peru and Guatemala and ILC Articles 20 and 45, in accordance with
Article 31(3) of the Vienna Convention. Nevertheless, Peru also requests us "to declare moot and
with no legal effect " the Panel's findings in paragraphs 7.525-7.528 and to reverse the
Panel's findings in paragraph 8.1.f of the Panel Report
273, which are not those findings concerning
the interpretation of Article 4.2 and Article II:1( b), but rather those concerning the question of
whether, by means of the FTA, the parties modified their WTO rights between themselves. We thus
note that, while Peru's arguments on appeal focus on the interpretation of Article 4.2 and Article
II:1(b) under Article 31(3)(a) and (c) of the Vienna Convention, Peru also requests the reversal of
the Panel's findings on the alleged modification of WTO provisions by means of the FTA.

263 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 337.
264 Guatemala's appellee's submission, paras. 42-44.
265 Guatemala's appellee's submission, para. 44.
266 Guatemala's appellee's submission, para. 49.
267 Guatemala's appellee's submission, para. 53.
268 Guatemala's appellee's submission, para. 65.
269 Appellate Body Report, Canada – Aircraft, para. 211.
270 Appellate Body Report, US – FSC, para. 102.
271 Appellate Body Report, US – FSC, para. 103.
272 Appellate Body Report, US – Gambling, para. 270.
273 Peru's appellant's submission, para. 204.

5.85. We note that, before the Panel, Peru did not raise arguments in respect of the FTA or
ILC Articles 20 or 45 under Article 31(3)(a) or (c) of the Vienna Convention. Its arguments in
respect of the FTA were that, even assuming th at Peru's PRS was WTO-inconsistent, Peru and
Guatemala had modified between themselves the relevant WTO provisions to the extent that the
FTA allowed Peru to maintain the PRS. Peru referred to Article 41 of the Vienna Convention in
support of its argument that parties to a multilateral treaty may modify their obligations as
between themselves.
274
5.86. Although, before the Panel, Peru did not ra ise arguments on the interpretation of Article 4.2
of the Agreement on Agriculture and Articl e II:1(b) of the GATT 1994 on the basis of
Article 31(3)(a) or (c) of the Vienna Conven tion, it did raise arguments concerning the
interpretation of Article 4.2 and Article II:1(b). Peru's arguments on appeal, albeit new, are
framed as concerning the interpretation of WTO provisions, namely, Article 4.2 and Article II:1(b),
which were raised before the Panel and are covered in the Panel Report. Therefore, Peru's new
arguments on appeal can be considered as relating to "issues of law covered in the panel report"
or "legal interpretations developed by the panel".
275 We consider that although arguments relating
to the FTA and the ILC Articles 20 and 45 under Article 31(3) of the Vienna Convention were not
raised before the Panel, those arguments can be addressed in this appeal to the extent they
concern issues of law and legal interpretations covered in the Panel Report, and without
prejudicing Guatemala's due process rights. In addi tion, we are of the view that the consideration
of provisions of an FTA for the purpose of determining whether a Member has complied with its
WTO obligations involves legal characterizations that fall within the scope of appellate review
under Article 17.6 of the DSU.
276
5.87. We now turn to Guatemala's contention that, in order to address the new arguments raised
by Peru, we would have to consider facts that were not presented to the Panel. 277 We agree that if
Peru's new arguments on appeal required us to re view new facts, we would not be able to address
such arguments to that extent. However, to the extent Peru's arguments would require us to
consider the provisions of the FTA and ILC Articles 20 and 45 to determine the consistency of the
PRS with Article 4.2 of the Agreement on Agricult ure and Article II:1(b) of the GATT 1994, we are
not persuaded that consideration of Peru's arguments on appeal would require us to review new
facts.

274 Panel Report, para. 7.508.
275 Before the Panel, Peru also claimed that, if the Panel were to conclude that the PRS is inconsistent
with the WTO agreements, the terms of the FTA should be considered as having modified as between the
parties to the FTA their WTO rights and obligations. (Panel Report, para. 7.507) Thus, even if one were to take
the view, as Guatemala does, that such arguments do not in fact concern interpretations but rather
modifications of WTO provisions, they could be considered as relating to "issue[s] of law covered in the panel
report" or "legal interpretations developed by the panel", to the extent they concern the Panel's finding on the
alleged modification of WTO rights and obligations by means of the FTA.
276 In respect of the provisions of the FTA at issue, we note that FTAs among WTO Members are
permitted by Article XXIV of the GATT 1994 and by Article V of the General Agreement on Trade in
Services (GATS) provided they fulfil specific conditions set forth in these provisions of WTO law. Article XXIV of
the GATT 1994 and Article V of the GATS necessitate consideration of relevant FTA provisions and thus provide
a basis for panels and the Appellate Body to determine the meaning of the provisions in such FTAs in order to
determine their consistency with WTO law. We further recall that, in EC – Bananas III, the Appellate Body was
confronted with the issue of whether the panel erred in conducting an objective examination of the
requirements of the Fourth ACP-EC Convention of Lomé, Decision of the CONTRACTING PARTIES of
9 December 1994, L/7604, 19 December 1994; extended by EC – The Fourth ACP-EEC Convention of Lomé,
Extension of Waiver, Decision of the WTO General Council of 14 October 1996, WT/L/186 (Lomé Convention).
In that dispute, the GATT Contracting Parties granted the European Communities a waiver from Article I of the
GATT 1947. (The EC – The Fourth ACP-EC Convention of Lomé, Extension of Waiver, Decision of the WTO
General Council of 14 October 1996, WT/L/186 (Lomé Waiver) to permit the European Communities to provide
preferential treatment to products originating from the African, Caribbean, and Pacific Group of States (ACP) to
the extent required under the Lomé Convention.) The Appellate Body agreed with the panel that, since the
GATT Contracting Parties "incorporated a reference to the Lomé Convention into the Lomé Waiver, the meaning
of the Lomé Convention became a GATT/WTO issue" to the extent necessary to interpret the Lomé Waiver.
(See Appellate Body Report, EC – Bananas III, para. 167)
277 In particular, Guatemala refers to statements or practice by WTO Members in WTO bodies or outside
the WTO, facts pertaining to the negotiating history or circumstances of the conclusion of the Vienna
Convention, and evidence of domestic practices and judicial decisions as well as the provisions of the FTA.
(Guatemala's appellee's submission, paras. 49-50)

5.88. In the light of the above, we are of the vi ew that Peru's arguments on appeal regarding the
interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994
in accordance with Article 31(3)(a) and (c) of the Vienna Convention are new, but concern "issues
of law covered in the panel report" or "legal inte rpretations developed by the panel". Therefore, to
the extent that consideration of these arguments does not require us to consider new facts, we are
of the view that such arguments do not adversely affect Guatemala's due process rights and were
properly raised on appeal.
5.89. Guatemala further contends that, even accepting that Peru can raise its new arguments on
appeal, the Panel was not obliged to address these arguments on its own motion, considering that
Peru did not raise them before the Panel. Guatemala contends that the Panel cannot be faulted
because it failed to address arguments that Peru did not raise in the Panel proceedings.
278 In
Guatemala's view, in the absence of arguments by Peru, the Panel was not required to develop on
its own motion an interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b)
of the GATT 1994 under Article 31(3) of the Vienna Convention that took into account the FTA and
ILC Articles 20 and 45.
5.90. These arguments by Guatemala do not concern the admissibility of Peru's arguments on
appeal, but, rather, the merits of the Panel's findings on the interpretation of Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994. Therefore, these arguments should
not be considered separately from the issue of whether the Panel committed an error in its
interpretation of Article 4.2 and Article II:1(b).
5.3.3.2 Peru's arguments under Article 31 of the Vienna Convention
5.91. Peru contends that the Panel should have interpreted the term "shall not maintain" in
Article 4.2 of the Agreement on Agriculture in the light of the provisions of the FTA between Peru
and Guatemala as allowing Peru to maintain the PRS. More specifically, Peru argues that
paragraph 9 of Annex 2.3 to the FTA, providing that "Peru may maintain its Price Range System"
with regard to imports of certain products, is rele vant to the interpretation of Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994 in accordance with Article 31(3)(a)
and (c) of the Vienna Convention.
279 Peru also contends that, according to ILC Article 20,
Guatemala's approval and ratification of the FTA amounts to "consent" precluding the wrongfulness
of Peru's maintenance of the PRS, and that "Guatemala's ratification of the FTA amounts to a
waiver in the sense of Article 45(a) of the ILC Articles".
280 Peru makes, mutatis mutandis , the
same arguments in respect of Article II:1(b) of the GATT 1994.281
5.92. Guatemala responds that Peru is misusing Article 31 of the Vienna Convention, which is
about the interpretation of a treaty, and that Peru does not want us merely to interpret Article 4.2
in the light of the FTA or the ILC Articles. Rather, in Guatemala's view, Peru wants us to modify
and amend Article 4.2, and to apply the provisions of the FTA or certain ILC Articles. 282 Guatemala
submits that a treaty interpreter is constrained, in the interpretative exercise, by the natural limits
of the treaty language being interpreted and that P e r u i s r e q u e s t i n g u s t o m o d i f y o r a m e n d
WTO law and apply it in a manner that no longer corresponds to its wording.283

278 Guatemala's appellee's submission, para. 179.
279 Article 31 of the Vienna Convention, entitled “General rule of interpretation”, states in relevant part:
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given
to the terms of the treaty in their context and in the light of its object and purpose.
…
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or
the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of
the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties.
280 Peru's appellant's submission, paras. 213-215. Peru refers to ILC Articles 20 and 45 (on the validity
of "consent" by a state that precludes wrongfulness of an act of another state within the limits of that consent
and the "loss of the right to invoke responsibility of a state" in circumstances where the injured state has
validly waived the claim).
281 Peru's appellant's submission, paras. 301, 303, 305, and 307.
282 Guatemala's appellee's submission, para. 182.
283 Guatemala's appellee's submission, para. 197.

5.93. We note that Peru argues that, by relying on paragraph 9 of Annex 2.3 to the FTA and on
ILC Articles 20 and 45, the Panel should have interpreted the terms "shall not maintain" in
Article 4.2 of the Agreement on Agriculture as meaning "may maintain" in the relationship between
Peru and Guatemala.
284 By the same token, we understand Peru to suggest that, by relying on
paragraph 9 of Annex 2.3 to the FTA and on ILC Articles 20 and 45, the Panel should have
interpreted Article II:1(b) of the GATT 1994 as allowing Peru to maintain the PRS. Article 31 –
included in Part III, Section 3 of the Vienna Convention, entitled "Interpretation of Treaties" – is
meant to assist an interpreter in ascertaining the ordinary meaning of treaty terms, reflecting the
common intention of the parties to the treaty. Under Article 31, treaty terms should be interpreted
in accordance with their ordinary meaning in their context and in the light of the object and
purpose of the treaty.
5.94. While context is a necessary element of an interpretative analysis under Article 31 of the
Vienna Convention, its role and importance in an interpretative exercise depends on the clarity of
the plain textual meaning of the treaty terms. If th e meaning of treaty terms is difficult to discern,
determining the ordinary meaning under Article 31 may require more reliance on the context and
the object and purpose of the treaty and possibly other elements considered "together with the
context" and the tools mentioned in Article 32. Howe ver, we do not see how, in an interpretative
exercise under Article 31, elements considered "together with the context" can be used to reach
the conclusion that the textual terms "shall not maintain" in Article 4.2 of the Agreement on
Agriculture should be read as meaning "may maintain" based on a particular provision found in the
FTA. We do not consider that Article 31 can be used to develop interpretations based on asserted
subsequent agreements or asserted "relevant rules of international law applicable in the relations
between the parties" under Article 31(3)(a) and (c ) that appear to subvert the common intention
of the treaty parties as reflected in the text of Article 4.2 and Article II:1(b).
5.95. Moreover, Peru clarified at the oral hearing that it is advocating an interpretation of
Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994 as permitting the
PRS exclusively in the relations between Peru and Guatemala, who are the parties to the FTA.
285
Article 31(1) of the Vienna Convention states that "[a] treaty shall be interpreted" such that the
object of the interpretative exercise is the treaty as a whole, not the treaty as it may apply
between some of its parties. We thus understand that, with multilateral treaties such as the
WTO covered agreements, the "general rule of interpretation" in Article 31 of the Vienna
Convention is aimed at establishing the ordinary meaning of treaty terms reflecting the common
intention of the parties to the treaty, and not just the intentions of some of the parties. While an
interpretation of the treaty may in practice appl y to the parties to a dispute, it must serve to
establish the common intentions of the parties to the treaty being interpreted.
5.96. Therefore, although Peru submits on appeal that the Panel erred in the interpretation of
Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994, in our view,
these arguments are beyond the scope of an interpretative exercise as envisaged in Article 3.2 of
the DSU and in Article 31 of the Vienna Convention. They are essentially the same arguments Peru
made before the Panel when it argued that, by virtue of the FTA, Peru and Guatemala modified
between themselves their obligations under the relevant WTO provisions.
286 This is also confirmed
by the fact that, in concluding its arguments that Article 4.2 and Article II:1(b) should be
interpreted taking into account the FTA under Ar ticle 31(3)(a) and (c) of the Vienna Convention,
Peru requests us to reverse the Panel's findings concerning the alleged modification of
WTO provisions by means of the FTA.287
5.97. Having concluded that Peru's arguments in fact amount to arguments about alleged
modifications of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994
as between Peru and Guatemala, and not to thei r interpretations under Article 31 of the Vienna
Convention, we now turn to consider whether other arguments made by Peru on the basis of

284 Paragraph 9 of Annex 2.3 to the FTA states that "Peru may maintain its Price Range System".
285 Peru is not arguing that its interpretation of Article 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994 based on Article 31(3)(a) and (c) of the Vienna Convention would equally
apply to other WTO Members. As considered above in sections 5.3.1 and 5.3.2, Peru advocates a "multilateral"
interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994 in arguing
that the measure at issue in an "ordinary custom duty" and does not constitute a "variable import levy" or
"similar border measure".
286 Panel Report, paras. 7.506-7.510.
287 Peru's appellant's submission, para. 204.

Article 31(3)(a) and (c) of the Vienna Convention would confirm or change our conclusion that
Peru's arguments do not concern interpretations within the meaning of Article 31.
5.98. Peru's argues that the FTA and ILC Articles 20 and 45 constitute relevant rules of
international law applicable in the relations between the parties within the meaning of
Article 31(3)(c) of the Vienna Convention and that , in addition, the FTA constitutes a "subsequent
agreement between the parties" under Article 31(3)(a). In this respect, Peru's arguments require
us to address the threshold question of whether the FTA and ILC Articles 20 and 45 are
instruments that could be taken into account "together with the context" under Article 31(3)(a)
and (c) of the Vienna Convention in the interp retation of Article 4.2 of the Agreement on
Agriculture and Article II:1(b) of the GATT 1994.
5.99. In particular, Peru contends that the both the FTA and the ILC Articles are "rules of
international law", that they are "applicable" betwee n the parties, that they are "relevant" to the
interpretation of the above-mentioned WTO provisions, and that "parties" in Article 31(3)(c) of the
Vienna Convention should be understood to mean the parties to the dispute.
288 Similarly, Peru
argues that the FTA is a "subsequent agreement", that it is "regarding the interpretation" of a
treaty, and that the term "parties" in Article 31(3)(a) should be understood to mean the parties to
the dispute.
289 Guatemala rejects all these arguments by Peru.290
5.100. We begin by examining, without addressi ng whether they are rules of international law
applicable between the parties, whether the FTA and ILC Articles 20 and 45 can be considered as
"relevant" to the interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of
the GATT 1994 within the meaning of Article 31(3) (c) of the Vienna Convention, and whether the
FTA can be considered as a subsequent agreement "regarding the interpretation" of these
WTO provisions within the meaning of Article 31(3)(a) of the Vienna Convention.
5.101. In order to be "relevant" for purposes of interpretation, rules of international law within the
meaning of Article 31(3)(c) of the Vienna Conven tion must concern the same subject matter as
the treaty terms being interpreted.
291 In EC and certain member States – Large Civil Aircraft , the
Appellate Body considered that Article 4 of th e 1992 Agreement between the EEC and the United
States on Trade in Civil Aircraft 292 was not relevant to the interpretation of "benefit" in
Article 1.1(b) of the Agreement on Subsidies and Countervailing Measures (SCM Agreement),
because, while imposing certain quantitative limits on the amount of government support that may
be provided for the development of large civil aircraft programmes, it did not "speak to the
market-based concept of 'benefit' as reflec ted in Article 1.1(b) of the SCM Agreement and the
market-based benchmark reflected in Article 14(b)".
293 The Appellate Body has also considered
that agreements "regarding the interpretation of the treaty or the application of its provisions"
within the meaning Article 31(3)(a) of the Vienna Convention are "agreements bearing specifically
upon the interpretation of a treaty".294
5.102. Paragraph 9 of Annex 2.3 to the FTA states that "Peru may maintain its Price Range
System". ILC Article 20 addresses the issue of validity of consent by a State that precludes the
wrongfulness of a given act by another State within the limits of that consent. ILC Article 45,

288 See Peru's appellant's submission paras. 161-198 and 205-212.
289 See Peru's appellant's submission paras. 226-233.
290 Guatemala's appellee's submission paras. 206-287.
291 Appellate Body Reports, US – Anti-Dumping and Countervailing Duties (China), para. 308; EC and
certain member States – Large Civil Aircraft, para. 846.
292 Done at Brussels on 17 July 1992, Official Journal of the European Communities, L Series, No. 301
(17 October 1992), p. 32.
293 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 851.
294 Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 – US) , para. 390.
In US – Clove Cigarettes, the Appellate Body found that it was not possible to discern a function of
paragraph 5.2 of the 2001 Doha Ministerial Decision "other than to interpret the term 'reasonable interval'" in
the Agreement on Technical Barriers to Trade (TBT Agreement), and it was therefore considered to "bear[]
specifically upon the interpretation" of that term. (Appellate Body Report, US – Clove Cigarettes, para. 266
(emphasis original)) In US – Tuna II (Mexico), the Appellate Body found that a TBT Committee Decision could
be considered as a "subsequent agreement" within the meaning of Article 31(3)(a) of the Vienna Convention.
The Appellate Body considered that the extent to which the Decision would inform the interpretation and
application of a term or provision of the TBT Agreement would depend on the degree to which it "bears
specifically" on the interpretation and application of a term or provision "in a specific case". (Appellate Body
Report, US – Tuna II (Mexico), para. 372)

paragraph (a) concerns the loss of right to invoke responsibility of a State, in circumstances where
the injured State has validly waived the claim.
5.103. The specific interpretative issues arising under Article 4.2 of the Agreement on Agriculture
and Article II:1(b) of the GATT 1994 in question in this dispute are not whether Peru "may
maintain" its PRS with regard to designated products 295, or whether Guatemala has consented to
the maintenance of the PRS or waived its right to challenge it. 296 Rather, in order to determine
whether Peru could maintain its PRS, the Panel had to interpret the meaning of the terms in
Article 4.2 and footnote 1 of the Agreement on Agri culture, and find whether the additional duties
resulting from the PRS could be characterized as "variable import levies", "minimum import prices"
or "similar border measures" rather than "ordinary customs duties" within the meaning of
footnote 1. With respect to Article II:1(b) of the GATT 1994, the Panel had to determine whether
the additional duties resulting from the PRS could be characterized as "other duties or charges" or
"ordinary custom duties". Paragraph 9 of Annex 2. 3 to the FTA and ILC Articles 20 and 45 do not
provide "relevant" interpretative guidance in this respect. Thus, we do not see how the FTA and
ILC Articles 20 and 45 can be considered as rules concerning the same subject matter as
Article 4.2 and Article II:1(b), or as bearing specifically upon the interpretation of these provisions.
5.104. Thus, without reaching the questions of whether the FTA and ILC Articles 20 and 45 are
"rules of international law applicable in the relations between the parties" within the meaning of
Article 31(3)(c) of the Vienna Convention and whether the FTA is an "agreement" within the
meaning of Article 31(3)(a), we disagree with Peru that the FTA and ILC Articles 20 and 45 are
"relevant" rules of international law within the meaning of Article 31(3)(c) and that the FTA is a
subsequent agreement "regarding the interpretation" of Article 4.2 of the Agreement on
Agriculture and Article II:1(b) of the GATT 1994 within the meaning of Article 31(3)(a) of the
Vienna Convention.
5.105. Having concluded that the FTA and ILC Articles 20 and 45 are not "relevant" to the
interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994
within the meaning of Article 31(3)(c) of the Vie nna Convention, and that the FTA does not qualify
as a subsequent agreement "regarding the interpre tation" of these provisions within the meaning
of Article 31(3)(a), there is no need for us to address whether the FTA and ILC Articles 20 and 45
are "rules of international law applicable in the relations between the parties", or the meaning of
the term "parties" in both Article 31(3)(a) and (c) of the Vienna Convention. Similarly, there is no
need for us to address whether the FTA can be co nsidered as an "agreement" within the meaning
of Article 31(3)(a) for purposes of Article 4.2 and Article II:1(b).

295 We further note that, even from the perspective of the FTA, other FTA provisions seem to give
priority to WTO law and can be read as qualifying paragraph 9 of Annex 2.3. Thus, under Article 1.3,
paragraph 1, of the FTA, "[p]arties confirm their existing mutual rights and obligations under the
WTO Agreement". In the context of tariff elimination, Article 2.3, paragraph 2 provides that "[e]xcept as
otherwise provided in this Treaty, each Party shall eliminate its customs tariffs on goods originating in the
other Party, in accordance with Annex 2.3." If paragraph 9 of Annex 2.3 is considered to be "relevant" to the
interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994, we fail to
see why these other FTA provisions could not be "relevant" as well. To the extent that these other provisions of
the FTA are also "relevant" to the interpretation of Article 4.2 and Article II:1(b), they point to a conclusion
contrary to Peru's contention that, by means of the FTA, Guatemala has consented to Peru maintaining a PRS
that is not WTO-consistent. While noting these discrepancies between various FTA provisions, we see no need
to resolve them here.
296 We also note that the relevance of the ILC Articles to Peru's interpretation of Articles 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994 appears to be premised on the assumption that
the FTA allows Peru to maintain a PRS that would otherwise be in breach of WTO obligations, considering that
ILC Article 20 addresses the issue of validity of consent by a State that precludes the wrongfulness of a given
act by another State within the limits of that consent and that ILC Article 45, paragraph (a) concerns the loss
of right to invoke responsibility of a State, in circumstances where the injured State has validly waived the
claim. As we have already considered above, it is not clear whether paragraph 9 of Annex 2.3 of the FTA,
which states that Peru may maintain the PRS, can be construed as allowing Peru to maintain a WTO-
inconsistent PRS, when read together with other provisions of the FTA, such as paragraph 1 of Article 1.3 of
the FTA which states that the parties confirm their existing rights and obligations under the WTO Agreement.
Thus, in the absence of clarity as to whether the FTA rules allow Peru to depart from its WTO obligations, we
do not see how the ILC Articles that address consent to wrongful acts and consent to a waiver can be relevant
to the interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994.

5.106. We note, however, that Peru has not yet ratified the FTA. In this respect, it is not clear
whether Peru can be considered as a "party" to th e FTA. Moreover, we express reservations as to
whether the provisions of the FTA (in particular paragraph 9 of Annex 2.3), which could arguably
be construed as to allow Peru to maintain the PRS in its bilateral relations with Guatemala, can be
used under Article 31(3) of the Vienna Convention in establishing the common intention of WTO
Members underlying the provisions of Articl e 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994. In our view, such an approach would suggest that WTO
provisions can be interpreted differently, depending on the Members to which they apply and on
their rights and obligations under an FTA to which they are parties.
5.107. In the light of the above, we consider that, while Peru has brought arguments on appeal
under Article 31(3)(a) and (c) of the Vienna Convention concerning the Panel's interpretation of
Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994, in fact, Peru's
arguments go beyond the interpretation of these pr ovisions in accordance with Article 3.2 of the
DSU and Article 31 of the Vienna Convention, and amount to arguing that, by means of the FTA,
Peru and Guatemala actually modified these WTO provisions between themselves.
5.108. We further observe that Peru's arguments re garding the interpretation of Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994, on the basis of relevant provisions
of the FTA, presuppose that the FTA provisio ns permit the maintenance of the PRS and the
resulting additional duties, even if they are found to be WTO-inconsistent. We have upheld the
Panel's findings that the duties resulting from the PRS constitute "variable import levies" within the
meaning of footnote 1 of Article 4.2 of the Agreem ent on Agriculture and "other duties or charges"
within the meaning of Article II:1(b) of the GATT 1994, which were not recorded in Peru's
Schedule of Concessions, and that Peru is therefore acting inconsistently with these provisions. We
further note that the parties to this dispute disa gree on whether the provisions of the FTA indeed
permit Peru to maintain a WTO-inconsistent PRS.
5.109. In this respect, we note that paragraph 1 of Article 1.3 of the FTA states that the parties
confirm their existing rights and obligations under the Marrakesh Agreement Establishing the
World Trade Organization (WTO Agreement), while paragraph 2 of the same provision states that,
in the event of any inconsistency between the FTA and the WTO covered agreements, the
provisions of the FTA shall prevail to the extent of the inconsistency.
297 A reading of these
provisions on their face reveals that it is not clear whether paragraph 9 of Annex 2.3, which states
that Peru may maintain the PRS, should necessarily be construed as allowing Peru to maintain a
WTO-inconsistent PRS, when read together with other provisions of the FTA.
5.110. As we have considered above, modifying or interpreting the obligations in Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of th e GATT 1994 in the light of the FTA presupposes
that the FTA provisions permit the maintenance of a WTO-inconsistent PRS. However, having
concluded that, even under the FTA itself, there is ambiguity as to whether the FTA allows Peru to
maintain a WTO-inconsistent PRS, we do not consider that it can be argued that, by means of the
FTA, the parties have agreed between themselves to modify Article 4.2 and Article II:1(b).
5.111. In any event, even assuming arguendo that the provisions of the FTA allowed Peru to
maintain a WTO-inconsistent PRS, we are not convinced that, as Peru suggested before the Panel,
such alleged modification as between the FTA part ies would be subject to Article 41 of the Vienna
Convention. Part IV of the Vienna Convention, wh ich is entitled "Amendment and Modification of
Treaties", provides rules for the modifications of treaty terms. In particular, Article 41 concerns

297 On the one hand, paragraph 9 of Annex 2.3 to the FTA, when read together with paragraph 2 of
Article 1.3 of the FTA, seems to suggest that the FTA would prevail over WTO law to the extent that these
provisions permit a WTO-inconsistent PRS; on the other hand, when paragraph 9 of Annex 2.3 is read together
with paragraph 1 of Article 1.3, which confirms the parties' WTO rights and obligations, it seems to suggest
that the FTA would only permit a WTO-consistent PRS. Moreover, paragraph 2 of Article 2.3 states that,
[e]xcept as otherwise provided in this Treaty, each Party shall eliminate its customs tariffs on goods originating
in the other Party, in accordance with Annex 2.3." (Emphasis added) Paragraph 2 of Article 2.3 and paragraph
9 of Annex 2.3 could be read together so that the phrase "[e]xcept as otherwise provided" in paragraph 2 of
Article 2.3 refers also to paragraph 9 of Annex 2.3, which states that "Peru may maintain its Price Range
System". The PRS would thus represent an exception to the obligation in paragraph 2 of Article 2.3 to the FTA
that requires the elimination of all customs tariffs; at the same time it would have to remain consistent with
WTO rights and obligations, as provided for in paragraph 1 of Article 1.3 of the FTA.

"Agreements to modify multilateral treaties between certain of the parties only." 298 Before the
Panel, Peru seemed itself to rely on the dist inction that the Vienna Convention draws between
rules of interpretation and rules concerning modifications, when it referred to Article 41 of the
Vienna Convention in making its arguments that the FTA provisions modified the relevant
WTO provisions between Peru and Guatemala.
299
5.112. Nevertheless, we note that the WTO agreements contain specific provisions addressing
amendments, waivers, or exceptions for regional trade agreements 300, which prevail over the
general provisions of the Vienna Convention, such as Article 41. This is particularly true in the case
of FTAs considering that Article XXIV of the GATT 1994 specifically permits departures from certain
WTO rules in FTAs. However, Article XXIV conditions such departures on the fulfilment of the rule
that the level of duties and other regulations of commerce, applicable in each of the FTA members
to the trade of non-FTA members, shall not be higher or more restrictive than those applicable
prior to the formation of the FTA.
5.113. In the light of the above, we consider th at the proper routes to assess whether a provision
in an FTA that may depart from certain WTO rules is nevertheless consistent with the covered
agreements are the WTO provisions that permit the formation of regional trade agreements –
namely: Article XXIV of the GATT 1994, or the Enabling Clause
301 as far as agreements between
developing countries are concerned, in respect of trade in goods; and Article V of the General
Agreement on Trade in Services (GATS) in respect of trade in services.
5.114. While it did not invoke Article XXIV of the GATT 1994 as a defence, in its appellant's
submission, Peru recalls that the Appellate Body in Turkey – Textiles had made clear that
"Article XXIV may justify a measure which is inconsistent with certain other GATT provisions",
provided that certain conditions are met.302 Before the Panel, Peru had argued that "Article XXIV of
the GATT 1994 demonstrates that Members may modify their WTO rights by means of regional
trade agreements".303 Guatemala responds that "Peru … makes no attempt to justify the departure
from Article 4.2 using the test a pplied by the Appellate Body in Turkey – Textiles ".304 In
Guatemala's view, the consequence of Peru's arguments is that "Article XXIV is redundant or, at a
minimum, overridden by an alleged principle of 'systemic integration'" and that "WTO Members
could rely on provisions of bilateral agreements … as amending their obligations under WTO law,

298 Article 41 of the Vienna Convention, entitled "Agreements to modify multilateral treaties between
certain of the parties only”, states:
1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the
treaty as between themselves alone if:
(a) the possibility of such a modification is provided for by the treaty; or
(b) the modification in question is not prohibited by the treaty and:
(i) does not affect the enjoyment by the other parties of their rights under the treaty or the
performance of their obligations;
(ii) does not relate to a provision, derogation from which is incompatible with the effective
execution of the object and purpose of the treaty as a whole.
2. Unless in a case falling under paragraph 1(a) the treaty otherwise provides, the parties in
question shall notify the other parties of their intention to conclude the agreement and of the
modification to the treaty for which it provides.
299 Panel Report, para. 7.508 (referring to Peru's first written submission to the Panel, para. 4.28; and
second written submission to the Panel para. 2.59).
300 Article X of the WTO Agreement sets out detailed procedures "to amend the provisions of this
Agreement or the Multilateral Trade Agreements". Article IX of the WTO Agreement gives the Ministerial
Conference and the General Council the exclusive authority to adopt interpretations of the WTO Multilateral
Trade Agreements and to waive obligations imposed on Members under these agreements. Importantly,
Article XXIV of the GATT 1994 and Article V of the GATS provide for regional trade exceptions, allowing
WTO Members to depart from specific rights and obligations under the WTO covered agreements when they
form customs unions, free trade areas or agreements liberalizing trade in services. Developing countries
entering into regional trade agreements covering trade in goods with other developing countries may also avail
themselves of the exception provided by the Enabling Clause. We note, however, that neither participant has
invoked or relied upon the Enabling Clause in respect of the FTA at issue.
301 GATT 1979 Decision o Differential and More Favourable Treatment, Reciprocity, and Fuller
Participation of Developing Countries, L/4903, 28 November 1979, BISD 26S, P. 203.
302 Peru’s appellant’s submission, para. 197 (referring to Appellate Body Report, Turkey – Textiles,
para. 58).
303 Panel Report, para. 7.508 (referring to Peru's first written submission to the Panel, para. 4.28).
304 Guatemala's appellee's submission, para. 204.

regardless of whether the conditions for ex ceptions or defences under WTO law under
Articles XXIV or XX of the GATT 1994 have been established."305
5.115. In Turkey – Textiles, the Appellate Body considered that Article XXIV of the GATT 1994
may provide justification for measures that are inconsistent with certain other GATT 1994
provisions, provided that two cumulative conditions are fulfilled: (i) the party claiming the benefit
of this defence must demonstrate that the measure at issue is introduced upon the formation of a
customs union or FTA that fully meets the requirements of Article XXIV; and (ii) that party must
demonstrate that the formation of that customs union or FTA would be prevented if it were not
allowed to introduce the measure at issue.
306
5.116. In setting out the above cited conditions for a GATT 1994-inconsistent measure to be
justified as part of a customs union or FTA under paragraph 5 of Article XXIV of the GATT 1994, in
Turkey – Textiles , the Appellate Body relied also on para graph 4 of this provision, which states
that the purpose of a customs union or FTA is "to facilitate trade" between the constituent
members and "not to raise barriers to the trade" with third countries.
307 We further note that
paragraph 4 qualifies customs unions or FTAs as "agreements, of closer integration between the
economies of the countries parties to such agreements". 308 In our view, the references in
paragraph 4 to facilitating trade and closer integration are not consistent with an interpretation of
Article XXIV as a broad defence for measures in FTAs that roll back on Members' rights and
obligations under the WTO covered agreements.
5.117. In the present dispute, Peru has not invoked Article XXIV of the GATT 1994 in order to
justify the inconsistency of the PRS with Arti cle 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994 and the parties agree that the FTA has not entered into force. At
the oral hearing, Peru and Guatemala agreed that an agreement that is not yet in force cannot
benefit from the defence of Article XXIV.
309 Moreover, as we have considered above, it is not clear
whether the FTA allows Peru to maintain a WTO-inconsistent PRS. In the light of this, we do not
need to consider whether the PRS is consistent with the requirements set forth in Article XXIV.
5.3.3.3 Conclusions
5.118. In the light of all of the above, we find that Peru's arguments, that the Panel erred in its
interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994
because it failed to take into account under Article 31(3) of the Vienna Convention the FTA
between Peru and Guatemala and ILC Articles 20 and 45, go beyond the interpretation of
Article 4.2 and Article II:1(b) in accordance with Article 3.2 of the DSU and Article 31 of the
Vienna Convention and amount to arguing that, by means of the FTA, Peru and Guatemala actually
modified these provisions between themselves. Mo reover, we find that the FTA between Peru and
Guatemala and ILC Articles 20 and 45 are not "relev ant" to the interpretation of Article 4.2 and
Article II:1(b) within the meaning of Article 31(3)(c ) of the Vienna Convention and that the FTA is
not a subsequent agreement "regarding the interpretation" of these provisions within the meaning
of Article 31(3)(a). We, therefore, find that the Panel did not commit an error by not interpreting
Article 4.2 of the Agreement on Agriculture an d Article II:1(b) of the GATT 1994 taking into
account the provisions of the FTA and ILC Articl es 20 and 45 under Article 31(3) of the Vienna
Convention.
5.119. Moreover, while Peru is asking us to reverse the Panel's findings that, "inasmuch as the
Free Trade Agreement signed by Peru and Guatem ala in December 2011 ha[d] not entered into
force, it [was] not necessary for [the] Panel to rule on whether the parties [could], by means of
the FTA, modify as between themselves their rights and obligations under the covered
agreements"
310, on appeal, Peru has not challenged the Panel's finding that an agreement that has
not yet entered into force, such as the FTA, ca nnot modify the rights and obligations under the

305 Guatemala’s appellee’s submission, para. 204.
306 Appellate Body Report, Turkey – Textiles, para. 58.
307 Appellate Body Report, Turkey – Textiles, para. 57.
308 Emphasis added.
309 The Article XXIV defence applies also in respect of "an interim agreement necessary for the formation
of a customs union or of a free-trade area". We understand, however, that also such "interim agreement"
would need to be in force for the defence to apply.

covered agreements.311 In the light of this, we find that the Panel did not err in declining to make
findings as to whether the FTA modified the WTO rights and obligations between Peru and
Guatemala because the FTA was not in force.
5.3.4 Overall conclusions
5.120. On the basis of the foregoing, we find th at Peru has not established Peru's claim that the
Panel erred in finding that the additional duties resulting from the PRS are "variable import levies"
within the meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture.
312 Thus, we
uphold the Panel's findings, in paragraph 8.1.b of the Panel Report, that the additional duties
resulting from the PRS constitute "variable import levies" within the meaning of footnote 1 of
Article 4.2 of the Agreement on Agriculture, and in paragraph 8.1.d of the Panel Report, that, by
maintaining a measure that constitutes a "variable import levy", Peru acts inconsistently with its
obligations under Article 4.2 of the Agreement on Agriculture.
5.121. On the basis of the foregoing, we also find that Peru has not established Peru's claim that
the Panel erred in finding that the measure at issue is not an "ordinary customs duty" under the
first sentence of Article II:1(b) of the GATT 1994. 313 Thus, we uphold the Panel's findings, in
paragraph 8.1.e of the Panel Report, that the addi tional duties resulting from the PRS constitute
"other duties or charges … imposed on or in connection with the importation", within the meaning
of the second sentence of Article II:1(b) of th e GATT 1994, and that, by applying such measure
without having recorded it in its Schedule of Concessions, Peru acts inconsistently with its
obligations under the second sentence of Article II:1(b) of the GATT 1994.
5.4 Guatemala's appeal: Article 4.2 of the Agreement on Agriculture – minimum import
prices
5.122. We now turn to Guatemala's other appeal in connection with the additional duties resulting
from the PRS, and Article 4.2 and footnote 1 of the Agreement on Agriculture. Overall, Guatemala
questions the Panel's interpretation and application of the terms "minimum import prices" and
"similar border measures" in footnote 1 of Article 4.2 of the Agreement on Agriculture.
314
Guatemala requests us to reverse the Panel's finding that the measure at issue constitutes neither
a "minimum import price" nor a "similar border measure".315 In addition, Guatemala requests us to
complete the legal analysis and find that the measure at issue constitutes a "minimum import
price" or at least a "similar border measure".
316 Below, we summarize the Panel's interpretation
and application of Article 4.2 and footnote 1 of th e Agreement on Agriculture at issue. Thereafter,
we examine each of Guatemala's claims.
5.4.1 The Panel's findings
5.123. Before the Panel, Guatemala claimed that the additional duties resulting from the PRS
constitute "minimum import prices", or measures "similar" to minimum import prices, within the
meaning of footnote 1 of Article 4.2 of the Agr eement on Agriculture, because the PRS prevents
goods from entering Peru at a price below the PRS floor price. Guatemala also argued that the PRS
ensures that no import will enter Peru at a price below the sum of the relevant lowest international

311 Panel Report, para. 7.527. At the oral hearing Peru acknowledged that "an agreement that is not in
force could not … constitute a treaty that could modify obligations in the sense of Article 41 of the Vienna
Convention".
312 See Panel Report, paras. 7.352, 7.371-7.372, 8.1.b, and 8.1.d. The Panel found that the additional
duties resulting from the PRS "constitute variable import levies or, at the least, share sufficient characteristics
with variable import levies to be considered a border measure similar to a variable import levy". (Panel Report,
para. 8.1.b) We note that Peru does not appeal separately the Panel's finding that the additional duties
resulting from the PRS constitute at least a border measure "similar" to "variable import levies". Thus, our
analysis is limited to the Panel's finding that the additional duties constitute "variable import levies".
313 See Panel Report, paras. 7.423, 7.425, and 8.1.e.
314 Guatemala's other appellant's submission, paras. 65-118.
315 Guatemala's other appellant's submission, paras. 119 and 141 (referring to Panel Report,
paras. 7.370, 7.371, and 8.1.c).
316 Guatemala's other appellant's submission, paras. 120-141.

price and the additional duty, thus establishing a de facto minimum import price threshold.317 Peru
replied that the PRS does not operate as to impose a minimum import price, either by impeding
the entry of goods at a price below a specified minimum level, or by varying the levy to equalize
import prices with a minimum threshold. Peru further argued that the measure at issue has neither
the objective nor the capacity to arrive at an indicative target price, and applies the same
additional duty regardless of the transaction value.
318
5.124. The Panel noted that the term "minimum import price" refers generally to the lowest price
at which imports of a certain product may enter a Member's domestic market. 319 Referring to the
original and compliance panels in Chile – Price Band System , the Panel noted that "minimum
import prices" are schemes that generally or norma lly operate in relation to the actual transaction
value of imports, so that, if the transaction price of an import is below a specified minimum import
price, an additional charge is imposed corresponding to the difference.320
5.125. The Panel also examined the meaning of "s imilar border measures" in footnote 1 of the
Agreement on Agriculture. The Panel noted that the word "similar" suggests a comparison with the
types of measures listed in footnote 1. 321 The Panel considered that a measure is "similar" to a
"minimum import price" when it shares a sufficient number of characteristics with, and has a
design, structure, and effects similar to, a "minimum import price".
322
5.126. The Panel then turned to examine whethe r the measure at issue constituted a "minimum
import price". It found that there was "no evidence at all" that the additional duties resulting from
the PRS directly impede the entry of products at prices below a certain threshold in a way different
from what would occur with ordinary customs duties and, in particular, with a specific import
tariff.
323
5.127. Having concluded that the measure at issue does not constitute a "minimum import price",
the Panel went on to consider whether the measure at issue nonetheless constitutes a border
measure "similar" to a "minimum import price". Despite the fact that the additional duties resulting
from the PRS have some similarly to the measure that was at issue in Chile – Price Band
System324, the Panel noted that Peru had presented ev idence that the additional duties do not
impede the entry of imports into the Peruvian market at transaction values below the PRS floor

317 Panel Report, paras. 7.354-7.355 (referring to Guatemala's first written submission to the Panel,
paras. 4.84-4.95, 4.141; second written submission to the Panel, paras. 4126-4.141; opening statement at the
first meeting of the Panel, paras. 37-39; and response to Panel question No. 126, paras. 135-152).
318 Panel Report, para. 7.356 (referring to Peru's first written submission to the Panel, paras. 5.58-5.68;
second written submission to the Panel, paras. 3.36 and 3.41).
319 Panel Report, para. 7.295 (referring to Appellate Body Report, Chile – Price Band System, para 236).
The Panel also observed that the ordinary meaning of "minimum" is "[t]he smallest amount or quantity
possible, usual, attainable, etc." (Panel Report, para. 7.293 (referring to Shorter Oxford English Dictionary,
6th edn (Oxford University Press, 2007), Vol. 1, p. 1789))
320 Panel Report, para. 7.295 (referring to Panel Reports, Chile – Price Band System, para. 7.36(e);and
Chile – Price Band System (Article 21.5 – Argentina), para. 7.30; and Appellate Body Report, Chile – Price
Band System, paras. 236-237).
321 Panel Report, para. 7.302 (referring to Appellate Body Report, Chile – Price Band System,
para. 228). The Panel also noted that the determination of whether a measure is similar to something else
must be approached on an empirical basis. (Panel Report, paras. 7.298-7.299 (referring to Appellate Body
Reports, Chile – Price Band System, para 226; Chile – Price Band System (Article 21.5 – Argentina),
para. 189))
322 Panel Report, para. 7.359 (referring to Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), para. 193). According to the Panel, for a measure to qualify as a border measure
"similar" to a minimum import price, it must, in its particular features, share "sufficient features with [this]
categor[y] of prohibited measure[] to resemble, or be of the same nature or kind and thus be prohibited by
Article 4.2" of the Agreement on Agriculture. (Panel Report, para. 7.303 (referring to Appellate Body Report,
Chile – Price Band System, para 239)) The Panel observed that the term "similar" means "having a
resemblance or likeness", "of the same nature or kind", and "having characteristics in common". (Panel Report,
para. 7.297 (referring to Appellate Body Report, Chile – Price Band System, para 226))
323 Panel Report, paras. 7.360-7.361.
324 The Panel observed that the measure at issue in Chile – Price Band System was considered to be
"similar" to a minimum import price inasmuch as it operated in practice as a "proxy" or "substitute" for a
minimum import price. According to the Panel, this conclusion was "based on the fact that the measure
operated in such a way as to impede the entry of imports … at prices below the lower threshold in the band".
(Panel Report, para. 7.362 (referring to Appellate Body Report, Chile – Price Band System (Article 21.5 –
Argentina), paras. 194-195))

price.325 Moreover, the Panel was not convinced that th e additional duties resulting from the PRS
lead to the establishment of a minimum import price with a de facto threshold consisting of the
sum of the lowest transaction price and the duty resulting from the PRS. According to the Panel,
this situation is not different from a specific tariff. 326 On this basis, the Panel found that the PRS
does not share sufficient characteristics with "minimum import prices" to make it a border
measure "similar" to a "minimum import price".327
5.4.2 Guatemala's claim that the Panel erre d in its interpretation and application of
"minimum import prices"
5.4.2.1 Interpretation of "minimum import prices"
5.128. Guatemala claims that the Panel erred in it s interpretation of "minimum import prices", in
footnote 1 of Article 4.2 of the Agreement on Agri culture, by adopting an excessively narrow legal
standard, requiring that such a measure must impose duties based on the transaction value of
imports, and must prevent each and every impo rt from entering below a specified threshold.
328
Peru argues that the Panel adopted the correct legal standard for "minimum import prices". Peru
contends that the Panel neither stated that, under such a measure, each and every import must be
prevented from entering the market below a specified threshold, nor suggested that a measure
relying on reference prices, instead of transaction values, cannot be considered a "minimum
import price" scheme.
329
5.129. The Appellate Body explained in Chile – Price Band System that "[t]he term 'minimum
import price' refers generally to the lowest price at which imports of a certain product may enter a
Member's domestic market."
330 It further noted that "no definition has been provided by the
drafters of the Agreement on Agriculture." 331 The Appellate Body has also referred to the
explanation given by the panel in that dispute that "minimum import price" schemes "generally
operate in relation to the actual transaction valu e of the imports", and that, under such a scheme,
"[i]f the price of an individual consignment is below a specified minimum import price, an
additional charge is imposed corresponding to the difference."
332 Moreover, the Appellate Body has
further stated that "in a typical minimum impo rt price scheme the value to which the minimum
import price or target price is compared is the transaction value of a particular shipment, rather
than a calculated reference price." 333 While the Appellate Body has noted that minimum import
prices schemes "generally operate" in relation to the actual transaction value of imports and that a
"typical" minimum import price scheme would involve such a comparison, we consider that these
qualifications suggest that there can be other examples of benchmarks for determining "the lowest
price at which imports … may enter a … market". The Appellate Body has not excluded the
possibility that measures that define in a different manner the lowest price at which imports may
enter a market could nevertheless qualify as a "minimum import price" scheme or as a "similar
border measure".
334 Such an assessment would have to be made on the basis of the total
configuration of the measure. Thus, in our view, a panel's examination of whether a measure is a
"minimum import price" within the meaning of fo otnote 1 of the Agreement on Agriculture should

325 Panel Report, para. 7.366.
326 Panel Report, para. 7.368.
327 Panel Report, para. 7.370.
328 Guatemala's other appellant's submission, paras. 61, 71, and 73.
329 Peru's appellee's submission, paras. 9-13.
330 Appellate Body Reports, Chile – Price Band System, para. 236; Chile – Price Band System
(Article 21.5 – Argentina), para. 152.
331 Appellate Body Report, Chile – Price Band System, para. 236.
332 Appellate Body Reports, Chile – Price Band System (Article 21.5 – Argentina), para. 152; Chile –
Price Band System, paras. 236-237 (both quoting Panel Report, Chile – Price Band System, para. 7.36(e)).
333 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), fn 267 to para. 195.
(emphasis original)
334 We recall that this Panel observed that the measure at issue in Chile – Price Band System was
considered to be "similar" to a minimum import price inasmuch as it operated in practice as a "proxy" or
"substitute" for a minimum import price. According to the Panel, this conclusion was "based on the fact that
the measure operated in such a way as to impede the entry of imports … at prices below the lower threshold in
the band." (Panel Report, para. 7.362 (referring to Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), paras. 194-195))

be based on evidence, where available, concerning the operation and impact of the measure, as
well as an analysis of the design and structure of the measure.335
5.130. As stated above 336, with respect to the meaning of the term "minimum import prices" in
footnote 1 of the Agreement on Agriculture, th e Panel relied on the relevant passages of the
Appellate Body report in Chile – Price Band System . In particular, the Panel noted that the term
"minimum import price" refers generally to the lowest price at which imports of a certain product
may enter a Member's domestic market.
337 The Panel noted that "minimum import prices" are
schemes that generally or normally operate in relation to the actual transaction value of imports,
so that, if the price of an individual import is below a specified minimum import price, an additional
charge is imposed corresponding to the difference.
338 Turning to the measure at issue, the Panel
found that there was "no evidence at all" that the additional duties resulting from the PRS directly
impede the entry of products at prices below a certain threshold, in a way different from what
would occur with ordinary customs duties, and, in particular, with a specific import tariff.339
5.131. Guatemala argues that the Panel's finding "appears to be premised on the fact that the
duties resulting from the PRS are not linked to the transaction price of individual shipments, but to
a reference price, based on an average of world prices". 340 Guatemala contends that the
Appellate Body has not indicated "categorically that minimum import prices must always be
applied to the actual transaction value of imports". 341 Thus, Guatemala submits that the Panel
"erroneously held … that the definition of a minimum import price includes only measures that are
applied with respect to the actual transaction value of each shipment of imports." 342 Peru responds
that the Panel did not adopt the legal standard, as suggested by Guatemala, to "disqualify any
system using a reference price 'based on an average of world prices' from being a minimum import
price within the meaning of Article 4.2 of the Agreement on Agriculture".343
5.132. Contrary to Guatemala's submission, the Panel did not interpret the term "minimum import
prices" in footnote 1 of the Agreement on Agriculture to mean that a measure must necessarily
operate in relation to the transaction values of im ports. Moreover, we do not consider the Panel to
have adopted such a standard when examining the measure at issue. In particular, the Panel did
not find that the additional duties resulting from the PRS cannot constitute "minimum import
prices" because the PRS operates in relation to reference prices instead of transaction values.
Rather, the Panel noted statistical evidence submi tted by Peru showing that certain transactions
entered Peru's market at a price below the PRS floor price.
344 The Panel also noted that there was
no evidence at all that the additional duties re sulting from the PRS directly impede the entry of

335 In the context of different WTO provisions, the Appellate Body has noted that, in assessing a
measure, a panel should take into account its design, and structure, as well as the operation of a measure.
(See e.g. Appellate Body Reports, Japan – Alcoholic Beverages II, p. 29; China – Raw Materials, para. 5.96)
336 See paras. 5.123-5.127 above.
337 Panel Report, paras. 7.295-7.296 (referring to Appellate Body Report, Chile – Price Band System,
para. 236).
338 Panel Report, para. 7.295 (referring to Panel Reports, Chile – Price Band System, para. 7.36(e);
Chile – Price Band System (Article 21.5 – Argentina), para. 7.30; and Appellate Body Report, Chile – Price
Band System, paras. 236-237).
339 Panel Report, paras. 7.360-7.361.
340 Guatemala's other appellant's submission, para. 70.
341 Guatemala's other appellant's submission, paras. 71-74 (referring to Appellate Body Reports, Chile –
Price Band System (Article 21.5 – Argentina), para. 153; Chile – Price Band System, para. 236). (emphasis
original)
342 Guatemala's other appellant's submission, para. 74. (emphasis original)
343 Peru's appellee's submission, para. 12.
344 The Panel noted that, inter alia, Peru submitted statistical evidence to the Panel for the period
between 2001 and 2013, demonstrating that, in approximately 57% of the two-week periods since Supreme
Decree No. 115-2001-EF came into force, "various trade transactions entered Peru at a price lower than the
reference price and the floor price in the range, accounting for more than one third of trade transactions
recorded over these periods." (Panel Report, para. 7.357 (referring to Peru's first written submission to the
Panel, paras. 5.62-5.68; response to Panel question No. 123, paras. 98-99; and Panel Exhibit PER-90))

products at prices below a certain threshold, in a way different from what would occur with
ordinary customs duties.345
5.133. In addition, Guatemala contends that "the Panel adopted an excessively narrow legal
standard, requiring that, in order to constitute a minimum import price, a measure … has to
prevent, in each and every import, that a product enter below a given threshold." 346 Guatemala
argues that "the correct legal characterization of a measure is not affected by the fact that the
measure may not produce its intended effects with respect to 100 per cent of imports." 347 Peru
contends that the Panel did not adopt the exce ssively narrow legal standard suggested by
Guatemala. Rather, according to Peru, the Panel followed the understanding of "minimum import
prices" set out in past reports, where such excessively narrow legal standard was not used.348
5.134. We fail to see, and Guatemala has not explained, where in the Panel Report the Panel
required that, for a measure to constitute a "minimum import price" scheme, such measure must
prevent each and every import transaction from entering at prices below a specified threshold. The
Panel noted evidence submitted by Peru demons trating that a certain percentage of imports
entered the domestic market at a price below the PRS floor price.
349 We do not consider the Panel
to have interpreted "minimum import prices" as implying that a measure requires that "each and
every import" enter at or above a specified threshold.
5.135. On the basis of the foregoing, we find that Guatemala has not established that the Panel
erred in its interpretation of "minimum import prices", in footnote 1 of Article 4.2 of the Agreement
on Agriculture, by requiring that a measure must impose duties based on the transaction value of
imports, and must prevent each and every import from entering below a specified threshold.
5.4.2.2 Application of "minimum import prices"
5.136. Guatemala claims that the Panel erred in finding that Peru's measure is not a "minimum
import price" despite the existence of an implicit or de facto threshold.
350 According to Guatemala,
the PRS contains an implicit or de facto threshold, which consists of the lowest international price
of the relevant product in the previous two-week pe riod plus the additional duty resulting from the
PRS.351 In essence, Guatemala argues that, without regard to the floor price, transaction prices of
imports will always reach the implicit threshold of the PRS, "except in highly unlikely and unproven
circumstances".352 Guatemala contends that, since basically no import can enter the Peruvian
market below the implicit threshold, the measure at issue qualifies as a "minimum import price",
and is thus inconsistent with Article 4.2 of the Agreement on Agriculture.
353
5.137. Peru submits that the implicit thresh old identified by Guatemala is based upon a
calculation that is not part of the PRS, and that the Panel was correct to find that there is no

345 Panel Report, paras. 7.360-7.361. In our view, simply because a measure operates in relation to a
reference price, instead of the transaction value of imports, does not necessarily mean that it is incapable of
preventing the entry of imports priced below a certain threshold. The measures at issue in Chile – Price Band
System operated in relation to a reference price, and, in those cases, the panels and the Appellate Body
accepted that it was "highly improbable" that a product would enter the Chilean market below the lower
threshold price of those measures. (See Appellate Body Report, Chile – Price Band System (Article 21.5 –
Argentina), paras. 202 and 224; and Panel Reports, Chile – Price Band System (Article 21.5 – Argentina),
para. 7.89; Chile – Price Band System, para. 7.41 and fn 607 thereto) In both the original and compliance
proceedings in Chile – Price Band System, the measures at issue were found to be "similar" to a minimum
import price. We examine in paras. 5.136-5.142 below Guatemala's claim that the Panel erred in its application
of Article 4.2 of the Agreement on Agriculture, including the term "minimum import prices" in footnote 1 of the
Agreement on Agriculture, to the measure at issue.
346 Guatemala's other appellant's submission, para. 61.
347 Guatemala's other appellant's submission, para. 75.
348 Peru's appellee's submission, paras. 10-11 (referring to Panel Report, para. 7.358 (quoting Panel
Report, Chile – Price Band System (Article 21.5 – Argentina), para. 7.30) and para. 7.363 (quoting Appellate
Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 195).
349 See Panel Report, para. 7.357 (referring to Peru's first written submission to the Panel,
paras. 5.62-5.68; and response to Panel question No. 123, paras. 98-99).
350 Guatemala's other appellant's submission, paras. 84-85.
351 Guatemala's other appellant's submission, paras. 44, 48, 84, 97 and 111. See also Guatemala's
second written submission to the Panel, para. 4.141.
352 Guatemala's other appellant's submission, para. 100. See also paras. 87-88.
353 Guatemala's other appellant's submission, para. 101.

de facto or implicit threshold in the PRS. 354 Peru contends that operators are free to transact at
any price. Peru argues that, if transaction prices are unlikely to be below the lowest international
price contemplated in the PRS reference price, this is a result of the tendency of import prices to
follow international prices, and not a result imposed by the PRS.
355
5.138. The Panel noted statistical evidence submi tted by Peru showing that certain transactions
entered Peru's market at a price below the PRS floor price. 356 The Panel stated that, "[t]aking into
account the structure and design of the measure at issue, as well as the details concerning its
operation, there is no evidence at all that the a dditional duties resulting from … the PRS directly
ensure that imported products subject to the PR S will not enter the Peruvian market at a price
lower than a certain threshold." 357 The Panel then compared the operation of the additional duties
resulting from the PRS with the operation of ordinary customs duties, in particular, specific import
tariffs. According to the Panel, "a specific tariff (for example a tariff of USD 100 per metric ton on
a product) could indirectly ensure that imports of that product do not enter at a price lower than a
certain threshold (in the case of the example, it would be ensured that the specific tariff would
operate as the lower threshold)."
358 With respect to this example, the Panel concluded that this
effect "would not convert the specific tariff into a minimum import price or a measure other than
ordinary customs duties".
359 Finally, the Panel turned to examine the de facto threshold of the
PRS, as identified by Guatemala. The Panel was no t convinced that "the duties resulting from the
PRS lead to the establishment of a minimum import price with a de facto threshold".360 According
to the Panel, the situation involving an alleged de facto threshold is also not different from
"a specific tariff, where the entry price might be no lower than the amount of the tariff itself,
irrespective of the way in which the authorities of a Member determine the amount of the specific
duty".361
5.139. Where available, statistical evidence concerning the impact of the measure is relevant to a
panel's examination. 362 There may be, however, additional elements relevant to a panel's
examination of whether a measure is a "minimum import price" within the meaning of footnote 1
of the Agreement on Agriculture. For purposes of such examination, a panel should also analyse
the design, structure, and operation of a measure. In this case, the Panel's finding was based on
the statistical evidence submitted by Peru. The Panel stated that, "[t]aking into account the
structure and design of the measure at issue, as well as the details concerning its operation", there
is no evidence that the measure ensures that imports will not enter below a certain threshold.
363
Beyond this sentence, the Panel did not explain any further how it had analysed the design and
structure of the measure at issue. Thus, the Panel did not sufficiently engage with the relevant
elements of the design, structure, and operat ion of the measure at issue that could have
supported the conclusion the Panel drew.
5.140. The only element concerning the operation of the measure examined by the Panel, in the
context of Guatemala's claim relating to "minimum import prices", was the operation of the
additional duties resulting from the PRS in comp arison with the operation of ordinary customs
duties. The Panel concluded that the additional duties operate similarly to a specific tariff
"irrespective of the way in which the authorities of a Member determine the amount of the specific
duty".
364 We consider that the Panel could not have reached such a conclusion without conducting
a more thorough examination of the design, structure, and operation of the measure in its relevant
context. The mere fact that a measure results in the payment of duties that may take the same
form as ordinary customs duties does not necessarily mean that the measure falls outside the

354 Peru's appellee's submission, paras. 24-25.
355 Peru's appellee's submission, para. 28.
356 See fn 348 above.
357 Panel Report, para. 7.360.
358 Panel Report, para. 7.361.
359 Panel Report, para. 7.361.
360 Panel Report, para. 7.368.
361 Panel Report, para. 7.368.
362 The weight and significance to be accorded to such evidence will, as is the case with any evidence,
depend on the circumstances of each case. In this regard, with respect to an examination of whether a
measure is a "similar border measure" within the meaning of footnote 1 of the Agreement on Agriculture, see
Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 189.
363 Panel Report, para. 7.360.
364 Panel Report, para. 7.368.

scope of footnote 1. 365 A measure may result in the imposition of specific duties that resemble
ordinary customs duties and nevertheless comprise a scheme imposing an explicit or implicit
minimum import price. For these reasons, the "way in which the authorities of a Member
determine the amount of the … duty"
366, together with the design, structure, and operation of the
measure, are relevant elements that must form part of a panel's examination because they assist
in distinguishing "minimum import prices" from "ordinary customs duties".
5.141. Thus, the Panel did not sufficiently examine th e explicit or the implicit threshold identified
by Guatemala. In particular, the Panel did not properly examine to what extent the implicit
threshold, as identified by Guatemala 367, can be said to form part of the design and structure of
the PRS. Furthermore, the Panel did not determin e whether the reference price of the PRS serves
as an appropriate proxy for transaction values of imports entering the Peruvian market. In this
regard, there was no examination of: (i) the relati onship between the prices of "marker products"
and the prices of "associated products"368; (ii) the fact that the reference price is calculated on the
basis of only a particular specified international market; and (iii) the impact, if any, of the
two-week gap in time between the international pr ices used to calculate the reference price and
the transaction values of imports entering the Peruvian market.
5.142. On the basis of the foregoing, we find that the Panel erred in its analysis of whether the
measure at issue is a "minimum import price" within the meaning of footnote 1 of Article 4.2 of the
Agreement on Agriculture because the Panel did no t properly examine the design, structure, and
operation of the measure when addressing Guatemala's claim. Consequently, we reverse the
Panel's finding, in paragraphs 7.371 and 8.1.c of the Panel Report, that the additional duties
resulting from the PRS do not constitute "minimum import prices" within the meaning of footnote 1
of Article 4.2.
5.4.3 Guatemala's claim that the Panel erre d in its interpretation and application of
"similar border measures"
5.4.3.1 Interpretation of "similar border measures"
5.143. Guatemala claims the Panel erred in its interpretation of "similar border measures", in
footnote 1 of Article 4.2 of the Agreement on Ag riculture, by conflating the legal standard for
"minimum import prices" with the legal standard for border measures "similar" to minimum import
prices. In Guatemala's view, the Panel failed to give effect to the term "similar" in footnote 1 of the
Agreement on Agriculture.
369 Peru contends that the Panel applied the correct legal test in
determining that the additional duties are not "similar" to "minimum import prices".370
5.144. Article 4.2 of the Agreement on Agriculture prohibits Members from maintaining, resorting
to, or reverting to, "any measures of the kind which have been required to be converted into
ordinary customs duties". Footnote 1 of the Agr eement on Agriculture provides a list of measures
covered by the obligation under Article 4.2. The vari ous border measures identified in footnote 1,
which include "minimum import prices" and "variable import levies", have different forms and
structures and apply to imports in different ways. Yet, these measures "have in common that they
restrict the volume or distort the price of imports of agricultural products".371 Footnote 1 includes a
category of "similar border measures other than ordinary customs duties". The Appellate Body has
endorsed the definition of "similar" as "having a resemblance or likeness", "of the same nature or

365 Appellate Body Reports, Chile – Price Band System, para. 216; Chile – Price Band System
(Article 21.5 – Argentina), para. 149.
366 Panel Report, para. 7.368.
367 According to Guatemala, this de facto or implicit threshold consists of the sum of the lowest relevant
international price and the additional duty resulting from the PRS. (Guatemala's other appellant's submission,
paras. 44-48, 84, 97, 111-113, and 115. See also Guatemala's second written submission to the Panel,
para. 4.141.)
368 We note that the floor and reference prices, and ultimately the additional duty resulting from the
PRS, are calculated only for the four "marker products". The same additional duty applicable for each "marker
product" is then also applied to the respective "associated products". See fn 31 and para. 5.163 below.
369 Guatemala's other appellant's submission, paras. 63 and 107-109.
370 Peru's appellee's submission, paras. 32-34.
371 Appellate Body Report, Chile – Price Band System, para. 200.

kind", and "having characteristics in common". 372 Similarity must be established by undertaking a
comparative analysis between an actual measure and one or more of the measures explicitly listed
in footnote 1, and such a task must be approached on an empirical basis. 373 A measure need not
be identical to one of the prohibited categories of measures in footnote 1 to fall nevertheless
within the scope of this provision. Rather, in order to be a "similar border measure", a measure
must, in its specific configuration, have sufficient "resemblance or likeness to" or be "of the same
nature or kind" as at least one of the specific categories of measures listed in footnote 1.
374 Thus,
a measure is "similar" to a "minimum import price" scheme when it shares a sufficient number of
characteristics with, and has a design, structure, operation, and impact similar, to a minimum
import price, even if it is not "identical" to such a scheme in all respects.
375
5.145. In setting out its understanding of "similar border measures" in footnote 1 of the
Agreement on Agriculture 376, the Panel relied on the Appellate Body reports in the original and
compliance proceedings in Chile – Price Band System. Recalling that Article 4 of the Agreement on
Agriculture prohibits border measures that do not constitute "ordinary customs duties", the Panel
found it "necessary also to examine whether the pa rticular features of the measure, taking into
account its structure and design as well as its effects, make it similar to the categories of
measures prohibited by footnote 1 … or to an ordinary customs duty".
377
5.146. Guatemala asserts that, by definition, a measure that is "similar" will not be exactly the
same as a measure that is a minimum import price, and does not need to be "'identical' to such
scheme in all respects".
378 Guatemala contends that the Panel ignored the fact that "minimum
import prices" and measures "similar" to minimum import prices are two different types of
measures.379 In Guatemala's view, under the Panel's logic, a measure would qualify as a "similar
border measure" only if it shared all necessary attributes with one of measures enumerated under
footnote 1 of the Agreement on Agriculture.380
5.147. In our view, the Panel did not find that, for a measure to qualify as a "similar border
measure", within the meaning of footnote 1 of th e Agreement on Agriculture, it must share all
necessary attributes with "minimum import prices". Rather, quoting from the Appellate Body
Report in Chile – Price Band System (Article 21.5 – Argentina) , the Panel stated that "[a] measure
is 'similar' to a minimum import price when it shares a sufficient number of characteristics with,
and has a design, structure, and effects similar to , a minimum import price, even if it is not
'identical' to such a scheme in all respects."
381 As stated above 382, a proper interpretation of
"similar border measures" requires a panel to examine whether a measure shares a sufficient
number of characteristics with at least one of the specific categories of measures listed in
footnote 1. In its examination, a panel must an alyse the design, structure, and operation of the
measure at issue. In this regard, the Panel's interpretation of "similar border measures" is an
accurate rendering of the meaning of this expression, as interpreted by the Appellate Body.

372 Appellate Body Reports, Chile – Price Band System, paras. 225-226; Chile – Price Band System
(Article 21.5 – Argentina), para. 163.
373 Appellate Body Reports, Chile – Price Band System, paras. 226-228; Chile – Price Band System
(Article 21.5 – Argentina), para. 163. In the compliance proceedings in Chile – Price Band System, the
Appellate Body explained that, in advocating that the approach be taken "on an empirical basis", the
Appellate Body in the original proceedings was contrasting this to, and counselling against, an approach that
focused on the fundamental nature of the shared characteristics. In the compliance proceedings, the Appellate
Body concluded that the panel was not required to focus its examination primarily on numerical or statistical
data regarding the effects of that measure in practice. Rather, where available, evidence on the "observable
effects of the measure" should, obviously, be taken into consideration, along with information on the structure
and design of the measure. (Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina),
para. 189)
374 Appellate Body Reports, Chile – Price Band System, para. 227; Chile – Price Band System
(Article 21.5 – Argentina), para. 163.
375 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 193.
376 See para. 5.125 above.
377 Panel Report, para. 7.305.
378 Guatemala's other appellant's submission, para. 106 (quoting Appellate Body Report, Chile – Price
Band System (Article 21.5 – Argentina), para. 193). (emphasis omitted)
379 Guatemala's other appellant's submission, paras. 106-107.
380 Guatemala's other appellant's submission, para. 108.
381 Panel Report, para. 7.359 (quoting Appellate Body Report, Chile – Price Band System (Article 21.5 –
Argentina), para. 193).
382 See para. 5.144 above.

5.148. On the basis of the foregoing, we find that Guatemala has not established that the Panel
erred in its interpretation of "similar border measures" in footnote 1 of Article 4.2 of the
Agreement on Agriculture by conflating the legal standard for "minimum import prices" with the
legal standard for border measures "similar" to minimum import prices. We note, however, that
the Panel stated that "it [is] necessary …. to examine whether the particular features of the
measure … make it similar to the categories of measures prohibited by footnote 1 … or to an
ordinary customs duty."
383 Footnote 1 of the Agreement on Agriculture, however, does not refer to
measures "similar" to "ordinary customs duties". Rather, footnote 1 includes within the scope of
the prohibition in Article 4.2 of the Agreement on Agriculture certain types of measures including
"similar border measures other than ordinary customs duties". Thus, we disagree with this
statement by the Panel to the extent that the Pa nel suggested that it is necessary to examine
whether a measure is "similar" to an "ordinary customs duty".
5.4.3.2 Application of "similar border measures"
5.149. Guatemala claims that the Panel erred in finding that Peru's measure is not "similar" to a
"minimum import price" within the meaning of footnote 1 of Article 4.2 of the Agreement on
Agriculture. Guatemala argues that, contrary to what the Panel implies, the measure contains
two mechanisms preventing imports from entering the Peruvian market at prices below certain
thresholds, namely, the explicit threshold and the implicit threshold. Thus, in Guatemala's view,
Peru's measure is at least "similar" to a "minimum import price".
384 Peru responds that Guatemala
failed to submit examples of any shared characteristics that would make the Peruvian measure
"similar" to a minimum import price, and has simp ly re-stated its arguments regarding the explicit
and implicit thresholds that were presented to the Panel.
385
5.150. After concluding that the additional duti es resulting from the PRS do not constitute a
"minimum import price", the Panel considered whet her the duties nonetheless constitute a border
measure "similar" to a "minimum import price". The Panel observed that, similarly to the measure
at issue in Chile – Price Band System386, the additional duties resulting from the PRS are calculated
on the basis of the difference between the floor price and the reference price. 387 The Panel also
noted that, under the PRS, "[t]he lower the reference price in comparison with the floor price, the
higher the specific duty and the greater its protective impact." 388 The Panel noted, however, that
Peru had presented evidence that the additional duties resulting from the PRS do not impede the
entry of imports into the Peruvian market at transaction values below the PRS floor price. 389
Moreover, the Panel was not convinced that the addi tional duties resulting from the PRS lead to
the establishment of a minimum import price with a de facto threshold consisting of the sum of the
lowest transaction price and the duty resulting from the PRS. According to the Panel, this situation
was no different from a specific tariff, where the entry price might be no lower than the amount of
the tariff itself, irrespective of the way in which the authorities determine the amount of the
specific duty.
390 On this basis, the Panel found that the PRS does not share sufficient
characteristics with minimum import prices to make them a border measure "similar" to a
"minimum import price".391

384 Guatemala's other appellant's submission, paras. 111-113. Guatemala also alleges that the Panel
conflated and thus misapplied the concept of "similar border measures" because, in its view, the Panel's factual
basis for finding that the measure at issue is not "similar" to a minimum import price is essentially the same as
the factual basis for finding that the measure is not a "minimum import price". (Guatemala's other appellant's
submission, paras. 102-103)
385 Peru's appellee's submission, para. 35.
386 The Panel observed that the measure at issue in Chile – Price Band System was considered to be
"similar" to a "minimum import price" inasmuch as it operated in practice as a "proxy" or "substitute" for a
"minimum import price". According to the Panel, "[t]his conclusion was based on the fact that the measure
operated in such a way as to impede the entry of imports … at prices below the lower threshold in the band."
(Panel Report, para. 7.362 (referring to Appellate Body Report, Chile – Price Band System (Article 21.5 –
Argentina), paras. 194-195))
387 Panel Report, para. 7.364.
388 Panel Report, para. 7.365.
389 Panel Report, para. 7.366.
390 Panel Report, paras. 7.368-7.369.
391 Panel Report, para. 7.370.

5.151. As we have stated above 392, the Panel's comparison between the operation of the
additional duties resulting from the PRS and the operation of ordinary customs duties is
inadequate, since the Panel did not sufficiently examine the design, structure, and operation of the
measure in its relevant context. Despite having distinct legal standards, the same or equivalent
factual elements or aspects of the design, structure, or operation of a measure may be relevant for
an assessment of whether such measure constitutes a "minimum import price" or a "similar border
measure". As the Panel relied on the same comparis on to reach its finding concerning whether the
measure at issue is "similar" to a minimum import price
393, our earlier analysis is also relevant
here.
5.152. Moreover, the Panel considered that the additional duties resulting from the PRS operate in
a manner similar to the measure that was at issue in Chile – Price Band System. In particular, the
Panel noted that the additional duties resulting from the PRS are calculated on the basis of the
difference between the floor price and the referenc e price, and that, under the PRS, the lower the
reference price in comparison with the floor price, the higher the specific duty and the greater its
protective impact.394 Despite the fact that the measure in Chile – Price Band System was found to
be "similar" to a minimum import price, the Panel gave prominence to statistical evidence
submitted by Peru showing that certain transactio ns entered Peru's market at a price below the
PRS floor price.
395 The Panel then concluded that the statistical evidence presented by Peru "shows
that the measure at issue does not impede the entry of products subject to the PRS into the
Peruvian market at a transaction value below the floor price".
396
5.153. As we have noted above in our analysis of whether the PRS is a "minimum import
price"397, where available, statistical evidence concerning the impact of the measure is relevant to
a panel's examination. 398 There may be, however, additional elements relevant to a panel's
examination of whether a measure is a border measure "similar" to a "minimum import price"
within the meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture. For purposes of
this examination, a panel should also analyse th e design, structure, and operation of a measure.
This is particularly important for an examination of whether a measure is "similar" to one of the
prohibited categories of measures listed in footnote 1. Also as stated above 399, a measure is
"similar" to a minimum import price scheme when it shares a sufficient number of characteristics
with, and has a design, structure, operation and impact similar to, a minimum import price, even if
it is not "identical" to such a scheme in all respects.
400 The Panel's finding was based essentially on
the statistical evidence submitted by Peru. Thus , by failing to analyse sufficiently the design,
structure and operation of the measure at issue, the Panel did not conduct a proper analysis as to
whether the additional duties resulting from the PRS, even if not identical to a "minimum import
price" scheme, may nonetheless constitute a "similar border measure" within the meaning of
footnote 1 of Article 4.2 of the Agreement on Agriculture.
5.154. As noted earlier
401, the Panel did not sufficiently examine the explicit or the implicit
threshold identified by Guatemala. The Panel also failed to determine whether the reference price
of the PRS serves as an appropriate proxy for transaction values of imports entering the Peruvian
market. These factual elements or aspects of the design, structure, and operation of the PRS are
relevant for both an assessment of whether the measure at issue meets the legal standard for
"minimum import prices" or the legal standard for "similar border measures".
402
5.155. On the basis of the foregoing, we find that the Panel erred in its analysis of whether the
measure at issue is a border measure "similar" to a "minimum import price" within the meaning of

392 See para. 5.139 above.
393 See Panel Report, paras. 7.368-7.369.
394 Panel Report, paras. 7.363-7.365 (referring to Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), para. 195).
395 Panel Report, para. 7.366 (referring to Panel Exhibit PER-90).
396 Panel Report, para. 7.366.
397 See para. 5.139 above.
398 The weight and significance to be accorded to such evidence will, as is the case with any evidence,
depend on the circumstances of each case. (See Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), para. 189)
399 See para. 5.144 above.
400 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 193.
401 See para. 5.141 above.
402 See para. 5.151 above.

footnote 1 of Article 4.2 of the Agreement on Agriculture because the Panel did not properly
examine the design, structure, and operation of the measure at issue when addressing
Guatemala's claim. Consequently, we reverse the Panel's finding, in paragraphs 7.370 and 8.1.c of
the Panel Report, that the measure at issue does not share sufficient characteristics with
"minimum import prices" to be considered a border measure "similar" to a "minimum import price"
within the meaning of footnote 1 of Article 4.2.
5.4.4 Guatemala's request for completion of the legal analysis
5.156. Guatemala requests that we complete the legal analysis and find that Peru's measure is
inconsistent with Article 4.2 of the Agreement on Agriculture because, as Guatemala argues, the
measure is either a "minimum import price" or a measure "similar" to a minimum import price.
Guatemala's request is contingent on whether we reverse the Panel's findings on "minimum import
prices" or on "similar border measures".
403 Having reversed both of these findings, we now
consider whether we can complete the legal analysis as requested by Guatemala.
5.157. In previous disputes, the Appellate Body has completed the legal analysis with a view to
facilitating the prompt settlement and effective resolution of the dispute. 404 The Appellate Body
has, however, held that it can do so only if th e factual findings of the panel and the undisputed
facts on the panel record provide it with a sufficient basis for its own analysis. 405 Reasons that
have prevented the Appellate Body from completing the legal analysis include the absence of full
exploration of the issues before the panel, and, consequently, considerations for parties' due
process rights.
406
5.158. Guatemala submits that the measure at issue is a "minimum import price" or a "similar
border measure" within the meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture
because the measure prevents imports from entering the Peruvian market at prices below the
explicit threshold of the PRS, namely, the floor price.
407 Alternatively, even if Peru's measure does
not raise, in all instances, the entry prices of imports to the level of the floor price, Guatemala
contends that the measure raises the entry price for the specified imports at least to the level of a
de facto or implicit threshold. According to Guatemala, this de facto or implicit threshold consists
of the sum of the lowest relevant international price and the additional duty resulting from the
PRS.
408
5.159. Pursuant to Guatemala's request for completion, the issue before us is whether the
measure at issue contains a "minimum import price" or a "similar border measure" within the
meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture. As stated above409, the term
"minimum import price" in footnote 1 "refers generally to the lowest price at which imports of a

403 Guatemala's other appellant's submission, para. 120.
404 See e.g. Appellate Body Reports, Australia – Salmon, paras. 117-118; US – Wheat Gluten,
paras. 80-92; Canada – Aircraft (Article 21.5 – Brazil), paras. 43-52.
405 See Appellate Body Reports, US – Gasoline, p. 19, DSR 1996:I, p. 17; Canada – Periodicals, p. 24,
DSR 1997:I, p. 469; EC – Poultry, para. 156; US – Shrimp, paras. 123-124; US – FSC, para. 133; Australia –
Salmon, paras. 117-119; Canada – Autos, paras. 133 and 144; Korea – Various Measures on Beef, para. 125
and fn 62 thereto; US – Lamb, paras. 150 and 172; US – Section 211 Appropriations Act, paras. 343 and 352;
EC and certain member States – Large Civil Aircraft, paras. 1174-1178; US – Large Civil Aircraft (2nd
complaint), paras. 1272-1274; US – Carbon Steel (India), para. 4.483. In certain disputes, the Appellate Body
could not complete the legal analysis in the absence of sufficient factual findings or undisputed facts on the
panel record. (See Appellate Body Reports, EC – Asbestos, paras. 78 and 82; EC – Hormones, para. 251;
Korea – Dairy, paras. 92 and 102; US – Hot-Rolled Steel, paras. 180 and 236; US – Softwood Lumber IV, para.
118; US – Softwood Lumber VI (Article 21.5 – Canada), paras. 157 and 161; US – Oil Country Tubular Goods
Sunset Reviews, paras. 219-220; US – Upland Cotton, para. 693; US – Zeroing (EC), paras. 228 and 243; EC –
Selected Customs Matters, para. 286; US – Continued Zeroing, para. 194; US – Anti-Dumping and
Countervailing Duties (China), para. 537; EC and certain member States – Large Civil Aircraft, paras. 736,
990, and 993; US – COOL, para. 481)
406 See Appellate Body Reports, EC – Export Subsidies on Sugar, fn 537 to para. 339; Canada –
Renewable Energy / Canada – Feed-in Tariff Program, para. 5.224; US – Countervailing and Anti-Dumping
Measures (China), para. 4.124.
407 Guatemala's other appellant's submission, paras. 44, 48, 83, 111-113, and 115.
408 Guatemala's other appellant's submission, paras. 44-48, 84, 97, 111-113, and 115. See also
Guatemala's first written submission to the Panel, para. 4.140.
409 See para. 5.129 above.

certain product may enter a Member's domestic market". 410 With respect to "similar border
measures" in footnote 1 411, a measure is "similar" to a "minimum import price" scheme when it
shares a sufficient number of characteristics with, and has a design, structure, operation and
impact similar to, a "minimum import price", even if it is not identical to such a scheme in all
respects.
412 Thus, in order to determine whether a measure contains either a "minimum import
price" or a "similar border measure", a panel's analysis should include a thorough assessment of
the design, structure, and operation of the measure at issue considered in its relevant context. The
mere fact that a measure results in the payment of duties that take the same form as ordinary
customs duties does not, alone, mean that th e measure falls outside the scope of footnote 1.
413
Thus, we are required to examine whether, and to what extent, either of the two thresholds
identified by Guatemala constitutes a minimum import price threshold. We shall do so by
considering the design and structure of the measure at issue, as well as its application.
5.160. As summarized in the Panel Report, the PRS imposes an additional duty on imports of
certain products when the reference price is below the floor price. 414 The floor price is based on an
average of international prices in a specified international market over a recent past period of
60 months.415 The reference price is based on an average of international price quotations in the
same specified international market over a recent past period of two weeks. 416 The additional duty
is the difference between the floor price and the reference price multiplied by a factor associated
with the import costs. 417 The Panel found that "[t]he lower the reference price in comparison with
the floor price, the higher the specific duty and the greater its protective impact." 418 Under Peru's
regulations, the additional duties resulting from the PRS, plus Peru's ad valorem duties, may not
exceed Peru's bound tariff rate.419
5.161. We have found that the Panel did not sufficiently examine the explicit or the implicit
threshold identified by Guatemala. 420 The Panel record also does not contain undisputed facts
concerning to what extent, in the light of the design, structure and operation of the measure,
either of these thresholds serves, even if not in all instances, as a minimum price threshold for
imports entering the Peruvian market, so as to qualify the measure as at least a "similar border
measure" within the meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture.

410 Appellate Body Reports, Chile – Price Band System, para. 236; Chile – Price Band System
(Article 21.5 – Argentina), para. 152. The Appellate Body has also explained that, generally speaking, under a
minimum import price scheme, "[i]f the price of an individual consignment is below a specified minimum
import price, an additional charge is imposed corresponding to the difference". (Appellate Body Reports,
Chile – Price Band System (Article 21.5 – Argentina), para. 152; Chile – Price Band System, para. 236
(referring to Panel Report, Chile – Price Band System, para. 7.36(e)))
411 See also para. 5.144 above.
412 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 193.
413 Appellate Body Reports, Chile – Price Band System, para. 216; Chile – Price Band System
(Article 21.5 – Argentina), para. 149.
414 Panel Report, para. 7.140; Annex III to Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4,
p. 204889).
415 The floor price is to be updated every six months. (Panel Report, para. 7.135; Article 6 of Supreme
Decree No. 115-2001-EF (Panel Exhibit GTM-4), p. 204888) The floor prices, which are expressed in f.o.b.
terms, are converted into c.i.f. terms by applying the freight and insurance costs specified in Annex V to the
Supreme Decree No. 115-2001-EF. (Panel Report, para. 7.133; Annexes II and V to Supreme Decree No. 115-
2001-EF (Panel Exhibit GTM-4), pp. 204889-204890) Annex V indicates the applicable freight and insurance
costs for each "marker product" and identifies the General Secretariat of the Andean Community as the source
of these costs. The Panel observed that these values coincide with the costs indicated in Annex 3 to
Decision 371 of the Andean Price Band System. (Panel Report, para. 7.134; Commission of the Cartagena
Agreement, Decision 371: Andean price Band System, 1994 (Panel Exhibit PER-27), Annex 3) The Panel noted
that Decision 371 contains no explanation as to how these values were determined. (Panel Report,
para. 7.134)
416 The reference price is to be updated every two weeks. (Panel Report, para. 7.136; Article 4 of
Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4), p. 204888) The reference prices are to be converted
into c.i.f. terms by applying the freight and insurance costs specified in Annex V to the Supreme Decree
No. 115-2001-EF. (Panel Report, para. 7.137; Article 5 and Annex V to Supreme Decree No. 115-2001-EF
(Panel Exhibit GTM-4), pp. 204888 and 204890)
417 Panel Report, paras. 7.140-7.141; Annex III to Supreme Decree No. 115-2001-EF (Panel
Exhibit GTM-4), p. 204889.
418 Panel Report, para. 7.365.
419 Panel Report, para. 7.142 (referring to Article 4 of Supreme Decree No. 153-2002-EF of
26 September 2002 (Panel Exhibit GTM-5), p. 147).
420 See paras. 5.139-5.142 and 5.151-5.155 above.

5.162. Moreover, the Panel record does not contain undisputed facts concerning whether the
reference price of the PRS serves as an appropriate proxy for transaction values of imports
entering the Peruvian market. Guatemala argues that the reference price is designed to operate as
an accurate and reliable proxy for typical transaction values of current imports entering the
Peruvian market in any given two-week period.
421 In contrast, Peru contends that the reference
price is not a proxy for transaction values of current imports entering the Peruvian market. 422
Without examining this issue, the Panel simply concluded that the statistical evidence submitted by
Peru revealed that "the measure at issue does not impede the entry of products subject to the PRS
into the Peruvian market at a transaction value below the floor price."423
5.163. We note that the floor and reference prices, and ultimately the additional duty resulting
from the PRS, are calculated only for the four "marker products" at issue. 424 The same additional
duty applicable for each "marker product" is th en also applied to the respective "associated
products".425 There is, however, no undisputed evidence on the Panel record concerning the
relationship between the prices of "marker products" and the prices of "associated products". In
addition, the reference price is calculated on the basis of only a particular specified international
market.426 There is no undisputed evidence on the Panel record concerning to what extent such
market can be said to adequately reflect global prices of a particular "marker product".
Furthermore, there is no evidence on the Panel record concerning the impact, if any, of the
two-week gap in time between the international pr ices used to calculate the reference price and
the transaction values of imports entering the Peruvian market. Finally, the main statistical
evidence referred to by Peru and Guatemala, and relied on by the Panel427, reveals, with respect to
specific two-week periods, only the number of import transactions with a value below the floor
price and the percentage that this number re presents against the total number of import
transactions within the same two-week period. It is not possible to conclude from this evidence
overall how representative or close the reference price is to the actual import transaction values
entering the Peruvian market. Without these factual elements, it is not possible to consider, on the
basis of the Panel record, whether, and to what extent, the reference price serves as an

421 Guatemala's other appellant's submission, paras. 10, 20, 33-34, 48, 52, 77, 111, 118, and 126-127.
Guatemala contends that statistical evidence on the Panel record supports its argument. In particular, with
respect to sugar imports since 2001, Guatemala contends that 97% of imports have entered at or above the
floor price. (Guatemala's other appellant's submission, paras. 81 and 131)
422 Peru's appellee's submission, para. 22. Peru submitted statistical evidence to the Panel for the period
between 2001 and 2013, with respect to the four "marker products", demonstrating that, in approximately
57% of the two-week periods since Supreme Decree No. 115-2001-EF came into force, "various trade
transactions entered Peru at a price lower than … the floor price in the range, accounting for more than one
third of trade transactions recorded over these periods." (Panel Report, para. 7.357 (referring to Peru's first
written submission to the Panel, paras. 5.62-5.68; response to Panel question No. 123, paras. 98-99; and
Panel Exhibit PER-90)) The Panel also noted that Peru cited examples of import transactions for sugar whereby
the transaction value of imports was below the floor price. In particular, according to the Panel, in the case of
sugar, transaction values of imports were below the floor price in 224 transactions, "amounting to
approximately 3% of sugar imports since the introduction of the PRS." (Panel Report, para. 7.357) According
to Peru, disaggregated data per two-week period reveals that, in a particular two-week period, 46% of sugar
imports entered below the floor price. (Peru's appellee's submission, para. 17)
423 Panel Report, para. 7.366. See also paras. 7.360-7.361. The Panel also stated that, "because of its
design and structure, the PRS does not operate in relation to the true transaction value of imports but on the
basis of international prices." (Panel Report, para. 7.367) In our view, the Panel's statement does not
constitute a conclusion on whether the reference price operates as a proxy for transaction values of imports
entering the Peruvian market, in the light of the evidence on the Panel record and the design, structure, and
operation of the PRS. Rather, the Panel's statement at issue merely recalls that the reference price is based on
international prices, instead of transaction values of imports entering the Peruvian market.
424 Supreme Decree No. 115-2001-EF divides the tariff lines subject to the PRS into two groups:
(i) four "marker products" and (ii) several "associated products". "Marker products" are defined as products
whose international prices are used for calculating the floor, ceiling and reference prices, while "associated
products" are defined as products obtained by processing or mixing of marker products or those that are
capable of replacing a "marker product" for industrial use or consumption. Each of the four "marker products"
corresponds to a specific tariff line for rice, maize, milk, and sugar, respectively. Several "associated products"
are grouped under each "marker product". (Panel Report, paras. 7.120-7.122; Annexes I and II to Supreme
Decree No. 115-2001-EF (Panel Exhibit GTM-4), pp. 204888-204889)
425 Panel Report, para. 7.125; Annex III to Supreme Decree No. 115-2001-EF (Panel Exhibit GTM-4),
p. 204890.
426 The relevant international market for each product is specified in Supreme Decree No. 115-2001-EF.
(Panel Report, paras. 7.128 and 7.136)
427 See chart submitted by Peru showing statistical data of product entries below the minimum price
(Panel Exhibit PER–90).

appropriate proxy for transaction values of imports entering the Peruvian market. This
consideration is also relevant for examining the de facto or implicit threshold identified by
Guatemala.428 This is because one of the two components of the implicit threshold is the additional
duty resulting from the PRS, which is, in turn, dependent on the reference price.429
5.164. Without knowing whether the reference price serves, even if only to a certain degree, as a
proxy for transaction values of imports entering Peru's market, it is not possible to determine
whether either of the thresholds identified by Guatemala constitutes a "minimum import price"
threshold, referring generally to the lowest price at which imports of a certain product may enter
the Peruvian market. Being unable to undertake such an examination ourselves, we are also
unable to determine whether the measure at issue shares a sufficient number of characteristics
with, and has a design, structure, operation and impact similar to, a "minimum import price" to
make it "similar" to a "minimum import price".
5.165. In the light of the above, we are unable to complete the legal analysis and reach a
conclusion as to whether the measure at issue is inconsistent with Article 4.2 of the Agreement on
Agriculture because it is either a "minimum import price" or a border measure "similar" to a
minimum import price within the meaning of f ootnote 1 of Article 4.2 of the Agreement on
Agriculture.
6 FINDINGS AND CONCLUSIONS
6.1. For the reasons set out in section 5.2 of this Report, with respect to Articles 3.7 and 3.10 of
the DSU, the Appellate Body:
a. finds that Peru's arguments on appeal are not "new claims" or a "new defence" and are
within the scope of this appeal;
b. finds that Guatemala has not relinquished its right to have recourse to the WTO dispute
settlement mechanism in respect of Peru's PRS; and
c. consequently, upholds the Panel's finding, in paragraph 8.1.a of the Panel Report, that
there is "no evidence that Guatemala brought these proceedings in a manner contrary to
good faith", and that there was, therefore, "no reason for the Panel to refrain from
assessing the claims put forward by Guatemala".
6.2. For the reasons set out in section 5.3.1 of this Report, with respect to "variable import levies"
in footnote 1 of Article 4.2 of the Agreement on Agriculture, the Appellate Body:
a. finds that Peru has not established that the Panel erred in its assessment of the
"variability" of the measure at issue;
b. finds that Peru has not established that the Panel erred in its assessment of the
"additional features" of the measure at issue; and
c. finds that the Panel did not act inconsistently with Article 11 of the DSU in its
examination of Guatemala's claim under Article 4.2 of the Agreement on Agriculture.

428 There is also no undisputed facts on the Panel record concerning whether the design, structure, and
operation of the PRS incorporates, or at least could reveal, the de facto or implicit threshold identified by
Guatemala. Moreover, there are no Panel's findings or undisputed facts on the Panel record – and in many
respects there is no evidence on the record – concerning the relationship between the lowest relevant
international price and the transaction values of imports entering the Peruvian market.
429 We recall that the additional duty resulting from the PRS is calculated on the basis of the difference
between the reference price and the floor price of the PRS. In turn, the implicit threshold is the sum of the
additional duty resulting from the PRS, and the lowest relevant international price.

6.3. For the reasons set out in section 5.3.2 of this Report, with respect to Article II:1(b) of the
GATT 1994, the Appellate Body:
a. finds that Peru has not established that the Panel erred in finding that the measure at
issue is not an "ordinary customs duty" under the first sentence of Article II:1(b) of the
GATT 1994; and
b. finds that the Panel did not act inconsistently with Article 11 of the DSU in its
examination of Guatemala's claim under Article II:1(b) of the GATT 1994.
6.4. For the reasons set out in section 5.3.3 of th is Report, with respect to the interpretation of
Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994 in accordance
with Article 31 of the Vienna Convention, the Appellate Body:
a. finds that Peru's arguments regarding the inte rpretation of Article 4.2 of the Agreement
on Agriculture and Article II:1(b) of the GATT 1994 in accordance with Article 31(3)(a)
and (c) of the Vienna Convention are within the scope of this appeal;
b. finds that Peru's arguments, that the Panel erred in its interpretation of Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994 because it failed to take
into account under Article 31(3) of the Vienna Convention the FTA and ILC Articles 20
and 45, go beyond the interpretation of Article 4.2 and Article II:1(b) in accordance with
Article 3.2 of the DSU and Article 31 of the Vienna Convention and amount to arguing
that, by means of the FTA, Peru and Guatem ala actually modified these WTO provisions
between themselves;
c. finds that the FTA between Peru and Guatemala and ILC Articles 20 and 45 are not
"relevant" to the interpretation of Articl e 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994 within the meaning of Article 31(3)(c) of the Vienna
Convention and that the FTA is not a subsequent agreement "regarding the
interpretation" of these WTO provisions wi thin the meaning of Article 31(3)(a); and,
therefore,
d. finds that the Panel did not commit an error by not interpreting Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of the GATT 1994 taking into account the
provisions of the FTA and ILC Articles 20 and 45 under Article 31(3) of the Vienna
Convention.
6.5. For the reasons set out in section 5.3.3 of this Report, the Appellate Body:
a. finds that the Panel did not err in declining to make findings as to whether the FTA
modified the WTO rights and obligations between Peru and Guatemala.
6.6. For the reasons set out in section 5.3 of this Report, the Appellate Body:
a. upholds the Panel's findings, in paragraph 8.1.b of the Panel Report, that the additional
duties resulting from the PRS constitute "variable import levies" within the meaning of
footnote 1 of the Agreement on Agriculture, and in paragraph 8.1.d of the Panel Report,
that, by maintaining a measure that constitutes a "variable import levy", Peru acts
inconsistently with its obligations under Article 4.2 of the Agreement on Agriculture; and
b. upholds the Panel's findings, in paragraph 8.1.e of the Panel Report, that the additional
duties resulting from the PRS constitute "other duties or charges … imposed on or in
connection with the importation", within the meaning of the second sentence of
Article II:1(b) of the GATT 1994, and that, by applying such measure without having
recorded it in its Schedule of Concessions, Peru acts inconsistently with its obligations
under the second sentence of Article II:1(b) of the GATT 1994.