CHILE – PRICE BAND SYSTEM AND SAFEGUARD MEASURES RELATING TO CERTAIN AGRICULTURAL PRODUCTS
Document: RECOURSE TO ARTICLE 21.5 OF THE DSU BY ARGENTINA AB-2007-2
Date: 7 May 2007
Document codes: WT/DS207/AB/RW
Complainant: Argentina
Respondent: Chile
Third parties: Australia, Brazil, Canada, China, Colombia, Costa Rica, EU, Ecuador, El Salvador, Guatemala, Honduras, Japan, Nicaragua, Paraguay, Peru, Thailand, Venezuela, U.S.
Dispute stage: Implementation & Compliance
Agreements cited: Art. XIX:1, II  GATT 1994Art. 4  AgricultureArt. 2, 3, 4, 5, 6, 12  Safeguards

CHILE – PRICE BAND SYSTEM AND SAFEGUARD MEASURES
RELATING TO CERTAIN AGRICULTURAL PRODUCTS

RECOURSE TO ARTICLE 21.5 OF THE DSU BY ARGENTINA

AB-2007-2

Report of the Appellate Body

APPELLATE BODY

Recourse to Article 21.5 of the DSU by Argentina

Chile, Appellant/Appellee
Argentina, Other Appellant/Appellee

Australia, Third Participant
Brazil, Third Participant
Canada, Third Participant
China, Third Participant
Colombia, Third Participant
European Communities, Third Participant
Peru, Third Participant
Thailand, Third Participant
United States, Third Participant

 AB-2007-2

 Present:

 Baptista, Presiding Member
 Abi-Saab, Member
 Sacerdoti, Member

I. Introduction
1. Chile and Argentina each appeals certain issues of law and legal interpretations developed in
the Panel Report, – Recourse to Article 21.5 of the DSU by Argentina (the "Panel Report").
1 T h e P a n e l w a s
established to consider Argentina's comp laint regarding the consistency with the Agreement on
Agriculture, the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and the
Marrakesh Agreement Es tablishing the (the " WTO Agreement ") of the
measure taken by Chile to comply with the recomme ndations and rulings of the Dispute Settlement
Body (the "DSB") in the original proceedings in Chile – Price Band System.2

1 and Corr.1, 8 December 2006.
2The recommendations and rulings of the DSB resulted from the adoption on 23 October 2002, by the
DSB, of the Appellate Body Report, WT/DS207/AB/R, and the Panel Report, WT/DS207/R, in Chile – Price
Band System. In this Report, we refer to the panel in these Article 21.5 proceedings as the "Panel". We refer to the
panel that considered the original complaint brought by Argentina as the "original panel" and to its report as the
"original panel report".

2. The original proceedings concerned Chile's price band system for certain agricultural
products.
3 The original panel found that Chile's price band system was a border measure similar to a
variable import levy and to a mi nimum import price, other than ordi nary customs duties, within the
meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture.4 Therefore, the original panel
concluded that, because the price band system was a measure "of the kind which ha[s] been required to
be converted into ordinary customs duties" under Article 4.2 of the Agreement on Agriculture , by
maintaining such a measure, Chile acte d inconsistently with that provision. 5 The original panel also
concluded that, because the duties resulting from the price band system were not recorded in the "other
duties and charges" column of Chile's Schedule of Concessions, but were levied nonetheless, those
duties were inconsistent with the second sentence of Article II:1(b) of the GATT 1994.6
3. The Appellate Body upheld the original panel' s finding that Chile's price band system was a
border measure similar to a variable import levy and to a minimum import price and was, therefore,
inconsistent with Article 4.2 of the Agreement on Agriculture .7 However, the Appellate Body
disagreed with the original panel's definition of "ord inary customs duties" and, therefore, reversed the
original panel's finding that the term "ordinary customs duty" within the meaning of Article 4.2 of the
Agreement on Agriculture was to be understood as "referring to a customs duty which is not applied
on the basis of factors of an exogenous nature".8 In addition, the Appellate Body reversed the original
panel's finding that the duties resulting from the origin al price band system were inconsistent with the
second sentence of Article II:1(b) of the GATT 1994 on the grounds that this claim was not part of the
matter before the original panel, and, by making this finding, the original panel had acted inconsistently
with Article 11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes
(the "DSU").9
4. On 23 October 2002, the DSB adopted the origin al panel and Appellate Body reports. On
6 December 2002, Chile requested that a reasonabl e period of time for the implementation of the

3The original panel also found that certain safeguard measures on products subject to the price band
system were inconsistent with Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. These
safeguard measures were withdrawn during the course of the original panel proceedings. (Original Panel Report,
paras. 2.15, 7.109-7.198, and 8.1(b)) The original panel's findings regarding the safeguard measures were not
appealed.
4Original Panel Report, paras. 7.25, 7.47, and 7.65.
5Ibid., paras. 7.102 and 8.1.
6Ibid., paras. 7.107, 7.108, and 8.1.
7Appellate Body Report, Chile – Price Band System, paras. 262, 280, and 288(c)(i).
8Ibid., paras. 278 and 288(c)(ii); Original Panel Report, paras. 7.52 and 7.60.
9Appellate Body Report, Chile – Price Band System, paras. 173, 174, 177, and 288(a); Original Panel
Report, para. 7.108.

recommendations and rulings of the DSB be determ ined through binding arbitration pursuant to
Article 21.3(c) of the DSU.10 In an award issued on 17 March 2003, the arbitrator determined that the
reasonable period of time for Chile to implement the recommendations and rulings of the DSB would
be 14 months, ending on 23 December 2003. 11 On 27 October 2003, Chile notified the DSB that it
had made amendments to its price band system, which would enter into force on 16 December 2003.12
However, Argentina considered that Chile's amended measure failed to comply with the
recommendations and rulings of the DSB in the original proceedings. 13 On 29 December 2005,
Argentina requested that the matter of compliance be referred to the original panel pursuant to
Article 21.5 of the DSU.14 On 20 January 2006, the DSB referred the matter to the original panel.15
5. The measure that Argentina challenged in these Article 21.5 proceedings is Chile's amended
price band system, as applied to imports of wheat a nd wheat flour. This measure (the "measure at
issue") consists of: (i) Article 12 of Chilean Law 18.525 on the Rules on the Importation of Goods, as
amended by Law 19.897 published on 25 September 2003; and (ii) Supreme Decree 831 of Chile's
Ministry of Finance, published on 4 October 200 3, regulating the application of Article 12 of
Law 18.525, as amended by Law 19.897. 16 The constituent parts and the operation of the measure at
issue are explained in the Panel Report 17 and Section IV of this Report, and the factual aspects of this
dispute are set out in greater detail in the Panel Report.18
6. Before the Panel in these Article 21.5 proceedings , Argentina claimed that Chile had failed to
implement the recommendations and rulings of the DSB, and that the measure at issue, as applied to
wheat and wheat flour, was inconsistent with Article 4.2 of the Agreement on Agriculture, the second
sentence of Article II:1(b) of the GATT 1994, and Article XVI:4 of the WTO Agreement.

10WT/DS207/9.
11Award of the Arbitrator, Chile – Price Band System, para. 58.
12WT/DS207/15/Add.1 and WT/DSB/M/157, para. 18.
13On 24 December 2003, Ar gentina and Chile notified to the DSB their understanding regarding
procedures under Articles 21 and 22 of the DSU with respect to the dispute. (WT/DS207/16)
14WT/DS207/18.
15WT/DS207/19.
16Panel Report, para. 2.12; Chilean Law 19.897 (Exhibits ARG-1 and CHL-1 submitted by Argentina
and by Chile, respectively, to the Pane l); Supreme Decree 831 of Chile's Ministry of Finance (Exhibits ARG-2
and CHL-2 submitted by Argentina and by Chile, respectively, to the Panel).
17Panel Report, paras. 2.12-2.32.
18Ibid., paras. 1.1-2.11.

7. The Panel Report was circulated to the Members of the World Trade Organization
(the "WTO") on 8 December 2006. The Panel found that:
(a) By maintaining a border measure similar to a variable import
levy and to a minimum import price, Chile is acting in a
manner inconsistent with Artic le 4.2 of the Agreement on
Agriculture, and has thus failed to implement the
recommendations and rulings of the DSB; and
(b) It is unnecessary, for the resolution of this dispute, to make a
separate finding on Argentina's claim under the second
sentence of Article II:1(b) of GATT 1994.
19
8. The Panel concluded that Chile's price band syst em continues to nullify and impair benefits
accruing to Argentina under the Agreement on Agriculture.20
9. On 5 February 2007, Chile notified the DSB, pursuant to Article 16.4 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 21 pursuant to Rule 20 of the Working Procedures
for Appellate Review (the "Working Procedures").22 On 12 February 2007, Chile filed an appellant's
submission.23 On 19 February 2007, Argentina notified the DSB, pursuant to Article 16.4 of the
DSU, of its intention to appeal certain issues of law covered in the Pane l Report and certain legal
interpretations developed by the Panel and filed a Notice of Other Appeal pursuant to Rule 23(1)
and (2) of the Working Procedures .24 On 23 February 2007, Argentina filed an other appellant's
submission.25 On 2 March 2007, Argentina filed an appellee's submission. 26 On 6 March 2007, Chile
filed an appellee's submission. 27 On the same day, Australia, Brazil, Canada, the European

19Panel Report, para. 8.2. The Panel also found that it was unnecessary, for the resolution of this
dispute, to make a separate finding on Argentina's claim under Article XVI:4 of the WTO Agreement. (Ibid.)
This finding of the Panel was not appealed.
20Panel Report, para. 8.3.
21WT/DS207/22 (attached as Annex I to this Report).
22WT/AB/WP/5, 4 January 2005.
23Pursuant to Rule 21 of the Working Procedures.
24WT/DS207/23 (attached as Annex II to this Report).
25Pursuant to Rule 23(3) of the Working Procedures, and pursuant to Rule 16(2) (see infra, para. 11).
26Pursuant to Rules 22 and 23(4) of the Working Procedures.
27Pursuant to Rules 22 and 23(4) of the Working Procedures, and pursuant to Rule 16(2) (see infra,
para. 11).

Communities, and the United States each filed a third participant's submission 28, and China,
Columbia, Peru, and Thailand each notified the Appellate Body Secretariat of its intention to appear at
the oral hearing and to make an oral statement.29
10. The oral hearing in this appeal was held on 15 March 2007. The participants and the third
participants (with the exception of China and Pe ru) presented oral arguments and responded to
questions posed by the Members of the Division hearing the appeal.
11. The Division received two procedural requests dur ing the course of the appeal. First, on
9 February 2007, the Division received a letter from Argentina requesting, pursuant to Rule 16(2) of
the Working Procedures, to change the date scheduled for f iling its other appellant's submission from
20 February to 26 February 2007. Argentina explai ned that filing a submission on 20 February would
be "highly problematic fo r Argentina" because the oral hearing in another appellate proceeding, in
which Argentina was also a participant, would be held on 19 February 2007. The Appellate Body
invited Chile and the third participants to comme nt on Argentina's request. Neither Chile nor any
third participant objected to Argentina's request, but Chile and the United States requested extensions
of the deadlines for filing their submissions in the event that the Division granted Argentina's
request.30 By letter dated 15 February 2007, the Divi sion informed the participants and the third
participants that it had decided to change the date for filing Argentina's other appellant's submission
from 20 February to 23 February 2007, and the da te for filing Chile's appellee's submission and the
third participants' submissions from 2 March to 6 March 2007.

28Pursuant to Rule 24(1) of the Working Procedures, and pursuant to Rule 16(2) (see infra, para. 11).
On 14 March 2007, the Director of the Appellate Body Secretariat received the executive summary of the
European Communities' third participant's submission. By letter dated 14 March 2007, the Division informed
the European Communities that the executive summary would not be accepted because it had been submitted
after 6 March 2007, the deadline for filing a third participan t's submission, and in the interest of fairness to all
participants and other third participants. The original and nine copies of the executive summary were, therefore,
returned to the European Communities.
29Pursuant to Rule 24(2) of the Working Procedures.
30By letter dated 9 February 2007, the Division hearing this appeal invited Chile and the third
participants to submit written comments on Argentina's re quest. Chile, Brazil, Columbia, Peru, and the United
States submitted written comments. Chile agreed that th e situation faced by Argentina constituted "exceptional
circumstances", and stated that it ha d no objection to Argentina's reques t. However, Chile requested that,
should the Division decide to grant Argentina's request, the date for filing Chile's appellee's submission—due on
2 March—also be extended by one week, to 9 March 2007. Chile added that, in order to ensure that Chile's
procedural rights were not compromised, the due date for Argentina's appellee's submission, 2 March 2007,
should not be altered unless the date of the oral hearing were also changed. The United States indicated that it
had no objection to Argentina's request, but stated its "assum ption" that, if the date for the filing of Argentina's
other appellant's submission were to be deferred until 26 February, the date for the filing of a third participant's
submission would be adjusted "commensurately", that is, postponed from 2 March until 8 March. Brazil,
Columbia, and Peru indicated that they had no objection to Argentina's request.

12. The second procedural request was made in a le tter from Argentina, dated 26 February 2007,
asking the Division to reject 13 of 15 exhibits that were attached to Chile's appellant's submission on
the grounds that these exhibits included new evid ence that was not before the Panel in these
Article 21.5 proceedings and that Article 17.6 of the DSU precludes the Appellate Body from
accepting such evidence.
31 The exhibits challenged by Argentina contain evidence relating to the
operation of the measure at issue through Decemb er 2006, including various tables and charts, along
with a sample Supreme Decree is sued in December 2006 pursuant to the measure at issue. The
exhibits also contain Supreme Decree No. 266 from 2002, which was issued pursuant to the original
price band system and was mentioned in Law 18.52 5, as amended, as the basis on which the price
band thresholds were established under the measure at issue. By letter dated 27 February 2007, the
Division invited Chile and the third participants to submit written comments on Argentina's request
and, in particular, invited Chile to explain whether the 13 exhibits were on the Panel record, and, if so,
to identify where they could be found. On 2 March 2007, the Division received comments from
Chile, Canada, and the United States. 32 In its reply, Chile explained, first, that, although the
information concerning the period from July 2006 to December 2006 was not on the Panel record,
such new evidence was submitted to the Appellate Body for the purpose of "completeness". As for
the Supreme Decree issued in December 2006, Chile argued that it was appropr iate for the Appellate
Body to review this Decree because, like other bi-monthly Decrees, it was "part and parcel" of the
measure at issue and was publicly available. Chile nevertheless deferred to the Appellate Body with
regard to the admissibility of such new evidence. With respect to the remaining 12 exhibits, Chile
explained that, except for Supreme Decree No . 266 from 2002, the evidence contained in these
exhibits relating to the period thr ough June 2006 was also submitted to the Panel, albeit in a different
form, and was therefore properly before the Appellate Body. Finally, with respect to Supreme Decree
No. 266, Chile maintained that it was the "source for the calculation" of price band thresholds in the
measure at issue, was referenced before the Pane l, and was publicly available. Chile nonetheless
deferred to the Appellate Body as to the admissibility of this Decree as ev idence in these appellate
proceedings.

31Argentina requested the Appellate Body to reject Exhibits CHL-AB-3 through CHL-AB-15 attached
to Chile's appellant's submission, along with related arguments, on the basis that they contained new evidence.
Alternatively, in th e event that the Appellate Body accepted Chile 's new evidence, Argentina requested the
Appellate Body to permit Argentina to file its own new evidence.
32Neither Canada nor the United States took a position on whether the 13 exhibits identified in
Argentina's request constituted new evidence. Neverthe less, they both expressed the view that, should the
Appellate Body determine these exhibits to be new evidence that was not presented to the Panel, then the
Appellate Body may not consider them.

13. By letter dated 13 March 2007, the Division indicated that, if a ruling on the admissibility of
these exhibits proved necessary, it would make such a ruling in "due course" and expressed its
"preliminary view" that the admissibility of such exhibits should be governed by the following three
principles:
First, any evidence relating to the operation of the measure at issue
after June 2006 is new evidence that does not properly form part of
the record upon which the Division must review the Panel's findings
and conclusions in this case and is inadmissible.
Secondly, Chile's exhibits are admissible insofar as they only present
data that were before the Panel. It is not necessary that the data were
presented to the Panel in precisely the same form as they are now
presented to the Appellate Body. Nevertheless, exhibits presenting
evidence in a form that differs fro m the way in which the evidence
was presented to the Panel are admissible only if: (i) the data
presented can be clearly traced to data in the Panel record; and
(ii) the way in which the data presented to the Panel has been
converted into the form in which it is presented in this appeal can be
readily understood.
Thirdly, a Decree that: (i) is expressly referred to in the measure at
issue in this appeal; (ii) is publicly available; and (iii) the content of
which was discussed before the Panel is, in principle, admissible,
unless Argentina can establish that it will suffer prejudice were the
Appellate Body to admit the text of this Decree. (original emphasis)
14. In its statement at the oral hearing, Arge ntina submitted that, despite the "complex
explanations" provided "ex post" by Chile, the data in the 13 exhibits could not be clearly traced to
data on the Panel record, and the way in which the data was converted into the form in which it was
presented on appeal could not be readily understood. With respect to Exhibit CHL-AB-5, containing
the text of Supreme Decree No. 266 from 2002, Argen tina maintained that its content had not been
discussed before the Panel and, in any event, the Decree does not contain the information that Chile
asserted it does.
33 Argentina considered that it could not properly respond to such evidence and had,
as a result, suffered prejudice.
15. For the reasons that we set out below34, we have not found it necessary to make any additional
ruling on the admissibility of the specific exhib its challenged by Argentina in its request of
26 February 2007.

33Argentina's statement at the oral hearing.
34Infra, para. 253.

II. Arguments of the Participants
A. Claims of Error by Chile – Appellant
16. At the outset, Chile underlines the economic reality behind this dispute and points out that it
has significantly liberalized its agricultural mark ets and lowered its tariffs and non-tariff barriers.
Since the conclusion of the Uruguay Round, Chile h as periodically and systematically lowered its
applied tariff rates from 11 per cent to the current 6 per cent on wheat and wheat flour, which is "a
fraction of" the 31.5 per cent bound ra te in its Schedule of Concessions.
35 To make such free trade
policies possible and sustainable, particularly for a developing country, some flexibility is needed.
Chile explained at the oral hearing that this is why the measure at issue adjusts ordinary customs
duties periodically in order to maintain a bare minimum in price stability, and that it would jeopardize
Chile's overall free trade policies if the Appellate Body were to strike down this delicate balance.
1. Burden of Proof
17. Chile contends that the Panel erred in its allocation of the burden of proof and wrongly
required Chile to prove that the measure at issue was consistent with Chile's obligations under the
covered agreements. As a resu lt of this "fundamental flaw" 36, Chile requests the Appellate Body to
reverse the Panel's findings and conclusions re lating to Article 4.2 and footnote 1 of the Agreement
on Agriculture.
18. Citing the Appellate Body Report in Canada – Dairy (Article 21.5 – New Zealand and
US II)37, Chile submits that the rules regarding the allo cation of burden of proof do not change in the
context of Article 21.5 proceedings. It was, therefore, for Argentina to prove that the measure at issue
violates Article 4.2 of the Agreement on Agriculture . On this basis, Chile argues that the Panel was
required to undertake its review starting from th e position that the measure at issue was WTO-
consistent, until Argentina had presented sufficient ev idence to prove the cont rary. If the evidence
leaves any doubt as to the WTO-consistency of Chile' s measure at issue, then, in Chile's view, "the
benefit of the doubt must go to Chile."38
19. Chile alleges that, from the outset to the conclusi on of its analysis, the Panel consistently and
expressly examined whether the measure found to be WTO-inconsistent in the original proceedings
had been made consistent, rather than dete rmining whether Argentina had established a prima facie

36Chile's statement at the oral hearing.
37Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US II), para. 66.

case that the measure at issue was inconsistent with the Agreement on Agriculture and whether Chile
had failed to rebut that case. Chile points to the Pa nel's statement, at the beginning of its substantive
analysis, that the "main issue for the Panel to de cide under this particular claim is whether the
amendments introduced by Chile to its [price band system] are such as to make the measure consistent
with Article 4.2" of the Agreement on Agriculture .39 Chile also refers to the Panel's conclusion that
"the amendments introduced by Chile into its [pri ce band system] have failed to convert it into a
measure which is no longer a border measure similar to a 'varia ble import levy' and to a 'minimum
import price'". 40 Chile refers to several other instances in the Panel's analysis where, according to
Chile, the Panel conducted its review based on whet her the measure at issue "continues to have
sufficient resemblance or likeness" to variable im port levies or minimum import prices or "has been
modified" in comparison to the original price band system. 41 On this basis, Chile claims that the
Panel proceeded on the assumption that the measure at issue was WTO-inconsistent, thus relieving
Argentina of its burden of proof while requiring Chile to demonstrate that the measure at issue was no
longer WTO-inconsistent.
2. Article 4.2 and Footnote 1 of the Agreement on Agriculture
20. Chile alleges that the Panel erred in its in terpretation and application of the terms in
Article 4.2 and footnote 1 of the Agreement on Agriculture , and requests the Appellate Body to
reverse the Panel's findings that the measure at issu e was similar to a "variable import levy" and to a
"minimum import price" within the meaning of the Agreement on Agriculture.
(a) The Panel's Alleged Failure to Examine the Phrase "Other Than
Ordinary Customs Duties"
21. Chile argues that the Panel should have examined whether the measure at issue involved
duties "other than ordinary customs duties" as set out in footnote 1 to Article 4.2 of the Agreement on
Agriculture, but that the Panel ignored this language. Instead, the Panel's approach assumed that a
finding that a measure is similar to a variable import levy or a minimum import price necessarily
implies that the measure is, as a matter of law, "oth er than an ordinary customs duty". According to
Chile, by adopting such an approach, the Panel faile d to give proper meaning and effect to all the
relevant terms in the text of footnote 1.

39Chile's appellant's submission, para. 46 (quoting Panel Report, para. 7.14). (emphasis added by Chile)
41Ibid., paras. 49 and 50 (quoting Panel Report, paras. 7. 81 and 7.92 and referring to paras. 6.12, 7.44,
7.54, 7.55, and 7.79).

22. In Chile's view, ordinary customs duties, lik e other measures listed in footnote 1, reduce
import volumes, distort import prices, and may impede the transmission of international prices to the
domestic market. For example, an ordinary cust oms duty at a rate high enough to make imports
prohibitive detaches domestic prices from international prices due to the absence of import
competition. Thus, ordinary customs duties may sh are certain substantive characteristics with the
measures identified in the footnote. In particular , the applied rates of ordinary customs duties may
undergo changes not foreseeable to traders, and such changes may be affected by "exogenous" factors
not known to the public.
42 Moreover, tariff-rate quotas, certain ty pes of variable duties, and seasonal
duties are, according to Chile, "ordinary customs duties", even though they share certain
characteristics similar to variable import levies. Ch ile also highlights certain statements made by the
Appellate Body in the original proceedings that, in Chile's view, suggest that ordinary customs duties
share substantive characteristics with the measures listed in footnote 1, including the Appellate Body's
observation that "ordinary customs duties are more transparent and more easily quantifiable than non-
tariff barriers".43 Chile also stresses that the Appellate Body reversed the original panel's finding that
the term "ordinary customs duty" is to be understo od as referring to a customs duty not applied on the
basis of exogenous factors.
23. On this basis, Chile submits that the Panel w as required to interpret the meaning of the phrase
"other than ordinary customs duties" in footnote 1, review the substantive characteristics of the
measure at issue, and conclude whether it constitute d an "ordinary customs duty." Because the Panel
did not do so, Chile argues, the Panel erred in its interpretation and appli cation of Article 4.2 and
footnote 1 of the Agreement on Agriculture.
(b) The Panel's Alleged Failure to Examine "Similarity" on an Empirical
Basis
24. Chile alleges that the Panel failed to conduct an empirical analysis of the measure at issue
and, instead, relied on theoretical comparisons w ith the original price band system in finding
"similarity" between the measure at issue and the measures listed in footnote 1 of the Agreement on
Agriculture. In the original proceedings, the Appellate Body stated that "the task of determining
whether something is similar to something el se must be approached on an empirical basis "44, but,
according to Chile, the Panel failed to identify any empirical evidence in finding that the measure at
issue was similar to a variable import levy. With r espect to the finding that the measure at issue was

43Ibid., para. 61 (quoting Appellate Body Report, Chile – Price Band System , para. 200). (emphasis
added by Chile)
44Ibid., para. 69 (quoting Appellate Body Report, Chile – Price Band System , para. 226). (emphasis
added by Chile)

similar to a minimum import price, Chile argu es that the Panel relied on "only a snapshot" 45 of data to
make a finding regarding the measure at issue as a whole, and failed to explain how such data
supported Argentina's argument that the lower band threshold operated as a substitute for a minimum
import price. In addition, Chile asserts that the Pa nel erroneously rejected, as irrelevant, the evidence
submitted by Chile regarding actual conditions of market access under the me asure at issue, even
though the finding of "similarity" should have been based on such empirical evidence.46
(c) The Panel's Finding that the Measu re at Issue is Similar to a
"Variable Import Levy"
(i) Variability
25. Chile alleges that the Panel misinterpreted the term "variable" in footnote 1 to Article 4.2 of
the Agreement on Agriculture and erred in finding that the measure at issue was similar to a
"variable import levy" within the meaning of footnote 1.
26. First, Chile submits that the Panel was mistaken in finding that the measure at issue imposed
variability by setting forth a formula that establishe s an automatic and periodic adjustment in duty
levels. Chile's Ministry of Finance may revise at any time the methodologies for establishing specific
duties and rebates. Moreover, duty levels under th e measure at issue do not change automatically
absent an administrative decree. Chile adds that the Panel's finding would "create perverse
incentives" for WTO Members to be l ess transparent and less predictable. 47 Specifically, Members
with a domestic legal structure that permits the exec utive branch to establish unilaterally the level of
duties would be free to use any unpublished and non- transparent formula to change their duty levels
without acting inconsistently with their WTO obligati ons. In contrast, changes in the levels of such
duties could be rendered WTO-inconsistent simply because the executive bran ch of a Member, such
as Chile, is required to publish the underlying methodol ogy by which an ordinary customs duty is set
at a particular level.
27. Secondly, Chile contests the Panel's findings that a variable import levy is "a duty ... liable to
vary automatically and continuously", and that the language of Law 18.525, as amended, and
Supreme Decree 831 "contemplates a scheme or formula" that causes and ensures automatic and

46Chile refers to the evidence that specific duties were imposed in only 17 weeks of the period from
16 December 2003 to 13 Janu ary 2006 (15.6 per cent of the time), and rebates were granted in 35 weeks (32.1
per cent of the time) of the same time period. For the rest of the time period, only the ad valorem tariff was
imposed. (Chile's appellant's submission, para. 37; see also Panel Report, para. 2.31)

continuous changes in the level of specific duties and rebates.
48 In making these findings, Chile
argues, the Panel erred in equating a "likelihood" of continuous variability with "ensuring" continuous
variability, because "liable" mean s "apt or likely", and "contemplate" is defined as "[r]egard as
possible, expect, take into account as a contingency". 49 The Panel's finding, therefore, contradicts the
Appellate Body's statement in the original proceedings that "variability" is inherent in a measure if the
measure "causes and ensures" automatic and continuous changes of duties.50
28. Thirdly, Chile asserts that the Panel erred in equating "periodic" variation with "continuous"
variability. Variable import levies and minimum import prices vary automatically and continuously
on a transaction-by-transaction basis. A periodic change in duty levels "simply does not rise to the
same level of automatic and continuous variability".
51 Moreover, the Appellate Body itself
distinguished between "periodic" and "continuous" variation in the original proceedings when it found
that a WTO Member "may, fully in accordance w ith Article II of the GATT 1994, exact a duty upon
importation and periodically change the rate".52 Chile highlights that, whereas the original price band
system changed the duty levels continuously 52 times per year, the measure at issue changes duty
levels only periodically, that is, six times per year, and ensures that any applicable duty remains stable
for all transactions made within each two-month period.
(ii) Transparency and Predictability
29. Chile claims that the Panel misunderstood and misapplied the tests of "transparency" and
"predictability" in determining whether the measur e at issue was a border measure similar to a
"variable import levy" within the meani ng of Article 4.2 and footnote 1 of the Agreement on
Agriculture. Rather than examining whether the level of the duties resulting from the measure at issue
was transparent and predictable, the Panel mistakenly examined whether the methodology underlying
the calculation of the duty levels (how and why Chile set a particular level of duties) was transparent
and predictable. According to Chile, this is contra ry to the approach taken by the Appellate Body in
the original proceedings. Chile asserts that the le vel of resulting duties under the measure at issue is

48Chile's appellant's submission, paras. 86 and 87 (quoting Panel Report, paras. 7.28 and 7.58).
(emphasis added by Chile)
49Ibid., paras. 86 and 88 (quoting Shorter Oxford English Dictionary , 5th edn, W.R. Trumble,
A. Stevenson (eds) (Oxford University Press, 2002), Vol. 1, pp. 499 and 1583).
51Chile's statement at the oral hearing.
52Chile's appellant's submission, para. 90 (quoting Appellate Body Report, Chile – Price Band System ,

transparent, and adds that "the obligation of transparency alone cannot limit WTO Members in respect
of the substantive content or ways in which, or reasons for which, they impose duties."53
30. In any event, Chile disagrees that the manner in which it established thresholds and reference
prices lacked transparency. Unlike under the orig inal price band system, the thresholds are now
established on a free on board ("f.o.b.") basis. Mo reover, the Appellate Body's finding of a lack of
transparency with respect to refe rence prices was premised on the fact that, under the original price
band system, no Chilean legislation identified any "mar kets of concern" or "qualities of concern" for
the purpose of calculating reference prices. Because the markets and qualities of concern are now
transparent and published, Chile argues that the Panel erred in finding that the measure at issue lacked
transparency simply because the reference price was not representative of existing world market
prices and was calculated for two specific qualities of wheat from two specific origins.
31. Chile also contests the Panel's finding that the measure at issue lacked predictability because,
in Chile's opinion, the applicable duties under th e measure at issue are no less predictable than
ordinary customs duties. Chile likens the measure at issue to the annual reductions in the tariff rates
applied to wheat and wheat flour that Chile made between 1999 and 2003. In the same way as those
annual decreases were "pre-publishe d", "automatic", and pursuant to a simple formula involving a
reduction of 1 percentage point ever y year, change in the applicable duties under the measure at issue
is "pre-published, is automatic on a two-month basis, and is pursuant to a formula".
54
32. Chile further alleges that the Panel erred in finding, on the basis of conjecture rather than
evidence, that the effect of the l ack of transparency and predictabil ity was to impede the transmission
of international prices to the domestic market. Chile presents various charts to show that the trend in
the duty-inclusive import prices under the measure at issue closely reflects the trend in the cost,
insurance and freight ("c.i.f.") import prices, and, therefore, that the measure at issue affects import
prices in ways similar to those of ordinary custom s duties and different from those of variable import
levies and minimum import prices. Chile adds that trends in domestic prices mirror trends in duty-
inclusive import prices. On this basis, Chile c oncludes that the Chilean domestic prices respond to,
and are not disconnected from, world prices.
33. Moreover, Chile asserts that the Panel "est ablished a standard for ... transparency and
predictability that was internally contradictory and impossible to satisfy". 55 The Panel found that
taking the average of daily prices from a 15-day peri od does not guarantee that the resulting reference

54Ibid., para. 122.
55Ibid., para. 112.

prices will be representative for the whole of a 60-day period.
56 The Panel also found that, under the
measure at issue, the link between the total amount of duties and the fluctuation of world prices is, in
itself, a factor of uncertainty and unpredictability. 57 Chile alleges that these findings impose
contradictory requirements, such that duties must follow world market pr ices in a representative
fashion and must, at the same time, be de-linked from world market prices. Chile further argues that
the Panel established "conflicting requirements" by "condemn[ing] any form of automaticity or fixed
scheme or formula" while, at the same time, requiring full transparency and predictability in how the
duty is calculated.
58
34. Finally, with respect to the conversion factor of 1.56—which is applied to the amount of
specific duties and rebates determined for wheat in or der to calculate the duties and rebates applicable
to wheat flour—Chile contends that the Panel's findi ng is also contradictory. The Panel appeared to
condemn the factor as lacking transparency and pr edictability because it cannot adjust to changes in
the ratio of prices between wheat flour and wheat. To Chile, this finding of th e Panel is contradictory
to the requirements of transparency and predictabilit y, as it implies that Chile would be required to
modify this conversion factor with each change in the ratio of prices for wheat flour and wheat. In
any event, Chile argues, the Appe llate Body should reverse this finding because it is based on the
Panel's erroneous findings with respect to wheat.
(d) The Panel's Finding that the Measu re at Issue is Similar to a
"Minimum Import Price"
35. Chile claims that the Panel erred in its findi ng that the measure at issue was similar to a
"minimum import price". First, the Panel failed to examine the transparency and predictability of the
measure at issue when finding it to be similar to a minimum import price. Instead, the Panel
"summarily"
59 concluded that the measure at issue had not been modified with respect to the features
that were found to make the original price band syst em similar to a minimum import price. Secondly,
Chile contests the Panel's finding that the lower threshold of the price band operated as a substitute for
a domestic target price or a minimum import price. According to Chile, empirical evidence shows
that the lower threshold under the measure at i ssue falls well below domestic prices, making it
impossible for the threshold to operate as a substitute for the latter.

56Panel Report, para. 7.66.
57Ibid., para. 7.71.
59Ibid., para. 166.

36. Thirdly, Chile contends that, contrary to the Panel's finding, the measure at issue does not
"overcompensate" for a decline in reference pr ices by increasing import prices above the lower
threshold. Evidence submitted by Argentina shows that, during the period November 2004 to
April 2005, there were only two days on which, as a result of the measure at issue, a decline in world
prices corresponded to an increase in entry prices. 60 For the remainder of the period, entry prices fell
in tandem with world prices. In using this ev idence, Chile argues, the Panel wrongly "relied upon
only a snapshot of empirical data" 61 and failed to explain how such evidence supported Argentina's
argument that the price band's lower threshold operated as a substitute for a minimum import price.
37. Finally, Chile points out that the Panel erred in concluding that, under the measure at issue,
imports could not enter the Chilean market at prices below the lower threshold. In this regard, Chile
characterizes as "irrelevant" the mathematical exam ple provided by Argentina to show that imports
will enter Chile at prices above the lower th reshold, except under certain unlikely scenarios. 62
According to Chile, the same resu lt will be reached under Argentina's mathematical example even if
the application of any duties is removed from th e example. For Chile, this "conclusively"
demonstrates that it is not the measure at issu e that is causing entry pr ices to exceed the lower
threshold, rather, it is the fact that the lower threshold was set on a low, f.o.b., basis.63
(e) The Panel's Alleged Failure to Examine the Measure at Issue in its
Entirety
38. Chile asserts that, in assessing whether the measure at issue is similar to a variable import
levy or a minimum import price, the Panel examined discrete features in isolation in reaching its
conclusion. Had the Panel examined the measure in its totality, it would have found that the measure
is, instead, similar to an ordinary customs duty. Ch ile highlights six aspects of the measure at issue in
support of this claim: (i) the duties are published an d changed periodically; (ii) the level of duties in
effect on the date of importation is transparent; (iii) the level of duties is predictable and will change
on pre-announced dates; (iv) the measure at issu e has no link to a domestic target price; (v) the
fluctuations of the duty rate as a result of the measure at issue are gradual and narrow; and (vi) due to
the concessions of rebates, the measure at issue provi des greater market access than if it were not in
effect.

60Chile's appellant's submission, paras. 73, 74, and 179 (referring to Exhibits ARG-11 and ARG-12
submitted by Argentina to the Panel); Chile's statement at the oral hearing.
62Chile's statement at the oral hearing.
63Ibid.

3. Articles 11 and 12.7 of the DSU

39. Chile also requests the Appellate Body to reverse the Panel's fi ndings and conclusions
relating to Article 4.2 and footnote 1 of the Agreement on Agriculture on the grounds that, in making
these findings, the Panel failed to discharge both it s duty under Article 11 of the DSU to carry out an
objective assessment of the matter before it, as well as its duty under Article 12.7 of the DSU to set
out the basic rationale behind its findings.
40. Chile takes issue with four aspects of the Panel' s findings. First, Chile contests the Panel's
finding that the thresholds under the measure at issue were not established on an f.o.b. basis. In so
finding, according to Chile, the Panel ignored the requirement provided in Law 18.525, as amended,
that the thresholds be established on an f.o.b. basi s and found, without basis, "that the Ministry of
Finance acted in violation of Chilean law". 64 Chile contends that the Panel identified no evidence,
and provided no explanation, in support of its finding that Chile had failed to demonstrate the
deduction of import costs when establishing such th resholds. Moreover, in Chile's view, a WTO
Member must be presumed to act in accordance with its own national laws unless proven otherwise.
41. Secondly, Chile asserts that, in concluding that the lower threshold of the measure at issue
operated as a substitute for a domestic target price, th e Panel relied on an alleged error in the original
panel's findings. The original panel "misunderstood" how the original price band system operated and
mistakenly believed that the reference prices were no t converted to c.i.f. terms before being compared
to the price band thresholds that were in c.i.f. terms. 65 Chile requested the Panel to correct this
misunderstanding, but the Panel did not do so an d provided no explanation or authority for its
statement that correcting the original panel's factual error was outside its mandate.66
42. Thirdly, Chile submits that the Panel failed to follow the approach set out by the Appellate
Body in the original proceedings, which calls for an examination of the specific "configuration and
interaction" of the different elements of the measure at issue. 67 Instead, the Panel examined only
discrete elements and "individual features" of the measure at issue "in isolation", compared them with
features of the original price band system, and provided no analysis or explanation of how the features
of the measure interact to support its findings.
68 Chile submits that the Panel should have "weighed
all features of the [measure at issue] as a whole before concluding whether, evaluated holistically

65Ibid., para. 206.
68Ibid., para. 220.

and with due regard to their effects", the measure at issue falls within a category of measures listed in
footnote 1 and is inconsistent with Article 4.2 of the Agreement on Agriculture.69
43. Finally, Chile maintains that, except for a "partial dataset" submitted by Argentina 70, the
Panel failed to consider empirical evidence regarding the actual operation of the measure at issue. In
Chile's view, the evidence referred to by the Panel ap pears to contradict the Panel's finding regarding
the disconnection between domestic and world prices. Chile points out that it submitted a "substantial
amount of evidence and data on the operation" of the measure at issue, yet the Panel "did not refer [to]
nor rely on any evidence regarding the actual operati on" of the measure at issue and also refused
Chile's request, during the interim review stage, to re view its analysis in the light of the mathematical
calculations presented by the parties.71
4. Conclusion
44. Chile requests the Appellate Body to rever se the Panel's findings and conclusions under
Article 4.2 of the Agreement on Agriculture and to find, instead, that the Panel failed to comply with
its duties under Articles 11 and 12.7 of the DSU, and that the measure at issue is consistent with
Chile's obligations under Article 4.2 of the Agreement on Agriculture.
B. Arguments of Argentina – Appellee
1. Burden of Proof
45. Argentina requests the Appellate Body to dismi ss Chile's claim that the Panel inappropriately
allocated the burden of proof. Argentina points to previous Appellate Body reports establishing that a
panel need not make an express ruling on whether a complainant has established a prima facie
case.72 Moreover, Chile's claim regarding the burden of proof is not borne out by the Panel record.
To establish a prima facie case of the inconsistency of the measure at issue with Article 4.2 of the
Agreement on Agriculture , Argentina submitted to the Panel exte nsive arguments in its written and
oral submissions and substantive evidence in its 38 e xhibits, including the text of the measure at issue
and empirical evidence regarding its operation. The Panel, on the basis of these arguments and

69Chile's appellant's submission, para. 224. (emphasis added)
70Ibid., para. 226 (referring to Exhibits ARG-11 and ARG-12 submitted by Argentina to the Panel).
71Ibid., paras. 226 and 227 (referring to Chile's firs t written submission to the Panel, Panel Report,
p. A-83, para. 154; Chile's second written submission to the Panel, Panel Report, p. C-78, paras. 173 and 174;
Chile's replies to Questions 64, 72, and 73 posed by the Panel, Panel Report, pp. F-104 to F-106 and F-109 to
F-112; and Panel Report, paras. 6.10 and 6.11).
72Argentina's appellee's submission, paras. 191-193 (quoting Appellate Body Report, Korea – Dairy ,

evidence, directed 22 questions to Argentina, out of 46 questions to both parties. Argentina argues
that, on the basis of all the arguments and evidence, the Panel correctly concluded that Argentina had
made out a prima facie case and correctly shifted the burden of proof to Chile, which Chile failed to
rebut. As a result, the Panel rightly found the measure at issue to be inconsistent with Article 4.2 of
the Agreement on Agriculture.
2. Article 4.2 and Footnote 1 of the Agreement on Agriculture

46. Argentina submits that, with the measure at issue, Chile has only "cosmetically" 73 amended
the original price band system while maintaining its non-transparency and unpredictability and fully
preserving its distortive effects. Argentina ther efore requests the Appellate Body to uphold the
Panel's finding that the measure at issue is incons istent with Chile's obliga tions under Article 4.2 of
the Agreement on Agriculture.
(a) The Panel's Alleged Failure to Examine the Phrase "Other Than
Ordinary Customs Duties"
47. Argentina points out that Chile's argument on appeal, that "[o]rdin ary customs duties may
share substantive characteristics in common with th e measure identified in footnote 1", was already
dismissed by the Panel. 74 Specifically, the Panel found that "[t]he level of ordinary customs duties is
in principle stable and predictable, at least until those duties are replaced with altogether new tariff
rates."75 Argentina adds that Chile's argument ca nnot succeed because Argentina has shown that,
unlike ordinary customs duties, changes in the leve l of duties are dependent on, and related to, an
underlying scheme or formula.
48. Moreover, Argentina maintains that the Panel co rrectly interpreted Article 4.2 and footnote 1
of the Agreement on Agriculture by addressing the text of these provisions, as well as the objectives
of the Agreement on Agriculture , in the light of the Appellate Body's findings in the original
proceedings. Having summarized both parties' arguments, the Panel stated that it would limit itself to
considering the similarity of the measure at issue w ith only two of the categories of measures listed in
footnote 1 to Article 4.2 of the Agreement on Agriculture (variable import levies and minimum
import prices).

75Ibid. (quoting Panel Report, para. 7.60).

(b) The Panel's Alleged Failure to Examine "Similarity" on an Empirical
Basis
49. Argentina emphasizes that, before the Panel, it based each of its arguments on analytical,
mathematical, and/or empirical evidence in support of the claim that, in th e light of the Appellate
Body's findings in the original pr oceedings, the measure at issue was "similar" to a variable import
levy and a minimum import price within the meaning of Article 4.2 of the Agreement on Agriculture.
The Panel, upon properly recalling the Appellate Body 's analysis and interpretation regarding the
terms "variable import levies" and "minimum import prices", applied the correct interpretation of
Article 4.2 to the measure at issue while taki ng into account arguments and evidence submitted by
both parties. Thus, the Panel conducted its analysis consistently with the Appellate Body's findings
and, on the basis of empirical evidence, rightly fo und that the measure continued to be a measure
required to be converted into ordinary customs duties pursuant to Article 4.2 of the Agreement on
Agriculture.
(c) The Panel's Finding that the Measu re at Issue is Similar to a
"Variable Import Levy"
(i) Variability
50. Argentina submits that the Panel correctly foun d the measure at issue to be similar to a
"variable import levy" within the meani ng of footnote 1 to Article 4.2 of the Agreement on
Agriculture.
51. According to Argentina, Chile's arguments on appeal imply that a variable import levy is
defined as a measure that must "operate automatical ly to change the level of duties on each and every
transaction".76 Such a definition has no textual suppor t and is not based on Appellate Body
jurisprudence. In the original pr oceedings, the Appellate Body found that variability is inherent in a
measure if the measure incorporates a scheme or fo rmula that causes and ensures that levies change
automatically and continuously. This is not th e same as the "transaction-by-transaction variability"
standard that Chile introduces in this appeal. Arge ntina adds that, even under the original price band
system, which was already found to be inconsistent with the Agreement on Agriculture , specific
duties did not vary on a transaction-by-transaction basis.
52. Argentina considers that "variability", as define d by the Appellate Body, is inherent in the
measure at issue because this measure incorporat es a formula that causes and ensures automatic and
continuous changes in duties. It is clear fro m the text of Law 18.525, as amended, and Supreme

76Argentina's appellee's submission, para. 146 (quoting Chile's appellant's submission, para. 94
(original emphasis)).

Decree 831 that there exist specific formulas on the basis of which specific duties and rebates are
established. These formulas cause considerable variability in the level of specific duties, as Argentina
demonstrated to the Panel by presenting a statistical model showing the standard deviation of specific
duties. According to Argentina, these data establish that, if the me asure at issue had been in place
since 1986, specific duties applied to wheat and wh eat flour would have varied much more than
international f.o.b. prices for wheat and wheat flour over the same period.
53. Moreover, Argentina maintains that the measure at issue is an automatic mechanism that
functions by itself and is activat ed "directly and ... unfailingly".
77 Pursuant to Law 18.525, as
amended, a decree must be issued every two months regardless of the level of the reference price in
relation to the upper and lower thr esholds. Moreover, the text of that Law shows that the imposition
of specific duties (or rebates) is statutorily manda ted whenever the reference price falls below the
lower (or above the upper) thresholds of the price band. 78 Argentina submits, therefore, that in
contrast to ordinary customs duties, which are subject to "discrete changes in applied tariff rates that
occur independently, and are unrelated to such an underlying scheme or formula" 79, duties resulting
from the measure at issue are dependent and relate d to an underlying scheme or formula. On this
basis, Argentina claims that the Panel correctly f ound that the level of specific duties or rebates under
the measure at issue is determined pursuant to the mandate of Law 18. 525, as amended, and the
variability in the level of specific duties or rebate s is not the result of separate, independent, and
discrete administrative acts. As the Panel rightly found, "the administrative action occurs after" the
amount of specific duties or rebates has been calcula ted in accordance with a formula set out in this
Law.80
(ii) Transparency and Predictability
54. Argentina recalls that, in the original proceed ings, the Appellate Body determined that the
lack of transparency and predictability associated with the original price band system impeded the
transmission of international prices to the domestic market, thus preventing enhanced market access
for imports of agricultural products, contrary to the object and purpose of the Agreement on

78In particular, Argentina recalls Article 12 of Law 18.525, as amended, which states, inter alia, that
"[t]he amount of these duties and rebates shall be established as provided for in this Article". (Argentina's
appellee's submission, para. 161 (quoting Panel Report, para. 2.14) (emphasis added by Argentina))
79Argentina's appellee's submission, para. 162 (quoting Appellate Body Report, Chile – Price Band
System, para. 233). (emphasis added by Argentina)

Agriculture.81 Argentina submits that the lack of transp arency and predictability of the measure at
issue has the same effect.
55. As regards the setting of the upper and lower thr esholds of the measure at issue, Argentina
agrees with the Panel that "[t]he mere assertion by Chile that the calcu lation formula has been
abolished and that import costs have been deducted is not enough to demonstrate that, in this regard,
the current system is any less intransp arent and unpredictable than the original." 82 Argentina also
agrees with the Panel's view that, by fixing the uppe r and lower thresholds for an 11-year period, "the
effect of disconnecting domestic prices from inte rnational price developments, thus impeding the
transmission of world market prices to the Chilean domestic market, has been carried on into the
[measure at issue]." 83 In addition, the annual reduction factor of 0.985, which will be applied to the
price band thresholds from 2007 to 2014, mean s that from 2007 onwards the upper and lower
thresholds will vary without any relation to world market or historical prices.
56. With respect to reference prices, Argentina point s out that the mere existence of a reference
price affects transparency and predictability in the measure at issue. Argen tina agrees with the Panel
that the "fact that specific duties are added ... on the basis of some periodically determined and
constantly changing reference price, rather than on the basis of either the value or the volume of the
imported goods, entails a systemic lack of transparency and predictability." 84 Argentina emphasizes
that traders will have difficulty in estimating the total amount of duties applicable if a shipment is sent
before the end of the 15-day period used for calcula ting a new reference price and does not arrive in
Chile until after a new specific duty/rebate has been established on the basis of this reference price.
Moreover, the fact that, under the measure at issue, specific duties do not vary weekly (as they did
under the original price band system) but vary bi-monthly does not bring more transparency or
predictability. Argentina also concurs with the Pane l's statement that "the only thing truly predictable
about the level of duties ultimately assessed under the [m easure at issue] is that in principle such level
will change every two months."
85
57. Argentina maintains that, because of the way reference prices are established under the
measure at issue, they are less representative of rele vant world market prices than were the reference
prices under the original price band system. U nder the original system, references prices were

81Argentina's appellee's submission, para. 170 (referring to Appellate Body Report, Chile – Price Band
System, paras. 234 and 258).
83Ibid. (quoting Panel Report, para. 7.79).

adjusted every week, whereas under the measure at i ssue, the reference prices are set only six times
per year. Argentina refers to certain exhibits it s ubmitted to the Panel to show that, while the measure
at issue has been in force, refe rence prices have been disconnected from international f.o.b. prices.
86
According to Argentina, such disconnection results from the fact that the relevant time periods for
calculating the reference prices amount to a total of 90 days, or less than 25 per cent of a year.
Argentina argues, therefore, that, in "fixing one problem"
87 (that is, variability) by changing reference
prices less frequently, Chile has created other proble ms that contribute to impeding price transmission
from international markets to the Chilean market.
58. Similarly, Argentina notes that neither the "markets of concern" nor the "qualities of concern"
used to determine reference prices are representa tive of the markets and qualities of wheat imported
into Chile, which insulates the Ch ilean market even more. Although only Argentina and the United
States are selected as the "markets of concern" from 2004 to 2005, Canada was in fact a larger
exporter of wheat to Chile than was the United States. Moreover, in addition to Trigo Pan Argentino
(Argentine bread wheat) and Soft Red Winter No. 2 , there are at least two other qualities of wheat
imported to Chile, both of which have higher prices than the qualities chosen by Chile for the purpose
of establishing reference prices. Argentina argues that the fact that reference prices are determined on
the basis of only two varieties of wheat from only tw o origins, but are used to calculate specific duties
or rebates imposed on imports of all wheat and wheat flour, further contributes to the effect of
impeding the transmission of international price developments to the Chilean market.
59. Finally, Argentina highlights that the conversi on factor of 1.56 transmits to the methods for
establishing duties on wheat flour imports the same non- transparency and unpredictability inherent in
the methods for establishing duties on wheat imports. Argentina stresses that this conversion factor
was embodied in the Chilean legislation in 1986 a nd has remained unchanged ever since, even though
the ratio of the price of wheat flour to that of wheat has changed over time.
(d) The Panel's Finding that the Measu re at Issue is Similar to a
"Minimum Import Price"
60. Argentina argues that, contrary to Chile's asser tion on appeal, the Panel correctly found that
the measure at issue operates so as to prevent the entry of imports of wheat or wheat flour into the
Chilean market at prices below the lower threshold of the price band. In the original proceedings, the
Appellate Body explained that a minimum import pri ce "refers generally to the lowest price at which

86Argentina's appellee's submission, para. 116 (referring to Exhibits ARG-15 and ARG-17 submitted
by Argentina to the Panel).
87Argentina's response to questioning at the oral hearing.

imports of certain product may en ter a Member's domestic market". 88 In the light of this definition,
Argentina underlines that, as it demonstrated befo re the Panel, specific duties resulting from the
measure at issue tend to elevate the entry price of imports to Chile above the price band's lower
threshold.
61. Argentina maintains that the measure at issue tends to elevate the entry price of wheat imports
to Chile at above the lower threshold of the price band except in certain unlikely scenarios. With the
current lower threshold of US$128 per tonne, this unlikely scenario only arises when the reference
price exceeds the c.i.f. price of an import transaction by more than US$7.2453 per tonne. Argentina
explains that such a scenario is highly improbable because reference prices are established on an f.o.b.
basis and always tend to be lower than the c.i. f. import prices. As confirmed by the evidence
submitted to the Panel, during the period of applicati on of the measure at issue, the c.i.f. prices of
wheat imports to Chile were always much higher than the f.o.b. reference prices for the corresponding
time period. On this basis, Argentina contends th at the formula used for calculating specific duties,
together with the lower threshold, works as a "brake"
89 for the decline in the entry price and impeded
any transmission of international prices below the level of the threshold.
62. Moreover, Argentina agrees with the Pane l that the measure at issue tends to
"overcompensate" for international price declin es when specific duties are applied. This
overcompensation refers to the s ituation in which, when international prices fall, and when the
reference price is below the lowe r threshold of the price band, the combined application of the
ad valorem tariff and the specific duty under the measure at issue results in an overall entry price that
rises rather than falls. 90 In this regard, Argentina recalls Ch ile's argument that "overcompensation"
occurred on only two days and counters that, each tim e overcompensation occurs, this "inevitably
taints the rest of [the following two-month] period" because the level of duties and the entry price is
affected by that initial "overcompensation".91
63. Finally, in Argentina's view, the evidence that it submitted to the Panel also highlights that the
measure at issue does not ensure that the entry pri ce of imports to Chile falls in tandem with falling
world market prices. This is due to the fact th at specific duties rise when international prices fall,

88Argentina's appellee's submission, para. 179 (quoting Appellate Body Report, Chile – Price Band
System, para. 236).
89Ibid., paras. 57 and 186.
90Argentina submits that relevant evidence demonstrates that, following the imposition of a specific
duty on 16 December 2004 and on 16 February 2005, the entry price of wheat imports rose by more than
4 per cent as compared to the previous day, despite decreases in the international f.o.b. prices used to calculate
the reference prices.
91Argentina's appellee's submission, para. 74. (original emphasis)

thereby moving in the opposite direction to inte rnational prices and "completely undercutting the
effect of the decline in ... international prices".
92
(e) The Panel's Alleged Failure to Examine the Measure at Issue in its
Entirety
64. Argentina submits that the Panel did not conduct a cursory review of the relevant features of
the measure at issue in isolation. Instead, the Panel conducted an objective assessment of the measure
at issue in the light of the evidence before it, an d consistently with the legal reasoning developed by
the Appellate Body in the original proceedings.
3. Articles 11 and 12.7 of the DSU
65. Argentina submits that the Panel acted consis tently with its obligations under Articles 11
and 12.7 of the DSU. First, Argentina argues that Chile did not point to any textual basis in the Panel
Report to support its assertion that the Panel found the Chilean Ministry of Finance to have violated
Chilean law in establishing the thresholds of the price bands. According to Argentina, the Panel
found only that Chile had failed to demonstrate that the abolition of the calculation formula for
establishing thresholds under the original price ba nd system had exerted any practical impact on the
levels of thresholds under the measure at issue, a nd that Chile had failed to submit sufficient evidence
to support its assertion that import costs were deducted for purposes of establishing the current
thresholds.
93 Argentina points out that the Panel's findi ng was consistent with Chile's statement that
the level of thresholds was a result of "an internal political agreement".94
66. Secondly, in response to Chile's assertion that the Panel should have corrected a factual
finding made by the original panel—namely, the original panel's alleged misunderstanding that the
reference prices were not converted to c.i.f. terms before being compared to the price band
thresholds—Argentina argues that the Panel's task was not to correct alleged errors regarding the
operation of the original price band system. Chile had the opportunity during the original proceedings
to bring this alleged error to the attention of the original panel and the Appellate Body, but Chile did
not do so. In these circumstances, the findings by the original panel and the Appellate Body, adopted
by the DSB, constitute a final resolution of the dis pute concerning the original price band system. In
any event, correcting this alleged factual error woul d not have affected the Panel's conclusion that the

94Ibid., para. 202 (quoting Chile's opening statement at the Panel meeting, Panel Report, p. D-33,
para. 25).

way the reference price is established tends to im pede the transmission of international prices to
Chile's domestic market, because the Panel made several other findings in support of this conclusion.
67. Thirdly, Argentina submits that the Panel did not conduct a cursory review of the relevant
features of the measure at issue "in isolation", and di d not fail to consider relevant empirical evidence.
Recalling the Appellate Body's previous interpretations of a panel's obligations under Article 11 of the
DSU95, Argentina emphasizes that the Panel did not fail to conduct an objective assessment of the
matter before it by disregarding or distorting any ev idence, even though Chile may have preferred the
Panel to have accorded different weight to certain evidence.
68. Finally, with respect to Chile's claim under Article 12.7 of the DSU, Argentina recalls the
Appellate Body's interpreta tion of this provision in Mexico – Corn Syrup (Article 21.5 – US) 96 and
submits that, pursuant to Article 12.7, a panel report must set forth explanations and reasons sufficient
to disclose the essential justification for the findi ngs and recommendations the panel is making.
Argentina maintains that the Panel indeed set forth such explanations and reasons by: (i) identifying
the relevant facts and applicable legal standard , namely, Article 4.2 and footnote 1 of the Agreement
on Agriculture; (ii) following the Appellate Body's interpretation of this legal standard; (iii) applying
this interpretation to the facts; (iv) addressing relevant arguments made by Chile and Argentina;
and (v) sufficiently explaining the reasons underlying its findings.
4. Conclusion
69. Argentina requests the Appellate Body to reject Chile's claims of error in their entirety,
including its claims under Articles 11 and 12.7 of the DSU, and to uphold the Panel's findings and
conclusions under Article 4.2 and footnote 1 of the Agreement on Agriculture.
C. Claims of Error by Argentina – Other Appellant
70. In the event that the Appellate Body reverses th e Panel's finding that the measure at issue is
inconsistent with Article 4.2 of the Agreement on Agriculture, Argentina requests the Appellate Body
to find that the measure at issue is inconsistent with the second sentence of Article II:1(b) of the
GATT 1994.

95Argentina's appellee's submission, paras. 221-223. In particular, Argentina refers to Appellate Body
Report, EC – Hormones, para. 133; and Appellate Body Report, Japan – Apples, paras. 221 and 222.
96Argentina's appellee's submission, para. 229 (quoting Appellate Body Report, Mexico – Corn Syrup
(Article 21.5 – US), paras. 106-108).

1. Conditional Appeal and Completion of the Analysis

71. Argentina recalls that the Panel declined to rule on Argentina's claim that the measure at issue
is inconsistent with the second sentence of Article II:1(b) of the GATT 1994. The Panel stated that a
finding on this claim was unnecessary to resolve this dispute, given that the measure at issue had
already been found to be inconsistent with Article 4.2 of the Agreement on Agriculture.97 Argentina
submits that, should the Appellate Body reverse the Panel's finding under Article 4.2 of the
Agreement on Agriculture , a finding concerning the consistency of the measure at issue with the
second sentence of Article II:1(b) of the GA TT 1994 would become necessary for the prompt
settlement of this dispute.98
72. Argentina asserts that the Appellate Body woul d be able to complete the analysis under the
second sentence of Article II:1(b) of the GATT 1994 in these proceedings. Referring to the Appellate
Body's finding in EC – Asbestos 99, Argentina considers that the Appellate Body has established a
three-tier test for completion of the analysis: (i) th ere is a sufficient factual basis in the panel record
for the Appellate Body's analysis; (ii) if the completion of the analysis requires interpretation of a
provision not examined by the panel, then this prov ision is part of a logical continuum with the
provision(s) that the panel did consider; and (iii) the provision with respect to which a party requests
a ruling is the subject of a prior interpretation or application by either a panel or the Appellate Body.
73. According to Argentina, there is a sufficient basis in the Panel record to complete the
analysis, because Argentina developed its claim under the second sentence of Article II:1(b) of the
GATT 1994 by providing arguments and evidence, a nd the Panel made extensive factual findings
regarding the operation of the measure at issue. In addition, Argentina contends that there is a close
relationship between Article 4.2 of the Agreement on Agriculture and the second sentence of
Article II:1(b) of the GATT 1994 because, in Argen tina's view, if a measure is not an "ordinary
customs duty" under Article 4.2, it is necessarily an "other duty or charge" that should have been
recorded in a Member's Schedule of Concessions pur suant to Article II:1(b) and the Understanding on
the Interpretation of Article II:1(b) of the GATT 1994. Finally, Argentina emphasizes that the second

97Argentina's appellee's submission, para. 8 (referring to Panel Report, paras. 7.117-7.120).
98In response to questioning at the oral hearing, Argentina indicated that it also requests the Appellate
Body to complete the analysis under Article 4.2 of the Agreement on Agriculture should that prove necessary
to resolve the dispute.
99Argentina's other appellant's submission, para. 19 (referring to Appellate Body Report, EC –
Asbestos, paras. 78-81).

sentence of Article II:1(b) of the GATT 1994 was the s ubject of rulings by the original panel and has
also been interpreted or applied by other panels.100
2. Scope of these Article 21.5 Proceedings in Relation to Argentina's Claim
under Article II:1(b) of the GATT 1994
74. Argentina asserts that its claim under the second sentence of Article II:1(b) of the GATT 1994
was properly within the scope of these Article 21.5 proceedings. Before the Panel, Chile contended
that Argentina's claim could have been, but was not, raised in the original proceedings, and that for
the Panel to address such a claim would prejudice Chil e's due process rights. Argentina responds that
Chile's arguments have no basis in relevant Appellate Body jurisprudence and would impair the aim
of the DSU, namely, to secure a prompt and positive solution to a dispute.
75. Argentina refers to previous findings by the Appellate Body regarding the scope of
Article 21.5 proceedings and alleges that, in acco rdance with these findings, a complainant may not,
in Article 21.5 proceedings, raise a claim for which: (i) there has been a definitive ruling of WTO-
consistency or inconsistency; or (ii) there has been a finding that the complainant failed to establish a
prima facie case in the original proceedings. 101 In Argentina's view, neither of these conditions is
satisfied in these proceedings because Argentina' s claim under the second sentence of Article II:1(b)
of the GATT 1994 is a new claim with respect to a ne w measure. Furthermore, this new claim relates
to the measure at issue in its totality rather than to one aspect in particular. Accordingly, Argentina
considers that the situation in the curren t proceedings is different from those in EC – Bed Linen
(Article 21.5 – India) and US – Countervailing Measures on Certain EC Products (Article 21.5 –
EC).
76. Finally, Argentina contends that, if the Appe llate Body were to acc ept Chile's procedural
objections and preclude Argentina from raising its claim under Article II:1(b) of the GATT 1994 in
these Article 21.5 proceedings, it would mean that Argentina should have made all conceivable claims
at the initial stages in the original proceedings re gardless of whether the claims would have been
fruitful. Because Article 3.7 of the DSU requires a Member to exercise its judgement as to whether
initiating a dispute would be "fruitful", such a finding by the Appellate Body would preclude

100Argentina's other appellant's submission, para. 25 (referring to Panel Report, Dominican Republic –
Import and Sale of Cigarettes , paras. 7.22-7.122; and Panel Report, US – Countervailing Measures on Certain
EC Products, paras. 6.62-6.72).
101Ibid., paras. 58-61 (referring to Appellate Body Report, EC – Bed Linen (Article 21.5 – India) ,
para. 96; Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 71 and footnote 110
thereto; and Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada) , footnote 150 to
para. 102).

complainants from exercising their judgement as re quired by Article 3.7 of the DSU. Argentina
submits that this would add a new and undue burden on complainants.
3. Consistency of the Measure at Issue with Article II:1(b) of the GATT 1994

77. Argentina requests the Appellate Body "to comp lete the analysis of the Panel where [the
Appellate Body] reverses or modifies findings of the Panel or [where] completion of the analysis of
the Panel is necessary to resolve this dispute." 102 Argentina maintains that, regardless of whether the
measure at issue is similar to a variable import levy or a minimum import price, the measure is
inconsistent with the second sentence of Article II:1( b) of the GATT 1994. Argentina contends that
this is because the measure at issu e is an "other duty or charge" not recorded in the appropriate
column in Chile's Schedule of Concessions, thus infringing the second sentence of Article II:1(b). In
this regard, Argentina agrees with Chile's statement, made before the Appellate Body in the original
proceedings, that the purpose of the second sentence of Article II:1(b) is to ensure that bindings on
"ordinary customs duties" cannot be circumvented by the creation of new types of duties or
charges.
103
78. Argentina recalls the Appellate Body's finding in the original proceedings that all that is
required for a border measure to be an ordinary cust oms duty is that it be expressed in the form of an
ad valorem or specific rate. In addition, the Appellate Body found that the fact that duties resulting
from the original price band system took the form of an "ordinary customs duty" did not imply that
the measure underlying such duties was consistent with Article 4.2 of the Agreement on Agriculture .
Argentina argues that this finding is equally appli cable in the context of Article II:1(b) of the
GATT 1994. The measure at issue is not expressed in an ad valorem or specific duty rate and
therefore it does not constitute an ordinary custom s duty. The duties resulting from the operation of
this complex mechanism also cannot be ordinary cu stoms duties even though they take the form of a
specific duty. Argentina further recalls that, accord ing to the negotiating history of Article II:1(b),
"other duties or charges" within the meaning of that provision are defined only by exclusion, that is,
as a residual category of duties or charges that do not constitute ordinary customs duties within the
meaning of the first sentence of Article II:1(b). Arge ntina concludes, therefore, that, because it is not
an ordinary customs duty, and because it is not recorded in the appropriate column for "other duties or
charges" in Chile's Schedule of Concessions, the m easure at issue must constitute an "other duty or
charge" that is prohibited under the second sentence of Article II:1(b) of the GATT 1994.

102Argentina's other appellant's submission, para. 86.

D. Arguments of Chile – Appellee
79. Chile requests the Appellate Body to reject Ar gentina's claims made in its other appeal,
namely: (i) to reverse the Panel's finding that it was unnecessary to make a separate finding on
Argentina's claim under the second sentence of Article II:1(b) of the GATT 1994; and (ii) to
complete the analysis and find that the measure at issue is inconsistent with the second sentence of
Article II:1(b) of the GATT 1994.
1. Conditional Appeal and Completion of the Analysis
80. As a threshold matter, Chile notes, based on Ar gentina's other appellant 's submission, that
Argentina has not specifically requested the Appellate Body to complete the analysis under Article 4.2
of the Agreement on Agriculture , if the Appellate Body were to reverse the Panel's findings and
conclusions under the same provision. Although Ar gentina makes a general reference to completing
the analysis in its other appellant's submission, th at submission, according to Chile, refers to, and
provides arguments regarding, completion of the an alysis only in respect of Argentina's claim under
Article II:1(b) of the GATT 1994. In Chile's view, because Argentina has provided no specific
reference or arguments in relation to completing the analysis under the Agreement on Agriculture ,
the Appellate Body cannot complete the analysis on these claims.
81. Chile alleges that, in any event, Argentina' s vague references to completing the analysis
disguise the complexity involved in doing so in this case. In Chile's view, the Appellate Body would
be required to complete the analysis on each of three different levels. First, the Appellate Body would
need to find that it is appropriate to complete th e analysis with respect to Argentina's claims under
Article 4.2 of the Agreement on Agriculture and, if so, then proceed with determining whether the
measure at issue is consistent with this provision. Secondly, in the event that the measure at issue
were found to be consistent with the Agreement on Agriculture, the Appellate Body would then need
to find that it is appropriate to complete the anal ysis with respect to whet her Argentina's claim under
the second sentence of Article II:1(b) of the GAT T 1994 was properly within the mandate of the
Panel. Thirdly, if it finds that Argentina's cl aim was properly within the Panel's mandate, the
Appellate Body would need to determine whethe r completing the analysis with respect to the
substance of Argentina's claim under this provision is appropriate and, if so, proceed to completing
the analysis. According to Chile, completing such a complex string of analyses would be
inappropriate in this case, particularly given the absence of any prior findings under the second
sentence of Article II:1(b) by the Appellate Body in the original proceedings or by the Panel in these
Article 21.5 proceedings.

2. Scope of these Article 21.5 Proceedings in Relation to Argentina's Claim
under Article II:1(b) of the GATT 1994
82. Chile asserts that Argentina's claim under the second sentence of Article II:1(b) of the
GATT 1994 was not properly within the scope of these Article 21.5 proceedings. Chile indicates that
the original price band system and the measure at issue share the same fundamental feature, namely,
that they both result in the application of specific duties or rebates. Chile argues that, before the
Panel, Argentina was asked to identify the new aspec ts of the measure at issue which did not exist
under the original price band system and which tr iggered a potential violation of the second sentence
of Article II:1(b) of the GATT 1994. The Panel f ound that Argentina had failed to identify any such
new aspect, and, according to Chile, Argentina has si milarly failed to do so before the Appellate
Body. Accordingly, Chile contends that, c onsistent with the findings of the panel in US –
Countervailing Measures on Certain EC Products (Article 21.5 – EC) , the Appellate Body should
find that Argentina's claim is beyond the scope of th ese Article 21.5 proceedings. For Chile, this is so
because it is a new claim on an aspect of the original measure that was never challenged and remained
unchanged in the measure at issue. Chile submits that, to protect its due process rights in these
Article 21.5 proceedings, the Appellate Body s hould find that Argentina's claim under the second
sentence of Article II:1(b) of the GATT 1994 was not properly within the terms of reference of the
Panel.
3. Consistency of the Measure at Issue with Article II:1(b) of the GATT 1994
83. Chile submits that the measure at issue is consistent with the second sentence of
Article II:1(b) of the GATT 1994 because it is not, nor does it result in, "other duties or charges". In
Chile's view, Argentina's appeal rests on the argum ent that the measure at issue does not constitute
"ordinary customs duties" becau se, despite the resulting duties taking the form of an ad valorem or
specific rate, the measure itself is not expressed in the form of an ad valorem or specific rate. Chile
submits that the Appellate Body should reject Arge ntina's approach because it is inconsistent with
Article II:1(b) of the GATT 1994 as well as the Appellate Body's findings in the original proceedings.
Specifically, Chile considers that Argentina, in making its arguments, seeks to exclude from the
Appellate Body's examination of its claim under Ar ticle II:1(b) the duties resulting from the measure
at issue. However, if the resulting duties are i gnored, the measure at issue cannot possibly constitute
"other duties or charges" under Article II:1(b) of the GATT 1994, or even a variable import levy or
minimum import price under footnote 1 of the Agreement on Agriculture. In addition, Chile suggests
that "Argentina's approach would mean that a me asure imposing ordinary customs duties could never
refer to anything other than the numerical rates to be applied" 104, contrary to the Appellate Body's

finding in the original proceedings that a Memb er may consider "exogenous" factors in setting the
level of ordinary customs duties.
84. Moreover, Chile takes issue with Argentina's ar gument that the measure at issue "should be
examined in isolation" 105 and can constitute ordinary customs duties only if the measure itself is
expressed in the form of an ad valorem or specific rate. In Chile's view, accepting this argument
would lead to "absurd results" 106, because this would mean that all measures underlying the
application of ordinary customs duties would be WTO-inconsistent if they are not limited to a
numerical rate only. Chile gives the exampl es of measures that provide for progressive duty
liberalization, tariff rate quotas, seasonal duties, and other types of ordinary customs duties. Chile
contends that, according to Argentina's argument, thes e would all be found to be WTO-inconsistent if
the measures themselves were not scheduled as a num erical rate, notwithstanding that the resulting
duties are ordinary customs duties. Chile submits, therefore, that Argentina's approach should be
rejected.
E. Arguments of the Third Participants
1. Australia

85. Australia contends that the Panel committed no e rror of law or legal interpretation in finding
that the measure at issue is inconsistent with Chile's obligations unde r Article 4.2 of the Agreement
on Agriculture. While recognizing the substantial changes that Chile made to its price band system,
Australia nevertheless submits that these changes we re not sufficient to bring Chile's measure into
compliance with the recommendations and rulings of the DSB in the original proceedings. The Panel
correctly identified the principal issue before it as whether the amendments introduced by Chile to its
price band system were such as to make the me asure consistent with Article 4.2 of the Agreement on
Agriculture, and correctly found that the measure at issu e has the restrictive features that characterize
the border measures prohibited under Article 4.2 and footnote 1.
86. Australia adds that the Panel did not fail to give effect to the language "other than ordinary
customs duties" in footnote 1 to Article 4.2. The structure of the Panel Report shows that the Panel
did analyze whether the measure at issue operated differently from "ordinary customs duties", along
with its consideration of whether the measure at issue was similar to a variable import levy and to a
minimum import price.

106Ibid., para. 29.

87. Australia further argues that the Panel did not fa il to examine, on an "empirical basis", the
similarity of the measure at issue with variable import levies and minimum import prices. Australia
contends that Chile misinterprets the Appellate Body 's use of the term "empirical" in the original
proceedings. The term was used by the Appellate Bo dy to reject the original panel's assessment that
certain characteristics of a measure could be cons idered as being of a "fundamental nature". In
Australia's opinion, the Appellate Body used "empir ical" simply to refer "to a comparison of actual
characteristics as opposed to a theoretical asse ssment of 'fundamental' characteristics".
107 The term,
according to Australia, was not intended to be limite d to only the economic impact, as suggested by
Chile. Therefore, the Panel's appr oach was consistent with the A ppellate Body's use of the term
"empirical".
88. Australia rejects Chile's contention that th e measure at issue does not impose automatic
variability as it requires a separate administrative act to change the duty levels. In accordance with
the findings of the Appellate Body in the origin al proceedings, the Panel correctly found that the
measure at issue falls within this definition becau se it contains a formula that establishes automatic
and periodic adjustment in the levels of specific du ties and rebates. The Panel was also correct in
concluding that continuous variability of the duties is a feature inherent in the measure at issue. The
Appellate Body's use of the term "continuous" does not suggest a requirement for a particular
frequency. Instead, according to Australia, the Appella te Body's reference to the right of Members to
change periodically the rate at which they apply du ties was a reference to change which is periodic in
the sense that it is not inherent in the operation of an underlying measure, which is not the case in the
measure at issue.
89. Australia acknowledges that the fixing of the upper and lower thresholds for an extended
period of time under the measure at issue is an "impr ovement", but maintains that the reference prices
remain unpredictable and the way in which they are calculated lacks transparency. Australia submits
that traders are "faced with a degree of unpredic tability not materially different from the original
[measure]"108 when they want to find out the amount of duties beyond the next bi-monthly duty
adjustment.
2. Brazil
90. Brazil submits that the measure at issue shares fundamental characteristics with the original
price band system and continues to be similar to a variable import levy and to a minimum import
price. Like the original measure, the measure at issue has an automatic protective effect when prices

107Australia's third participant's submission, para. 14.
108Ibid., para. 19.

fall below the lower threshold, and it still contai ns a pre-determined formula that changes the
reference prices within short periods to reflect inte rnational prices. Furthermore, Brazil submits, the
measure at issue imposes specific duties that more than fill the gap between the international price and
the lower threshold so as to insulate domestic produ cers from the price declines. Brazil asserts that
the differences between the original price band system and the measure at issue are essentially "minor
details that do not alter the functioning of the system as a variable import levy and minimum price".
109
91. Brazil contends that the Panel correctly analyzed "variability" and found the measure at issue
to be similar to a variable import levy. The Pane l correctly reflected the reasoning of the Appellate
Body in the original proceedings in finding the measure at issue to be "variable" due to its in-built
formula that causes specific duties to vary on a bi-mont hly basis. The measure at issue could also be
considered to be "variable" because its in-built form ula means that a trader may be faced with one of
three scenarios: (i) a requirement to pay a specific duty on top of ad valorem duties; (ii) a
requirement to pay only ad valorem duties; or (iii) a rebate on ad valorem duties. Brazil also
disagrees with Chile's assertion that the measure at issue does not, in itself, impose variability,
because Supreme Decree 831 specifies that Chile's Mi nistry of Finance can revise aspects of the
measure at any time. This argument is not te nable because it is Law 18.525, as amended, that
establishes the measure at issue and its formul a, whereas Supreme Decree 831 merely specifies
certain operational details of the mechanism. Brazil further refers to the findings of the Appellate
Body in US – Oil Country Tubular Goods Sunset Reviews and of the panel in US – Zeroing (Japan),
and contends that "the mere possibility" that a challenged measure may be modified in the future
"cannot shield [it] from a finding of WTO-inconsistency".110
92. Brazil rejects Chile's attempt to distinguish the variability of the measure at issue from that of
the original measure by characterizing the latter as a measure which imposed duties that varied
continuously on a transaction-by-transaction basis. In fact, the only difference in variation is that
under the measure at issue the duti es are fixed for a two-month period rather than weekly, and this
change does not make the variability disappear. Furt hermore, the Panel correctly concluded that the
fact that there is a separate administrative act of publishing a decree every two months was "a mere
formality", and did not mean that the measure was no longer "automatic".
111 Rather, Brazil maintains,

109Brazil's third participant's submission, para. 9.
110Ibid., para. 16 (referring to Appellate Body Report, US – Oil Country Tubular Goods Sunset
111Ibid., para. 21.

the variable duties resulting from the measure at issu e continue to be "inherently unpredictable and
lacking in transparency".
112
93. Brazil also disagrees with Chile's argument that the variations in the measure at issue are
equivalent to modifications of "ordinary customs duties". Fluctuations in the duties resulting from the
measure at issue are fundamentally different, b ecause they result from an in-built formula and are
mandated for a two-month period. With respect to the transparency and predictability of the measure
at issue, Brazil maintains that none of the modifi cations that Chile made to the original measure
changed its intrinsic lack of predictability and transparency nor its similarity to a variable import levy.
94. According to Brazil, the measure at issue al so continues to be a measure similar to a
minimum import price, because it sets a numerical benchmark (the lower threshold) below which
import prices can fall only in the most exceptional ci rcumstances. Even in the unlikely event that
world market prices fall "precipitously" within a two-month period, the measure at issue would
nonetheless neutralize the fall in prices when the sp ecific duty levels are updated in the subsequent
two months.
113 This confirms that the measure at issue continues to be similar to a minimum import
price. Brazil further argues that it is not necessary fo r the thresholds to be expressed in c.i.f. terms
for the measure at issue to function as a minimum import price.
95. Brazil argues that the Panel was not required to make an additional determination that the
measure at issue was not an "ordinary customs duty" . This is because, according to Brazil, a finding
that a measure falls within footnote 1 to Article 4.2 of the Agreement on Agriculture necessarily
implies that the measure is not an "ordinary custom s duty". In addition, the Appellate Body, in the
original proceedings, did not make a separate findi ng that the measure was not an "ordinary customs
duty" after finding that it was similar to a variable import levy and to a minimum import price. In any
event, the measure at issue is not an "ordinary customs duty", becau se it is not expressed either as an
ad valorem duty, a specific duty, or a combination thereof, and also because it does not impose a duty
regularly, but rather, exceptionally.
96. In addition, Brazil is of the opinion that the Pa nel did not misallocate the burden of proof but
"merely required that Chile substantiate a par ticular factual assertion" that Chile had made. 114 The
Panel did not start from the premise that the measure at issue was WTO-inconsistent, but merely
considered the measure at issue against the "backdr op" of the original measure, and in line with the

112Brazil's third participant's submission, para. 28.
113Ibid., para. 29.
114Ibid., para. 37.

previous Appellate Body statements that an exam ination of the measure taken to comply cannot be
done in abstraction from the measure that was the subject of the original proceedings.115
97. Regarding Argentina's conditional appeal, Braz il submits that, in the event the Appellate
Body reverses the Panel's findings under Article 4.2 of the Agreement on Agriculture , the Appellate
Body should complete the analysis and find the meas ure at issue to be inconsistent with the second
sentence of Article II:1(b) of the GATT 1994. Th e measure at issue is not an "ordinary customs
duty", but constitutes "other duties or charges" that are not recorded in Chile's Schedule of
Concessions.
98. Brazil submits that Argentina's claim under the second sentence of Article II:1(b) was within
the terms of reference of the Panel because it concerns a " changed aspect of a new measure".116
Brazil disagrees with certain obiter statements of the Panel which imply that "a complaining
Member must challenge every conceivable violation in the original proceedings in order to preserve
its rights upon implementation." 117 Brazil submits that such an a pproach may lead to an increase in
the use of judicial economy and place "an excess ive burden" on the complainant and the dispute
settlement system.118
3. Canada
99. Canada submits that, should the Appellate Body reach Argentina's conditional appeal, a
clarification of the jurisdiction of Article 21.5 pane ls is required. Although the Appellate Body need
not review the Panel's extensive comments on this is sue, it remains open to the Appellate Body to do
so as part of its broader review of this dispute. In Canada's opinion, the narrow approach to the
jurisdiction of Article 21.5 panels enunciated by the Panel was inappropriate. Adopting such an
approach would fetter the ability of Members to adva nce their claims and would be detrimental to the
efficient and effective operation of the dispute settle ment system. For Canada, it is "incontestable"
that a Member has a right to bring new claims and arguments before an Artic le 21.5 panel relating to
new measures.119 Canada submits that an Article 21.5 panel should also be presumed to have
jurisdiction over all claims and arguments raised by the complainant and should not reject such claims
or arguments on the sole basis that they could have been raised previously.

115Brazil's third participant's submission, para . 38 (referring to Appellate Body Report, US – Softwood
116Ibid., para. 42. (original emphasis)
117Ibid., para. 43. (original emphasis)
118Ibid., para. 43.
119Canada's third participant's submission, para. 5.

100. In Canada's opinion, there are three reasons why this should be the "starting presumption" for
Article 21.5 panels. First, a complaining Member should be presumed in all proceedings to be acting
in good faith in bringing claims and arguments it considers fruitful to resolve the dispute. Secondly,
the DSU contains no provision directing or authorizing panels to reject claims solely on the basis that
they could have been raised previously, but it does require panels to make an objective assessment of
the matter. Thirdly, a "presumption of inadmiss ibility of arguments" may result in complainants
multiplying their claims, regardless of their mer its, in the original proceedings, so as to avoid
subsequent procedural challenges during Article 21.5 proceedings.
120
101. Canada maintains that, in any event, "[t]o ha ve a presumption in favour of admission of all
claims and arguments is not to say that the presumption cannot be rebutted" 121, and points to the
Appellate Body Reports in US – Shrimp (Article 21.5 – Malaysia) , EC – Bed Linen (Article 21.5 –
India), and the Panel Report in US – Countervailing Measures on Certain EC Products (Article 21.5 –
EC) as examples of whether the presumption was appropriately rebutted. 122 In addition, claims and
arguments are also subject to general principles of international law, such as procedural fairness and
res judicata. In this regard, Canada indicates that, fo r example, in cases where unfair prejudice to a
party would result, a panel could exercise discretion to refuse to exercise jurisdiction. In Canada's
view, however, the Panel did not assess whether there could be potential prejudice to Chile if
Argentina's claims under Article II:1(b) of the GA TT 1994 were to be allowed. Instead, the Panel
merely "formulated a particularly narrow rule fo r jurisdiction" which created a presumption that
Article 21.5 panels will not cons ider arguments that could have been raised in the original
proceedings, but were not, unless three stringent conditions are met.
123 Such a narrow approach
places a high burden on the complainant and allows a respondent to rely on a presumption of
prejudice to its position. It is not consistent with the presumption of good faith that should be
accorded complainants and it does not acknowledge th at the complainant has already established that
the original measure was WTO-inconsistent.
102. Canada believes that the facts of this case illustrate the unreasonableness of the Panel's
approach. Argentina's claim in the original proceedings was based on the first sentence of
Article II:1(b), and Argentina argued that the duties imposed by Chile through the original price band
system were "ordinary customs duti es" within the meaning of that sen tence. However, the original

120Canada's third participant's submission, para. 9.
121Ibid., para. 10.
122Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia) , para. 97; Appellate Body Report,
EC – Bed Linen (Article 21.5 – India) , para. 96; Panel Report, US – Countervailing Measures on Certain EC
Products (Article 21.5 – EC), footnote 294 to para. 7.75.
123Canada's third participant's submission, para. 13.

panel disagreed. Subsequently, the Appellate Body reversed the original panel's finding but did not
make a finding on whether duties in the original pr ice band system were in fact "ordinary customs
duties". Canada argues that the Panel's narrow approach would unfairly preclude Argentina from
bringing a claim whose potential validity was only clear after the findings in the original proceedings,
and that Chile would suffer no prejudice were an Article 21.5 panel to consider that claim.
4. Colombia
103. Colombia chose not to submit a third participant' s submission pursuant to Rule 24(2) of the
Working Procedures. In its statement at the oral hearing, Colombia addressed the burden of proof
applied by the Panel and the interpretation of the te rm "variable import levy", and joined Chile in its
criticism of the Panel's interpretations and findings.
5. European Communities
104. The European Communities requests the Appellate Bo dy to find that the Panel erred in law in
its analysis of the consistency of the measure at issue with Article 4.2 of the Agreement on
Agriculture and to rectify, as appropriate, the views expressed by the Panel on the scope of the
jurisdiction of Article 21.5 panels. The European Communities also submits that, because, in its
view, the measure at issue should be considered an "ordinary customs duty", there is no breach of
Article II:1(b) of the GATT 1994 and that a finding in this respect is not necessary to the resolution of
the dispute.
105. The European Communities agrees with Chile that the Panel conducted only a "cursory
review" of the measure at issue and merely compar ed it to the original price band system without
establishing rigorously in law whether the measure at issue was still similar to a variable import levy
or to a minimum import price. 124 When properly assessed against the standards established by the
Appellate Body, the measure at issue should be found to meet the requirements of an "ordinary
customs duty" in terms of transparency and predictab ility. In examining the similarity of the measure
at issue to a minimum import price, the issue of whether the measure disconnects domestic prices
from international prices should not be given too much weight. This is in line with the approach
adopted by the Appellate Body which "put [the] main emphasis on the lack of transparency and
predictability" when analyzing similarity. 125 The European Communities adds that transparency and
predictability must be considered in the light of the actual effects of the measure at issue.

124European Communities' third participant's submission, para. 1.
125Ibid., para. 4.

106. According to the European Co mmunities, the Panel erred in assessing the measure at issue
against the highest possible standard of transparen cy and predictability, instead of using the proper
standard, that is, the transparency and predictab ility of ordinary customs duties. Below bound duty
rates, there is no specific level of predictability or transparency imposed on the administration or level
of ordinary customs duties. In the same way, the Panel's analysis of transparency and predictability
should not have focused on the level of the resu lting duties but on the measure at issue and its
operation. The European Communities adds th at the Panel should also have undertaken a
comprehensive and empirical review of the measure at issue in the light of the object and purpose of
Article 4.2 of the Agreement on Agriculture, which the Appellate Body identified as enhanced market
access, and not as either transparency and predictability per se, or unfettered market access.
107. The European Communities submits that, when properly analyzed in the light of these
requirements, the measure at issue is sufficiently tr ansparent and predictable. The changes in duties
are not, strictly speaking, continuous, and there is reasonable transparency and predictability in the
variations in duties. Under the measure at issue, traders know the level of duties to be paid for each
two-month period, and are "able, to a reasonable extent, to understand the dynamics of the system and
anticipate the evolution of the payable duty during the next [two-month] period."
126 Although they
cannot anticipate the precise amount of specific duty or rebate that will be applied, this is no different
from the situation where a Member reviews its applie d rates. In addition, when, as in this case, the
operation of the measure results in an increase in th e entry price of imports that is transparent and
predictable, then the system should be deemed to operate as an ordinary customs duty.
108. The European Communities disagrees with the Panel's views, expressed as obiter dicta, with
respect to the scope of review by an Article 21. 5 panel. The European Communities disagrees, in
particular, with the Panel's statements that Article 21.5 panels are precluded from examining claims
that could have been raised during the original proceedings, and that an Article 21.5 panel may not
assess new claims that relate to aspects of the or iginal measure that remain unchanged. In the
European Communities' opinion, the scope of ju risdiction of an Article 21.5 panel is framed
exclusively by the terms of Article 21.5 of the DSU, the request for the establishment of a panel, and
the res judicata principle. By definition, the latter principle cannot apply in the situation where the
claim was not made in the original proceedings.
109. The European Communities argues that the Panel's obiter dicta would force a complainant to
identify all of its potential claims before an original panel. Such a condition has no basis in the DSU,
and would deny Members the right to exercise thei r own "process economy" and to bring actions that

126European Communities' third participant's submission, para. 9.

they consider "fruitful". 127 The European Communities "fundame ntally disagrees" with the Panel's
view that an Article 21.5 panel would "create a situation of uncertainty for the respondent", and would
"jeopardize the security and predictability" of the WT O dispute settlement system, if it were to admit
new claims. 128 Rather, the Panel's restrictive approach would create a situation of uncertainty for
complainants, and be counterproductive to the prompt and efficient settlement of disputes, because it
would, in effect, prevent complainants from ex ercising "process economy" by limiting themselves to
the claims that they consider to be the strongest, and force them to include a maximum of claims in
the original proceedings.
110. Furthermore, according to the European Communities, allowing new claims at the
implementation stage would not imply subjecting a respondent to immediate retaliation before having
been afforded a reasonable period of time to comply. The European Communities argues that
"reasonable periods of time" are grace periods "derogating from the normal rule [of] immediate
compliance and not stemming from an automatic right". 129 As such, the European Communities does
not view the lack of a reasonable period of tim e as sufficient to limit Members from bringing new
claims.
111. The European Communities also registers its di sagreement with the reasoning of the panel in
US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) . In the view of the
European Communities, that case, along with the Panel's obiter dicta in this case, create great
uncertainty regarding the scope of Article 21.5 proceedings. The European Communities therefore
requests the Appellate Body to "rectify" the Panel's obiter dicta, or, at least, to declare it "unsound
and thus moot and without legal effect".130
6. Thailand
112. Pursuant to Rule 24(2) of the Working Procedures , Thailand chose not to submit a third
participant's submission. In its statement at th e oral hearing, Thailand addressed the question of
whether the measure at issue continued to be simila r to a "variable import levy" and agreed with the
Panel's analysis of, and findings on, this issue.

127European Communities' third participant's submission, para. 21.
129Ibid., para. 27.
130Ibid., para. 30.

7. United States

113. The United States asserts that the Panel correc tly interpreted and applied Article 4.2 and
footnote 1 of the Agreement on Agriculture and properly found that the measure at issue is similar to
a variable import levy and to a minimum import pric e. According to the United States, the Panel was
correct to focus its analysis on whether the measure at issue was similar to a variable import levy and
to a minimum import price. An additional analysis in the light of the phrase "other than ordinary
customs duties" was not required. This is consis tent with the approach adopted by the Appellate
Body in the original proceedings and, in any ev ent, undertaking such an analysis would not have
changed the Panel's ultimate conclusions. The Un ited States points out that, under the measure at
issue, Chile cannot provide a list of exact levels and dates of the application of duties to wheat imports
throughout the year, which highlights that the meas ure at issue is not like seasonal duties, which are
predictable and transparent "ordinary customs duties".
114. In the view of the United States, the Panel corr ectly found that the changes in the duty levels
under the measure at issue were continuous. As under the original price band system, under the
measure at issue duties are applied on a transaction- by-transaction basis. The only change is that,
instead of the duties being calculated every week, duty levels are now set on a bi-monthly basis and
applied to those imports with waybills dated within that two-month period. The United States further
disagrees with Chile that the Panel applied the wrong standard in concluding that the measure at issue
is applied "continuously" because it "contemplates" a scheme or formula that causes automatic and
continuous changes in duties. According to the Un ited States, the fact that the Panel used the verb
"contemplate" instead of the verb "incorporate" —which was used by the Appellate Body in the
original proceedings—does not affect the Panel's analysis and ultimate findings on the "continuous"
nature of the change in resulting duties under the measure at issue.
115. The United States contests Chile's argument that the measure at issue is not "automatic" on
the basis that the Chilean Ministry of Finance has the ability to cha nge certain aspects of the measure
at issue, and that a separate administrative action is required to change the level of duties. The fact
that the Ministry of Finance may theoretically c hoose to make certain future changes does not alter
the continuous and automatic nature of the formula as it stands. Similarly, the United States argues
that the mere interjection of "a layer of clerical tasks (publication of the level of duty set by the
formula)"
131 does not suffice to break the link between the formula and the level of duties
automatically calculated by virtue of its application.

131United States' third participant's submission, para. 13.

116. The United States disagrees with Chile that the sc ope of the Panel's analysis of transparency
and predictability should have been restricted to an examination of the duties resulting from the
measure at issue. The Panel correctly followed th e guidance of the Appellate Body by also applying
the transparency and predictability test to the methodol ogy incorporated in the measure at issue. This
is logical because, in order to predict resulting duty levels, an exporter must have a sense of how the
measure that fixes the level of duties operates. In this regard, the United States argues that the Panel's
conclusion that the measure at issue was neither pred ictable nor transparent was correct. As under the
original price band system, under the measure at i ssue, traders will often not be in a position to
predict, before sending their shipments, the specific duties that may be applicable.
117. The United States considers that the Panel correc tly concluded that the lower threshold of the
measure at issue acts as a substitute or a proxy for a minimum import price. A finding to the contrary
would allow a WTO Member to avoid its obligations under Article 4.2 of the Agreement on
Agriculture simply by labelling its measure something other than a "c.i.f. price", "minimum import
price", or "entry price". Furthermore, just because import prices have not yet triggered the threshold
does not mean that a minimum import price does not exist. The United States also points out that
there is evidence that the speci fic duties applied by virtue of the measure at issue tend to
"overcompensate" for price declines and elevate th e entry price of wheat imports above the lower
threshold.
132
118. Lastly, the United States submits that it is not necessary for the Appellate Body to make a
separate finding on Argentina's claim under the second sentence of Article II:1(b) of the GATT 1994.

III. Issues Raised in This Appeal
119. The following issues are raised in this appeal:
(a) whether the Panel erred in its allocation of the burden of proof;
(b) whether the Panel erred in its interpreta tion and application of Article 4.2 and
footnote 1 of the Agreement on Agriculture in finding that:
(i) the measure at issue is "similar" to a "variable import levy" and to a
"minimum import price" within the meaning of footnote 1; and
(ii) the measure at issue is inconsistent with Article 4.2;

132United States' third participant's submission, para. 18.

(c) whether the Panel failed to discharge its duties under Article 11 of the DSU to
conduct an objective assessment of the matter before it and under Article 12.7 of the
DSU to set out a basic rationale for its findings; and
(d) if the Appellate Body reverses the Panel's findings that the measure at issue is
inconsistent with Article 4.2 of the Agreement on Agriculture, then:
(i) whether the Appellate Body can and should rule on Argentina's claim under
the second sentence of Article II:1(b) of the GATT 1994; and, if so, then
(ii) whether the measure at issue is inc onsistent with the second sentence of
Article II:1(b) of the GATT 1994.
IV. Background and the Measure at Issue
A. Overview of the Measure at Issue and the Original Price Band System
120. The measure at issue in these Article 21.5 pro ceedings is a Chilean measure that amends
Chile's original price band system.
133 The original price band system was found to be inconsistent
with Article 4.2 of the Agreement on Agriculture because it was "similar" to a "variable import levy"
and to a "minimum import price", within the meaning of footnote 1 to that provision, and was,
therefore, required to have been converted into "ordinary customs duties". 134 Subsequently, Chile
adopted the measure at issue in order to comply w ith the recommendations and rulings adopted by the
DSB in the original proceedings. Argentina, howev er, considered that Chile had failed to comply
with those recommendations and rulings, and ch allenged Chile's measure in these Article 21.5
proceedings.
121. The measure at issue applies to imports of wheat and wheat flour, as did the original price
band system.135 Chile has bound its tariff for wheat and wheat flour at 31.5 per cent ad valorem, and
applies a most-favoured-nation tariff of 6 per cent ad valorem on such products (the "applied tariff").136

133See infra, para. 127.
134Original Panel Report, para. 8.1(a); Appellate Body Report, Chile – Price Band System ,
para. 288(c)(iii).
135In addition to wheat and wheat flour, the measure at issue applies to imports of sugar; the original
price band system applied to imports of sugar and edible vegetable oils. (Panel Report, para. 2.18; Original
Panel Report, para. 2.9) Because Argentina's claim in these Article 21.5 proceedi ngs concerns only wheat and
wheat flour, we examine the measure at issue, and recall aspects of the original price band system, only to the
extent that they relate to wheat and wheat flour.
136Panel Report, para. 2.17. The ad valorem rate was 7 per cent in 2002, when the original proceedings
were concluded. (Appellate Body Report, Chile – Price Band System, para. 14)

The total amount of duties collected on a shipment of wheat or wheat flour imports could, however,
be equal to, or higher or lower than, the applied tariff, as a result of the operation of the measure at
issue.137
122. It is not disputed that the measure at issue and the original price band system "share the
fundamental feature that they may result in the application of specific duties or rebates". 138 Under
both measures, two parameters are used to dete rmine whether specific duties or rebates will be
applied, as well as the amount of such specific duti es and rebates—a price ba nd defined by its lower
and upper thresholds (or band thresholds), and a reference price.139 When the reference price is below
the lower threshold, a specific duty is im posed in addition to the applied tariff. 140 When the reference
price is between the lower and upper threshold, only the applied tariff is imposed. When the reference
price is above the upper threshold, a rebate is deducted from the amount of the applied tariff. 141 With
regard to wheat flour, the specific duties or reba tes are established by multiplying the specific duties
and rebates for wheat by a conversion factor of 1.56. 142 When a specific duty is imposed in addition
to the applied tariff, the sum of the two is ca pped at Chile's bound tariff rate of 31.5 per cent
ad valorem.143 The value of any rebate is deducted from (but may not exceed) the amount payable as
the applied tariff.144
123. The original price band system, however, diffe red from the measure at issue in several
aspects. Thus, before turning to examine the measu re at issue and the Panel's assessment of it, we
consider that recalling certain features of the or iginal price band system provides background useful
to our task.

137Panel Report, para. 2.18.
138Chile's appellee's submission, para. 22; Argentin a's first written submission to the Panel, Panel
Report, p. A-12, para. 36.
139Panel Report, para. 2.20.
140Ibid., paras. 2.25 and 2.26.
141Ibid.
142Ibid., para. 2.27. As explained by Chile, the figure of 1.56 results from the fact that, between
January 1986 and December 1995, the average ratio of the pr ice of wheat flour to the price of wheat was 1.566.
This figure was then built into the Chilean legislation and it has remained unchanged ever since. ( Ibid.,
para. 7.80)
143Ibid., para. 2.19
144Ibid.

B. The Original Price Band System
124. The original price band system was contained in Article 12 of Chilean Law 18.525 on the
Rules on the Importation of Goods.
145 Under the original system, the lower and upper thresholds were
announced annually, and were determined using av erage monthly free on board ("f.o.b.") Gulf of
Mexico prices for a specific quality of wheat, namely, Hard Red Winter No. 2 , for the preceding 60
months on the Kansas Exchange. 146 After having been adjusted to account for international inflation,
these average monthly prices were listed in descending order and up to 25 per cent of the highest and
lowest of the 60 monthly prices were eliminated.147 Among the remaining monthly prices, the highest
and the lowest were selected, and import costs and the applied ad valorem tariff were added to these
two prices to establish the upper and lower thresholds on a cost, insurance and freight ("c.i.f.")
basis.148
125. Reference prices were determined weekly (every Friday) by selecting the lowest daily f.o.b.
price in foreign markets of concern during that week. 149 These markets of concern included
Argentina, Australia, Canada, and the United States. The reference prices so determined remained in
force for the following week and could be consul ted by the public at th e offices of the Chilean
customs authorities.150
126. The reference price used to calculate the specifi c duty or rebate applicable to a particular
import shipment was the reference price in force for the week during which the shipment was sent
from the exporting country. 151 When the reference price was be low the lower threshold, the amount
of the specific duty was equal to the difference be tween these two parameters. Conversely, when the
reference price was above the upper threshold, the amount of the rebate was equal to the difference
between these two parameters. 152 The annual decrees that establi shed the price bands contained a
table that set out a range of reference prices and the rebate or specific duty th at would be applied in

145Original Panel Report, para. 2.2 and footnotes 4 and 5 thereto. The original price band system was
amended by Law 19.772, published on 19 November 2001, whereby Chile placed a cap on the duties payable so
as to ensure they did not exceed the bound tariff rate of 31.5 per cent ad valorem. (Panel Report, para. 2.13 and
footnote 23 thereto)
146Panel Report, para. 2.22.
147Ibid.; Appellate Body Report, Chile – Price Band System, para. 18.
150Panel Report, para. 2.24.
151Panel Report, Chile – Price Band System , para. 2.6; Appellate Body Report, Chile – Price Band
System, para. 22.

respect of each of those reference prices. Once the reference price that applied for a particular week
had been established, the corresponding specific duty or rebate for that reference price could be found
in the table.153
C. The Measure at Issue
127. The measure at issue in these proceedings unde r Article 21.5 of the DSU consists of:
(i) Article 12 of Law 18.525 on the Rules on the Importation of Goods, as amended by Law 19.897
published on 25 September 2003; and (ii) Supreme D ecree 831 of the Ministry of Finance, published
on 4 October 2003, which regulates the application of Article 12 of Law 18.525, as amended by
Law 19.897.154 The relevant provisions of Law 18.525, as amended, and Supreme Decree 831 entered
into force on 16 December 2003.155
128. The lower and upper band thresholds under the m easure at issue are speci fied for the 11-year
period between 2003 and 2014. 156 For the first four years of that period (from 16 December 2003 to
15 December 2007), the lower and upper threshol ds are set at US$128 per tonne and US$148 per
tonne, respectively.157 From 16 December 2007 to 15 December 2014, the thresholds will be adjusted
annually by multiplying the thresholds in force during the previous annual period by a factor of 0.985,

153Appellate Body Report, Chile – Price Band System, para. 29.
154As explained in paragraph 2.15 of the Panel Report, the amended version of Article 12 of
Law 18.525 expressly provides for the issuance of a supr eme decree to establish: th e periods in which specific
duties and tariff rebates are to be established and applied; the most relevant markets; the procedures and dates
for calculating the reference prices; and other methodological factors necessary for the implementation of
Article 12.
155Panel Report, paras. 2.12-2.16.
156Ibid., para. 2.21. Article 12 of Law 18.525 (as modified by Law 19.897) is reproduced in
paragraph 2.14 of the Panel Report and provides, in relevant part:
For the purpose of determining the duties and rebates up until the annual
period ending in 2007, the floor and ceiling prices for wheat ... shall be
considered in the drafting of Chilean Ministry of Finance exempt decrees
No. 266 ... published in the Official Journal of 16 May 2002, expressed in
f.o.b. terms in United States dollars per tonne. There shall be established,
on the one hand, specific duties when th e reference price is below the floor
price of US$128 for wheat ... and, on the other hand, rebates on the amounts
payable as ad valorem duties established in the Customs Tariff when the
reference price is above the ceiling price of US$148 for wheat ... .
For the purpose of determining the du ties and rebates as from the annual
period ending in 2008 and up to 2014, the floor and ceiling prices
established in the previous paragraph shall be adjusted annually by
multiplying the values in force during the previous annual period by a factor
of 0.985 in the case of wheat ... .
157Panel Report, para. 2.21.

which amounts to a US$2 reduction per year.
158 Accordingly, for the last year of this 11-year period
(from 16 December 2013 to 15 December 2014), the lo wer and upper thresholds will be US$114 and
US$134, respectively.159
129. Reference prices are determined by the Ch ilean authorities once every two months, in
December, February, April, June, August, and October. 160 A reference price is calculated as the
simple average of daily f.o.b. prices for wheat in the "most relevant markets", recorded during a 15-
day period ending on the 10th day of these months.161 The "most relevant markets" are Argentina (for
the reference prices determined in December, Febr uary, and April), and the United States (for the
reference prices determined in June , August, and October). The daily prices used are the daily prices
quoted for Trigo Pan Argentino , f.o.b Argentine port and Soft Red Winter No. 2 , f.o.b Gulf of
Mexico.162
130. Every two months, the reference price thus establis hed is compared to the band thresholds to
determine the amount of the specific duty or rebate, if any. When the reference price is below the

158Panel Report, para. 2.21.
159The lower and upper thresholds in force for each year from 16 December 2003 to 15 December 2014
are set out in a table in Article 6 of Supreme Decree 831, reproduced in paragraph 2.16 of the Panel Report.
160Panel Report, para. 2.23. Article 12 of Law 18.525, as amended, is reproduced in paragraph 2.14 of
the Panel Report and provides, in relevant part, that the amount of specific duties and rebates shall be
established as provided in that Article "by way of a supreme decree issued ... six times for wheat in the course of
each twelve-month period extending from 16 December to 15 December of the following year." See also
Article 5 of Supreme Decree 831, reproduced in paragraph 2.16 of the Panel Report.
161Panel Report, para. 2.23; Chile's response to Question 63 posed by the Panel, Panel Report,
p. F-103. Article 12 of Law 18.525, as amended, is reproduced in paragraph 2.14 of the Panel Report and
provides, in relevant part:
The f.o.b. reference price shall co nsist of the average of the daily
international prices for wheat ... recorded in the most relevant markets over
a period of 15 calendar days for wheat ... reckoned from the date fixed by
the Regulations for each Decree.
See also Article 7 of Supreme D ecree 831, reproduced in paragraph 2.16 of the Panel Report, which
provides:
The reference price for wheat shall co rrespond to the average of the daily
prices recorded in the markets specifi ed in Article 8, over a period of
15 days counted retroactively from the 10
th day of the month in which the
relevant decree is to be published.
162Panel Report, para. 2.23. See also Article 8 of Supreme Decree 831, reproduced in paragraph 2.16
of the Panel Report, which provides:
The most relevant market for wheat, during the period of application of
duties and rebates extending from 16 December to 15 June of the following
year, shall be that of Trigo Pan Argentino, and the prices will correspond to
the daily prices quoted for that product f.o.b. Argentine port ; during the
period of application extending from 16 June to 15 December, it shall be
that of Soft Red Winter No. 2 , and the prices will correspond to the daily
prices quoted for that product f.o.b. Gulf of Mexico.

lower price band threshold, the amount of the specific duty is equivalent to the difference between
these two parameters, multiplied by 1.06. 163 When the reference price is above the upper price band
threshold, the amount of the rebate is equivale nt to the difference between these two parameters,
multiplied by 1.06. 164 The amount of the specific duty or rebate so calculated is announced in
bi-monthly supreme decrees issued by the Chilean Ministry of Finance. 165 Once announced, a
specific duty or rebate is applied to all wheat a nd wheat flour imports arriving in Chile during the
two-month period beginning on the 16th day of the month in which a bi-monthly Supreme Decree is
published.166
131. From 16 December 2003 (when the measure at issu e entered into force) to 13 January 2006,
only two reference prices, namely , those calculated in December 2004 and February 2005, were
below the lower band threshold. 167 As a result, a specific duty was imposed on 16 December 2004
and on 16 February 2005, with each duty remaini ng effective for the following two-month period. 168
This means that, from 16 December 2003 to 13 January 2006: specific duties were applied in
17 weeks; rebates were applied in 35 weeks; and, for the remaining 57 weeks of that period, only the

163The rate of 1.06 corresponds to one plus the general ad valorem rate of 6 per cent. (Panel Report,
para. 2.25) See also the text of Article 12 of Law 18.525, as amended, and Article 14 of Supreme Decree 831,
reproduced in paragraphs 2.14 and 2.16 of the Panel Report, respectively.
164The rate of 1.06 corresponds to one plus the general ad valorem rate of 6 per cent. (Panel Report,
para. 2.25) See also the text of Article 12 of Law 18.525, as amended, and Article 15 of Supreme Decree 831,
reproduced in paragraphs 2.14 and 2.16 of the Panel Report, respectively.
165Panel Report, para. 2.28. These bi-monthly decrees do not specify the reference price used or set out
the underlying calculation, but simply contain the result of that calculation. (Panel Report, para. 2.29; Exhibit
ARG-5 submitted by Argentina to the Panel)
166The Annex to Supreme Decree 831 specifies the dates for announcing specific duties or rebates, their
periods of validity, and the periods and most relevant markets for determining reference prices, as reproduced in
paragraph 2.16 of the Panel Report:
Periods for the
calculation of
reference prices
Period of publication
of decree
Periods of validity
of specific duties
or rebates
Most relevant market
26 Nov. - 10 Dec.
27 Jan. - 10 Feb.
27 March - 10 April
27 May - 10 June
27 July - 10 Aug.
26 Sep. - 10 Oct.
11-15 Dec.
11-15 Feb.
11-15 April
11-15 June
11-15 Aug.
11-15 Oct.
16 Dec. - 15 Feb.
16 Feb. - 15 April
16 April - 15 June
16 June - 15 Aug.
16 Aug. - 15 Oct.
16 Oct. - 15 Dec.
Trigo Pan Argentino
Trigo Pan Argentino
Trigo Pan Argentino
Soft Red Winter No. 2
Soft Red Winter No. 2
Soft Red Winter No. 2

167Argentina's first written submission to the Panel, Panel Report, pp. A-28 to A-31, paras. 133-140
and 149.
168Chile's second written submission to the Panel, Panel Report, pp. C-61 and C-65, paras. 49
and 80. Chile's oral statement and response to questioni ng at the oral hearing. See also Decree 762 of
13 December 2004 and Decree 88 of 10 February 2005, contained in Exhibit ARG- 5 submitted by Argentina
to the Panel.

ad valorem applied tariff was applied to wheat and wheat flour imports to Chile.
169 In addition, from
13 January to June 2006, wheat and wheat flour imports entered into Chile subject only to the
ad valorem applied tariff.170
V. Burden of Proof
132. Chile claims that the Panel did not properly allocate the burden of proof because the Panel
proceeded on the assumption that the measure at issue was inconsistent with Article 4.2 of the
Agreement on Agriculture . In so doing, Chile argues, the Pane l relieved Argentina of its burden of
proof and wrongly required Chile to demonstrate that the measure at issue was consistent with this
provision. Chile requests the Appellate Body to reverse "all of the Panel's conclusions" because of
this "fundamental flaw".171
133. In Argentina's view, the Panel correctly found, on the basis of the arguments and evidence on
the Panel record, that Argentina had established a prima face case and that Chile had failed to rebut it,
and thereby rightly concluded that the measure at issue was inconsistent with Article 4.2 of the
Agreement on Agriculture. Accordingly, Argentina requests the Appellate Body to dismiss this ground
of Chile's appeal.
134. We first recall that, in WTO dispute settlement , as in most legal systems and international
tribunals, the burden of proof rests on the party that asserts the affirmative of a claim or defence. 172 A
complaining party will satisfy its burden when it establishes a prima facie case by putting forward
adequate legal arguments and evidence. 173 The nature and scope of arguments and evidence required
"will necessarily vary from measure to measure, provision to provision, and case to case". 174 When a
claim is brought against a WTO Member's legislation or regulation, a panel may, in some circumstances,
consider that the text of the relevant legal instru ment is sufficiently clear to establish the scope and
meaning of the law. However, in other cases, a panel may consider that additional evidence is

169Panel Report, para. 2.31.
170Ibid.
171Chile's statement at the oral hearing.
172Appellate Body Report, US – Wool Shirts and Blouses , p. 14, DSR 1997:1, 323, at 335. Moreover,
each party bears the burden of proving the facts that it asserts in support of its claim or defence (Appellate Body
Report, Japan – Apples , para. 157), and it is not for a panel "to make the case for a complaining party".
(Appellate Body Report, Japan – Agricultural Products II , para. 129) In addition, a "panel may not take upon
itself to rebut the claim (or defence) where the responding party (or complaining party) itself has not done so."
(Appellate Body Report, US – Gambling, para. 282)
173"[A] prima facie case is one which, in the absence of ef fective refutation by the defending party,
requires a panel, as a matter of law, to rule in fa vour of the complaining party." (Appellate Body Report, EC –
Hormones, para. 104)
174Appellate Body Report, US – Wool Shirts and Blouses , p. 14, DSR 1997:1, 323, at 335; Appellate
Body Report, US – Carbon Steel, para. 157.

necessary to do so. 175 Once the complaining party has established a prima facie case, it is then for
the responding party to rebut it.176
135. A panel errs when it sustains a claim for which the complaining party has failed to make out a
prima facie case.177 Nevertheless, a panel does not commit le gal error merely by omitting to specify
which party bears the burden of proof in respect of each claim or defence.178 Moreover, a panel is not
obliged, in every instance, to make an explicit finding that a complaining party has met its burden to
establish a prima facie case in respect of each element of a particular claim, or that the responding
party has effectively rebutted a prima facie case.179 Thus, a panel is not required to make an explicit
ruling that a complaining party has established a prima facie case of inconsistency before examining
the responding party's defence and evidence. 180 At the same time, the mere articulation by a panel of
the correct rules as to the burden of proof is not sufficient if the panel does not, in fact, properly
allocate that burden in the case before it.181
136. Neither Chile nor Argentina suggests that the general rules on burden of proof, which imply
that a responding party's measure will be treated as WTO-consistent unless proven otherwise, do not
apply in proceedings under Article 21.5 of the DSU. We observe, in this regard, that Article 21.5
proceedings do not occur in isolation from the origin al proceedings, but that both proceedings form
part of a continuum of events. 182 The text of Article 21.5 expressly links the "measures taken to
comply" with the recommendations and rulings of the DSB concerning the original measure. 183 A
panel's examination of a measure taken to comply cannot, therefore, be undertaken in abstraction from
the findings by the original panel and the Appellate Body adopted by the DSB. 184 Such findings
identify the WTO-inconsistency with respect to the original measure, and a panel's examination of a
measure taken to comply must be conduc ted with due cognizance of this background. 185 Thus, the

175Appellate Body Report, US – Carbon Steel, para. 157.
176See, for example, Appellate Body Report, US – Gambling, para. 139 and footnote 149 thereto.
178Appellate Body Report, India – Quantitative Restrictions, para. 137.
179Appellate Body Report, Thailand – H-Beams, para. 134.
181Appellate Body Report, India – Patents (US), para. 74.
182Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.
183Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina),
para. 142; Appellate Body Report, US – FSC (Article 21.5 – EC II) , para. 61; Appellate Body Report, US –
Softwood Lumber IV (Article 21.5 – Canada), para. 68.
184Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada) , para. 102; Appellate
Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.
185Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.

adopted findings from the original proceedings may well figure prominently in proceedings under
Article 21.5, especially where the measure taken to comply is alleged to be inconsistent with WTO
law in ways similar to the original measure.
186 In our view, these considerations may influence the
way in which the complaining party presents its case, and they may also be relevant to the manner in
which an Article 21.5 panel determines whether th at party has discharged its burden of proof and
established a prima facie case.
137. We note that the Panel in these Article 21.5 proceedings did not make any express statement
regarding the allocation of the burden of proof in its Report. Chile points to various statements in the
Panel Report purportedly indicating that, "[t]hroughout its analysis, from the first paragraph to the last
paragraph", the Panel misallo cated the burden of proof. 187 According to Chile, the Panel erred in
conducting its review by focusing on whether the me asure at issue "continues to have sufficient
resemblance or likeness" to variable import levies and to minimum import prices, or "has been
modified" in comparison to the original price band system. 188 The statements referred to by Chile are
mostly found in the introductory or concluding para graphs in each section of the Panel's substantive
analysis. For example, in the first paragraph of its substantive analysis, the Panel stated that the "main
issue" for it to decide was "whether the amendments introduced by Chile to its [price band system] are
such as to make the measure consistent with Article 4.2" of the Agreement on Agriculture .189 Chile
also refers to the Panel's conclusion that "the am endments introduced by Chile into its [price band
system] have failed to convert it in to a measure which is no longer a border measure similar to a
'variable import levy' and to a 'minimum import price'".190
138. These statements must, however, be understood in the context of these Article 21.5
proceedings, which include the recommendations and rulings of the DSB in the original proceedings
and the measure taken to comply with them. In th e original proceedings, Chile's original price band
system was found to be similar to a variable im port levy and to a minimum import price, and thus
inconsistent with Article 4.2 of the Agreement on Agriculture. In these Article 21.5 proceedings, the
task of the Panel was to examine Argentina's claim that the measure taken to comply was similar to a
variable import levy and to a minimum import price and, therefore, inconsistent with Article 4.2. 191

186Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 109.
187Chile's statement at the oral hearing.
188Chile's appellant's submission, paras. 49 and 50 (quoting Panel Report, paras. 6.12, 7.44, 7.54, 7.55,
7.79, 7.81, and 7.92).
191In the Request for the Establishment of a Panel, Argentina claimed that Chile continued to maintain
a measure similar to a variable import levy and to a mi nimum import price, thereby acting inconsistently with
Article 4.2 of the Agreement on Agriculture. (Panel Report, pp. G-2 and G-3)

The panel and the Appellate Body reports in the or iginal proceedings contain detailed interpretations
of this provision, and provide a reasoned analysis applying these interpretations to the various features
of the original price band system and explaining why it was inconsistent with Article 4.2. The Panel's
examination of the measure at issue in these Ar ticle 21.5 proceedings was conducted against this
background and in the light of the parameters set out in the original reports.
139. In addition, before the Panel, both Argentin a and Chile made claims and arguments that
referred extensively to the original price band syst em as well as to the interpretations, reasonings, and
findings of the panel and the Appellate Body in the original proceedings. 192 Argentina claimed that,
through the measure at issue, Chile had only "cos metically" amended the original price band system
while preserving its distortive effects and its lack of transparency and predictability. 193 In response,
Chile countered that the measure was "in keeping wi th" the original findings and their application to
the original price band system, arguing that Chile "was only required to take action with respect to
specific aspects of the [original price band syst em] that the Appellate Body had identified". 194 I n
making their arguments, both parties recognized that the measure at issue shares certain features of
the original price band system, such as the existence of band thresholds, reference prices, the resulting
specific duties and rebates for wheat, and the conversion factor of 1.56 for calculating duties and
rebates on wheat flour. 195 Their disagreement focused, to a la rge degree, on whether the measure at
issue has the same characteristics that were found by the original panel and the Appellate Body to
have rendered the original price band system inconsistent with Article 4.2 of the Agreement on
Agriculture.
140. Read in this context, the statemen ts in the Panel Report quoted by Chile 196 do not indicate a
misallocation of the burden of proof. Rather, they reflect the Panel's approach in analyzing the
measure at issue in the light of the interpretation of the requirements of Article 4.2 in the original
proceedings and the parties' claims and arguments in these Article 21.5 proceedings. In these
circumstances, it was appropriate for the Panel to make comparisons between the measure at issue and
the original price band system, especially with regard to the specific aspects th at had been modified.
We do not consider, therefore, that the Panel erred merely because it examined the modifications

192Panel Report, paras. 7.6-7.12.
193See Argentina's opening statement at the Panel meeting, Panel Report, p. D-3, para. 7.
194Panel Report, paras. 7.9.
195See, for example, Argentina's first written submission to the Panel, Panel Report, p. A-12, para. 36;
and Chile's first written submission to the Panel, Panel Report, pp. A-64 and A-65, paras. 20-30.
196Chile's appellant's submission, paras. 46-50 (quoting Panel Report, paras. 6.12, 7.14, 7.44, 7.54,
7.55, 7.79, 7.81, 7.92, and 7.96).

made to Chile's original price band system thr ough the measure at issue in the light of the
recommendations and rulings of the DSB.
141. Moreover, a careful reading of the Panel Report suggests that the Panel conducted its analysis
on the basis of Argentina's arguments and evidence presented in order to establish a prima facie
case, as it proceeded to consider Chile's argument s and evidence submitted in rebuttal. The Panel
record reveals that, in its two written submissions and two oral statements, Argentina developed
extensive legal arguments supported by evidence presen ted in 38 exhibits, including the legal text of
the measure at issue and mathematical/statistical ev idence regarding the application of the measure.
Argentina sought to demonstrate that the measure at issue, " per se and in its specific application to
imports of wheat and wheat flour"
197, was inconsistent with Article 4.2 of the Agreement on
Agriculture. The Panel commenced its examination with the text of the measure at issue and found
that, "[o]n its face, the language of the [measure at issue] will necessarily result in variability in the
level of duties".198 Because Chile contested this characterization of its measure, the Panel went on to
consider Chile's arguments and evidence. The Pane l found these to be unpersuasive "in light of the
available evidence to the contrary and, indeed, of Chile's own explanations". 199 Similarly, the Panel
considered the empirical evidence regarding the a pplication of the measure at issue contained in
certain exhibits submitted by Argentina, and found that even Chile's arguments and evidence appeared
to confirm Argentina's position that the lower threshold of the price band continued to operate as a
substitute for a minimum price.
200 Such statements and findings suggest that the Panel considered that
Argentina had provided sufficient proof for its cl aim as it turned to examine whether Chile had
effectively rebutted that claim. That the Pane l did not expressly specify the moment at which it
determined that Argentina had established a prima facie case and announce when it would turn to
Chile's rebuttal does not constitute an error in the allocation of the burden of proof.201
142. In the light of the foregoing, we are satisfied that the Panel properly considered that Argentina
had presented arguments and evidence sufficient to establish a prima facie case of inconsistency
with Article 4.2 of the Agreement on Agriculture , and appropriately focused its analysis, as well, on
whether Chile had succeeded in rebutting Argentina's prima facie case.

197Argentina's first written submission to the Panel, Panel Report, pp. A-7 and A-8, para. 14.
198Panel Report, para. 7.58.
199Ibid., para. 7.59.
200Ibid., 7.87-7.92.
201Appellate Body Report, India – Quantitative Restrictions, para. 142.

143. We nevertheless wish to express reservations regard ing certain statements made by the Panel.
For example, at the outset of its analysis, after summarizing the parties' arguments and quoting the
relevant treaty provision, the Panel immediately stat ed that the "main issue for the Panel to decide ...
is whether [Chile's] amendments ... are such as to make the measure [at issue] consistent with
Article 4.2" of the Agreement on Agriculture .202 Given that the Panel did not specifically articulate
its allocation of the burden of proof, such a statemen t, read in isolation, could be construed to imply
that the Panel might have proceeded to consider whether Chile had proven the WTO-consistency of
the measure at issue without analyzing whether Argentina had established a prima facie case of
inconsistency. In our view, the Panel could have made it more discernable, in its reasoning, that it
was mindful of the burden on Argentina.
144. In conclusion, having carefully examined the Panel's analysis, the Panel record, and the
arguments presented on appeal, we are of the view th at the Panel did not err in its allocation of the
burden of proof.
VI. Article 4.2 and footnote 1 of the Agreement on Agriculture
145. Before turning to the specifics of Chile's appeal, we consider it useful to recall certain general
observations made by the Appellate Body in the cour se of the original proceedings. Part III of the
Agreement on Agriculture consists of two articles, Article 4 on market access and Article 5 on special
safeguard provisions. The Appellate Body observed that "Article 4 of the Agreement on Agriculture
is appropriately viewed as the legal vehicle for re quiring the conversion into ordinary customs duties
of certain market access barriers affecting imports of agricultural products"203, and explained its origin
and function as follows:

202Panel Report, para. 7.14.
203Appellate Body Report, Chile – Price Band System, para. 201.

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
negotiators decided that these bor der measures should be converted
into ordinary customs duties, with a view to ensuring enhanced
market access for such imports. T hus, 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.
204
146. In our analysis below, we fi rst consider specific issues arising in connection with the
interpretation of Article 4.2 and footnote 1 and then turn to consider whether the Panel properly
applied those provisions in these proceedings.
A. Interpretation of Article 4.2 and Footnote 1 of the Agreement on Agriculture
147. This dispute centres on the second paragraph of Article 4 of the Agreement on Agriculture ,
which, along with its footnote 1, provides:
2. Members shall not maintain, resort to, or revert to any
measures of the kind which have b een required to be converted into
ordinary customs duties 1, except as otherwise provided for in
Article 5 and Annex 5.
Multilateral Trade Agreements in Annex 1A to the WTO Agreement.
148. Article 4.2, therefore, prohibits Members from ma intaining, resorting to, or reverting to, "any
measures of the kind which have been required to be converted into ordinary customs duties". This

204Appellate Body Report, Chile – Price Band System, para. 200.

requirement applies from the date of entry into force of the WTO Agreement, regardless of whether a
Member in fact converted such measures into ordinary customs duties.205
149. Footnote 1 provides a non-exhaustive list of the measures that are covered by the obligation
under Article 4.2. The various border measures id entified in footnote 1 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"206 and, therefore, frustrate a
key objective of the Agreement on Agriculture —to achieve improved market access conditions for
imports of agricultural products by permitting only th e application of ordinary customs duties. 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, alone, mean that the measure falls outside the scope of
footnote 1.207 Thus, in order to ascertain whether a measure is among the "measures of the kind which
have been required to be converted into ordinary customs duties", it is necessary to conduct an in-
depth examination of the measure itself. Such an examination must take due account of the scope and
meaning of the relevant language in footnote 1.
150. In these Article 21.5 proceedings, as in the orig inal proceedings, three categories of measures
mentioned in footnote 1 are relevant to the determin ation of whether the measure at issue falls within
the scope of that provision: (i) minimum import prices; (ii) variable import levies; and (iii) similar
border measures other than ordinary customs duties. We examine these in turn. For each element, we
first identify its scope and meaning. Then, for thos e elements in respect of which Chile has alleged
that the Panel committed interpretative error, we examine whether any such error was made.
1. "Minimum Import Prices"

151. Although Chile has not appealed the Panel's in terpretation of "minimum import prices" in
footnote 1 to the Agreement on Agriculture, it has appealed the Panel's application of this concept to
the measure at issue. Accordingly, we briefly review the meaning of "minimum import prices" so as
to facilitate our subsequent analysis.
152. In the original proceedings, the Appellate Body stated that the "term 'minimum import price'
refers generally to the lowest price at which imports of a certain product may enter a Member's

205Appellate Body Report, Chile – Price Band System, para. 212.
206Ibid., para. 200.
207Ibid., para. 216.

domestic market."
208 The Appellate Body also quoted certain statements made by the original panel,
including its explanation 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"209, and that:
... minimum import prices "are gene rally not dissimilar from variable
import levies in many respects, including in terms of their protective
and stabilization effects, but [...] th eir mode of operation is generally
less complicated." The main difference between minimum import
prices and variable import levies is, according to the [original panel],
that "variable import levies are generally based on the difference
between the governmentally determined threshold and the lowest
world market offer price for the product concerned, while minimum
import price schemes generally operate in relation to the actual
transaction value of the imports."
210 (emphasis added by the
Appellate Body)
153. In these proceedings, the Panel's definition of "minimum import price", which was based on
the original panel and Appellate Body reports, was as follows:
In essence, a minimum import price is a measure which ensures that
certain imported products will not en ter a domestic market at a price
lower than a certain threshold, normally by imposing an import duty
assessed on the basis of the difference between such threshold and
the transaction value of the imported goods.
211
154. In response to questioning at the oral heari ng in this appeal, neither Chile nor Argentina
indicated any objection to this definition.
2. "Variable Import Levies"
155. In examining the meaning of the term "variabl e import levies", the Appellate Body explained
that a levy is "variable" when it is "liable to vary". 212 This characteristic alone, however, would not
suffice to characterize a measure as a "variable import levy" within the meaning of footnote 1. In
addition, as the Appellate Body found, "variable import levies" are measures which themselves—as a
mechanism—impose the variability of the duties, that is, measures that are "inherently" variable
because they "incorporate[] a scheme or formul a that causes and ensures that levies change

208Appellate Body Report, Chile – Price Band System, para. 236.
209Ibid. (quoting Original Panel Report, para. 7.36(e)).
211Panel Report, para. 7.30.
212Appellate Body Report, Chile – Price Band System, para. 232.

automatically and continuously". 213 The presence of this underlying formula distinguishes variable
import levies from ordinary customs duties, which ar e also subject to variation, but through discrete
changes in applied tariff rates that occur independ ently and as a result of separate administrative or
legislative action.214
156. The Appellate Body further observed that variable import levies are characterized by certain
additional features which include "a lack of transpar ency and a lack of predictability in the level of
duties that will result from such measures". 215 In making this statement, the Appellate Body was not
identifying a "lack of transparency" and a "lack of predictability" as independent or absolute
characteristics that a measure must display in order to be considered a variable import levy. Rather,
the Appellate Body was simply explaining that the le vel of duties generated by variable import levies
is less transparent and less predictable th an is the case with ordinary customs duties. 216 Thus, the
Appellate Body considered transparency and predic tability in tandem and in relation to the level of
resulting duties, observing that "an exporter is less like ly to ship to a market if that exporter does not
know and cannot reasonably predict wh at the amount of duties will be." 217 This is why variable
import levies are "liable to restrict the volume of imports". 218 In addition, they "contribute to
distorting the prices of imports by impeding the transmission of international prices to the domestic
market".219
157. Turning to examine the Panel's definition of "v ariable import levies" in these proceedings, we
observe that the Panel quoted extensively from the A ppellate Body's interpretation of this term, and
synthesized its understanding of the proper approach as follows:

213Appellate Body Report, Chile – Price Band System, para. 233.
214Ibid.
215Ibid., para. 234.
216The Appellate Body explained that the Uruguay Round negotiators had identified "certain border
measures which have in common that they restrict the volume or distort the price of imports of agricultural
products" and "decided that these border measures should be converted into ordinary customs duties" which
"would, in principle, become the only form of border protection." Ordinary customs duties were viewed as the
preferred border measure because they "are more transparent and more easily quantifiable", " more easily
compared between trading partners " and, therefore, "the maximum amount of such duties can be more easily
reduced in future multilateral trade negotiations." (Appellate Body Report, Chile – Price Band System, para. 200
(emphasis added))
217Ibid., para. 234 (referring to Argentina's responses to questioning at the oral hearing in the original
proceedings).
218Ibid.
219Ibid.

In essence, a variable import levy is a duty assessed upon
importation, which is liable to vary automatically and continuously
on the basis of an underlying scheme or formula that does not require
any discrete or independent legislative or administrative action and is
intransparent and unpredictable as to the level of resulting duties.
220
158. This description by the Panel seems to us to be an accurate rendering of the meaning of
"variable import levies", as interpreted by the Ap pellate Body. Indeed, Chile's appeal does not
challenge this definition per se, but subsequent statements made by the Panel that reveal, according
to Chile, a mistaken understanding of the meaning of "variable import levies".
159. Chile contends that the Panel erred in attributin g meaning to the word "variable" that did not
accord in two ways with the meaning identified by the Appellate Body in the original proceedings:
(i) in finding that a measure constitutes a variable import levy merely because the measure makes it
likely or possible that resulting duties will change continuous ly; and (ii) in finding that "periodic
variability"221 is equivalent to the automatic and continuous variability that is emblematic of variable
import levies. We examine each of these arguments in turn.
160. On the first point, Chile claims that the Panel erred because it did not require that a measure
make certain that resulting duties change continuously in order to constitute a variable import levy.
Chile points to the Panel's statement that the measure at issue "contemplates a scheme or formula that
both causes and ensures that the level of such duties or rebates changes automatically and
continuously over time".222 According to Chile, the Panel's use of the verb "contemplates" shows that
the Panel accepted that a measure may be a variable import levy when it merely makes it likely or
possible that resulting duties will change continuously. We observe, however, that, in the same
sentence quoted by Chile, the Panel observed that "the language of the legislation ... will necessarily
result in variability in the level of duties collected or rebates granted". 223 Thus, when read in its
entirety, the relevant sentence of the Panel Report seems to us to reflect accurately the approach taken
by the Appellate Body in the original proceedings. The Appellate Body explained that measures that
are inherently variable will fall within the scope of footnote 1, and that "[v]ariability is inherent in a
measure if the measure incorporates a scheme or fo rmula that causes and ensures that levies change
automatically and continuously." 224 We consider that the Panel properly recognized that measures

220Panel Report, para. 7.28.
223Panel Report, para. 7.58. (emphasis added)
224Appellate Body Report, Chile – Price Band System, para. 233.

containing underlying formulas, which produce automatic changes in duties, display the same type of
"inherent variability" that characterizes variable import levies.
161. Secondly, Chile argues that the Panel erred in accepting that "periodic variability" is
equivalent to automatic and continuous variability. For Chile, a "periodic" adjustment is not the same
as the "automatic and continuous" adjustment of duties that is inherent in variable import levies. We
are not, however, persuaded by Chile's arguments. The Panel did not equate periodic change with
automatic and continuous change. Rather, it defined an inherently variable measure as one that causes
and ensures automatic and continuous changes in duty levels, and properly recognized that a measure
produces such automatic changes wh en it incorporates an underlying scheme or formula. The Panel
then examined the measure at issue and found that it exhibited these characteristics. Moreover,
although we need not resolve the issue here, it does not seem to us that the concepts of "periodic
change", on the one hand, and "automatic and continuous change", on the other hand, are necessarily
mutually exclusive, as Chile asserts.225
162. We, therefore, see no error in the Panel's interp retation of the term "variable import levies"
within the meaning of footnote 1 of the Agreement on Agriculture.
3. "Similar Border Measures Other Than Ordinary Customs Duties"
163. A third category of measures defined in footnote 1 as subject to the obligation in Article 4.2
of the Agreement on Agriculture is that of "similar border meas ures other than ordinary customs
duties". In the original proceedings, the Appellate Body endorsed the original panel's definition of the
term "similar" as "having a resemblance or likenes s", "of the same nature or kind", and "having
characteristics in common". 226 Similarity must be determined 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". 227 The Appellate Body observed that all of the
border measures expressly mentioned in footnote 1 "have in common the object and effect of
restricting the volumes, and distorting the prices, of imports of agricultural products in ways different
from the ways that ordinary customs duties do".
228 A measure need not be identical to one of the
prohibited categories of measures listed in footnote 1 to fall nevertheless within the scope of that

225Even periodic changes may amount to automatic and continuous change in circumstances where
those changes are frequent enough to render the resulting duties "inherently variable".
226Appellate Body Report, Chile – Price Band System , paras. 225 and 226 (quoting Original Panel
Report, para. 7.26; and The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon Press), 1993,
Vol. II, p. 2865).
227Ibid., para. 226.
228Ibid., para. 227.

provision. Rather, as the Appellate Body explained, in order to be a "similar border measure" within
the meaning of footnote 1, a measure must, "in its specific factual 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".
229
164. As regards the words "ordinary customs duties" in footnote 1, the Appellate Body reversed
the original panel's finding that this term is to be understood as "referring to a customs duty which is
not applied on the basis of f actors of an exogenous nature". 230 The Appellate Body observed that
"ordinary customs duties" are expressed in the form of ad valorem or specific rates and are
calculated on the basis of the value and/or volume of imports. At the same time, 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 the value and/or volume of imports, does not, alone, imply that the
underlying measure or scheme constitutes ordinary cu stoms duties and cannot be similar to one of the
categories of measures explicitly identified in footnote 1.231
165. In this appeal, Chile contends that, because the Panel did not make a finding or conduct any
analysis as to whether the measure at issue constitu ted "ordinary customs duties", the Panel failed to
give proper meaning and effect to the language "other than ordinary customs duties" in footnote 1.
Chile submits that the Panel erroneously assumed that a finding that a measure is similar to a variable
import levy or a minimum import price necessarily implies that the measure is, as a matter of law,
"other than ordinary customs duties".
166. Chile's arguments are, therefore, based on the premise that footnote 1 requires a separate
examination of two distinct elements: (i) a measure 's "similarity" to a liste d category of measures;
and (ii) whether the measure constitutes an ordinary customs duty. According to Chile, the Panel was
required to review whether the measure at issue c onstitutes "ordinary customs duties" and to make an
express conclusion in that regard.
167. We recall that an examination of "similarity" cannot be made in the abstract: it necessarily
involves a comparative analysis.
232 That analysis can be undertaken by comparing the measure at
issue with at least one of the listed measures which, by definition, have characteristics different from
the characteristics of an ordinary customs duty. The term "ordinary customs duties" in footnote 1
forms part of the phrase "similar border measures other than ordinary customs duties". This phrase

229Appellate Body Report, Chile – Price Band System, para. 227. (original emphasis)
230Ibid., para. 288(c)(ii).
231Ibid., paras. 274-279.
232Ibid., para. 228.

contains no punctuation, which suggests that the phrase as a whole defines a relevant concept for
purposes of footnote 1. As we see it, "other than or dinary customs duties" is an adjectival phrase that
qualifies the term "similar border measures". This la nguage will, therefore, inform a panel's analysis
of whether a measure is "similar" to one of the categories of measures listed in footnote 1. We
observe, as well, that the structure and logic of foot note 1 make clear that variable import levies and
minimum import prices cannot be ordinary customs du ties. The same is true for border measures
similar to variable import levies and to minimum import prices.
168. In these proceedings, the Panel undertook no separate inquiry into whether the measure at
issue was "other than ordinary customs duties". Instead, after finding that the measure at issue was
similar to a variable import levy and to a minimu m import price, the Panel simply added that, "[a]s
such, it is not an ordinary customs duty." 233 The Panel's approach differs in this regard from that of
the original panel, which did conduct a separate anal ysis of the phrase "other than ordinary customs
duties" and, on the basis of that analysis, found that the characteristics of the original price band
system differed from the characteristics of "ordinary customs duties".234
169. The Panel's approach is, however, consistent with the approach taken by the Appellate Body
in the original proceedings. Having reversed th e original panel's definition of "ordinary customs
duties"235, the Appellate Body made no separate finding as to whether the original measure was "other
than ordinary customs duties". The Appellate Body e xplicitly stated that its reversal of the original
panel's finding did not affect the conclusion of the original panel, which the Appellate Body shared,
that the original price band system was a measure "similar" to "variable import levies" and to
"minimum import prices" within the meani ng of Article 4.2 and footnote 1 of the Agreement on
Agriculture.236 Thus, the original measure was characterized as a "similar border measure other than
ordinary customs duties", even in the absence of a separate finding th at it was "other than ordinary
customs duties".
170. In addition, even though the original panel did undertake a separate analysis before making an
express finding that the original measure was "other than ordinary customs duties", it does not seem to
have considered itself bound by the text of footnote 1 to do so. The original panel stated that "a
measure explicitly listed in footnote 1 ... is necessarily not, at the same time, an ordinary customs
duty" and that "a measure which is 'similar to' any of the measures listed in footnote 1 will also be

233Panel Report, para. 7.104.
234Original Panel Report, paras. 7.48-7.65.
235Appellate Body Report, Chile – Price Band System, para. 278.
236Ibid., para. 279.

'other than ordinary customs duties'."
237 Other language used by the original panel also suggests that
it was of the view that this additional step of th e analysis was not necessary, but would "reinforce"
and provide further support for its finding regarding th e similarity of the original price band system to
a variable import levy and a minimum import price.238
171. Taking account of all of the above, we are of the view that inconsistency with Article 4.2 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. 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.
172. Accordingly, the Panel did not err in om itting to undertake a separate and independent
analysis of whether the measure at issue is "other than ordinary customs duties". Having found that
the measure was similar to a variable import levy and to a minimum import price, the Panel could
properly conclude from these findings that, "[a]s such, it is not an ordinary customs duty."239
4. Additional Observations on the Relations hip Between Article 4 and Article 5
of the Agreement on Agriculture
173. In the original proceedings, the Appellate Body acknowledged the importance of agricultural
products to many developing countr y Members of the WTO, and the role of special and differential
treatment for developing country Members under the Agreement on Agriculture.240 At the same time,
the Appellate Body recognized that the requirements of the Agreement on Agriculture apply to
developing country Members except where otherwise provided.241 Article 4.2 expressly identifies two
exceptions to the obligations that it imposes on all WTO Members, namely, Article 5 and Annex 5 to
the Agreement on Agriculture. Annex 5 exempts developing country Members from these disciplines
in specific circumstances. Article 5 specifies th at a Member may, under certain conditions, impose a
special safeguard on imports of an agricultural prod uct "in respect of which measures referred to in
[Article 4.2] have been converted into an ordi nary customs duty". The provisions of Article 5
establish the conditions in which a Member may have recourse to such a special safeguard, set out
rules on the form and duration of such safeguard measures, and establish certain transparency

238The original panel said: "[o]ur findings regarding one of those two aspects can therefore be expected
to reinforce our findings regarding the other"; and "our findings regarding 'similar to variable import levy and
minimum import price' and 'other than ordinary customs duties' are mutually reinforcing". (Original Panel Report,
paras. 7.24 and 7.48, respectively)
239Panel Report, para. 7.104.
240Appellate Body Report, Chile – Price Band System, para. 197.
241Ibid., paras. 197 and 198.

requirements that attach to their use. One circumstance in which a qualifying Member may be
authorized to adopt a special safeguard is when th e price of imports of a relevant agricultural product
falls below a specified trigger price. However, pursuant to Article 5, a special safeguard can be
imposed only on those agricultural products for wh ich measures within the meaning of footnote 1
were converted into ordinary customs duties and fo r which a Member has reserved in its Schedule of
Concessions a right to resort to these safeguards. Because Chile reserved no such right in respect of
wheat and wheat flour, Chile cannot avail itself of th e mechanism set out in Article 5 for imports of
these products.
174. The existence of an exemption from the market access requirements in the form of a special
safeguard under Article 5 suggests that this prov ision (in addition to Annex 5) was the narrowly
circumscribed vehicle to be used by those Member s who reserved their rights to do so in order to
derogate from the requirements of Article 4.2. We note that paragraph 9 of Article 5 provides that
Article 5 is to remain in force for the duration of the process of reform. Negotiations for the process
of reform are envisaged in Article 20 of the Agreement on Agriculture and form part of the Doha
Development Agenda.242 The establishment of a special safeguard mechanism for developing country
Members forms part of the Doha Work Programme on agriculture. 243 We, however, are charged with
reviewing the Panel's interpretati on of an existing obligation. We recall, in this regard, that
Article 4.2 must be interpreted in a way that does not deprive Article 5 of proper meaning and
effect.244
B. The Panel's Application of Article 4.2 and Footnote 1 of the Agreement on
Agriculture to the Measure at Issue
175. Chile contends that the Panel erred in its application of footnote 1 of the Agreement on
Agriculture and, thereby, in finding the measure at issue to be inconsistent with Article 4.2 of the
Agreement on Agriculture. We consider these allegations below.

242Doha Ministerial Declaration, WT/MIN(01)/DEC/1, adopted 14 November 2001, para. 13.
243See paragraph 42 of Annex A of the Decision Adopted by the General Council on 1 August 2004
(the "July Package"), WT/L/579, as well as paragr aph 7 of the Hong Kong Ministerial Declaration,
WT/MIN(05)/DEC, adopted 18 December 2005.
244Appellate Body Report, Chile – Price Band System, para. 217.

1. The Panel's Analytical Approach

176. Chile points to two alleged errors in the analy tical approach adopted by the Panel. First,
Chile claims that the Panel erred in examining onl y discrete features of the measure at issue, in
isolation, rather than conducting "a holistic appraisal of all of the features of the [measure at issue]
and its effects taken together". 245 Secondly, Chile faults the Panel for failing to analyze the similarity
of the measure at issue to variable import levies and minimum prices on an "empirical basis".
177. As regards the first issue, Chile submits that the Panel failed to follow the approach set out by
the Appellate Body in the original proceedings . Instead, the Panel ex amined only "individual
features" of the measure at issue in isolation, comp aring them with features of the original price band
system, and supplied no analysis or explanation of the particular configuration and interaction of all of
the specific features of the measure at issue.246 Chile maintains that:
... the Panel should have weighed all features of the [measure at
issue] as a whole before concluding whether, evaluated holistically
and with due regard to their eff ects, the [measure at issue] is a
"border measure other than ordinary customs duties" similar to a
"variable import duty."
247
178. Chile adds that, if the Panel had properly exam ined the measure in its totality, it would have
found that the measure is similar to an ordinary customs duty.
179. Argentina submits that the Panel did not examine relevant features of the measure at issue in
isolation, but properly conducted an objective assessment of the measure at issue consistently with the
interpretation of Article 4.2 of the Agreement on Agriculture and the legal reasoning developed by
the Appellate Body in the original proceedings, and in the light of the evidence on the Panel record.
180. In the original proceedings, the Appellate Body emphasized that it had reached the conclusion
that the original measure was simi lar to a variable import levy and to a minimum import price on the
basis of:

246Ibid., paras. 219-225.
247Ibid., para. 224.

... the particular configuration and interaction of all these specific
features of Chile's price band system. In assessing this measure, no
one feature is determinative of whether a specific measure creates
intransparent and unpredictable ma rket access conditions. Nor does
any particular feature of Chile's price band system, on its own, have
the effect of disconnecting Chile's market from international price
developments in a way that insulates Chile's market from the
transmission of international prices, and prevents enhanced market
access for imports of certain agricultural products.
248 (original
emphasis)
181. We observe that the Panel directly quoted from or referred to this approach in several places
in its Report. The Panel explained that "a determination of whether Chile has amended its [price band
system] in a manner so as to comp ly with the DSB's recommendations and rulings and to bring the
measure into conformity with the WTO agreem ents requires a review that goes beyond the
consideration of 'specific aspects'" and then q uoted the above passage from the Appellate Body
Report.249 The Panel then stated its intention to proceed with its analysis in the following manner:
We will thus examine Chile's am ended [price band system],
considering the configuration and interaction of its different features,
in order to determine whether it can still be considered to be a border
measure similar to a "variable import levy" or a "minimum import
price", in the terms of footnote 1 to Article 4.2 of the [ Agreement on
Agriculture].
250 (emphasis added)
182. The Panel referred to its examination of the c onfiguration and interaction of the different
aspects of the measure at issue on two further occasions, including in its conclusion. 251 Moreover, in
response to comments made by Chile during the interim review stage, the Panel again summarized the
principal factors that led to its conclusion that th e measure at issue was similar to a variable import
levy and to a minimum import price and reiterated th at its finding was made "on the basis of the
configuration and interaction of the different features of Chile's amended [price band system]".252
183. In our view, the explanations provided by the Pane l as to its approach are consistent with the
guidance provided by the Appellate Body and demonstrate that the Panel undertook a proper
assessment of the measure at issue and of the specific configuration and interaction of its various
features.

248Appellate Body Report, Chile – Price Band System, para. 261.
249Panel Report, para. 7.53.
250Ibid., para. 7.54.
251Ibid., paras. 7.95 and 7.96.
252Ibid., para. 6.12.

184. Chile also alleges that the Panel erred in assessing "similarity", because it failed to carry out
the requisite "empirical analysis" of the measure at issue and instead relied on theoretical comparisons
with the original price band system as a basis for finding that the measure at issue is similar to a
variable import levy and to a minimum import price.
185. In response, Argentina emphasizes that it submitted analytical, mathematical, and/or
empirical evidence to the Panel in support of its claims and arguments and that the Panel properly
relied on some of this evidence in finding that the m easure at issue was inconsistent with Article 4.2
of the Agreement on Agriculture.
186. We recall that, in the original proceedings, the Appellate Body stated its view that "the task of
determining whether something is similar to some thing else must be approached on an empirical
basis."
253 The Panel recognized this statement and adopted it:
As indicated by the Appellate Body, in order to determine whether
[the measure at issue] is a border measure similar to a variable import
levy or a minimum import price within the meaning of footnote 1 to
Article 4.2, we should start by considering, on an empirical basis ,
whether it bears sufficient likeness or resemblance to those two
categories of measures so as to be considered similar.
254 (emphasis
added)
187. Thus, the Panel explicitly articulated the corr ect "empirical" approach. Nonetheless, Chile
maintains that, despite this statement, "the Panel findings contain virtually no empirical analysis of the
[measure at issue] and instead are entirely based on theoretical conclusions".255
188. In our view, Chile's appeal on this point attributes a meaning to "empirical" approach other
than the meaning contemplated by the Appellate Body in the original proceedings. There, the
Appellate Body agreed with the original panel that an examination of similarity involved a
comparison of two things and an assessment of the characteristics that they share. The Appellate
Body disagreed, however, with the original panel's additional observation that, in order for two things
to be similar, they must share some but not a ll "fundamental characteristics", and that a "border
measure should therefore have some fundamental characteristics in common with one or more of the
measures explicitly listed in footnote 1."256 The Appellate Body explained:

253Appellate Body Report, Chile – Price Band System, para. 226.
254Panel Report, para. 7.24.

We see no basis for determining similarity by relying on
characteristics of a "fundamental" nature. The Panel seems to
substitute for the task of defining the term "similar" that of defining
the term "fundamental". This mere ly complicates matters, because it
raises the question of how to distinguish "fundamental"
characteristics from those of a less than "fundamental" nature. The
better and appropriate approach is to determine similarity by asking
the question whether two or more things have likeness or
resemblance sufficient to be similar to each other. In our view, the
task of determining whether something is similar to something else
must be approached on an empirical basis .257 (original italics,
underlining added)
189. As this excerpt makes clear, in advocating that the issue of similarity be approached "on an
empirical basis", the Appellate Body was contrasting this to, and counselling against, an approach that
focused on the fundamental nature of the shared characteristics. The proper approach should,
instead, entail both an analysis of the extent of such shared characteristics and a determination of
whether these are sufficient to render the two things similar. Such characteristics can be identified
from an analysis of both the structure and design of a measure as well as the effects of that measure.
Thus, we do not consider that the Panel would have needed, as Chile's argument seems to imply, to
focus its examination primarily on numerical or statistical data rega rding the effects of that measure
in practice. Where it exists, evidence on the observa ble effects of the measure should, obviously, be
taken into consideration, along with information on the structure and design of the measure. The
weight and significance to be accorded to such evidence will, as is the case with any evidence, depend
on the circumstances of the case.
190. In this case, the Panel took careful account of th e design and structure of the measure at issue
and discussed in some detail the features that led to its characterization as a measure similar to a
variable import levy and to a minimum import pr ice. The Panel's reasoning relied on, but was not
limited to, its observations regarding the d esign and structure of the measure at issue. 258 The Panel
also stated that it had given careful consideration to the evidence available 259 and, in its reasoning,
referred to some such evidence, notably as support fo r its findings that "the lower threshold of the
band in the [measure at issue] appears to continue to operate in practice as a 'proxy' or substitute for a
minimum import price" and that, as a result of the operation of the measure at issue, "the Chilean

257Appellate Body Report, Chile – Price Band System, para. 226.
258At paragraph 6.12 of its Report, the Panel said th at "[i]t is on the basis of the configuration and
interaction of the different features of [the measure at issue], and not only on [the basis of] particular
mathematical calculations provided by the parties", that the Panel found the measure at issue to be inconsistent
with Article 4.2 of the Agreement on Agriculture. (emphasis added)
259Panel Report, paras. 6.9-6.12.

domestic price has been disconnected fr om international price developments."
260 We see no error in
this analysis, which appears to us to have been conducted on an empirical basis.
2. Similarity to a Minimum Import Price
191. According to Chile, the Panel erred in finding that the measure at issue was similar to a
minimum import price. Chile asserts that the Panel "summarily" 261 concluded that the measure at
issue had the same features that were found to ma ke the original price band system similar to a
minimum import price, and ignored relevant evidence or relied on incomplete data in finding that the
measure "overcompensates" for a decline in refe rence prices by increasing import prices above the
lower threshold, and that the lower threshold of th e price band operated as a substitute for a domestic
target price or a minimum import price.
192. Argentina submits that, contrary to Chile's ass ertion on appeal, the Panel correctly found that
the measure at issue operates so as to prevent the entry of imports of wheat or wheat flour into the
Chilean market at prices below the lower threshold of the band. Moreover, Argentina agrees with the
Panel that the measure at issue tends to "overcom pensate" for international price declines when
specific duties are applied. In Argentina's view, the evidence that it submitted to the Panel highlights
that, due to the application of specific duties, the m easure at issue does not ensure that the entry price
of imports to Chile falls in tandem with falling world market prices.
193. Before turning to scrutinize the Panel's reasoning on this issue in the light of Chile's appeal, it
bears repeating that Argentina did not claim, and the Panel did not find, that the measure at issue is a
minimum import price, but that it is similar to a minimum import price within the meaning of
footnote 1. A measure is "similar" to a minimum import price when it shares a sufficient number of
characteristics with, and has a design, structure, a nd effects similar to, a minimum import price, even
if it is not "identical" to such a scheme in all respects.
194. The Panel began its analysis of whether the measure at issue was similar to a minimum
import price by referring to the Appellate Body's analys is of the same issue in relation to the original
measure, as well as to Chile's view that "[t]he defining characteristic of a minimum import price is the
impossibility for any commercial operation to be expressed in terms of a price lower than the

260Panel Report, para. 7.87 and footnote 178 thereto (referring to Exhibits ARG-11 and ARG-12
submitted by Argentina to the Panel). The Panel also referred to evidence supporting its reasoning in ibid.,
paragraphs 7.59, 7.66, 7.69, and 7.89.

established price." 262 The Panel then recalled that the lowe r threshold of the measure at issue had
been set by using the figures of a lower threshold under the original price band system. The lower
threshold of the original price band system had alre ady been held to operate in a manner similar to a
minimum import price. The Panel then referred to "the available evidence" 263 and noted that it
showed that the measure at issue "appears to conti nue to operate in practice as a 'proxy' or substitute
for a minimum import price" 264 and to disconnect the Chilean domestic price from international price
developments, because it "operates so as to prevent th e entry of imports of wheat or wheat flour into
the Chilean market at prices below the lower threshold of the band".265
195. The overall approach taken by the Panel seems to us to accord with the proper interpretation
of a border measure that is similar to a minimum import price, as discussed above. 266 The Panel
examined the structure and design of the measure at issue, as well as evidence relating to its operation.
The Panel found that, like the original price band system, this measure imposed a threshold that
operates to ensure that, in all but the most un likely circumstances, wheat and wheat flour will not
enter the Chilean market at a price lower than that threshold, and that does not ensure that entry prices
fall in tandem with world market prices. The measure did so by imposing a specific duty assessed on
the basis of the difference between such a threshold and another value, namely, a reference price. 267
On this basis, the Panel observed that the features th at made the original price band system similar to
a minimum import price had not been modified, and were features of the measure at issue as well.268
196. Chile focuses in its allegations of error on two specific aspects of the Panel's analysis. First,
the Panel considered that the measure at issue "opera tes so as to prevent the entry of imports of wheat
or wheat flour into the Chilean market at prices below the lower threshold of the band". 269 Secondly,
the Panel observed that the measure at issue do es not merely ensure a reasonable margin of
fluctuation of domestic prices, but may also "overc ompensate" such that, wh en international prices
fall and reference prices are below the lower thresholds of the price band, "the combined application

262Panel Report, para. 7.84 and footnote 175 thereto (referring to Chile's response to Question 19 posed
by the Panel, Panel Report, p. F-92).
263Ibid., para. 7.87.
264Ibid.
265Ibid., para. 7.91.
266Supra, paras. 151-153.
267We recall that, under the measure at issue, the reference price is set every two months and calculated
as the simple average of daily f.o.b. prices in certain fo reign markets over a 15-day period. We also note that in
a typical minimum import 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.
268Panel Report, para. 7.92.
269Ibid., para. 7.91.

of the ad valorem tariff rates and the specific duties resulti ng from the [measure at issue] may result
in an overall entry price of that shipment that rises rather than falls."
270
197. On the first issue, Chile acknowledges, as it did be fore the Panel, that it is extremely unlikely
that wheat and wheat flour will enter the Chilean market at prices below the lower band threshold. 271
Chile nonetheless maintains that it is not the operation of the measure at issue that causes entry prices
to exceed the lower threshold, but the fact that the level of this threshold is low, notably because it is
set on an f.o.b. basis.272
198. We do not see how this argument assists Chile . The entry price of any given shipment
depends not only on the specific duty applied, if any, but also on the c.i.f. transaction value and the
ad valorem tariff applied to that c.i.f. value. This does not mean, as Chile's arguments imply, that the
lower band threshold has nothing to do with the r esulting level of entry prices. Because any specific
duty is applied on the basis of the difference between the lower band threshold and the reference
price, the lower threshold is an indispensable factor in determining the magnitude of the specific duty.
As the Appellate Body observed in the original pr oceedings, an examination of whether the measure
at issue is similar to a minimum import price should not place "too much emphasis on whether or not
Chile's price bands are related to domestic target prices or domestic market prices".
273 Even if the
lower threshold of the measure at issue does not serve as a target domestic price per se274, it does
serve the function of ensuring that, the more the refe rence prices fall below that lower threshold, the
higher the specific duties imposed will be. This is accompanied by a high likelihood that the
corresponding entry price in the Chilean market will be higher than that threshold. Thus, the fact that
the lower band threshold was expressed on an f.o.b. basis indicates that the measure at issue is not
"identical" to a minimum import price but does not, in and of itself, preclude a finding that the
measure at issue is "similar" to a minimum import price.
199. On the second issue, Chile does not dispute th at evidence submitted by Argentina for the
period between November 2004 and April 2005 show s that, during this time period, there were two
occasions on which a decline in world prices corresponded to an increase in the entry prices as a result

270Panel Report, para. 7.88 (referring to Appellate Body Report, Chile – Price Band System, para. 260).
In footnote 178 to paragraph 7.87 of its Report, the Panel referred to Exhibits ARG-11 and ARG-12 submitted
by Argentina to the Panel. These exhibits relate d to the operation of the measure at issue between
November 2004 and April 2005, when specific duties were applied.
271Panel Report, para. 7.89 (referring to Chile's res ponse to Question 58 posed by the Panel, Panel
Report, p. F-99).
272Chile's statement at the oral hearing.
273Appellate Body Report, Chile – Price Band System, para. 246.
274We observe that it could be argued that the lower band threshold plus average c.i.f. costs and the
applied tariff serves as a proxy for a domestic target price, although Argentina has not made such an argument.

of the measure at issue. 275 Chile argues, instead, that, in us ing this evidence, the Panel wrongly
"relied upon only a snapshot of empirical data" in order to find that the measure at issue
overcompensated for declines in world prices. 276 In Chile's view, the changes made on those two
occasions merely adjusted the level of protection, no t the trends in entry prices themselves. Those
trends, Chile argues, followed international price developments and were fundamentally different
from the trends that would have occurred with the application of a minimum import price.
200. Argentina believes that the Panel drew the a ppropriate conclusions from the evidence before
it. The measure at issue does not en sure that the entry price of imports to Chile falls in tandem with
falling world market prices because specific duties rise when international prices fall. Argentina
rejects Chile's argument that "overcompensation" occurred on only two days, arguing, instead, that the
rise in entry prices on each of those two days "inevitably taint[ed] the rest of [the following two-
month] period" because the level of duties and the entry price were affected by that initial
"overcompensation".
277
201. In examining this claim of error by Chile, we recall that our task is to consider whether the
Panel erred in its applicati on of Article 4.2 of the Agreement on Agriculture to the measure at issue
and, in particular, in finding that the measure at issue does not ensure that the entry price of imports to
Chile falls in tandem with falling world market prices, albeit to a lesser extent than the decrease in
these prices.
278 In our view, it is primarily the periods in which the reference price is below the lower
band threshold that will be the most relevant to the assessment of whether the effects of the measure
at issue are similar to the effects of a minimum im port price. The formula set out in the measure at
issue yielded a reference price that was lower than the lower threshold on only two occasions. 279
Although the reference price fell below the lower thre shold only twice, Chile does not dispute that, on
both of those occasions, when the new specific duty was imposed for the following two-month period,
the entry price of wheat and wheat flour imports rose notwithstanding that world prices and the
reference price had decreased. In these circumstances, we see no error in the Panel's reasoning or its

275Chile's appellant's submission, paras. 73 and 179 (referring to Exhibits ARG-11 and ARG-12
submitted by Argentina to the Panel); Chile's statement and response to questioning at the oral hearing.
277Argentina's appellee's submission, para. 74. (original emphasis)
278We note that Chile also challenges the objectivity of the Panel's assessment of the facts. (See infra,
Section VII.A)
279Chile's appellant's submission, paras. 73 and 179 (referring to Exhibits ARG-11 and ARG-12
submitted by Argentina to the Panel); Chile's statement and response to questioning at the oral hearing. See
also supra, para. 131.

reliance on the evidence submitted by Argentina afte r having weighed the evidence submitted by both
parties.
202. In sum, the measure at issue shares the following characteristics with a minimum import price
scheme, all of which were also characteristics exhib ited by the original price band system: (i) when a
reference price applicable to a shipment falls belo w a specified level (the lower band threshold), an
additional specific duty is imposed on the basis of th e difference between those two parameters; (ii)
due to the operation of the measure, it is highly im probable that the entry prices of wheat and wheat
flour in the Chilean market will fall below the lowe r band threshold; (iii) the lower band threshold
operates, at least to a degree, as a proxy or substitut e for domestic target prices; (iv) the lower the
reference price relative to the lower band threshold, the higher the specific duty and the greater its
protective effects; and (v) the measure distorts th e transmission of declines in world prices to the
domestic market. Notwithstanding certain dissimilarities between the measure at issue and a
minimum import price scheme
280, which were also present in the original price band system, the
overall nature of the measure at issue, including its design and structure, and the way it operates, are
sufficiently "similar" to a minimum import price to make it, as the Panel found, a prohibited border
measure within the meaning of footnote 1 to Article 4.2.
203. For all of the above reasons, we see no error in the Panel's finding, in paragraph 7.92 of the
Panel Report, that the measure at issue is simila r to a minimum import price within the meaning of
footnote 1 of the Agreement on Agriculture . We observe that this finding, in itself, would be a
sufficient basis on which to find the measure at issue inconsistent with Article 4.2 of the Agreement
on Agriculture. We nevertheless continue to examine Chile's appeal of the Panel's finding that the
measure at issue is also similar to a variable import levy.
3. Similarity to a Variable Import Levy
(a) Variability
204. Chile submits that the Panel erred in character izing the measure at issue as similar to a
variable import levy within the meaning of footnote 1 of the Agreement on Agriculture. According to
Chile, the Panel's errors included characterizing the me asure at issue as "variabl e" when it lacked the
type of variability that would have made it similar to a variable import levy, misapplying the tests of

280In particular: (i) the measure at issu e does not operate on the basis of the transaction value of a
shipment, but instead involves a comparison between the lower threshold and a reference price not directly
related to that transaction value; (ii) the measure at issue does not operate only to bring the entry price of a
shipment up to the level of the lower threshold, but instead en sures that the entry price of wheat and wheat
imports will almost always exceed the lower band threshold; and (iii) the lower band thresholds under the
measure at issue are fixed as a function of historical international prices rather than domestic market prices.

"transparency" and "predictability", and erroneously finding that the me asure at issue is likely to lead
to a reduction in the volume of imports and to impe de the transmission of international prices to the
domestic market.
205. Before turning to the specifics of Chile's a ppeal, it is useful to review how the Panel
undertook its analysis of whether the measure at issu e is similar to a variable import levy. The Panel
first recalled the Appellate Body's interpretation of footnote 1 from the original proceedings and
proceeded to apply that interpretation to the measure at issue. The Panel then examined "variability"
and found that "continuous variability of the duties is a feature inherent in" 281 the measure at issue
because it set forth "a scheme or formula that estab lishes an automatic and periodic adjustment in
such levels".282 The Panel observed that the level of duties that would result every two months was
not predictable and, after examining various aspects of the measure at issue, determined that "several
crucial aspects of the design and operation of the [measu re at issue] continue to be characterized by a
lack of both transparency and predictability" 283, and that these also had the effect of impeding the
transmission of international price developments to the Chilean market. In addition, in response to
comments made by Chile at the interim review stag e, the Panel explained that its finding that the
measure at issue was similar to a variable import levy:
... was reached mainly on the basis that the [measure at issue]
contains a scheme or formula that causes and ensures that the level of
duties collected or rebates granted under the system changes
automatically and continuously over time, as well as that the design
and operation of the [measure at issue] continues to be characterized
by a lack of both transparency and predictability, features also
observed in the course of the orig inal proceedings. These aspects
affect the basic elements of the [me asure at issue], i.e., the reference
price and the thresholds of the band.
284 (emphasis added)
206. We note that the Panel's use of the word "mainly" in summarizing its approach suggests that it
considered "variability" first and foremost and then looked, "as well", at predictability, transparency,
and the extent of transmission of international pr ices to the domestic market. In broad terms,
therefore, in applying footnote 1 to the measure at issue, the Panel appears to have followed the
approach laid down by the Appellate Body in the or iginal proceedings. We turn to consider Chile's
various allegations concerning specific elements of the Panel's analysis.

281Panel Report, para. 7.61.
282Ibid., para. 7.59.
283Ibid., para. 7.63.
284Ibid., para. 6.10.

207. On the issue of whether the Panel erred in ch aracterizing the measure at issue as "variable",
Chile argues that the Panel could not properly find that the measure at issu e ensures automatic and
continuous changes in duty levels. According to Chile, the measure at issue does not entail
"automatic" changes, because any changes in specific duties or rebates can be effected only through
the enactment of additional, separate, bi-monthly admi nistrative decrees. Chile adds that the measure
at issue does not involve "continuous" variati on, because changes in duty levels occur only
periodically, that is, six times per year, which is a much lower frequency of change than occurred
under the original measure.
208. For Argentina, the Panel properly found that th e measure at issue is an automatic mechanism
that functions by itself and is activated "directly and ... unfailingly".
285 Argentina points to a
statistical model that it presented to the Panel show ing the considerable variation in specific duties
that results from the measure at issue, and rejects the suggestion that changes in duty levels occur only
as a result of separate, independent administrative acts. The issuance of bi-monthly decrees does not
prevent the measure at issue from being character ized as "variable" because, as the Panel rightly
found, this administrative action occurs pursuan t to the mandatory language of Law 18.525, as
amended, and Supreme Decree 831. Those instruments require specific duties or rebates to be applied
depending on the level of the reference price in relation to the band thresholds and prescribe a formula
for calculating the amount of such duties or rebates. Thus, Argentina asserts, the bi-monthly decrees
"are neither independent nor separate legislative or administrative actions".286
209. We note that the Panel took account of each of the features of the measure at issue addressed
by Chile in these Article 21.5 pro ceedings, and nonetheless characteriz ed it as "variable" within the
meaning of footnote 1. As regards the "automaticity " of the measure, the Panel considered that the
relevant scheme or formula is found in the mechanism set forth in the measure at issue. The issuance
of bi-monthly decrees is specifically provided for under the measure at issue, and the bi-monthly
decrees simply publish the level of the relevant sp ecific duty or rebate, as calculated in accordance
with the mathematical formula mandated by La w 18.525, as amended, and Supreme Decree 831. 287
The Panel seems to have considered that the i ssuance of these bi-monthly decrees did not suffice to
break the link between the formula and the level of duties automatically calculated by virtue of its
application. We see no error in this analysis.

286Ibid., para. 165 (referring in footnote 86 to Appellate Body Report, Chile – Price Band System ,
para. 233).
287Panel Report, para. 7.59.

210. Chile also contests the Panel's finding that "peri odic" adjustment of the duty or rebate levels
every two months can constitute "variability" within the meaning of footnote 1 to the Agreement on
Agriculture. Chile relies on a statement made by the A ppellate Body in the original proceedings to
the effect that Members may "periodically" change their applied duty rates.288 Chile draws an analogy
between its measure, under which the level of speci fic duties/rebates changes six times per year, and
Chile's gradual reduction of its applied tariff rate between 1984 and 2003. In addition, Chile contrasts
the measure at issue, which involves periodic chang es in duty levels, with the original price band
system pursuant to which, according to Chile, sp ecific duties varied on a transaction-by-transaction
basis.
211. As our interpretation of footnote 1 above has s hown, the frequency of change effected by a
measure may be relevant in dete rmining whether it is "variable". 289 However, this criterion is not
determinative in and of itself. No specific frequenc y of change in resulting duties is required in order
for a measure to be considered "variable" within the meaning of footnote 1. That a measure produces
duties that vary with every transaction is not a necessary condition for a measure to be "variable".
Rather, "variability" must be assessed on the basis of the overall configuration of a measure and the
interaction of its specific features. 290 Thus, although the measure at issue involves less frequent
changes in duties than the original price band system, the frequency of change is but one of the
features to be considered in an assessment of the "variability" of the measure at issue. That
assessment must also take account of the extent to which the changes are automatic and based on an
underlying mechanism or formula.
212. In this case, the Panel held that there is a st rong element of automaticity in the measure at
issue, as a result of a formula that produces changes in the level of duties or rebates every two months.
These features were, in the view of the Panel, su fficient to establish the "inherent variability" of the
measure at issue. We see no error in the reasoning that led the Panel to this conclusion.
(b) The "additional features" of the measure at issue
213. In order to complete its evaluation of whether the measure at issue fell within the scope of
footnote 1 to Article 4.2 of the Agreement on Agriculture, the Panel went on to consider whether the
measure was also characterized by a lack of transp arency and predictability in the level of resulting

288Appellate Body Report, Chile – Price Band System, para. 232.
289Supra, paras. 155-162.
290Appellate Body Report, Chile – Price Band System, para. 261.

duties that would be liable to restrict market a ccess for imports and impede the transmission of
international prices to the domestic market. We pr oceed to Chile's appeal of the Panel's findings
regarding these additional features.
214. As a preliminary matter, we note that, in making its extensive arguments regarding the
alleged errors made by the Panel in examining the "additional features" of the measure at issue, Chile
seems to assign too prominent a role to these "additiona l features". In the original proceedings, after
having explained what might constitute the requis ite "variability" for purposes of footnote 1, the
Appellate Body remarked that variable import le vies have additional features that undermine one of
the objectives of the Agreement on Agriculture , namely, to improve market access conditions for
imports of agricultural products by permitting th e application of only ordinary customs duties.
291 The
Appellate Body observed that these additional features "include a lack of transparency and a lack of
predictability in the level of duties that will result fr om such measures" that "are liable to restrict the
volume of imports" and which "will also contribute to distorting the prices of imports by impeding the
transmission of international prices to the domestic market".292
215. The Appellate Body thus envisaged that an anal ysis of the "additional features" that make a
"variable" duty a "variable import levy" within the meaning of footnote 1 would be undertaken in the
light of the function of that provision—to enhance market access for agricultural products. With these
considerations in mind, we continue our examination of Chile's appeal.
216. Chile insists that the duties resulting from the operation of the measure at issue are
predictable, because they are derived from decrees that are readily available to traders, and because
they are fixed for two months at a time, in advance. Chile compares this to applied "ordinary customs
duties", which can change at any time, to any level (below the bound rate), as well as with the original
price band system, where the duties changed on a weekly basis.
217. Chile's arguments do not, in our view, suffice to sh ow that the Panel erred in its approach to
resolving this issue. The Panel opined that, because of the way that the reference price is calculated,

291Appellate Body Report, Chile – Price Band System, para. 234.
292Ibid.

traders often will not be able to predict their total duty liability before sending a shipment 293, and
added that "the only thing truly predictable a bout the level of duties ultimately assessed under the
[measure at issue] is that in principle such level will change every two months."294
218. It is true, as Chile argues, that applied ordinary customs duties can be changed. However, the
Panel found that the measure at issue, which engi neers automatic and continuous change every two
months, does not afford exporters a degree of predicta bility similar to that of ordinary customs duties,
and we see no error in this reasoning.
219. Chile makes an additional argument that the Pane l mistakenly conflated two distinct criteria
for determining whether a measure is a variable import levy: continuous variability and predictability.
Chile understands the Panel to have made this error when it reject ed the analogy that Chile drew
between the measure at issue and Chile's programme of progressive reductions in its applied tariff.
The Panel instead observed that "Chile's programme of gradually lowering its ad valorem tariff is an
example of a predictable movement in the conditions of market access", and added that, in contrast,
"the only thing truly predictable about the level of duties ultimately assessed under the [measure at
issue] is that in principle such level will change every two months."
295 Unlike Chile, we see no
"conflation" of the separate "requirements" of "c ontinuous variation" and "predictability" in this
statement. The Panel simply found that, under the me asure at issue, the level of resulting duties is not
predictable, but the fact that their level ma y change every two months is predictable because such
change is automatic.
220. With respect to the Panel's analysis of transp arency, or its absence, in the operation of the
measure at issue, Chile contests various aspects of the Panel's reasoning explaining why, in the Panel's
view, both the reference price and the band thresholds lacked transparency. To an extent, Chile's
arguments rest on the mistaken assumption that "tra nsparency" is an indepe ndent criterion that, if
satisfied, conclusively establishes that a measure cannot be similar to a variable import levy. As we

293Panel Report, para. 7.71. The Panel also quoted from Brazil in support of its finding regarding the
lack of predictability of resulting duties:
[E]ven though traders often speculate on the evolution of prices, they cannot
predict changes with the certainty require d to afford predictability to trade.
Variable import levies are prohibited precisely because the Agreement on
Agriculture requires that market access be based on predictable regulation
that does not alter with market prices.
(Ibid. and footnote 153 thereto (referring to Brazil's oral statement before the Panel, Panel Report, p. E-6,
para. 10))
294Ibid., para. 7.61.
295Ibid., paras. 7.60 and 7.61.

have seen, this is not the case.
296 Moreover, in the original proceed ings, the Appellate Body analyzed
"transparency" in tandem with the predictability of the level of the duties resulting from the operation
of the original price band system.
221. It is true that Chile has enacted certain modifications that render the measure at issue more
transparent than the original price band system, including fixing the levels of the band thresholds
through 2014. Yet, in its analysis of additional features of the measure at issue, the issue before the
Panel was how those modifications affected the transp arency and predictability of the levels of duties
resulting from the measure at issue, in particular, as compared to variable import levies. In examining
this issue, the Panel expressed the view that, not withstanding the modifications made by Chile, in
general, the use of a reference price "entails a sy stematic lack of transparency and predictability",
particularly when the reference price is periodi cally determined and constantly changing, and
detached from the transaction value, volume, and origin of a shipment. 297 We believe that the Panel
did not err in finding that the measure at issue l acks transparency and predictability even though the
system of fixing the reference price is more transparent than was the case under the original price
band system, and the band thresholds are now pre-determined and known in advance.
222. We are, however, concerned by certain aspects of the Panel's analysis of transparency. For
example, the Panel found that the reference price lacked transparency b ecause it was insufficiently
representative of world market prices. 298 In so finding, the Panel seems to have used transparency as
an independent criterion, rather than examining, as it should have done, whether the various elements
of the measure at issue in their interaction and c onfiguration are sufficiently transparent to enable
traders to anticipate their duty liability. Overa ll, however, we do not think that these concerns
materially affect the analysis undertaken by the Panel, or vitiate its conclusions.
223. Finally, we see no error in the Panel's assessme nt that the measure at issue impeded the
transmission of world market prices to the Chilean market. As discussed above, the Panel had before
it evidence showing that, when the reference price is below the lower threshold, the measure at issue
distorts the transmission of declines in world prices to the domestic market. 299 In addition, the Panel
observed that the 1.56 conversion factor used to calculate specific duties and rebates on wheat flour

296Supra, para. 156.
297Panel Report, paras. 7.72 and 7.73.
298This opinion was based on the fact that the reference price is calculated using prices from only 15
days out of a 60-day period; that it is calculated on the basis of prices in one market (Argentina) and one quality
of concern for half the year ( Trigo Pan Argentino ) and another market (United States) and another quality of
concern (Soft Red Winter No. 2) for the other half of the year, but did not take account of Canadian market
prices notwithstanding that Canada was the second largest exporter of wheat to Chile in 2004 and 2005. (Panel
Report, paras. 7.66-7.69)
299Supra, paras. 199-202.

imports also reinforces the insulation of the Chilean market and impedes the transmission to it of
world market prices of wheat flour. 300 This is so because the conversion factor is based on the
average ratio of wheat flour to wheat prices between January 1986 and December 1995301 even though
the wheat flour to wheat price ratio has changed over time.
224. In sum, the measure at issue shares the following characteristics with variable import levies,
all of which were also characteristics exhibited by the original price band system: (i) when an
administratively determined reference price falls belo w a specified threshold, an additional charge is
imposed on the basis of the difference between these two parameters; (ii) the amount of any specific
duty automatically changes in response to movements in either or both of these parameters; (iii) it is
highly improbable that the entry prices of wheat and wheat flour in the Chilean market will fall below
the lower band threshold; (iv) the lower the refere nce price relative to the lower band threshold, the
higher the specific duty and the greater its protective effects; and (v) the mode of operation of the
measure compromises the transparency and predic tability of the resulting duties and distorts the
transmission of declines in world prices to the dom estic market. As the Panel found, the measure at
issue, in its overall nature, design and structure, a nd the way it operates, is "similar" to a variable
import levy.
225. For all of the above reasons, we see no error in the Panel's finding, in paragraph 7.81 of the
Panel Report, that the measure at issue is "similar" to a "variable import levy" within the meaning of
footnote 1 to Article 4.2 of the Agreement on Agriculture.
C. Conclusion
226. We, therefore, uphold the Panel's finding, in paragraph 7.104 of the Panel Report 302, that the
measure at issue is a border measure similar to a variable import levy and to a minimum import price
within the meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture ; and uphold the
Panel's consequential finding, in paragraph 8.2(a) of the Panel Report, that:
By maintaining a border measure similar to a variable import levy
and to a minimum import price, Chile is acting in a manner
inconsistent with Article 4.2 of the Agreement on Agriculture, and
has thus failed to implement the recommendations and rulings of the
DSB.

300Panel Report, para. 7.80.
301Argentina's appellee's submission, para. 142; Ch ile's second written submission to the Panel, Panel
Report, p. C-82, para. 201.
302See also Panel Report, paras. 7.81, 7.92, and 7.96.

VII. Articles 11 and 12.7 of the DSU
227. Chile maintains that the Panel failed to comply with its duties under Articles 11 and 12.7 of
the DSU. The claims of error raised by Chile under both provisions relate to the following four
aspects of the Panel's analysis: (i) its findings with respect to the methodology for fixing the upper
and lower thresholds of the measure at issue; (i i) its references to the original panel's and the
Appellate Body's findings that, under the original measure, the reference price was not adjusted for
"import costs", and the Panel's related statement th at reviewing the characteristics of the original
measure was outside its mandate; (iii) its allegedly "cursory review" of individual features of the
measure at issue "in isolation"; and (iv) its alle ged failure to consider "empirical evidence" in
reaching its findings.
228. Because the duties imposed on panels by virtue of these two provisions are distinct, we first
consider whether the Panel complied with its duty under Article 11 to make an objective assessment
of the matter, and then examine whether it satisfied the requirement under Article 12.7 to provide a
"basic rationale" for its findings.
A. Article 11 of the DSU
229. Article 11 of the DSU deals with the function of panels and assigns to them certain duties,
inter alia, to "make an objective assessment of the ma tter before it, including an objective assessment
of the facts of the case and the applicability of and co nformity with the relevant covered agreements".
The Appellate Body has considered these duties on many occasions, and has consistently recognized
that Article 11 affords panels a margin of discretion in their assessment of the facts.
303 This margin
includes the discretion to identify which evidence the panel considers most relevant in making its
findings304, and to determine how much weight to attach to the various items of evidence placed
before it by the parties to the case. 305 A panel does not commit erro r simply because it declines to
accord to the evidence the weight that one of the parties believes should be accorded to it. 306 The
relevant standard has been summarized by the Appellate Body as follows:

303Appellate Body Report, EC – Asbestos , para. 161; Appellate Body Report, EC – Hormones ,
para. 132; Appellate Body Report, EC – Sardines , para. 299; Appellate Body Report, Japan – Apples ,
306Appellate Body Report, Australia – Salmon , para. 267; Appellate Body Report, Japan – Apples ,

Article 11 requires panels to take account of the evidence put before
them and forbids them to wilfully disregard or distort such evidence.
Nor may panels make affirmative findings that lack a basis in the
evidence contained in the panel reco rd. Provided that panels' actions
remain within these parameters, however, we have said that "it is
generally within the discretion of the Panel to decide which evidence it
chooses to utilize in making findings"
 , and, on appeal, we "will not
interfere lightly with a panel's exercise of its discretion".307
230. Chile submits, first, that the Panel breached this standard in finding that the band thresholds
under the measure at issue were established on a c.i.f. basis despite the fact that Chilean law required
that the bands be established on an f.o.b. basis. In doing so, the Panel, in Chile's view, "ignored the
direct evidence in the Chilean le gislation" and "necessarily concluded that the Ministry of Finance
acted in violation of Chilean law".
308 Chile points out that Law 18.525, as amended, provides that
"the values considered shall be the [band thres holds from the 2002 Decree] in United States dollars
f.o.b. per tonne."309 Article 4 of Supreme Decree 831 also expressly states that the "floor and ceiling
values and the reference prices provided for in these regulations shall be expressed in f.o.b terms".310
231. Chile's arguments assume that the Panel found th e band thresholds to ha ve been established
on the basis of c.i.f. values and not f.o.b. values. In our view, the Panel did not make such a finding.
When considering the transparency of the band thres holds, the Panel noted that these levels have been
established until 2014, and acknowledged Chile 's explanation as to their origin. 311 After recalling the
two problematic aspects that the Appellate Body had identified in connection with the band thresholds

307Appellate Body Report, US – Carbon Steel , para. 142. (footnotes referring to Appellate Body
Reports in EC – Hormones and US – Wheat Gluten omitted)
308Chile's appellant's submission, para. 203. (original emphasis omitted)
309Ibid., para. 202. See also supra, footnote 156. The text of Article 12 of Law 18.525, as amended, is
reproduced in paragraph 2.14 of the Panel Report.
310The text of Supreme Decree 831 is reproduced in paragraph 2.16 of the Panel Report.
311Chile explained that the band thresholds had been established on the basis of the thresholds provided
for under the original price band system in a decree from May 2002, "expressed at import cost level, by
deducting [from those 2002 floor and ceiling thresholds under the original price band system] all import costs
applicable to an ordinary trading transaction at the date of entry into force of the Law (second half of 2003)."
(Panel Report, para. 7.74 (quoting from Chile's response to Question 52 posed by the Panel, Panel Report,
p. F-96))

under the original price band system
312, the Panel expressed the opinion that the current thresholds are
"affected by the same deficiencies"313 and explained that:
Chile has not demonstrated that the alleged abolition of the
calculation formula that included discarding the highest and lowest
25 per cent of world prices, has had any practical impact on the levels
at which the upper and lower thresholds of the band have been set.
Nor has Chile provided any evidenc e to support its assertion that
"import costs" were indeed deducted in the process of calculating the
current thresholds. The mere assertion by Chile that the calculation
formula has been abolished and that import costs have been deducted
is not enough to demonstrate that, in this regard, the current system is
any less intransparent and unpred ictable than the original. 314
(emphasis added)
232. Chile reads the Panel's statement that Chile has not "provided any evidence to support its
assertion that 'import costs' were indeed deducted" as a factual finding that import costs were not
deducted, that is, that the thresholds of the meas ure at issue were established on a c.i.f. basis,
particularly when this statement is read together with the subsequent sentence. The Panel itself,
however, made no explicit finding that such thres holds were derived from or expressed as c.i.f.
values. Indeed, the Panel expressly acknowledged, in the same paragraph, "that the upper and lower
thresholds of the band were set by Chile on the b asis of the [band thresholds] provided for under the
original [price band system], after deducting 'import costs'." 315 To us, the reasoning quoted above
suggests that the Panel's concern was not with whether import costs had been deducted in
establishing the band thresholds on an f.o.b. basis, but with the lack of transparency as to how this
had been done. We fail to see how the Panel's stat ement that the "mere assertion ... that import costs
have been deducted is not enough to demonstrate that ... the current system is any less intransparent
and unpredictable" amounts to finding that import co sts had not been deducted. Rather, the Panel
simply observed that the basis on which the band th resholds had been established was not altogether
transparent. Therefore, assuming that Chilean law requires that the band thre sholds be established on
an f.o.b. basis, we consider that the Panel did not make any finding that the Chilean Ministry of
Finance acted in violation of Chilean law.

312The Panel observed that the Appellate Body had found: (i) that discarding 25 per cent of "atypical
observations" of world market prices at the bottom and top increased the likelihood that the lower threshold
would equal or exceed the internal price and impeded th e transmission of international price developments to
the domestic market; and (ii) that the way in which Chile converted f.o.b. prices to a c.i.f. basis, by adding
"import costs", was intransparent and unpredictable because no published legislation set out how those costs
were calculated. (Panel Report, paras. 7.75 and 7.76 (referring to Appellate Body Report, Chile – Price Band
System, para. 246))
313Panel Report, para. 7.77.
314Ibid., para. 7.79.
315Ibid., para. 7.79.

233. Chile also claims that the Panel acted inconsiste ntly with Article 11 of the DSU in refusing to
re-assess certain aspects of the original price band system that, according to Chile, both the original
panel and the Appellate Body misunde rstood, and in relying on this "factual error" in its analysis of
the measure at issue. Chile argues that the orig inal panel and Appellate Body mistakenly believed
that, under the original measure, the c.i.f. band thres holds were compared to an f.o.b. reference price
in order to determine applicable specific duties a nd rebates. Chile contends that, in fact, although
reference prices were determined on an f.o.b. basis, they were only compared to the original band
thresholds after having been converted to a c.i.f. basis.
234. In examining this aspect of Chile's appeal, we first note that Chile did not raise this alleged
misunderstanding concerning the operation of the origin al measure either to the original panel at the
interim review stage, or during the appeal in the original proceedings. 316 Moreover, Chile itself
appeared to state, in response to a question posed by the original panel, that the reference prices
determined on an f.o.b. basis were not subject to any adjustment. 317 This response would appear to be
the basis for the original panel's statement that "as confirmed by Chile, the f.o.b. prices used for the
[band thresholds] are adjusted, inter alia, for 'usual import costs', whereas the f.o.b. prices used for the
Reference Prices are not".318
235. Chile contends, in support of this part of its appeal, that the Panel "clearly relied" on the
original panel's "factual error". 319 We do not detect such relianc e in the passages where the Panel
refers to the operation of the original price band system. 320 In addition, the Panel expressly stated that
its findings and conclusions regarding the measure at issue did not depend on whether, under the

316Chile did not, in response to questioning at the oral hearing, asserts that it had brought this alleged
misunderstanding to the attention of the original panel or the Appellate Body.
317In its statement at the oral hearing in this app eal, Argentina pointed to Question 9(d) posed by the
original panel, along with Chile's response, which are as follows:
(d) Is the weekly import reference price also adjusted in the manner
indicated in paragraph 15(h) of Chile's first submission? If so is allowance
made for differences of cost as between different import origins?
Response
 The reference price notified on a weekly basis by Customs is not
subject to any adjustment mechanisms , and hence no allowance needs to be
made for differences of cost or for different import origins.
318Original Panel Report, para. 7.63. (underlining added) We note that, in footnote 640 to this sentence,
the original panel referred to Chile's response to question 9(e). Since, however, question 9(e) does not touch
upon this issue, the original panel undoubtedly intended to refer to Chile's answer to question 9(d).
320Panel Report, paras. 7.40, 7.48, 7.50, 7.75, 7.86, and 7.88.

original price band system, the reference price was converted to a c.i.f. basis.
321 In other words, even
assuming arguendo that this aspect of the operation of the original price band system was
misunderstood in the original proceedings, this mi sunderstanding would not have affected the Panel's
findings with respect to the measure at issue, and, therefore, even its correction would not have
assisted Chile in these proceedings.
236. We also recall that, in Mexico – Corn Syrup (Article 21.5 – US), the Appellate Body declined
to "revisit the original panel report" because that report had "been adopted and ... these Article 21.5
proceedings concern a subsequent measure."
322 In this regard, the A ppellate Body referred to
Articles 3.2 and 3.3 of the DSU and the importan ce of security, predictability, and the prompt
settlement of disputes. Moreover, we are mindful that adopted panel and Appellate Body reports must
be accepted by the parties to a dispute. 323 These same considerations must also be taken into account
in this appeal, and they confirm our view that the Panel did not, in this case, fail to comply with its
duties under Article 11 of the DSU in declining to correct the alleged misunderstanding concerning
the original price band system.
237. Chile's third allegation that the Panel failed to make an objective assessment under Article 11
of the DSU is based on the argument that the Pane l conducted only a "cursory review" of discrete
features of the measure at issue "in isolation", rather than a "holistic appraisal of all of the features of
the [measure at issue] and its effects taken together". 324 As we have seen, Chile also claimed that the

321In response to Chile's comments at the interim review stage, the Panel stated:
In any event, even if, ad arguendo, we were to accept Chile's explanation
that there is a misunderstanding about the way in which, in the original
[price band system], the reference pri ce was not adjusted for "import costs",
this would not affect the conclusions contained in this compliance Panel
report.
(Panel Report, para. 6.14)
322Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , paras. 78 and 79. (original
emphasis)
323Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia) , para. 97; Appellate Body Report,
EC – Bed Linen (Article 21.5 – India), para. 93.

Panel erred in its application of Article 4.2 of the Agreement on Agriculture on the same grounds. It
is not clear to us how its claim of error under Article 11 of the DSU differs from that claim.325
238. In any event, we see no breach of Article 11 in the Panel's approach. As discussed above, the
Panel properly applied Article 4.2 and footnote 1 of the Agreement on Agriculture to the measure at
issue, in accordance with the interpretative guidance provided by the Appellate Body in the original
proceedings. The fact that the Panel did not agr ee with arguments or evidence proffered by Chile
cannot, in itself, establish a failure to consider su ch evidence or to assess it objectively as required by
Article 11. We see no indication that the Panel's treatment of the evidence was biased or otherwise
exceeded the bounds of discretion enjoyed by the Panel as the trier of fact. We also recall that a claim
that a panel failed to comply with its duties unde r Article 11 of the DSU must stand by itself and
should not be made merely as a subsidiary argument or claim in support of a claim that a panel failed
to apply correctly a provision of the covered agreements.
326
239. Chile's last allegation of error under Article 11 of the DSU characterizes the Panel's alleged
"refusal to consider empirical evidence" in its eval uation of the measure at issue as a failure to make
an objective assessment of the facts. 327 Chile points out that it submitted a "substantial amount of
evidence and data on the operation" of the measure at issue, yet the Panel "did not refer [to or] rely on
any evidence regarding the actual operation" of the measure at issue, and refused Chile's request
during the interim review stage to review its analys is in the light of the mathematical calculations
presented by the parties.328
240. We are mindful that the information placed befo re a panel is often vol uminous in nature and
that the probative value of specific pieces of evidence varies considerably. A panel must examine and
consider all of the evidence placed before it, mu st identify the evidence upon which it has relied in
reaching its findings, and must not make findings th at are unsupported by evidence. Yet, a panel is
also afforded a considerable margin of discretion in its appreciation of the evidence. This means,

325In claiming that the Panel failed to comply with its Article 11 duties, Chile submits, for example,
that: "the Panel found ... automa tic and continuous variation, notwithstanding Chile’s arguments that (1) the
duty varies only with the enactment of a separate administrative decree; and (2) the frequency of variation is
down from continuous (based on a transaction-by-transaction basis) to 6 times per year." Similarly, Chile
submits that "the Panel finds that the [measure at issue] continues to be affected by a lack of transparency and
predictability, notwithstanding Chile’s arguments that (1) the bands are now fixed and no longer subject to
added 'import costs' and the 25 percent rule; and (2) reference prices are fully predictable and transparent."
(Chile's appellant's submission, para. 223. (emphasis added)) These arguments repeat the arguments that Chile
made in support of its allegation that the Panel erred in applying Article 4.2 of the Agreement on Agriculture to
the measure at issue. See supra, paras. 177, 207, 210, and 216.
326Appellate Body Report, US – Steel Safeguards, para. 498.
328Ibid., paras. 226 and 227.

among other things, that a panel is not required, in its report, to explain precisely how it dealt with
each and every piece of evidence on the panel record. As we see it, Chile is trying to have us weigh
the evidence differently than did the Panel.
329 Chile may well consider that the Panel should have
ascribed more weight to, and relied upon, certain evid ence that Chile put forward, or should not have
relied on certain evidence submitted by Argentina, but, in the absence of any indication that the Panel
ignored or distorted Chile's evidence, or made findings that were unsupported by any evidence, we
see no basis for interfering with the Panel's exercise of its discretion in this case.
241. Thus, on the basis of the above, we find that the Panel did not fail to comply with its duties
under Article 11 of the DSU.
B. Article 12.7 of the DSU
242. Chile's allegations that the Panel acted inconsis tently with Article 12.7 of the DSU are based
on the same four alleged deficiencies in the Panel's analysis that Chile invoked in its claims under
Article 11 of the DSU. Chile contends that the Pane l failed to provide a "basic rationale": (i) for its
alleged finding that the Ministry of Finance acted in violation of Chilean law in establishing the levels
of the price band thresholds; (ii) for its finding that the correction of an alleged factual error made by
the panel and the Appellate Body in the or iginal proceedings was outside its mandate
330; (iii) in
finding that the measure at issue fell within the scope of footnote 1 of the Agreement on Agriculture
on the basis of an allegedly cursory review of indi vidual features of that measure; and (iv) for its
alleged failure to conduct an empirical analysis in making its findings.
243. Before turning to the merits of Chile's appeal, we briefly review the duties that Article 12.7 of
the DSU imposes on a panel in the event that the pa rties do not reach a mutually satisfactory solution
to their dispute. Specifically, a panel is to "submit its findings in the form of a written report to the
DSB" and, according to the second sentence of Article 12.7, "the report of a panel shall set out the
findings of fact, the applicability of relevant pr ovisions and the basic rationale behind any findings
and recommendations that it makes." The Appella te Body has explained that this provision
"establishes a minimum standard for the reasoning that panels must provide in support of their
findings and recommendations", namely, that the expl anations and reasons provided must suffice "to
disclose the essential, or fundamental, justification for those findings and recommendations". 331

329Chile itself acknowledges that the Panel did refer to two exhibits submitted by Argentina regarding
the operation of the measure at issu e as well as certain other evidence. (Chile's appellant's submission,
para. 226) Moreover, at the interim review stage, the Panel stated that it had taken note of the extensive
explanations provided by the parties and had reached its conclusions based on those explanations along with the
available evidence. (Panel Report, paras. 6.9 and 6.10)
330Supra, para. 233.
331Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 106.

Panels need not "expound at length on the reasons for their findings and recommendations" in order to
satisfy their obligations under Article 12.7. 332 Moreover, panels may refer to reasoning from other
sources, in particular:
[A] panel acting pursuant to Ar ticle 21.5 of the DSU would be
expected to refer to the initial panel report, particularly in cases
where the implementing measure is closely related to the original
measure, and where the claims made in the proceeding under
Article 21.5 closely resemble the claims made in the initial panel
proceedings.
333
244. Bearing in mind all of the above, we do not cons ider that the Panel failed to provide a basic
rationale for its findings. First, with respect to th e alleged finding that the Ministry of Finance acted
in violation of Chilean law in establishing the levels of the price band thresholds on a c.i.f. basis, we
have already observed that the Panel made no e xplicit finding that the band thresholds were
established on such a basis.334
245. Secondly, Chile alleges that the Panel breached its obligations under Article 12.7 because it
did not supply any reasons for finding that the co rrection of a misunderstandi ng regarding reference
prices under the original measure was beyond its manda te. The "finding" challenged by Chile on this
basis is contained in the Panel's response to Chile 's comments during the interim review. In response
to Chile's request to correct the alleged misunders tanding, the Panel referred to various observations
made by the Appellate Body and the original panel and stated:
The Panel has noted Chile's arguments in this regard. It is outside the
Panel's mandate, however, to review the characteristics of the
original [price band system], as they were described in the original
proceedings by the Appellate Body and by [the original panel].
335
246. This response indicates that the reason why the Panel viewed Chile's request as being
outside its mandate in these Article 21.5 proceedings was because it related to the description of the
original price band system in the original proceedings. To us, this is sufficient to satisfy the Panel's
obligations under Article 12.7.

332Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 109.
333Ibid.
334Supra, para. 232. Because the Panel made no such finding, it had no corresponding duty to provide a
basic rationale.
335Panel Report, para. 6.14. (footnote omitted)

247. Thirdly, Chile alleges that the Panel failed to provide a basic rationale when it found—on the
basis of only a cursory review of individual feat ures "in isolation"—that the measure at issue fell
within the scope of footnote 1 of the Agreement on Agriculture . We have already dealt with, and
dismissed, Chile's arguments that the Panel's a pproach in this regard constituted an erroneous
application of footnote 1 and Article 4.2 of the Agreement on Agriculture , as well as a failure to
comply with Article 11 of the DSU.
336 Chile's arguments under Article 12.7 of the DSU challenge the
same elements of the Panel's substantive analysis us ing a different legal basis, but without identifying
how that analysis lacks a basic rationale. In fa ct, Chile's own arguments disclose that the Panel
provided ample reasoning in support of its findings. Moreover, our examination has shown that the
Panel analyzed the measure at issue in detail, and explained why it found the measure to be similar to
a variable import levy and to a minimum import price. The mere fact that Chile disagrees with the
substance of that reasoning cannot suffice to establish a violation of Article 12.7.
248. Lastly, as regards the Panel's alleged failure to supply a basic rationale for its "failure to
consider empirical evidence", we recall that we have already expressed the view that Chile's
arguments seek to attribute to the phrase "an empiri cal basis" a meaning other than the one intended
by the Appellate Body in the original proceedings. 337 We have also determined that the Panel did
consider empirical evidence, even if it did not acco rd as much weight or si gnificance to the evidence
submitted by Chile as Chile would have liked. 338 Thus, the Panel provided the essential justification
for its findings, including an identification and ex planation of the "empirical" evidence on which it
relied.
249. We, therefore, consider that the Panel did not fail to satisfy its duty, under Article 12.7 of the
DSU, to provide a "basic rationale" for its findings and conclusions.
VIII. Conditional Appeal
250. Argentina makes an appeal that is conditional upon our reversal of the Panel's findings that
the measure at issue is inconsistent with Article 4.2 of the Agreement on Agriculture. In the event of
a reversal of the findings of the Panel in paragraphs 8.2(a), 8.3 and 8.4 of the Panel Report, Argentina
requests the Appellate Body to determine that it is necessary, for the resoluti on of this dispute, to
make a separate finding on Argentina's claim under the second sentence of Article II:1(b) of the
GATT 1994, and to find that the measure at issue is inconsistent with the obligation contained therein.

336Supra, paras. 183 and 238.
337Supra, paras. 188-190.
338Supra, paras. 190 and 240.

251. We have upheld the Panel's findings that the measu re at issue is inconsistent with Article 4.2
of the Agreement on Agriculture. Accordingly, the condition on which Argentina's appeal is
predicated is not satisfied, and we need not rule on Argentina's other appeal.
252. If the condition on which Argentina's appeal is made had been satisfied, we would have had
to consider whether Argentina's claim under the second sentence of Article II:1(b) of the GATT 1994
was within the scope of these Article 21.5 proceed ings. The Panel provided an extensive discussion
of the issue of when "an Article 21.5 compliance panel may consider a new claim, not raised before
the original panel" 339—a discussion which the Panel itself characterized as " obiter dicta".340 S o m e
third participants have expressed differing views as to whether we could have or should have
reviewed these comments by the Panel concerning th e scope of proceedings under Article 21.5 of the
DSU.341 Because we do not address Argentina's conditional appeal, we neither consider nor express a
view on the Panel's discourse on this issue.
IX. "New" Exhibits Submitted by Chile on Appeal
253. We have reached our findings and conclusions on the basis of a careful examination of the
Panel Report in the light of the claims of error a nd arguments raised on appeal. In undertaking this
task, we did not find it necessary to have recourse to the information provided by Chile in Exhibits
CHL-AB-3 through CHL-AB-15 attached to its appe llant's submission. As a result, we need not
make any separate or additional ruling on the admissibility of these exhibits.342

339Panel Report, para. 7.151. The Panel set out its analysis at paragraphs 7.121-7.161 of the Panel
Report.
340Ibid. para. 7.121.
341Australia notes that the Panel's findings were "u nnecessary for the resolution of the dispute" and
submits that, "[w]hile the issues raised are important ... it would [not] be useful for the Appellate Body to
resolve this question absent a specific factual issue neces sitating such resolution." (Aus tralia's statement at the
oral hearing) Canada submits that whether or not we reverse the Panel's findings on Article 4.2 of the
Agreement on Agriculture, "it remains open to the Appellate Body to reconsider the Panel's analysis concerning
this question as part of its broader review of this dispute." According to Canada, clarification of the jurisdiction
of Article 21.5 panels is required due to the systemic importance of this issue. (Canada's third participant's
submission, paras. 3 and 4) The European Communities asserts that the Panel's comments contribute to "great
uncertainty" concerning the scope of Article 21.5 proceedings, and that the Appellate Body should avail itself of
the opportunity to resolve this uncertainty, or at least declare the Panel's approach to be moot and without legal
effect. (European Communities' third participant's submission, para. 30) The United States argues that, given
that the Panel's comments are obiter dicta, they are moot and of no legal e ffect, and adds that, because neither
Argentina nor Chile appealed the Panel's dicta, the Appellate Body is not in a position to declare them to be
moot and of no legal effect. (United States' statement at the oral hearing)
342We set out our preliminary view of the principles that should govern the admissibility of these
exhibits in a letter, dated 13 March 2007, to the participants and the third participants. (Supra, para. 12)

X. Findings and Conclusions
254. For the reasons set forth in this Report, the Appellate Body:
(a) finds
 that the Panel did not err in its allocation of the burden of proof;
(b) finds that the Panel did not err in its interpre tation of Article 4.2 and footnote 1 of the
Agreement on Agriculture , or in its application of those provisions to the measure at
issue and, therefore:
(i) upholds the Panel's finding, in paragr aph 7.104 of the Panel Report 343, that
the measure at issue is a border measure similar to a variable import levy and
to a minimum import price within the meaning of footnote 1 to Article 4.2 of
the Agreement on Agriculture; and
(ii) upholds the Panel's finding, in paragraph 8. 2(a) of the Panel Report, that, by
maintaining a border measure similar to a variable import levy and to a
minimum import price, Chile is acting inconsistently with its obligations
under Article 4.2 of the Agreement on Agriculture and has not implemented
the recommendations and rulings of the DSB;
(c) finds that the Panel did not fail to discharge its duties under Article 11 of the DSU to
conduct an objective assessment of the matte r before it or under 12.7 of the DSU to
set out a basic rationale for its findings; and
(d) finds, in the light of these findings, that, because the condition on which Argentina's
other appeal is predicated has not been fu lfilled, it is not necessary to consider that
appeal.
255. The Appellate Body recommends that the DSB request Chile to bring its measure, found in
this Report, and in the Panel Report as upheld by this Report, to be inconsistent with the Agreement
on Agriculture, into conformity with its obligations under that Agreement.

343See also Panel Report, paras. 7.81, 7.92, and 7.96.

Signed in the original in Geneva this 20th day of April 2007 by:

Luiz Olavo Baptista
Presiding Member

 _________________________ _________________________
 Georges Abi-Saab Giorgio Sacerdoti
 Member Member

ANNEX I

5 February 2007

 (07-0519)
 Original: English

Recourse to Article 21.5 of the DSU by Argentina

Notification of an Appeal by Chile
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

 The following notification, dated 5 February 2007, from the Delegation of Chile, is being
circulated to Members.
Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review, Chile
hereby notifies its decision to appeal to the Appellate Body certain issues of law covered in the Report
of the Panel on Chile – Price Band System and Safeguard Me asures Relating to Certain Agricultural
Products - Recourse to Article 21.5 of the DSU by Argentina (WT/DS207/RW) and certain legal
interpretations developed by the Panel.

 Chile seeks review by the Appellate Body of cer tain Panel conclusions that are in error and
are based upon erroneous findings on issues of law and on related legal interpretations.

1. The Panel failed to determine and apply the appropriate burden of proof applicable to a
dispute settlement proceeding under Article 21.5 of the DSU by allocating to Chile the burden to
prove that Law 19.897 and Supreme Decree 831 (collec tively, the "Implementing Measure") were no
longer WTO inconsistent rather than allocati ng the burden to Argentina to prove that the
Implementing Measure was inconsistent with Ch ile's WTO obligations under Article 4.2 and
footnote 1 of the Agreement on Agriculture.
1

2. The Panel erred in its interpretation of Article 4.2 and footnote 1 of the Agreement on
Agriculture by failing to give effect to the language "other than ordinary customs duties" in
footnote 1,
2 by failing to examine "similarity" with variable import levies and minimum import prices
on an empirical basis with reference to th e actual effects of the Implementing Measure, 3 by

1The Panel's errors are reflected in its overall analysis in paragraphs 7.14 to 7.104, most notably in its
findings in paragraphs 7.14, 7.44, 7.54, 7.55, 7.79, 7.81, 7.92, 7.96, and in its findings in relation to the parties'
comments on the interim report in paragraphs 6.8 to 6.12, most notably paragraph 6.12.
2The Panel's error is set forth in paragraphs 7.14, 7.20, 7.54, 7.81, 7.92 and 7.104.
3The Panel's error is set forth in paragraphs 6.9 to 6.12 and 7.97 to 7.103 and otherwise apparent from
the Panel's analysis in paragraphs 7.14 to 7.104.

misinterpreting the term "variable" in footnote 1, including in a manner not in accordance with the
Appellate Body's findings,
4 by interpreting the terms "transpare ncy" and "predictability" in a manner
not in accordance with the Appellate Body's findings, 5 and by otherwise developing a legal test for
compliance with Article 4.2 and footnote 1 of the Agreement on Agriculture that is internally
contradictory and not in accordance with the Appellate Body's findings in the prior dispute.6

3. The Panel erred in its application of Article 4.2 and footnote 1 of the Agreement on
Agriculture to the Implementing Measure, including its findings relating to whether the
Implementing Measure, was similar to a "variable import levy" 7 and its findings relating to whether
the Implementing Measure was similar to a "minimum import price" 8 particularly when such an
analysis is appropriately conducted on an empirical basis.

4. The Panel acted inconsistently with its oblig ations under Article 11 of the DSU to "make an
objective assessment of the matter before it, including an objective assessment of the facts of the case
and the applicability of and conformity with the re levant covered agreements" and Article 12.7 of the
DSU to set out "the findings of fact, the applicab ility of relevant provisions and the basic rationale
behind any findings and recommendations that it makes" by, inter alia:

(a) concluding, without explanation, that the Ministry of Finance violated Chilean law in
establishing the levels of the price bands;
9

(b) failing, without explanation, to correct e rrors in the Original Panel's characterization
of the Price Band System, although the Panel relied on such characterization in making its
own findings;10

(c) conducting only a cursory review of rele vant features of the Implementing Measure
in isolation;
11 and

(d) failing to consider empirical evidence on the actual operation of the Implementing
Measure.
12

 Chile respectfully requests that the Appellate Body reverse the findings and conclusions of
the Panel and modify accordingly the recommendations and rulings of the Panel.
13

4The Panel's errors are set forth in paragraphs 7.28 and 7.55 to 7.104.
5The Panel's errors are set forth in paragraphs 7.28 and 7.55 to 7.104.
6The Panel's errors are reflected in its overall analysis in paragraphs 7.14 to 7.104.
7The Panel's error is set forth in paragraphs 7.55 to 7.104, in particular paragraphs 7.55 to 7.81.
8The Panel's errors are reflected in paragraphs 7.55 to 7.104, in particular paragraphs 7.82 to 7.92.
9The Panel's error is set forth in paragraph 7.79.
10The Panel's error is set forth in paragraphs 6.14, 7.40(d), 7.48, 7.50, 7.75, and 7.86 to 7.88.
11The Panel's errors are reflected in its overall analysis in paragraphs 7.14 to 7.104.
12The Panel's errors are reflected in its overall analysis in paragraphs 7.14 to 7.104 and in its findings in
relation to the parties' comments on the interim report in paragraphs 6.8 to 6.12.
13See paragraphs 8.2(a), 8.3, and 8.4.

ANNEX II

26 February 2007
 (07-0799)
 Original: English

Recourse to Article 21.5 of the DSU by Argentina

Notification of an Other Appeal by Argentina
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 23(1) of the Working Procedures for Appellate Review

 The following notification, dated 19 February 2007, from the Delegation of Argentina, is
being circulated to Members.

 Pursuant to Articles 16.4 and 17 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes ("DSU") and Rule 23(1) of the Working Procedures for Appellate Review ,
Argentina submits its Notice of Other Appeal on cert ain issues of law covered in the Report of the
Panel on Chile – Price Band System and Safeguard Me asures Relating to Certain Agricultural
Products
1, and certain legal interpretations developed by the Panel.

 On 5 February 2007, Chile filed its Noti ce of Appeal pursuant to Rule 20 of the Working
Procedures for Appellate Review . Chile requested that the Appellate Body, inter alia , reverse the
findings and conclusions of the Panel and modify accordingly the recommendations and rulings of the
Panel as set forth in paragraphs 8.2(a), 8.3 and 8.4 of the Panel Report.

 If the Appellate Body were to reverse an y of the Panel's findings, recommendations and
rulings as set forth in paragraphs 8.2(a), 8.3 and 8.4 of the Panel Report, Argentina respectfully
requests the Appellate Body seek review of the Pane l's conclusion, and its re lated legal findings and
interpretations, that it is unnecessary, for the resoluti on of this dispute, to make a separate finding on
Argentina's claim under the second sentence of Article II:1(b) of the GATT 1994.
2

 In that event, Argentina respectfully requests that the Appellate Body find:

(a) that it is necessary, for the resolution of this dispute, to make a separate finding on
Argentina's claim under the second sentence of Article II:1(b) of the GATT 1994;

1Recourse to Article 21.5 of the DSU by Argentina, WT/DS207/RW, circulated 8 December 2006 (the
"Panel Report").
2This conclusion is set out in paragraph 8.2(b) of the Panel Report. The related legal findings and
interpretations of the Panel are set out in paragraphs 6.6, 6.7, 7.3, 7.5 and 7.105 to 7.162 of the Panel Report.

(b) that the amended PBS is inconsistent with the second sentence of Article II:1(b) of
the GATT 1994.

 Argentina also requests the Appellate Body to complete the analysis of the Panel where it
reverses or modifies findings of the Panel or comple tion of the analysis of the Panel is necessary to
resolve this dispute.