CHILE – PRICE BAND SYSTEM AND SAFEGUARD MEASURES RELATING TO CERTAIN AGRICULTURAL PRODUCTS
Document: Recourse to Article 21.5 of the DSU by Argentina Report of the Panel
Date: 8 December 2006
Document codes: WT/DS207/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

Report of the Panel

I. INTRODUCTION
1.1 On 29 December 2005, Argentina requested the establishment of a panel pursuant to
Article 21.5 of the Understanding on Rules and Pr ocedures Governing the Settlement of Disputes
(hereinafter "DSU") concerning Chile's alleged failure to implement the recommendations and rulings
of the Dispute Settlement Body (her einafter "DSB") in the dispute (hereinafter " Chile – Price Band
System").1
1.2 At its meeting on 20 January 2006, the DSB decided, in accordance with Article 21.5 of the
DSU, to refer to the original Panel, if possibl e, the matter raised by Argentina in document
 At that meeting, the parties to the dis pute also agreed that the Panel should have
standard terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by Argentina in document , the matter referred to the DSB by
Argentina in that document, and to make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in those
agreements."
3
1.3 On 4 April 2006, the parties agreed that the Panel would be composed as follows:
 Chairman: Mr Hardeep Puri

 Members: Mr Ho-Young Ahn
 M r T i m o t h y G r o s e r
4

1.4 Australia, Brazil, Canada, China, Colombia, the European Communities, Peru, Thailand and
the United States reserved their rights to participate in the Panel proceedings as third parties.5
1.5 The Panel met with the parties on 1 and 2 Augu st 2006. It met with the third parties on
2 August 2006. The Panel issued the draft descriptive part of its report to the parties on 27 September
2006. On the same date, third parties were also sent a copy of the annexes that contained their
respective submissions and oral statements. On 2 October 2006, both parti es submitted comments to
the draft descriptive part of the report. On 4 Oc tober 2006, the United States requested a correction
into the annex that contains its oral statement made at the meeting with the Panel. The Panel issued
its interim report to the parties on 11 October 2006.
II. FACTUAL ASPECTS
A. BACKGROUND
2.1 This dispute concerns the amendments made by Chile to its Price Band System ("PBS") and
whether, as a result of these amendments, the modi fied system (the "amended PBS") complies with

1 Request for the Establishment of a Panel, (Recourse to Article 21.5 of the DSU by Argentina ) (hereinafter
"Chile – Price Band System (Article 21.5 – Argentina)"), 9 January 2006,WT/DS207/18.
2 Constitution of the Panel (N ote by the Secretariat), Chile – Price Band System (Article 21.5 –
Argentina), 4 April 2006, WT/DS207/19, para. 1.
3 Ibid., para. 2.
4 Ibid., para. 3.
5 Ibid., para. 4.

the recommendations and rulings approved by the DS B and brings the amended PBS into conformity
with Chile's obligations under the WTO covered agreements.
B. M
EASURES SUBJECT TO THE ORIGINAL PROCEEDINGS
2.2 The original Panel and Appellate Body proceed ings concerned two distinct matters: (a)
Chile's PBS; and (b) Chile's provisional and de finitive safeguard measures on imports of wheat,
wheat flour and edible vegetable oils, as well as the extension in time of those measures.
C. PANEL AND APPELLATE BODY FINDINGS IN THE ORIGINAL PROCEEDINGS
2.3 With regard to Chile's PBS 6, the original Panel found that the PBS was a border measure
similar to a variable import levy and to a minimum import price, other than ordinary customs duties,
within the meaning of footnote 1 to the Agreement on Agriculture.7 The Panel found additionally that
the PBS was not maintained under balance-of-p ayment provisions or under other general, non-
agriculture specific provisions of GATT 1994 or of the other Multilateral Trade Agreements in Annex
1A to the WTO Agreement, within the meaning of footnote 1 to the Agreement on Agriculture. 8 The
Panel concluded that the PBS was inconsistent with Article 4.2 of the Agreement on Agriculture.9
2.4 The original Panel also found that, since the PBS duties did not constitute ordinary customs
duties, the fact that those duties were not record ed by Chile in the colu mn of "other duties and
charges" in its Schedule but were nevertheless le vied, made them inconsistent with the second
sentence of Article II:1(b) of GATT 1994.10
2.5 The Appellate Body upheld the Panel's finding that Chile's PBS was a border measure similar
to a variable import levy and a minimum import pri ce and was therefore inconsistent with Article 4.2
of the Agreement on Agriculture. 11 The Appellate Body, however, disagreed with the Panel's
definition of "ordinary customs duties" and rever sed the Panel's finding that the term "ordinary
customs duty", as used in Article 4.2 of the Agreement on Agriculture, was to be understood as
"referring to a customs duty which is not applied to factors of an exogenous nature".
12
2.6 The Appellate Body also considered that the Pa nel had acted inconsistently with Article 11 of
the DSU, by making a finding under the second sentence of Article II:1(b) of the GATT 1994, which
was not part of the matter before the Panel, and thereby denying Chile the due process of a fair right
of response. The Appellate Body consequently re versed the Panel's finding under Article II:1(b) of
GATT 1994.13

6 The original Panel also made findings with respect to Argentina's claims regarding Chile's provisional
and definitive safeguards measures on imports of wheat, wheat flour and edible vegetable oils. Noting that the
measures had expired, the Panel abstained from maki ng recommendations regarding these measures. Panel
Report on Chile – Price Band System , paras. 7.112, 7.113, 7.124, 7.126, 7.128, 7.140, 7.149, 7.162, 7.174,
7.180, 8.1 and 8.3. These findings were not appealed a nd the measures are not part of the matter in the current
proceedings.
7 Panel Report on Chile – Price Band System, paras. 7.25, 7.47 and 7.65.
8 Ibid., 7.102.
9 Ibid., paras. 7.102 and 8.1.
10 Ibid., paras. 7.107, 7.108 and 8.1.
11 Appellate Body Report on Chile – Price Band System, paras. 262, 280 and 288.
12 Ibid., paras. 278 and 288. Panel Report on Chile – Price Band System, para. 7.52.
13 Appellate Body Report on Chile – Price Band System, paras. 177 and 288.

D. CURRENT PROCEEDINGS
2.7 At its meeting on 23 October 2002, the DS B adopted the Appellate Body Report on Chile –
Price Band System (WT/DS207/AB/R) and the Panel Report on the same case (WT/DS207/R), as
modified by the Appellate Body.14 Pursuant to said reports, the DSB requested Chile to bring its PBS,
as found to be inconsistent with the Agreement on Ag riculture, into conformity with its obligations
under that Agreement.15
2.8 At the DSB meeting of 11 November 2002, pu rsuant to Article 21.3 of the DSU, Chile
informed the DSB that it was consulting with Argentin a to find a mutually agreeable solution and that
it would require a "reasonable period of time", pursuant to the terms of Article 21.3, to implement the
recommendations and rulings of the DSB in the dis pute. The parties did not agree on the reasonable
period of time for implementation, and therefore, pursuant to Chile's request, such period was
determined by binding arbitration, in accordance with Article 21.3(c) of the DSU. The award of the
arbitrator was circulated to the Members on 17 March 2003. 16 It determined that the reasonable
period of time for Chile to implement the recommenda tions and rulings of the DSB in the case was to
be 14 months from the date of adoption of the Pa nel and Appellate Body reports by the DSB and
would therefore expire on 23 December 2003.17
2.9 In December 2003, Argentina and Chile conc luded an understanding regarding procedures
under Articles 21 and 22 of the DSU with respect to the dispute. The bilateral understanding was
notified to the Dispute Settlement Body by both Members through a letter dated 24 December 2003.18
2.10 In a communication dated 19 May 2004, Argen tina requested consultations with Chile under
Article 21.5 of the DSU. In that request, Argen tina disagreed that the changes made to the PBS by
Chile, as regards wheat and wheat flour, were in compliance with the recommendations contained in
the reports of the Panel and the Appellate Body. Specifically, Argentina considered that, through the
amendments incorporated by Law 19.897 and Supr eme Decree 831 of 2003, imports of wheat and
wheat flour were still affected by the imposition of specific duties and rebates whose application
continued to be subject to floor and ceiling parameters, as well as to the reference price mechanism.
This in turn apparently meant that Chile had main tained a measure similar to a variable import levy
and a minimum import price with respect to tho se products and, at the same time, was imposing
"other duties or charges" on imports that were not recorded in the relevant column of its Schedule.
Argentina finally stated that this also meant that Chile granted imports treatment less favourable than
that accorded to the same products of Chilean origin . Argentina concluded that Chile had not ensured
the conformity of its laws, regul ations and administrative procedur es with its obligations as provided
in the WTO Agreements and, specifically, that the measures adopted by Chile to implement the
recommendations and rulings of the DSB were inconsistent, inter alia, with the following provisions
of the covered agreements: Article 4.2 of th e Agreement on Agriculture; the second sentence of

14 Chile – Price Band System , Appellate Body Report and Panel Report, Action by the Dispute
Settlement Body (WT/DS207/8), 29 October 2002. First written submissions of Argentina and Chile, paras. 4
and 6 respectively.
15 Appellate Body Report on Chile – Price Band System , para. 289. See also, Panel Report on Chile –
Price Band System, para. 8.3.
16 Chile – Price Band System , Arbitration under Article 21.3(c) of the Understanding on Rules and
Procedures Governing the Settlement of Disputes (WT/DS207/14), 19 March 2003.
17 Chile – Price Band System , Arbitration under Article 21.3(c) of the Understanding on Rules and
Procedures Governing the Settlement of Disputes – Award of the Arbitrator (WT/DS207/13), 17 March 2003.
18 Chile – Price Band System , Understanding between Argentina and Chile Regarding Procedures
Under Articles 21 and 22 of the DSU (WT/DS207/16), 7 January 2004.

Article II.1(b) of the GATT 1994; paragraph 4 of Article III of the GATT 1994; and, hence,
Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization.
19
2.11 As noted, on 29 December 2005, Argentina requested the establishment of a panel pursuant to
Article 21.5 of the DSU. In Argentina's view, th e amendments to the Chilean PBS do not alter the
PBS in its essence and do not bring it into conformity with the covered agreements. 20 The Panel was
established by the DSB at its meeting on 20 January 2006.
E. MEASURE CHALLENGED BY ARGENTINA: CHILE'S AMENDED PRICE BAND SYSTEM
1. The legal instruments
2.12 The measure subject to challenge by Argentina through this recourse to Article 21.5 of the
DSU is Chile's amended PBS, as applied to imports of wheat and wheat flour, based on the following
legislation: (a) Law 19.897, published on 25 September 2003, establishing rules on the importation of
goods into the country, which amends Article 12 of Law 18.525 and the Customs Tariff; and, (b)
Supreme Decree 831 of the Ministry of Finan ce, published on 4 October 2003, regulating the
application of Article 12 of Law 18.525, as substituted by Article 1 of Law 19.897.21
(a) Law 19.897
2.13 Law 19.897 modifies Article 12 of Law 18.525 on the Rules on the Importation of Goods. 22
It was published in Chile's Official Journal of 25 September 2003. The amendments entered into
force for wheat and wheat flour from 16 Decemb er 2003. In turn, Law 18.525 was published in
Chile's Official Journal on 30 June 1986. Chile's PBS is regulated by Article 12 of Law 18.525 as
amended by Law No. 19.897.23
2.14 The text of the relevant portions of Article 12 of Law 18.525, after the modifications
introduced through Law 19.897, is as follows:
"Established hereunder are specific duties in United States dollars per tariff unit and
rebates on the amounts payable as ad valorem duties established in the Customs
Tariff, which could affect the importati on of wheat, wheat flour and sugar, as
stipulated in this Law.
The amount of these duties and rebates shall be established as provided for in this
Article by the President of the Republic, by way of a supreme decree issued by the
Chilean Ministry of Finance by order of the President of the Republic, six times for
wheat in the course of each twelve-month period extending from 16 December to 15
December of the following year... in terms which, when applied to the price levels
attained by the products in question on the international markets, allow domestic
market stability.

19 Request for Consultations, Chile – Price Band System (Article 21.5 – Argentina) , 25 May 2004,

20 Request for the Establishment of a Panel, Chile – Price Band System (Article 21.5 – Argentina) ,
9 January 2006, WT/DS207/18.
21 Ibid., pp. 1-3. See also, Argentina's reply to question 1 from the Panel and Chile's reply to question 1
from the Panel.
22 Law 19.897, in Exhibits ARG-1 and CHL-1.
23 In the original proceedings, the relevant text of this provision was the article as amended by Laws
18.591 (published January 3, 1987) an d 18.573 (published December 2, 1987). A fifth paragraph was added to
the article during the proceedings, by Law 19.772 (published November 19, 2001). Through this addition, Chile
placed a cap on the duties payable so as to ensure they did not exceed the tariff limits bound in the WTO.

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 the reference
price is below the floor price of US$128 fo r 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 duties 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... In 2014, the
President of the Republic shall evaluate the modalities and conditions of application
of the price band system, taking into cons ideration international market conditions,
the requirements of the industrial, produc tive and consumer sectors and Chile's trade
obligations at that date.
The duties and rebates referred to in this Article shall correspond to the difference
between the floor or ceiling prices determin ed above and a f.o.b. reference price,
multiplied by a factor of one (1), plus the general ad valorem duty in force for these
products. The f.o.b. reference price sha ll consist 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.

The duties and rebates for wheat flour ar e based on those determined for wheat,
multiplied by a factor of 1.56.
The duties and rebates applicable to each import transaction shall be those in effect
on the date of the waybill of the vehicle transporting the goods in question.
The duties resulting from the application of this Article, added to the ad valorem
duty, shall not exceed the tariff rate bound by Chile under the World Trade
Organization for the goods referred to in paragraph 1, each import transaction being
considered individually and using the c.i.f. value of the goods concerned in the
transaction in question as a basis for calculation. The rebates established as a result
of the application of this Article sha ll in no circumstances exceed the amount
corresponding to the ad valorem duty payable on the importation of the goods. The
National Customs Service shall adopt th e measures necessary to enforce the
provisions of this paragraph.
The President of the Republic, by way of a supreme decree issued by the Chilean
Ministry of Finance and endorsed by the Ministry of Agriculture, shall establish,
pursuant to this Article, the periods in wh ich specific duties and tariff rebates are to
be established and applied. Furthermore, the President shall establish the most
relevant markets for each product, the procedures and dates for calculating the

reference prices and other methodological factors necessary for the implementation of
this Article."
24
(b) Supreme Decree 831 of the Ministry of Finance
2.15 In its version amended through Law 19.897, Ar ticle 12 of Law 18.525 specifically provides
for the issuance of a Supreme Decree in order to de termine: (a) the periods in which specific duties
and tariff rebates are to be established and applied; (b) the most relevant markets for each product;
(c) the procedures for calculating the reference pri ces; (d) the dates for calculating the reference
prices; and (e) other necessary methodological factors to implement the provisions in Article 12 of
the Law.
2.16 Decree 831 of the Ministry of Finance of 26 September 2003 contains the implementing
regulations for Article 12 of Law No. 18.525, as replaced by Article 1 of Law No. 19.897.
25
"Having regard to the provisions of Arti cle 12 of Law No. 18.525, establishing 'Rules
on the importation of goods into the country', as substituted by Article 1 of Law No.
19.897, and the powers conferred upon me by paragraph 8 of Article 32 of the
Political Constitution of the Republic of Chile, I hereby issue the following:
Decree:
The following regulations for the application of specific duties in dollars of the
United States of America, per tariff unit, and rebates on the amounts payable as ad
valorem duties established in the Customs Tariff, referred to in Article 12 of Law No.
18.525, as substituted by Article 1 of Law No. 19.897, are hereby adopted.
§ 1. Initial Provisions
Article 1.- Specific duties and tariff rebates.
The specific duties in dollars of the United States of America, per tariff unit, and the
rebates on the amounts payable as ad valorem duties established in the Customs
Tariff, hereinafter referred to as duties and rebates, which may affect the importation
of wheat, wheat flour and sugar, shall be determined in accordance with the
provisions of Article 12 of Law No. 18.525, hereinafter referred to as the Law, and by
the present regulations.
The amount of such duties and rebates shall be set by the President of the Republic by
a supreme decree, issued by the Ministry of Finance "by order of the President of the
Republic", six times for wheat in the course of each annual period extending from 16
December to 15 December of the following year, and twelve times for sugar in the
course of each annual period extending fro m 1 December to 30 November of the
following year, in terms which, when applie d to the price levels attained by the
products in question in international mark ets, are such as to lend stability to the
domestic market.

24 Law 19.897, in Exhibits ARG-1 and CHL-1. We ha ve omitted references to sugar, which, although
part of the PBS, it is not at issue in this case.
25 Decree 831, in Exhibits ARG-2 AND CHL-2.

Article 2.- Definitions
For the purposes of these regulations and th e application of duties and rebates, the
following definitions shall apply:
(a) Reference price: average of the daily international wheat and sugar prices recorded in
the most relevant markets, which shall be used for determining the duties and rebates
under the Law;
(b) Floor price: price used to determine the specific duties under the Law, when the
reference price is lower than the floor price; and
(c) Ceiling price: price used to determine the rebates on the amounts payable as ad
valorem duties established in the Customs Tari ff under the Law, when the reference
price is higher than the ceiling price.

Article 3.- Products covered
The duties and rebates established in confor mity with the Law and these regulations
shall apply to the following tariff codes of the Chilean Customs Tariff:
Product Code Item
Wheat 1001.9000 Other
Wheat flour 1101.0000 Wheat flour or meslin
Sugar [...] [...]

Article 4.- References to values and measures
The floor and ceiling values and the referen ce prices provided for in these regulations
shall be expressed in f.o.b. terms in dollars of the United States of America.
The duties and rebates established in conformity with these regulations shall be applied in
dollars of the United States of America, per ta riff unit in the case of duties and per tonne in
the case of rebates.

§ 2. Wheat
Article 5.- Issuing of decrees
Duties and rebates for wheat shall be determined six times in the course of each
annual period extending from 16 December to 15 December of the following year by
a supreme decree, which shall be published in the Official Journal within a period of
five days prior to the date of their entry into effect.
The periods of validity for implementation of each supreme decree establishing duties
or rebates shall be as follows:
• From 16 December to 15 February;
• from 16 February to 15 April;
• from 16 April to 15 June;

• from 16 June to 15 August;
• from 16 August to 15 October; and
• from 16 October to 15 December.
Article 6.- Floor and ceiling prices
The floor and ceiling prices for wheat during the period from December 2003 to
December 2014 shall be as follows:

Floor and ceiling prices for wheat, by period of validity
Period of validity Floor price Ceiling price
16.12.2003 to 15.12.2007 128 148
16.12.2007 to 15.12.2008 126 146
16.12.2008 to 15.12.2009 124 144
16.12.2009 to 15.12.2010 122 142
16.12.2010 to 15.12.2011 120 140
16.12.2011 to 15.12.2012 118 138
16.12.2012 to 15.12.2013 116 136
16.12.2013 to 15.12.2014 114 134

Article 7.- Reference price
The reference price for wheat shall corr espond to the average of the daily prices
recorded in the markets sp ecified 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.
Article 8.- Most relevant market
The most relevant market for wheat, duri ng 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.

§ 4. Determination of specific duties and tariff rebates
Article 13.- Establishment of duties and rebates
In each supreme decree issued under these re gulations there shall be established, with
respect to the products forming its subject matter, specific duties, when the reference
price is below the floor price, and rebates on the amounts payable as ad valorem
duties established in the Customs Tariff, when the reference price is above the ceiling
price.

When the reference price is above the floor price but below the ceiling price, this
shall be recorded in the corresponding d ecree, which shall not establish duties or
rebates during the period in which it remains in force.
Article 14.- Calculation of specific duties
The specific duties applicable to imports of wheat, refined sugar and raw sugar shall
correspond to the difference between the floor price and the reference price of each
product multiplied by a factor of one (1) plus the general ad valorem tariff in force
established in the Customs Tariff.
Specific duty = (Floor price in force
- reference price) *
(1 + general ad valorem
tariff in force,
Customs Tariff)

Article 15.- Calculation of the tariff rebate
The rebates on amounts payable as ad valorem Customs Tariff duties, applicable to
imports of wheat, refined sugar and raw s ugar, shall correspond to the difference
between the reference price and the ceiling price of each product multiplied by a
factor of one (1) plus the general ad valorem tariff in force established in the Customs
Tariff.
Tariff rebate = (Reference price
- ceiling price in force) *
(1 + general ad valorem
tariff in force,
Customs Tariff)

Article 16.- Wheat flour
In the case of wheat flour, the duties and rebates applied shall be those determined for
wheat multiplied by a factor of 1.56.
Specific duty or
tariff rebate for
wheat flour
=
Specific duty or
tariff rebate in
force for wheat
* 1.56

Article 17.- Date of application of duties and rebates
The duties or rebates applicable to each import transaction, established pursuant to
the procedure specified in these regulations, sh all be those in effect on the date of the
waybill of the vehicle transporting the goods in question.
In the case of electronic filing, the waybill da te will be taken to be the date of actual
acceptance of the vehicle and the goods will be considered to have been presented at
the same time, in accordance with Article 37 of the Customs Ordinance.

Article 18.- Limitations on the application of duties and rebates
The duties resulting from the applicati on of these regulations, added to the ad
valorem duty, may not exceed the tariff rate bound by Chile under the World Trade
Organization, each import transaction being considered individu ally and using the
c.i.f. value of the goods concerned in th e transaction in question as the basis for
calculation.
The rebates on the amounts payable as Customs Tariff ad valorem duties determined
for each import transaction may not exceed the amount corresponding to the ad
valorem duty established in the Customs Tariff in force, calculated on the basis of the
c.i.f. unit value of the goods.
The National Customs Service shall adopt the measures necessary to enforce the
provisions of this Article.
ANNEX
Summary Table for the implementation of paragraph 2
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

[...]"

2. Workings of the amended PBS
2.17 Chile has bound its tariff rates for the products re levant in the current proceedings, wheat and
wheat flour, at 31.5 per cent. 26 However, in practice, Chile's applied tariff rates are significantly
below its bound rate. Not considering the specifi c duties applied under the amended PBS, the MFN
tariff generally applicable to imports of wheat and wheat flour is 6 per cent.27
2.18 Under the amended PBS, the total amount of duties imposed on imports of wheat, wheat flour
and sugar28 may vary, through the imposition of additional specific duties or through the concession
of rebates on the amounts payable. The total amount of duty applied to imports of wheat and wheat
flour therefore consists of two components: the ad valorem MFN tariff and the applicable specific
duty, if any, resulting from the amended PBS. 29 In other words, the total amount of duties resulting

26 Chile's first written submission, para. 37. Chile's reply to question 71.
27 Chile's reply to questions 47 and 71. Argentina's first written submission, para. 27. Chile's first
written submission, para. 18.
28 As noted above (see footnote 24), sugar is not at issue in this case. The original PBS was also
applicable to edible vegetable oils, which have since be en excluded from the system . Argentina's first written
submission, paras. 21 and 22. Chile's first written submission, para. 18. Chile's reply to question 47 from the
Panel.
29 Argentina's first written submission, paras. 24 and 25 . Chile's first written submission, paras. 18 and
20.

from the application of the amended PBS may vary between: (a) less than 6 per cent ad valorem,
when a rebate is granted; (b) 6 per cent ad valorem, when there is no rebate granted and no additional
specific duty imposed; and (c) more than 6 per cent ad valorem, when an additional specific duty is
imposed.
2.19 The sum of the applied ad valorem tariff and the specific duty resulting from the amended
PBS, if any, is capped at the ad valorem rate bound at the WTO (31.5 per cent), each import
transaction being considered individually and usin g the CIF value of the goods concerned in the
transaction in question as a basis for calculation. Likewise, the rebates on the amounts payable as
Customs Tariff ad valorem duties determined for each import transaction, if any, may not exceed the
amount corresponding to the applicable ad valorem duty.
30
2.20 For the determination of the specific duty app licable, if any, the amended PBS, like the
original, consists of two elements: a lower and upper threshold (the band's "floor" and "ceiling") and
a reference price.
2.21 Under the amended PBS, the lower and upper th resholds of the band ha ve been determined
for the period extending from 16 December 2003 to 15 December 2014. For the period from 16
December 2003 to 15 December 2007, the lower a nd upper thresholds have been established at
US$128 per tonne and US$148 per tonne, respectively. From 16 December 2007 to 15 December
2014, the indicated lower and upper th resholds will be adjusted annually by multiplying the prices in
force during the previous annual period by a fact or of 0.985. The lower and upper thresholds
resulting from this operation are set out in Law 19.897 and in Supreme Decree 831.
31
2.22 Under the previous system, the lower and upper th resholds of the PBS were determined every
year on the basis of average monthly prices observed for the preceding 60 months on specific
exchanges. In the case of wheat, the calculation was based on Hard Red Winter No. 2 , FOB Gulf
(Kansas Exchange). These average prices were adjusted by the percen tage variation in the external
price index (IPE) drawn by the Central Bank of Chile. The adjusted prices were listed in descending
order, eliminating up to 25 per cent of the highest and lowest values. Tariff and importation costs
(such as freight, insurance, opening of a letter of credit, interest on credit, taxes on credit, customs
agents' fees, unloading, transport to the plant an d wastage costs) were added to the prices thus
determined in order to fix the lower and upper thresholds on a CIF basis.32
2.23 The amended PBS also involves the use of a "refer ence price". This reference price is not the
transaction price, but a price determined by the Chilean authorities six times in the course of each
twelve-month period extending from 16 December to 15 December of the following year. 33
According to Law 19.897, the reference prices ar e to be based on "the average of the daily
international prices for wheat... reco rded in the most relevant markets over a period of 15 calendar
days".34 The most relevant markets for wheat ar e defined by Decree 831 to be those of Trigo Pan

30 Chile's first written submission, paras. 23, 26 and 37. Chile's oral statement, paras. 22 and 24. Law
19.897, Article 1, in Exhibits ARG-1 and CHL-1. Decree 831, Article 18, in Exhibits ARG-2 and CHL-2, art.
18. See also, Chile's reply to question 66 from the Panel.
31 Argentina's first written submission, paras. 33, 35 and 66. Chile's first written submission,
paras. 28-29. Chile's oral statement, para. 25. Law 19.897, in Exhibits ARG-1, CHL-1. Decree 831, in
Exhibits ARG-2 and CHL-2.
32 Panel Report on Chile – Price Band System, paras. 2.4-2.5.
33 Argentina's first written submission, para. 38. Ch ile's first written submission, para. 19. See also,
Argentina's reply to question 12(d) from the Panel and Chile's reply to questions 12(a), 12(d) and 13 from the
Panel. Law 19.897, in Exhibits ARG-1, CHL-1. Decree 831, in Exhibits ARG-2 and CHL-2.
34 Argentina's first written submission, para. 40. Ch ile's first written submission, paras. 30 and 34.
Law No. 19.897, in Exhibits ARG-1 and CHL-1.

Argentino and Soft Red Winter No. 2 . The prices for those markets are to correspond to the daily
prices quoted for the products FOB Argentine port and FOB Gulf of Mexico, respectively.
35
2.24 Under the previous system, the reference prices were determined weekly (every Friday) by
the Chilean authorities, using the lowest f.o.b. pri ce for the product in question on foreign "markets of
concern to Chile". With respect to wheat, these markets of concern included Argentina, Canada
Australia and the United States. The reference price could be consulted by the public at the offices of
the Chilean customs authorities.36
2.25 Under the amended PBS, a specific duty is tri ggered when the reference price is below the
lower threshold of the band. The additional duty (w hich cannot bring the total duty to a level higher
than the ad valorem rate bound at the WTO) is equivalent to the difference between the lower
threshold of the band and the reference price, mult iplied by a factor of one (1) plus the general
ad valorem tariff (6 per cent). Conversely, a tariff reba te is triggered when the reference price is
higher than the upper threshold of the band. The re bate (which cannot be greater than the applied
ad valorem rate) is equivalent to the difference betw een the upper threshold of the band and the
reference price, multiplied by a factor of one (1) plus the general ad valorem tariff (6 per cent).37
2.26 Under the previous system, a specific duty was triggered when the reference price was below
the lower threshold of the band. The duty increase was equivalent to the absolute difference between
the lower threshold of the band a nd the reference price. Conversel y, a tariff rebate was triggered
when the reference price was above the price that determined the upper threshold of the band. The
rebate (which could not be greater than the applied ad valorem rate) was then equivalent to the
absolute difference between the reference price and the upper threshold of the band.38
2.27 As regards wheat flour, and similar to the origin al PBS, the price band for wheat is used to
calculate the duty or rebate, which is then multiplied by a factor of 1.56 to obtain the specific duty or
rebate for wheat flour.39
2.28 According to Decree 831, duties and rebates for wheat are to be determined six times in the
course of each annual period extending from 16 December to 15 December of the following year, by a
Supreme Decree, which is to be published in the Offici al Journal of Chile within a period of five days
prior to the date of its entry into effect. The periods of validity for implementation of each Decree
establishing duties or rebates are as follows: 16 De cember to 15 February; 16 February to 15 April;
16 April to 15 June; 16 June to 15 August; 16 August to 15 October; and, 16 October to
15 December.40
2.29 Each of these bimonthly decrees contains the sp ecific duties or rebates applicable for wheat
and wheat flour. The decrees do not indicate the re ference price calculated for each period. The

35 Argentina's first written submission, paras. 41 and 42 . Chile's first written submission, paras. 35 and
115. Decree 831, Article 8, in Exhibits ARG-2 and CHL-2.
36 Panel Report on Chile – Price Band System, paras. 2.4 and 2.6.
37 Argentina's first written submission, paras. 52, 56-5 7 and 62-63. Chile's oral statement, paras. 21
and 23. Chile's first written submission, paras. 21-22 and 24-25. Law 19.897, in Exhibits ARG-1, CHL-1.
Decree 831, in Exhibits ARG-2 and CHL-2.
38 Panel Report on Chile – Price Band System, para. 2.4.
39 Argentina's first written submission, para. 59. Chile 's first written submission, para. 27. Chile's oral
statement, para. 62. Law 19.897, in Exhibits ARG-1, CHL-1. Decree 831, in Exhibits ARG-2 and CHL-2.
Panel Report on Chile – Price Band System, para. 2.5.
40 Chile's first written submission, para. 33. Chile's rebuttal, para. 48. Chile's reply to question 6(b)
from the Panel. Decree 831, Article 5, in Exhibits ARG-2 and CHL-2.

specific duties or rebates remain valid for two months 41, "and during that period are completely
disconnected from what may occur in the reference, or any other, markets."42
2.30 When a shipment of a product subject to the amended PBS (including wheat and wheat flour)
arrives at the border for importation into Chile, the customs authorities apply the total amount of
applicable duties or rebates under th e amended PBS, if any, as indicat ed in the corresponding Decree.
The specific duty or rebate, applicable to each import transaction, is the one in effect on the date of
the waybill of the vehicle transporting the goods in question. 43 Under the previous system, the
applicable reference price for a particular shipment was determined with reference to the date of the
bill of lading.44
2.31 According to the data provided by Chile, during the first 109 weeks of operation of the
amended PBS (from 16 December 2003 to 13 January 2006), in 57 weeks (52.3 per cent) only the
general ad valorem tariff was applied, in 35 weeks (32.1 per cen t) duty rebates were applied and in 17
weeks (15.6 per cent) specific duties were applied. From 13 January to 15 June 2006, wheat imports
entered into Chile subject only to the general ad valorem tariff.45
2.32 The Law states that:
"In 2014, the President of the Republic shall evaluate the modalities and conditions of
application of the price band system, taking into consideration international market
conditions, the requirements of the industri al, productive and consumer sectors and
Chile's trade obligations at that date".46
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1 In turn, Argentina requests that the Panel find th at through the amendments incorporated into
its PBS, Chile has failed to implement the recomme ndations and rulings of the DSB and continues to
be in breach of its obligations as a Member of th e WTO. More specifically, Argentina requests that
the Panel find that the amended PBS, as applied to the importation of wheat and wheat flour:
(a) Is inconsistent with Article 4.2 of the Agreement on Agriculture, since it constitutes a
border measure similar to a variable import levy and a minimum import price;
(b) Is inconsistent with the second sentence of Article II:1(b) of GATT 1994, since it
falls within the category of "other duties or charges", has not b een recorded in the
relevant column of Chile's Schedule of Concessions and is nevertheless levied; and,

41 Decree 831, Articles 1 and 5, and Annex "Summary Table for the implementation of paragraph 2",
in Exhibits ARG-2 and CHL-2.
42 Chile's first written submission, para. 180. See also Chile's first written submission, para. 93, Chile's
oral statement, paras. 31 and 63, and Chile's reply to questions 12(a), 13 and 14 from the Panel. See also,
Chile's first written submission, para. 114. Chile's rebuttal, paras. 8 and 89. Chile's reply to question 14 from
the Panel.
43 Chile's first written submission, para. 36. Decree 831, Article 17, in Exhibits ARG-2 and CHL-2.
44 Panel Report on Chile – Price Band System, para. 2.6.
45 Chile's rebuttal, paras. 173 and 174. Argentina's reply to question 29 from the Panel.
46 Law No. 19.897, in Exhibits ARG-1 and CHL-1. See also, Chile's reply to question 49 from the
Panel.

(c) Does not ensure the conformity of Chile 's laws, regulations and administrative
procedures with its obligations as provi ded in the WTO Agreements, which is
inconsistent with Chile's obligations under Article XVI:4 of the WTO Agreement.
47
3.2 Chile has requested the Panel to find that the amended PBS has eliminated any inconsistency
with Article 4.2 of the Agreement on Agricultu re and has implemented the DSB recommendations
and rulings in the original proceedings. More specifically, Chile has requested the Panel to find that:
(a) Argentina's claim under the second sentence of Article II:1(b) of GATT 1994 is
outside the terms of reference of this compliance Panel;
(b) Argentina's "claim ... relating to the factor of 1.56 used to determine the duties or rebates
for wheat flour" is outside the terms of reference of this compliance Panel48;
(c) The amendments incorporated by Chile make the PBS consistent with Article 4.2 of
the Agreement on Agriculture; and,
(d) As a consequence of the PBS not being inconsistent with Article 4.2 of the
Agreement on Agriculture, the challenged measures are also not in breach of
Article XVI:4 of the WTO Agreement.49
IV. ARGUMENTS OF THE PARTIES
4.1 The arguments of the parties are set out in their submissions to the Panel. Submissions from
the parties, including the first written submissions , rebuttals and written versions of their oral
statements, are attached as annexes to the report.
V. ARGUMENTS OF THE THIRD PARTIES
5.1 The arguments of the third parties to these pro ceedings that presented oral statements to the
Panel are attached as annexes to the report, i.e ., Australia, Brazil, Canada, Colombia, the European
Communities, Thailand and the United States. Th e only written submission r eceived by the Panel,
that presented by Brazil, is likewise attached.
VI. INTERIM REVIEW
6.1 On 11 October 2006, the Panel submitted its inte rim report to the parties. On 18 October
2006, Argentina and Chile submitted written requests for review of precise aspects of the interim
report.
6.2 The Panel modified aspects of its report in light of the parties' comments where it considered
that appropriate, as explained below. The Pane l has also made some additional revisions and
corrections for the purposes of clarity and accuracy. References to paragra ph numbers and footnotes
in this Section refer to those in the interim report, except as otherwise noted.

47 Request for the Establishment of a Panel, Chile – Price Band System (Article 21.5 – Argentina) ,
9 January 2006, WT/DS207/18. See also, Argentina' s first written submission, paras. 13-14 and 305,
Argentina's rebuttal, paras. 320-321, and Argentina's oral statement, paras. 3-7.
48 Chile's first written submission, paras. 58-63 and 197. Chile's rebuttal, paras. 182-195, 206 and 211.
The Panel is of the view that Argentina has not raised a cl aim specifically related to the use of such 1.56 factor.
The Panel will consider the parties' arguments related to th is factor in the findings section of this Report. See
para. 7.80 below.
49 Chile's first written submission, paras. 2, 46-57, 64 -197. Chile's rebuttal, paras. 6 and 211. Chile's
oral statement, para. 19.

Factor applicable to wheat flour
6.3 In footnote 48, paragraph 3.2(a), of the interi m report, the Panel had referred to Chile's
request that the Panel find the claim raised by Argentina relating to the factor of 1.56 used to determine
the duties or rebates applicable to wheat flour to be outside of its terms of reference. Chile requested
that this argument not be confined to a footnote a nd that it be addressed separately and not only in the
context of arguments raised by Argentina.
6.4 The Panel has reviewed paragraph 3.2 of the re port, in the light of Chile's request, and has
reflected Chile's argument relating to the 1.56 factor in the main body of that paragraph and not solely in
a footnote.
6.5 The Panel is not persuaded, however, by Chile's interpretation that Argentina has raised a
claim related to the use of a factor of 1.56. The Panel recalls the traditional definition of a claim as
the affirmation "that the respondent party has violat ed, or nullified or impaired the benefits arising
from, an identified provision of a particular agreement"
50, as compared to the arguments "adduced by
a complaining party to demonstrate that the responding party's measure does indeed infringe upon the
identified treaty provision".
51 Argentina's comments regarding the 1.56 factor are not a separate
claim, but rather part of its arguments to support the claim that the amended PBS is similar to a
"variable import levy" and a "minimum import price," and is thus inconsistent with Article 4.2 of the
Agreement on Agriculture. Accordingly, the Panel did not modify its reasoning contained in
paragraph 7.80 of the interim report.
Linkage between Argentina's claim under th e second sentence of Article II:1(b) of GATT
1994 and its claim under Article 4.2 of the Agreement on Agriculture
6.6 In paragraph 7.3 of the interim report, the Pa nel noted that Argentina has linked its claim
under the second sentence of Article II:1(b) of GA TT 1994 to the Panel's requested findings under
Article 4.2 of the Agreement on Agriculture. That linkage is also mentioned in paragraph 7.157 of the
interim report. Argentina requested that the Panel clarify that, in its request for the establishment of
this compliance Panel, its claim under Article II: 1(b) of GATT 1994 was not linked to its claim under
Article 4.2 of the Agreement on Agriculture and that, furthermore, the former claim is one that stands
on its own.
6.7 We take note of Argentina's explanation, a nd we have made corresponding adjustments in
paragraphs 7.107 and 7.157, which reflect Argentina's arguments. However, we find no need to
review paragraph 7.3 of the interim report, whic h quotes Argentina's words, linking its claim under
Article II:1(b) of GATT 1994 to its claim under Arti cle 4.2 of the Agreement on Agriculture, in order
to discuss what should be the proper order of the Panel's analysis.
Mathematical calculations submitted by the parties
6.8 Chile requested that the Panel review Section V II.B of the interim report (paragraphs 7.6 to
7.104). In its opinion, the Panel has not consider ed the extensive mathematical calculations provided
by the parties, regarding whether the amended PBS works similarly to a variable levy or a minimum
import price, and the effects of overcompensation and isolation.
6.9 The Panel had already noted in its interim repor t, the extensive explanations provided by the
parties regarding the operation of the amended PBS.

50 Appellate Body Report on Korea – Dairy, para. 139.
51 Ibid.

6.10 On the basis of such explanations and the ev idence available, the Pa nel concluded that the
amended PBS continues to have the same features that were found to make the original PBS similar to
a "variable import levy". Such a conclusion was reached mainly on the basis that the amended PBS
contains a scheme or formula that causes and ensu res that the level of duties collected or rebates
granted under the system changes automatically and c ontinuously over time, as well as that the design
and operation of the amended PBS continues to be ch aracterized by a lack of both transparency and
predictability, features also observed in the course of the original proceedings. These aspects affect
the basic elements of the amended PBS, i.e., the reference price and the thresholds of the band.
6.11 With regard to the similarity to a "minimum import price", and also on the basis of the
explanations provided by the parties and the evid ence available, the Panel noted that the amended
PBS operates so as to prevent the entry of imports of wheat and wheat flour into the Chilean market at
prices below the lower threshold of the band. The Panel also noted that, as a result of the combined
application of the ad valorem tariff rates and the specific duties or rebates resulting from the PBS, the
Chilean domestic price has been disconnected from international price developments. The amended
PBS was found to go beyond simply ensuring "a reasonable margin of fluctuation of domestic prices".
Instead, specific duties resulting from the amended PB S tend to "overcompensate" for price declines
and to elevate the entry price of wheat imports to Chile above the lower threshold of the price band.
In these circumstances, the entry price of such im ports to Chile under the amended PBS is higher than
if Chile simply applied a minimum import price at the level of the lower threshold of the price band.
6.12 It is on the basis of the configuration and in teraction of the different features of Chile's
amended PBS, and not only on partic ular mathematical calculations provided by the parties, that the
Panel found that the amendments introduced by Chile into its PBS have failed to convert it into a
measure that is no longer a border measure similar to a "variable import levy" and to a "minimum
import price", in the terms of footnote 1 to Article 4.2 of the Agreement on Agriculture.
Consequently, the Panel finds no need to review Section VII.B of the report as requested by Chile.
Adjustment for import costs in the original PBS

6.13 In paragraphs 7.40(d), 7.48 and 7.50 of the interim report, the Panel had referred to the way in
which prices used to determine the reference price were not adjusted for "import costs", unlike the
prices used in the calculation of the upper and lower thresholds of the band. The Panel also referred
to the findings made by the Appellate Body a nd by the original Panel in that regard. Chile requested
that these paragraphs be reviewed, since they pe rpetuate a misunderstanding about the way in which
the original PBS functioned.
6.14 The Panel has noted Chile's arguments in this regard. 52 It is outside the Panel's mandate,
however, to review the characteristics of the origin al PBS, as they were d escribed in the original
proceedings by the Appellate Body and by that Panel. In any event, even if, ad arguendo, we were to
accept Chile's explanation that there is a misunders tanding about the way in which, in the original
PBS, the reference price was not adjusted for "imp ort costs", this would not affect the conclusions
contained in this compliance Panel report.
Amendments to Chile's PBS
6.15 Chile requested that the Panel review the language of paragraphs 7.53 and 7.92 of the interim
report, referring to whether the Panel should consider "specific aspects" of the amended PBS or rather
determine the nature of the amendments to the PB S and whether those amendments are sufficient to
comply with the DSB's recommendations and rulings and bring the measure into conformity with the

52 See, for example, Chile's first written submission, paras. 167-169.

WTO agreements. The Panel has reviewed the langua ge of both paragraphs in the light of Chile's
comments.
The amended PBS as a border measure other than an ordinary customs duty
6.16 Paragraph 7.109 of the interim report states th at the Panel had already noted that the
challenged measures are border measures "other than an ordinary customs duty". Argentina
requested that a cross-reference be added to this paragraph to cite the corresponding section where the
Panel concluded that the amended PBS is not an ordinary customs duty. The Panel has included the
cross-reference requested and reviewed the language of paragraph 7.104 in the light of Argentina's
comment.
Implementation of rulings and recommendations of the DSB
6.17 In light of the Panel's finding that Chile has ma intained a border measure similar to a variable
import levy and to a minimum import price, and c onsequently acted in a manner inconsistent with
Article 4.2 of the Agreement on Agriculture, Argentina requested the Panel to make an additional
explicit finding that Chile has not implemented the recommendations and rulings of the DSB to bring
its measure into conformity with its obligations under the Agreement on Agriculture. The Panel has
reviewed the language of paragraph 8.2(a) in the light of Argentina's comments.
Additional revisions and corrections
6.18 The Panel made additional revisions and correcti ons to paragraphs 1.5, 7.60 and 7.171 of the
interim report, as well as to footnote 225.
VII. FINDINGS
A. ORDER OF THE PANEL'S ANALYSIS
7.1 Argentina claims that the amended PBS is incons istent with Article 4.2 of the Agreement on
Agriculture, with the second sentence of Article II: 1(b) of GATT 1994 and with Article XVI:4 of the
WTO Agreement.
7.2 In the original proceedings, when dealing with Argentina's claims under Article 4.2 of the
Agreement on Agriculture and Article II:1(b) of GATT 1994, the Panel decided to commence its
analysis with an examination of the first claim. The Panel's decision was based on the consideration
"that Article 4.2 of the Agreement on Agriculture deal s more specifically and in detail with measures
affecting market access of agricultural products". 53 In this regard, the Appellate Body stated that,
inasmuch as the two provisions "establish distinct legal obligations... the outcome of this case would
be the same" whether the analysis had begun with an examination of Article 4.2 of the Agreement on
Agriculture or of Article II:1(b) of the GATT 1994. 54 In any event, the Appellate Body concluded
that the Panel had not erred in examining Argen tina's claim under Article 4.2 of the Agreement on
Agriculture before the claim under Article II:1(b) of the GATT 1994 and decided to follow the same
order.55
7.3 There is an additional reason to follow the same order in the current proceedings. Argentina
has linked its claim under the second sentence of Article II:1(b) of GATT 1994 to the Panel's
requested findings under Article 4.2 of the Agreement on Agriculture. In Argentina's words:

53 Panel Report on Chile – Price Band System, para. 7.16.
54 Appellate Body Report on Chile – Price Band System, para. 189.
55 Appellate Body Report on Chile – Price Band System, para. 191.

"Insofar as the amended PBS is a border measu re similar to a variable import levy
and a minimum import price, it is inconsistent with Article 4.2 of the Agreement on
Agriculture, since it is a measure other than an ordinary customs duty.
Not being an ordinary customs duty, the amended PBS constitutes 'other duties or
charges' not recorded in the appropriate column of Chile's Schedule of concessions
(No. VII).
Therefore, if the amended PBS was not reco rded but is nonetheless being levied, it is
in breach of the second sentence of Article II:1(b) of the GATT 1994, pursuant to the
Understanding on the Interpretation of Article II:1(b) of the GATT 1994."
56
7.4 Likewise, Argentina has made its claim under Article XVI:4 of the WTO Agreement
contingent on the Panel making findings under Artic le 4.2 of the Agreement on Agriculture and the
second sentence of Article II:1(b) of GATT 1994:
"[B]eing inconsistent with Article 4.2 of the Agreement on Agriculture and the
second sentence of Article II:1(b) of the GATT 1994, the amended PBS is in breach
of Article XVI:4 of the Marrakesh Agreement Estab lishing the World Trade
Organization since, while it remains in force, Chile is not ensuring the conformity of
its laws, regulations and administrative pr ocedures with its obligations under the
WTO Agreements."57
7.5 In light of the above, as was done in the original proceedings, we will start our analysis with an
examination of the amended PBS under Article 4.2 of the Agreement on Agriculture. We will then turn
to Argentina's claim under the se cond sentence of Article II:1(b) of GATT 1994 and finally to the
claim under Article XVI:4 of the WTO Agreement.
B. ARGENTINA'S CLAIM UNDER ARTICLE 4.2 OF THE AGREEMENT ON AGRICULTURE
1. Arguments of the parties
7.6 Argentina claims that the amended PBS is incons istent with Article 4.2 of the Agreement on
Agriculture. It argues that the essence of the PB S was unaffected by the changes introduced by Chile
through Law 19.897 and Supreme Decree 831.58 In its view, both the way in which the amended PBS
is designed as well as the way in which it operates ar e sufficiently similar to the characteristics of a
"variable import levy" and a "minimum import price" as to make the PBS not an ordinary customs
duty, but rather a "similar border measure", in the terms of footnote 1 to Article 4.2 of the Agreement
on Agriculture.
59
7.7 Argentina adds that the particular configurati on and interaction of the specific characteristics
of the amended PBS generate certain market access conditions that l ack transparency and
predictability, disconnecting the Chilean market from in ternational price trends in a way that insulates
the Chilean market from the transmission of inte rnational prices, and prevents enhanced market
access for imports of wheat and wheat flour.60 Argentina also contends that the factor of 1.56 applied
to the duties and rebates determined for wheat, in or der to calculate the duties and rebates applicable

56 Argentina's first written submission, paras. 293-295 (Footnote omitted).
57 Ibid., para. 304.
58 Ibid., para. 70.
59 Ibid., paras. 71, 72, 74, 285, 286 and 288. Argentina's rebuttal, paras. 5, 6 and 12.
60 Argentina's first written submission, paras. 73 and 287. Argentina's rebuttal, paras. 7 and 13.

to wheat flour, further insulates the entry pr ice for wheat flour from international price
developments.61
7.8 Argentina argues that, in the light of the Appella te Body's findings in the original case, Chile
should have abolished its PBS as a pplied to wheat and wheat flour, as it did in the case of edible
vegetable oils.62
7.9 Chile responds that the amendments made to its PBS under Law 19.897 and its Regulations are
in keeping with the findings and conclusions of the Appellate Body and that Chile has therefore complied
with the recommendations and rulings of the WTO Dispute Settlement Body. 63 In Chile's opinion, it
was only required to take action with respect to sp ecific aspects of the PBS that the Appellate Body
had identified.64 Chile adds that this is without prejudice to the fact that, in its view, the amendments
introduced to the PBS do not have the effects that Argentina alleges and which would continue to
make it inconsistent with Article 4.2 of the Agreement on Agriculture.65
7.10 Chile argues that the amendments help to gra dually reduce protection in the domestic wheat
and milling sector. The parameters used for the ass essment of specific duties, namely floor, ceiling
and reference prices, have been establishe d in a transparent and predictable manner. 66 In its opinion,
the Chilean wheat and wheat flour market has be en connected to the international market, and
protection levels will increasingly diminish, meani ng that in addition to closer connection with
foreign markets, there will be a decrease in rela tive prices that will render Chile's wheat market more
competitive.67
7.11 Chile states that, as a result, the new PBS operat es in such a way that it does not constitute a
variable import levy or a minimum import price, or a measure similar to a variable import levy or a
minimum import price. Therefore, in Chile's view , the amended PBS does not constitute one of the
measures cited in the footnote to Article 4.2 of the Agreement on Agriculture and is thus not among
the measures required to be converted into ordinary customs duties.68
7.12 With respect to the factor of 1.56 used to determine the duties or rebates for wheat flour, Chile
requests the Panel to find that this is a claim that falls outside the terms of reference of this compliance
Panel.69
2. Relevant provision
7.13 In the original proceedings, the Appellate Body defined in its report Article 4 of the
Agreement on Agriculture, the provision cited by Ar gentina, as "the legal vehicle for requiring the
conversion into ordinary customs duties of certa in market access barriers affecting imports of
agricultural products".70 Article 4.2 provides:
"Members shall not maintain, resort to, or revert to any measures of the kind which
have been required to be converted into ordinary customs duties1, except as otherwise
provided for in Article 5 and Annex 5."

61 Argentina's first written submission, paras. 224-235.
62 Argentina's rebuttal, paras. 317-319.
63 Chile's first written submission, paras. 64, 89, 193 and 197. Chile's rebuttal, paras. 6, 81 and 207.
65 Chile's first written submission, para. 88.
66 Ibid., para. 193.
67 Ibid., para. 195.
68 Ibid., paras. 194, 196. Chile's rebuttal, para. 210.
69 Chile's first written submission, paras. 58-63 and 197. Chile's rebuttal, paras. 182-195, 206 and 211.
70 Appellate Body Report on Chile – Price Band System, para. 201.

 "__________
 1 These measures include quantitative import restrictions, variable import levies,
minimum import prices, discretionary import licensing, non-tariff measures maintained
through state-trading enterprises, voluntary ex port restraints, and similar border measures
other than ordinary customs duties, whether or not the measures are maintained under
country-specific derogations from the provisions of GATT 1947, but not measures maintained
under balance-of-payments provisions or under other general, non-agriculture-specific
provisions of GATT 1994 or of the other Multila teral Trade Agreements in Annex 1A to the
WTO Agreement."
3. Panel's analysis
(a) Issues for the Panel's consideration
7.14 The main issue for the Panel to decide under this particular claim is whether the amendments
introduced by Chile to its PBS are such as to make the measure consistent with Article 4.2 of the
Agreement on Agriculture. More specifically, whethe r the measure can no longer be considered to be
a border measure that is similar to a variable import levy or to a minimum import price.
7.15 In the original proceedings, Chile's PBS was not found to be a "variable import levy" or a
"minimum import price" system, but rather an inst rument that had sufficient likeness or resemblance
to be considered similar to those schemes.71
7.16 Variable import levies and minimum import prices are included in the list in footnote 1 to
Article 4.2 of the Agreement on Agriculture as ex amples of "measures of the kind which have been
required to be converted into ordinary customs duties" . The list in footnote 1 contains other types of
measures, such as quantitative import restrictions, discretionary import licensing, non-tariff measures
maintained through state-trading enterprises and voluntary export restraints.
7.17 In the current case, Argentina has argued that th e amended PBS is similar to variable import
levies and to minimum import prices. 72 Accordingly, the Panel will limit itself to considering the
possible similarity between the amended PBS and those two categories of measures (variable import
levies and minimum import prices) and not other categories of measures also listed in footnote 1 to
Article 4.2 of the Agreement on Agriculture.
(b) General considerations
7.18 The Panel begins by noting the objectives of the WTO Agreement on Agriculture, as
described in its preamble: "to establish a fair and market-oriented agricultural trading system", and to
initiate a reform process "through the negotiati on of commitments on support and protection and
through the establishment of strengthened and more operationally effective GATT rules and
disciplines".
73 To achieve this objective, the preamb le states that it is necessary to provide for
reductions in protection, "resulting in correcting and preventing restrictions and distortions in world
agricultural markets,"74 through achieving "specific binding commitments," inter alia, in the area of
market access75.76

71 Ibid., paras. 222-262. Panel Report on Chile – Price Band System, paras. 7.38-7.47.
72 Argentina's first written submission, paras. 71-72, 285-286. Argentina's rebuttal, paras. 5-6, 12, 159,
205 and 320.
73 Preamble to the Agreement on Agriculture, recital 2.
74 Ibid., recital 3.
75 Ibid., recital 4.
76 Appellate Body Report on Chile – Price Band System, para. 196.

7.19 As noted by the Appellate Body in the original proceedings, during the course of the Uruguay
Round, negotiators decided that certain border measu res, which restricted the volume of trade or
distorted the price of imports of agricultural pro ducts, had to be converted into ordinary customs
duties, with a view to ensuring enhanced market a ccess for such imports. This agreement is reflected
in the text of Article 4 of the Agreement on Ag riculture which, as its title indicates, deals with
"Market Access".77
(c) Is the amended PBS a border measure similar to those listed in footnote 1 to Article 4.2?
(i) Border measures listed in footnote 1 to Article 4.2
7.20 We now turn to Argentina's contention that Ch ile's amended PBS is a border measure similar
to a variable import levy and a minimum import pric e within the meaning of footnote 1 to Article 4.2
of the Agreement on Agriculture.
7.21 As in the case of the original measure 78, we note that the amended PBS continues to apply
exclusively to imported goods and is enforced at the border by Chilean customs authorities. 79 Chile
has not disputed these facts. It is therefore cl ear and undisputed that the amended PBS, like the
original PBS, is still a border measure.
7.22 Footnote 1 lists six categories of border meas ures and a residual category of such measures
that are included in "measures of the kind which have been required to be converted into ordinary
customs duties" within the meaning of Article 4.2. 80 The list is illustrative, and includes "quantitative
import restrictions, variable import levies, minimum import prices, discretionary import licensing,
non-tariff measures maintained through state-trad ing enterprises, voluntary export restraints, and
similar border measures other than ordinary customs duties" (emphasis added).
7.23 Argentina has alleged that Chile's amended PB S has characteristics sufficiently similar to
those of a "variable import levy" and a "minimum im port price" so as to render it a "similar border
measure", in the terms of footnote 1 to Article 4. 2 of the Agreement on Agriculture, rather than an
ordinary customs duty.
81
7.24 As indicated by the Appellate Body, in order to determine whether Ch ile's amended PBS 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.
82
7.25 We will thus compare Chile's amended PBS to those two categories of measures (i.e., variable
import levies and minimum import prices). Before looking at these two categories of measures, we
recall the words of the Appellate Body in the original case:
"[A]ll of the border measures listed in footnote 1 have in common the object and
effect of restricting the volumes, and distorting the prices, of imports of agricultural

77 Ibid., para. 200.
78 Panel Report on Chile – Price Band System, para. 7.25.
79 Law 19.897, in Exhibits ARG-1, CHL-1.
80 Footnote 1 exempts "measures ma intained under balance-of-payments provisions or under other
general, non-agriculture-specific provisions of the GA TT 1994 or the other Multilateral Trade Agreements in
Annex 1A to the WTO Agreement." These "measures" are not relevant in these proceedings.
81 Argentina's first written submission, paras. 72 an d 286. Argentina's rebuttal, paras. 6 and 12.
Argentina's closing oral statement, para. 19. Argentina's reply to question 5(b) from the Panel.
82 Appellate Body Report on Chile – Price Band System, paras. 225-226. See also, Panel Report on

products in ways different from the ways that ordinary customs duties do. Moreover,
all of these measures have in common also th at they disconnect domestic prices from
international price developmen ts, and thus impede the transmission of world market
prices to the domestic market. However, even if Chile's price band system were to
share these common characteristics with all of these border measures, it would not be
sufficient to make that system a 'simil ar border measure' within the meaning of
footnote 1. There must be something mo re. To be 'similar', Chile's price band
system—in its specific factual configuration—must have, to recall the dictionary
definitions we mentioned, sufficient 'resembl ance 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."
83
(ii) Definition of the term "variable import levies" in the original proceedings
7.26 In the original proceedings, the Appellate Body noted that the terms "variable import levies"
and "minimum import prices" are not defined in the Agreement on Agriculture nor in any other of the
WTO Agreements.84 In those proceedings, the Panel conclude d that it could not interpret those terms
solely by looking at their text and context and on the basis of the general method of interpretation
codified in Article 31 of the Vienna Convention on the Law of Treaties. 85 It consequently decided to
resort to supplementary means of interpretation as codified in Article 32 of the Vienna Convention. 86
The Appellate Body disagreed with the Panel's appr oach and decided to interpret the terms "variable
import levies" and "minimum import prices" using the customary rules of interpretation as codified in
Article 31 the Vienna Convention, i.e., discussing the ordinary meaning of these terms in their
context, and in the light of their object and purpose.87
7.27 Applying those customary rules to the interpreta tion of the term "variable import levies", the
Appellate Body stated:
"In examining the ordinary meaning of the term ' variable import levies ' as it appears
in footnote 1, we note that a 'levy' is a duty, tax, charge, or other exaction usually
imposed or raised by legal execution or process. 88 An 'import' levy is, of course, a
duty assessed upon importation. A levy is 'variable' when it is 'liable to vary'. 89 This
feature alone, however, is not conclusive as to what constitutes a 'variable import
levy' within the meaning of footnote 1. An 'ordinary customs duty' could also fit this
description. A Member may, fully in accordance with Article II of the GATT 1994,
exact a duty upon importation and periodically change the rate at which it applies that
duty (provided the changed rates remain below the tariff rates bound in the Member's
Schedule).
90 This change in the applied rate of duty could be made, for example,
through an act of a Member's legislature or executive at any time. Moreover, it is
clear that the term 'variable import levies' as used in footnote 1 must have a meaning
different from 'ordinary customs duties', b ecause 'variable import levies' must be
converted into 'ordinary customs duties'. Thus, the mere fact that an import duty can

83 Appellate Body Report on Chile – Price Band System, para. 227.
84 Ibid., para. 229.
85 Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.
86 Panel Report on Chile – Price Band System, para. 7.35. See also, Appellate Body Report on Chile –
Price Band System, para. 229.
87 Appellate Body Report on Chile – Price Band System, paras. 230-231.
88 (original footnote) The New Shorter Oxford English Dictionary..., p. 1574.
89 (original footnote) Ibid., p. 3547.
90 (original footnote) Appellate Body Report, Argentina – Textiles and Apparel..., para. 46.

be varied cannot, alone, bring that duty with in the category of 'variable import levies'
for purposes of footnote 1.
To determine what kind of variability makes an import levy a 'variable import levy',
we turn to the immediate context of the othe r words in footnote 1. The term 'variable
import levies' appears after the introductory phrase '[t]hese measures include'.
Article 4.2—to which the footnote is attached—also speaks of ' measures'. This
suggests that at least one feature of 'varia ble import levies' is the fact that the
measure itself—as a mechanism—must impose the variability of the duties.
Variability is inherent in a measure if the measure incorporates a scheme or formula
that causes and ensures that levies change automatically and continuously. Ordinary
customs duties, by contrast, are subject to discrete changes in applied tariff rates that
occur independently, and unrelated to such an underlying scheme or formula. The
level at which ordinary customs duties are applied can be varied by a legislature, but
such duties will not be automatically and continuously variable. To vary the applied
rate of duty in the case of ordinary customs duties will always require
separate legislative or administrative action, whereas the ordinary meaning of the
term 'variable' implies that no such action is required.
However, in our view, the presence of a formula causing automatic and continuous
variability of duties is a necessary, but by no means a sufficient, condition for a
particular measure to be a 'variable import levy' within the meaning of footnote 1.
91
'Variable import levies' have additional features that undermine the object and
purpose of Article 4, which is to achieve improved market access conditions for
imports of agricultural products by perm itting only the application of ordinary
customs duties. These additional features include a lack of transparency and a lack of
predictability in the level of duties that will result from such measures. This lack of
transparency and this lack of predictability are liable to restrict the volume of imports.
As Argentina points out, an exporter is less likely to ship to a market if that exporter
does not know and cannot reasonably predic t what the amount of duties will be. 92
This lack of transparency and predictab ility will also contribute to distorting the
prices of imports by impeding the transmission of international prices to the domestic
market."
93
7.28 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 administ rative action and is intransparent and unpredictable
as to the level of resulting duties.
(iii) Definition of the term "minimum import prices" in the original proceedings
7.29 As noted above94, the Appellate Body defined the term "minimum import prices" by using the
customary rules of interpretation as codified in Ar ticle 31 the Vienna Convention, i.e., discussing the
ordinary meaning of these terms in their context, and in the light of their object and purpose. 95
Applying those customary rules to the interpreta tion of the term "minimum import prices", the
Appellate Body stated:

91 ( original footnote ) The participants agreed with this in th eir responses to questioning at the oral
hearing.
92 (original footnote) Argentina's responses to questioning at the oral hearing.
93 Appellate Body Report on Chile – Price Band System, paras. 232-234.
94 See para. 7.26 above.
95 Appellate Body Report on Chile – Price Band System, paras. 230-231.

"The term 'minimum import price' refers generally to the lowest price at which
imports of a certain product may enter a Me mber's domestic market. Here, too, no
definition has been provided by the drafters of the Agreement on Agriculture .
However, the Panel described 'minimum import prices' as follows:
[these] schemes generally operate in relation to the actual transaction
value of the imports. If the price of an individual consignment is
below a specified minimum import price, an additional charge is
imposed corresponding to the difference.
96
The Panel also said that minimum import prices 'are generally not dissimilar from
variable import levies in many respects, including in terms of their protective and
stabilization effects, but that their mode of operation is generally less complicated.' 97
The main difference between minimum import prices and variable import levies is,
according to the 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 concer ned, while minimum import price schemes
generally operate in relation to the actual transaction value of the imports.'
98
(emphasis added)."99
7.30 In essence, a minimum import price is a measure which ensures that certain imported
products will not enter a domestic market at a pri ce lower than a certain threshold, normally by
imposing an import duty assessed on the basis of th e difference between such threshold and the
transaction value of the imported goods.
(iv) Determination that the original PBS was sim ilar to "variable import levies" or "minimum
import prices"
7.31 After having defined the terms, the original Pa nel and the Appellate Body found Chile's PBS
to be a border measure similar to a "variable import levy" or a "minimum import price".100
7.32 The original Panel highlighted the fact that Chile's PBS had features that revealed "its
intrinsically unstable, intransparent and unpredictabl e nature, as well as the insulation of the domestic
market from international price competition which it [achieved]. 101 The Appellate Body emphasized
the fact that "a formula inherent in Chile's pr ice band system [caused] and [ensured] automatic and
continuous variability of the duties resulting from that system".102
7.33 Looking at the way in which the lower and upper thresholds of Chile's PBS were determined,
the original Panel noted that those thresholds varied in relation to "world prices", and not in relation to
domestic prices, or to some target price set by the Chilean authorities. In the words of the Panel:
"We recognize that, on the face of it, the Chilean PBS does not share all the
characteristics of both 'variable import levies' and 'minimum import prices'... [T]he
lower threshold of the Chilean PBS is not explicitly derived from, or linked to, an
internal market-related price, as is often the case in variable import levy schemes.

96 (original footnote) Panel Report, para. 7.36(e).
97 (original footnote) Ibid.
98 (original footnote) Ibid.
99 Appellate Body Report on Chile – Price Band System, paras. 236-237.
100 Panel Report on Chile – Price Band System, para. 7.47. Appellate Body Report on Chile – Price
Band System, paras. 252 and 262.
101 Panel Report on Chile – Price Band System, para. 7.61.
102 Appellate Body Report on Chile – Price Band System, para. 241.

Instead, it corresponds to an administrativel y determined threshold price which may,
but will not necessarily, be equal to or above the domestic market price. Nonetheless,
we consider that, on the basis of the evidence before us, it cannot be excluded that the
lower threshold of the PBS, given the way in which it is designed, particularly with
the many adjustments made by the administ ering agencies to the basic world market
price quotations employed, including for inflation, operates in practice as a 'proxy' for
such internal prices."103
7.34 In other words, taking into account the evidence submitted, the original Panel considered that
the lower thresholds of Chile's price bands, under th e original PBS, could often, although admittedly
not in all cases, be equal to or higher than the domes tic price. The Panel also noted that this could
have been due, in part, to the way in which the pr ice band thresholds, which were first calculated on
the basis of monthly f.o.b. world prices over the previ ous five years, were then converted to a c.i.f.
basis.104
7.35 In this respect, the original Panel also noted the fact that the PBS thresholds were determined:
"[I]nter alia, after discarding 25 per cent of 'atypical observations' at the bottom and
at the top, hence substantially increasing the likelihood that the lower threshold of the
PBS [would] equal or exceed the higher internal price."105
7.36 Based on these elements, the original Panel conc luded that the lower thresholds of Chile's
price bands operated like substitutes for domestic target prices and that this feature of Chile's PBS was
similar to the features of variable import levies and those of minimum import prices.106
7.37 The Appellate Body agreed only partially with the original Pa nel's assessment. In the words
of the Appellate Body:
"[T]he Panel placed too much emphasis on whether or not Chile's price bands are
related to domestic target prices or domestic market prices. In our view—even
though Chile's price bands are set in relation to world prices from a past five-year
period—Chile's price band system can still have the effect of impeding the
transmission of international price developm ents to the domestic market in a way
similar to that of other categories of prohi bited measures listed in footnote 1. There
are factors other than world market prices that are relevant to the assessment of
Chile's price bands. The prices that re present the highest 25 per cent as well as the
lowest 25 per cent of the world prices from the past five years are discarded in
selecting the 'highest and lowest f.o.b. pri ces' for the determination of Chile's annual
price bands. Furthermore, we place considerable importance on the intransparent and
unpredictable way in which the 'highest and lowest f.o.b. prices' that have been
selected are converted to a c.i.f. basis by adding 'import costs'. As Chile concedes, no
published legislation or regulation sets out how these 'import costs' are calculated."
107
7.38 The Appellate Body also found that the way in which the second essential element of Chile's
PBS, i.e., the "reference price", was established was si milarly affected by a lack of transparency and
predictability:

103 Panel Report on Chile – Price Band System, para. 7.45.
104 Appellate Body Report on Chile – Price Band System, para. 244.
105 Panel Report on Chile – Price Band System, para. 7.45 (footnote omitted). See also, Appellate Body
Report on Chile – Price Band System, para. 245.
106 Panel Report on Chile – Price Band System, para. 7.46.
107 Appellate Body Report on Chile – Price Band System, para. 246.

"In addition to the lack of transparency and th e lack of predictability that are inherent
in how Chile's price bands are established, we see similar shortcomings in the way the
other essential element of Chile's price band system—the reference price—is
determined. As we have explained, the duties resulting from Chile's price band
system are equal to the difference between the price band thresholds and the reference
price. Chile sets the reference price on a week ly basis, and it does so in a way that is
neither transparent nor predictable."
108
7.39 The Appellate Body thus concluded that, even assuming that one of the two parameters of the
original PBS, the band thresholds, did not distort the transmission of world market prices to Chile's
market, it would nevertheless remain that the other parameter, the weekly reference prices, was liable
to distort, if not disconnect, that transmission by vi rtue of the way in which it was determined. That
was because specific duties resulting from Chile's PBS were equal to the difference between two
parameters: the annual price band thresholds and the weekly reference prices applicable to the
shipment in question. Consequently, even in su ch a case, the duties resulting from Chile's PBS would
not transmit world market price developments to Chile's market in the same way as "ordinary customs
duties".109
7.40 The Appellate Body cited the following feat ures that compromised transparency and
predictability in the way in which the PBS's re ference price was established and impeded the
transmission of international price developments to Chile's market:
(a) No Chilean legislation or regulation speci fied how the international "markets of
concern" and the "qualities of concern" were selected, so that it was not certain that
the weekly reference price was representative of the current world market price.
(b) The weekly reference price was not represen tative of an average of current lowest
prices found in all markets of concern.
(c) The same weekly reference price applied to imports of all goods falling within the
same product category, regardless of the or igin of the goods, and regardless of the
transaction value of the shipment.
(d) Unlike with the prices used in the calculation of the upper and lower thresholds of the
band, the price used to determine the week ly reference price was not adjusted for
"import costs", and thus was not converted from an f.o.b. basis to a c.i.f. basis. This
was likely to inflate the amount of specific duties applied under Chile's PBS, because
the duties were imposed in an amount equal to the difference between the
annual price band thresholds, based on higher c.i.f. prices, and the weekly reference
prices, based on lower f.o.b. prices.
110
7.41 The Appellate Body also found that, contrary to what Chile had contended, the PBS did not
merely moderate the effect of fluctuations in wo rld market prices on Chile's market, nor did it tend
only to compensate for price declines. Rather , the duties resulting from Chile's PBS tended to
"overcompensate" for such price declines, and to el evate the entry price of imports to Chile above the
lower threshold of the relevant price band. In other words, when international prices fell, and when
the weekly reference prices were below the lower th resholds of the band, the total duties applied to

108 Ibid., para. 247.
109 Ibid., para. 251.
110 Appellate Body Report on Chile – Price Band System, paras. 249-250.

particular shipments would, in many cases, result in overall entry prices for those shipments that rose
rather than fell.111
7.42 The fact that the PBS duties were "capped" at the level of the 31.5 per cent ad valorem tariff
rate bound in Chile's WTO Schedule was not consid ered relevant by the Panel and the Appellate
Body, with respect to whether the PB S was any less distortive or insulating. 112 In this regard, the
Appellate Body found "nothing in Article 4.2 [of the Agreement on Agriculture] to suggest that a
measure prohibited by that provision would be rend ered consistent with it if applied with a cap." 113
The Appellate Body concluded that the fact that the duties resulting from Chile's PBS were capped at
31.5 per cent ad valorem reduced the extent of the trade distortions in that system by reducing the
extent to which those duties fluctuate, but it did not eliminate those distortions. Moreover, the cap did
not eliminate the lack of transparency, or the lack of predictability, in the fluctuation of the duties
resulting from the PBS.114
7.43 The Appellate Body emphasized that it had reached its conclusions on the basis of the
particular configuration and interaction of all the specific features of Chile's PBS.115
(v) Is the amended PBS still similar to "variable import levies" or "minimum import prices"?
Amendments introduced by Chile in its PBS
7.44 The parties are in agreement th at Chile has amended its PBS. 116 The Panel must determine,
however, if such amendments are sufficient to co mply with the DSB's recommendations and rulings
to bring the measure into conformity with the WTO agreements.
7.45 In this respect, we initially note that Chile has argued that it was only "required to take action"
on "specific aspects of the PBS that made the system a measure similar to a variable import levy and a
minimum import price", identified by the Appellate Body.117
7.46 Chile maintains that several features that were observed by the Panel and the Appellate Body
in the course of the original proceedings, and which were related to the matter of transparency or
predictability, have been modified under the amended PBS.
7.47 For example, Chile notes that the amended PB S has abolished the formula which, under the
original PBS, discarded the highest 25 per cent as well as the lowest 25 per cent of world prices over
the preceding five years for the calculation of the lower and upper thresholds of the band. 118
Additionally, in the amended PBS both the lower and upper thresholds of the band are to be defined in
f.o.b. terms, so that there is no explicit process of conversion of prices from f.o.b. to c.i.f. and it is no
longer necessary to add "import costs".119
7.48 Indeed, in the original proceedings, the way in which the lower threshold was determined was
found to artificially increase the margin between th e lower threshold of the PBS and the reference
price, and thus the applicable PBS duty. This fo r two reasons. First, because the lowest 25 per cent

111 Ibid., para. 260.
112 Ibid., paras. 254-259. See also, Panel Report on Chile – Price Band System, footnote 608.
113 Appellate Body Report on Chile – Price Band System, para. 254.
114 Ibid., para. 259.
115 Ibid., para. 261.
116 See, inter alia , Argentina's first written submission, paras. 2, 14, 21 and 23, Chile's first written
submission, paras. 15, 45, 64 and 88.
117 Chile's first written submission, para. 88.
118 Chile's first written submission, para. 108. See also, Law 19.897, in Exhibits ARG-1, CHL-1.
119 Law 19.897, in Exhibits ARG-1, CHL-1. Chile's first written submission, para. 109.

of all observed international market prices over th e preceding 60 months were discarded, while the
prices observed in "markets of concern" used for the calculation of the reference price did not undergo
the same operation. Second, because the f.o.b. pr ices used for the threshold values were adjusted,
inter alia, for "usual import costs", whereas the f.o.b. prices used for the reference prices were not.
120
For the same two reasons, the Panel also found that it could not be excluded that this threshold would
operate in practice as a "proxy" for a domestic target price or domestic market price.121
7.49 In the original proceedings, the Appellate Body had also placed considerable importance on
the way in which, in determining the thresholds of the bands, "import costs" were added to convert
f.o.b. prices to a c.i.f. basis. The Appellate Body found that process to be neither transparent nor
predictable, since no published legislation or re gulation set out how those "import costs" were
calculated.122
7.50 The Appellate Body additionally noted that, unlike the five -year average monthly prices used
in the calculation of Chile's annual price bands, th e lowest "market of concern" price used to
determine the weekly reference price was not adjust ed for "import costs" and thus not converted from
a f.o.b. basis to a c.i.f. basis. This made it likely that the amount of specific duties applied under
Chile's PBS would be inflated, because these duti es were imposed in an amount equal to the
difference between Chile's annual price band thresholds, which were based on higher c.i.f. prices, and
Chile's weekly reference prices, which were based on lower f.o.b. prices. This factor was found, inter
alia, to contribute to giving Chile's PBS "the effect of impeding the transmission of international price
developments to Chile's market".123
7.51 Chile has also highlighted the fact that, under the amended PBS, the most relevant markets for
wheat in Chile are explicitly indicated in Supreme Decree 831. 124 According to Supreme Decree 831,
during the yearly periods extending from 16 December to 15 June of the following year, the "most
relevant market" for wheat will be that for Trigo Pan Argentino (Argentine bread wheat) and the
prices will correspond to the daily prices quoted for that product f.o.b. Puerto Argentino (Argentine
port). Likewise, during the period extending from 16 June to 15 December every year, the "most
relevant market" will be that for Soft Red Winter No. 2 and the prices will correspond to the daily
prices quoted for that product f.o.b. Gulf of Mexico.
125
7.52 In the original proceedings, the Appellate Body had called attention to the fact that no Chilean
legislation specified how the international "marke ts of concern" to Chile and the "qualities of
concern" of products actually liable to be imported to Chile were selected in order to set the reference
prices. Thus, as stated by the Appellate Body it w as not "certain that the weekly reference price
[would be] representative of the current world market price".126
7.53 We have noted the features highlighted by Chile127 and some of them will be further discussed
below. However, we are not persuaded by Chile's argument that all it was required to do was to take
action on certain specific aspects of the PBS. On the contrary, a determination of whether Chile has
amended its PBS in a manner so as to comply w ith the DSB's recommendations and rulings and to
bring the measure into conformity with the WTO agreements, requires a review that goes beyond the
consideration of "specific aspects". We recall, in th is regard, the statement of the Appellate Body in
the original case:

120 Panel Report on Chile – Price Band System, para. 7.63.
121 Ibid., para. 7.45. See also, Appellate Body Report on Chile – Price Band System, paras. 243-245.
122 Appellate Body Report, Chile – Price Band System, para. 246.
123 Ibid., para. 250.
124 Chile's first written submission, paras. 35 and 115.
125 Supreme Decree 831, Article 8, in Exhibits ARG-2 and CHL-2.
126 Appellate Body Report on Chile – Price Band System, para. 249.
127 See paras. 7.47 and 7.51 above.

"[W]e reach our conclusion on the basis of 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 market 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 deve lopments in a way that insulates Chile's
market from the transmission of internationa l prices, and prevents enhanced market
access for imports of certain agricultural products."
7.54 We will thus examine Chile's am ended PBS, considering the conf iguration and interaction of
its different features, in order to determine whethe r 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.
Is the amended PBS still similar to a "variable import levy"?

7.55 We have already described the considerations th at led the Appellate Body to find that Chile's
original PBS, in respect of its particular features, shared sufficient similarity with "variable import
levies" as to resemble, or be considered to be of the same nature or kind as such levies. 128 We will
now address the issue of whether the amended PBS continues to have sufficient resemblance or
likeness, to a "variable import levy".
7.56 In light of the Appellate Body's interpretati on of the term "variable import levies", we
consider first the ordinary meaning of the words them selves. In this regard, we note that the amended
PBS continues to be a system for the determinati on of certain duties or rebates imposed on specific
products upon their importation. We also note th at the duties resulting from the amended PBS (i.e.,
the total amount of duties resulting from the application of the amended PBS 129) continue to be
"variable", i.e., "liable to vary".130
7.57 Recalling a statement of the Appellate Body, Chile has stated that "the mere fact that a levy is
variable does not mean that it is a 'variable import levy'." 131 Indeed, not all import duties that are
liable to vary can be categorized as "variable import levies". A particular type of variability is needed
to make an import levy a "variable import levy". Looking at the context in which the term "variable
import levy" is used in footnote 1 to Article 4.2, th e Appellate Body noted that at least one feature of
"variable import levies" is the fact that the measure itself, as a mechanism, must impose the
variability in the duties.
7.58 On its face, the language of the legislation for the amended PBS will necessarily result in
variability in the level of duties collected or rebates granted under the system, due to the fact that such
language contemplates a scheme or formula that bot h causes and ensures that the level of such duties
or rebates changes automatically and continuously over time. Chile has contested this fact. In
particular, when asked about this by the Panel, Chile asserted that:
"[T]he changes introduced by Chile by means of Law 19.897, the price bands no
longer operate as a scheme or formula for th e calculation of duties or rebates at the

128 See paras. 7.31, 7.32, and 7.37-7.43 above.
129 The total amount of duties resulti ng from the application of the am ended PBS will vary between:
(a) less than 6 per cent ad valorem, when a rebate is granted; (b) 6 per cent ad valorem, when there is no rebate
granted and no additional specific duty imposed; and (c) more than 6 per cent ad valorem, when an additional
specific duty is imposed in cases when the reference price is below the lower threshold.
130 Appellate Body Report on Chile – Price Band System, para. 232.
131 Chile's first written submission, para. 134. Cfr., Appellate Body Report on Chile – Price Band

border, in the manner indicated by the DSB in the original proceedings... Law 19.897
establishes a single specific duty (or tari ff rebate) applicable to every import
operation. This duty, like any other ordinary customs duty, remains invariable until it
is changed by an administrative act. The other parameters laid down in Law 19.897
are no longer part of a scheme or formul a, as they were under the PBS, but are
elements for defining the framework of th e border protection applied by the Chilean
Government."
132
7.59 We find this statement by Chile unpersuasive in light of the available evidence to the contrary
and, indeed, of Chile's own explanations of how the amended PBS operates in practice. 133 T h e
variability of the total amount of applied duties resulting from the operation of the amended PBS is
not equivalent to the result of discrete changes in tariff rates. 134 Nor is the variability in the level of
such specific duties or rebates the result of sep arate, independent and discrete legislative or
administrative acts. Rather, the level of speci fic duties or rebates under the amended PBS is
determined and announced six times during the course of each annual period, pursuant to the mandate
of the legislation itself. As noted, such legislati on sets forth a scheme or formula that establishes an
automatic and periodic adjustment in such levels. Furthermore, under the terms of the legislation, any
administrative action is limited merely to announc ing (by means of a Supreme Decree published in
the Official Journal of Chile) the level of the sp ecific duties or rebates resulting from the application
of the scheme or formula set out in such legislation. Under the applicable legislation, administrative
action occurs after the amount of the applicable duties resulting from the amended PBS has been
calculated in accordance with a formula.
7.60 Chile has highlighted the fact that ordinary cu stoms duties may also vary over time. It has
illustrated this fact, by citing the changes it made in its own ad valorem tariff from 1984 to 2003,
lowering it gradually from 35 per cent to 6 pe r cent. That progressive decrease of the ad valorem
tariff was achieved through successive variations of the tariff rate, in the context of a trade
liberalization policy. 135 In our opinion, however, the variab le features in the amended PBS are
different from the possible modifications that a Memb er may introduce in its ordinary customs duties.
The level of ordinary customs duties is in principl e stable and predictable, at least until those duties
are replaced with altogether new tariff rates. Chile's programme of gradually lowering its ad valorem
tariff is an example of a predictable movement in the conditions of market access. Indeed, Chile
referred to the latter stage of that programme as "a plan for the progressive and automatic reduction of
Chile's general tariff from 11 per cent to 6 per cent between January 1999 and January 2003".136
7.61 In contrast, the only thing truly predictable about the level of duties ultimately assessed under
the amended PBS is that in principle such level will change every two months. In other words,
continuous variability of the duties is a feature inherent in the amended PBS.
7.62 This being said, the amended PBS is affected by more than the lack of predictability
explained above. In the original proceedings, bot h the Panel and the Appellate Body emphasized the
fact that the measures listed in footnote 1 to Article 4.2 of the Agreement on Agriculture are

132 Chile's response to question 7.
133 Law 19.897, in Exhibits ARG-1, CHL-1. Supreme Decree 831, in Exhibits ARG-2 and CHL-2.
See also, Chile's response to questions 6(b) and 16.
134 Discrete changes occur independently and unrelated to an underlying statutory scheme or formula.
Cfr., Appellate Body Report on Chile – Price Band System, para. 233 ("Ordinary customs duties, by contrast,
are subject to discrete changes in applied tariff rates that occur independently, and unrelated to such an
underlying scheme or formula").
135 Chile's first written submission, paras. 134-136.
136 Chile's rebuttal, para. 105. See Exhibit CHL-8.

characterized by a lack of tr ansparency and predictability. 137 Both these features were noted by the
Appellate Body as undermining the object and purpos e of Article 4 of the Agreement on Agriculture:
"to achieve improved market access conditions for imports of agricultural products by permitting only
the application of ordinary customs duties". Ac cordingly, the Panel must examine whether the
amended PBS lacks not only predictability but also lacks the requisite transparency.138
7.63 Notwithstanding the amendments incorporated by Chile into its PBS, several crucial aspects
of the design and operation of the amended PBS c ontinue to be characterized by a lack of both
transparency and predictability, which was also ob served in the course of the original proceedings.
On its face, the amended PBS is based on a scheme or formula that determines the level of specific
duties or rebates that are to be applied on imports of wheat and wheat flour. As will be discussed
below, several specific features, re lated to the matter of transparency or predictability, that were
observed by the Panel and the Appellate Body in th e course of the original proceedings, have been
rendered moot in the amended PBS. Further, Chile asserts that, any interested exporter with
knowledge of the market should be now able to pr edict, by applying the PBS's formulas, the amount
of applicable duties or rebates. In Chile's words:
"[W]hat is necessary in order to foresee th e amount of the specific duty is a wheat
trader's own skills in predicting prices and negotiating sales or purchases."139
7.64 In practice, however, several features of the system continue to be affected by a lack of
transparency and predictability. The basic feature of the system is that, every two months, specific
duties are to be imposed when the reference price is calculated by Chilean authorities to be below the
lower threshold of the band. Conversely, rebates are to be granted when the reference price is
calculated to be above the upper threshold. The tw o basic elements of the amended PBS are thus the
reference price and the thresholds of the band.140
7.65 Supreme Decree 831 provides a technical definition of the term "reference price": the
"average of the daily international wheat and suga r prices recorded in the most relevant markets". 141
As explained in the descriptive section of this report 142, the reference price is determined by the
Chilean authorities six times in the course of each year and based, by statute, on an average of the
daily international prices recorded over a period of 15 calendar days for two specific qualities of
wheat in two selected markets (those of Trigo Pan Argentino and Soft Red Winter No. 2, quoted f.o.b.
Argentine port and f.o.b. Gulf of Mexico, respectively).
7.66 The parties have extensively discussed with th e Panel the manner in which reference prices
are established by Chilean authorities. Despite the technical explanation of how reference prices are
supposed to be calculated, the available evidence suggests that the manner in which these prices are
determined continues to be affected by a serious lack of transparency. To begin with, reference prices
are supposed to be determined through a scheme or formula, based on average daily prices for 15
calendar days out of each 60-day period. 143 The fact that authorities are statutorily limited to
averaging the observations made during 15 calen dar days does not guarantee that the resulting
reference prices will be representative for the whole pe riod. In response to a question from the Panel,
Chile has stated that:

137 Appellate Body Report on Chile – Price Band System, para. 234. Panel Report on Chile – Price
Band System, para. 7.34.
138 Appellate Body Report on Chile – Price Band System, para. 234.
139 Chile's first written submission, para. 162.
140 See paras. 2.20, 2.25 and 2.28 above.
141 Supreme Decree 831, Article 2(a), in Exhibits ARG-2 and CHL-2.
142 See para. 2.23 above.
143 Law 19.897, in Exhibits ARG-1, CHL-1. See para. 2.23 above.

"It has been estimated that the average pri ce over the period of at least fifteen days
closest to the date of calculation of the duty or rebate (corr esponding roughly to ten
working days) is the minimum necessary fo r the result to be representative of the
conditions prevailing at that time on the ma rket, so as to prevent that average from
potentially being influenced by extreme quot ations which occasionally appear in the
market and which do not necessarily reflect th e level and trend of prices at that point
in time."
144
7.67 It is noteworthy that Chile has stated also that "the representativeness [of the reference price]
at each point in time is of no relevance" and has high lighted instead that this price is supposed to be
representative "of trends in the international market".145 In Chile's words:
"The reference price is based on informati on generated in the international markets
and supplied by reliable sources. At the time it is calculated, therefore, it is
representative of trends in the internationa l market. However, it should be pointed
out that the reference price is used as an in strument to facilitate determination of the
level of protection for wheat, and that it has no useful bearing on commercial
operations in that product. Accordingly, its representativeness at each point in time is
of no relevance."
146
7.68 However, the Panel notes that, in the course of the original proceedings, the Appellate Body
reached the conclusion that the process of selecting the reference price was not transparent and not
predictable for traders, based inter alia on the fact that it was not certain that the weekly reference
prices under the original PBS were representative of current world market prices.147
7.69 Likewise, under the amended PBS, the refere nce prices are supposed to correspond to the
wheat prices recorded in only two markets select ed by Chile, i.e., Argentina and the United States. 148
Available evidence demonstrates, however, that dur ing the years 2004 and 2005, Canada was a larger
exporter of wheat to Chile than the United States, in volume and in monetary terms. 149 In other
words, at least for some periods, and despite the de finition contained in the Chilean legislation, the
reference price has not reflected the prices recorded in some of the most relevant markets of concern
for Chile.150
7.70 It should be noted again that, in the original proceedings, the fact that the weekly reference
price used under Chile's PBS was not representative of an average of current lowest prices found in
all markets of concern, was another factor cons idered by the Appellate Body in reaching its
conclusion that the process of selecting the reference price was not transparent and not predictable for
traders.151
7.71 Furthermore, as pointed out by Argentina, b ecause of the way in which reference prices are
calculated, traders will still have difficulty to estimate the total amount of applicable duties under the
amended PBS before they send a particular shipment. 152 Depending on the time it takes for a

144 Chile's response to question 12(a).
145 Chile's response to question 12(b).
146 Ibid.
147 Appellate Body Report on Chile – Price Band System, para. 249.
148 Supreme Decree 831, Article 8, in Exhibits ARG-2 and CHL-2. See para. 2.23 above.
149 Argentina's oral statement, para. 54. See also, Exhibit ARG-31 and Chile's response to question 60.
150 Indeed, because of the changing nature of trad e patterns, which are the markets of concern for a
particular product is an evolving matter. Current markets of concerns may become irrelevant in one or two
years, due to many different reasons.
151 Appellate Body Report on Chile – Price Band System, para. 249.
152 Argentina's first written submission, paras. 278-280.

particular shipment to arrive to Chile, and depending on the dates of that shipment, it is possible that
at the time of exportation, the 15-day period of collection of prices used by the Chilean authorities for
calculating the reference prices will not have ended. Indeed, the fact that the total amount of
applicable duties under the amended PBS is linked to the fluctuation of world market prices is in itself
a factor of uncertainty and unpredictability. We find merit in Brazil's statement during the Panel
meeting:
"[E]ven though traders often speculate on the evolution of prices, they cannot predict
changes with the certainty required to afford predictability to trade. Variable import
levies are prohibited precisely because the Agreement on Agriculture requires that
market access be based on predictable re gulation that does not alter with market
prices."
153
7.72 Transparency and predictability in the system are also affected by the mere existence of a
"reference price". The fact that specific duties are added to the applied ad valorem tariff, on the basis
of some periodically determined a nd 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. This in turn is likely to lead to a reduction in the volume of imports and to impede the
transmission of international prices to the domestic market.
7.73 As previously noted 154, under the amended PBS, the refere nce price is determined by the
Chilean authorities six times per year, on the basis of the daily prices recorded in the "most relevant
markets for wheat" over the 15 preceding days. This refe rence price so determined is then used to set
the level of duties or rebates under the PBS, if any, applicable to all imports of wheat, regardless of
their origin, and regardless of the transaction valu e of the respective shipment. In other words,
according to the current legislation, the same refe rence price, determined from prices pertaining to
specific varieties of wheat from specific origins, is to be used to determine the specific duties (or
rebates, if applicable) that are imposed on "imports of all goods falling within the same product
category, regardless of the origin of the goods , and regardless of the transaction value of the
shipment".155 The same specific duties or rebates under the amended PBS are also applicable to all
imports of wheat flour, with the corresponding conversion factor of 1.56. 156 This feature was found,
in the course of the original proceedings, to contri bute in giving the PBS "the effect of impeding the
transmission of international price developments to Chile's market".157
7.74 The thresholds of the band are the second basic element of the amended PBS. Chile has set
the upper and lower thresholds of the band at US$148 and US$128, respectively, which will be
adjusted annually beginning in 2007. 158 When asked about the way in which these two figures were
determined, Chile has explained that it was done on the basis of the floor and ceiling prices provided
for under the original PBS.159 In Chile's words:
"[T]he f.o.b. equivalents we re determined on the basis of the floor and ceiling prices
provided for in Decree No. 266 of May 2002, expressed at import cost level, by
deducting all import costs applicable to an or dinary trading transaction at the date of
entry into force of the Law (second half of 2003)."160

154 See para. 7.65 above.
155 Cfr. Appellate Body Report on Chile – Price Band System, para. 250.
156 Cfr. Chile's response to question 15.
157 Appellate Body Report on Chile – Price Band System, para. 250.
158 Law 19.897, in Exhibits ARG-1, CHL-1. See para. 2.21 above.
159 Chile's response to question 52.
160 Ibid.

7.75 In the course of the original proceedings, th e way in which thresholds were determined
(inter alia, after discarding 25 per cent of "atypical observations" at the bottom and at the top) was
found by the Appellate Body to increase the likelih ood that the lower threshold of the band would
equal or exceed the higher internal price. In othe r words, the lower threshold of the band was found
to operate like a substitute for domestic target prices.
161 For a similar reason, Chile's original PBS
was also found to have the effect of impeding the tr ansmission of international price developments to
the domestic market in a way similar to that of other categories of prohibited measures listed in
footnote 1.162
7.76 Chile states that, under the amended PBS, in order to determine the upper and lower
thresholds of the band, it has converted c.i.f. values to f.o.b. equivalents "by deducting all import costs
applicable to an ordinary trading transaction at the date of entry into force of the Law". 163 I n t h i s
regard, we recall the findings of the Appellate Bo dy with respect to the manner in which Chile
determined the upper and lower thresholds of the ba nd under the original PBS. In those proceedings,
the Appellate Body determined that the way in which Chile converted f.o.b. prices into a c.i.f. basis,
by adding "import costs", was intransparent and unpredictable, inter alia , because no published
legislation or regulation set out how those "import costs" were calculated.164
7.77 In other words, under the amended PBS the upper and lower thresholds of the band have been
set on the basis of a methodology that was found, in the course of the original proceedings, to be
intransparent and unpredictable and to have the eff ect of impeding the transmission of international
price developments to the domestic market. The new thresholds are thus affected by the same
deficiencies that were identified in the original PBS.
7.78 Chile has asserted that under the amended PB S it "abolished the calculation formula that
included discarding the highest 25 per cent as well as the lowest 25 per cent of world prices over the
past five years".
165 It has added that all prices are now "set as f.o.b., meaning that today there is no
price or value that converts an f.o.b. price to a c. i.f. basis, and it is no longer necessary to add 'import
costs', which makes the system a great deal more transparent".166
7.79 The Panel has noted, however 167, that the upper and lower thresholds of the band were set by
Chile on the basis of the floor and ceiling prices pr ovided for under the original PBS, after deducting
"import costs". In other words, Chile has admitted that these thresholds were set using figures that
were determined through a methodology that, in th e original proceedings, was found to increase "the
likelihood that the lower threshold of the PBS [woul d] equal or exceed the higher internal price". 168
Chile has not demonstrated that the alleged a bolition 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
evidence 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 enou gh to demonstrate that, in this regard, the current
system is any less intransparent and unpredictabl e than the original. Moreover, under the amended
PBS, the upper and lower thresholds of the band, set on the basis of the methodology described above,
have been fixed until 2014, with annual predetermine d adjustments that will enter in force beginning

161 Panel Report on Chile – Price Band System, para. 7.45.
162 Appellate Body Report on Chile – Price Band System, para. 246.
163 Chile's response to question 52.
164 Appellate Body Report on Chile – Price Band System, para. 246.
165 Chile's first written submission, para. 108.
166 Ibid., para. 109.
167 See para. 7.74 above.
168 Panel Report on Chile – Price Band System, para. 7.45. Appellate Body Report on Chile – Price
Band System, para. 245.

in 2007. By fixing the thresholds in this ma nner, the effect of disconnecting domestic prices from
international price developments, thus impeding the transmission of world market prices to the
Chilean domestic market, has been carried on into the amended PBS.
7.80 Argentina has also referred to th e issue of the factor of 1.56 applied to the duties and rebates
determined for wheat, under the amended PBS, in orde r to calculate the duties and rebates applicable
to wheat flour.169 We are not convinced by Chile's contention that this is a claim that falls outside the
terms of reference of this compliance Panel. 170 In our view, Argentina's comments regarding the 1.56
factor are rather part of its arguments to suppor t its claim that the amended PBS is similar to a
"variable import levy" and a "minimum import price" and is thus inconsistent with Article 4.2 of the
Agreement on Agriculture. It is therefore not a sep arate claim. In that respect, through the 1.56
factor, wheat flour is subject to an additional element of insulation from the transmission of
international prices. As explained by Chile, the figure of 1.56 results from the fact that "between
January 1986 and December 1995 (the period of app lication of the band at that time), the average
ratio of the price of flour to the price of wheat was 1.566".
171 This figure was then "built into the
Chilean legislation and it has remained unchanged ever since". 172 Chile, however, admits that the
ratio of the price of wheat flour to the price of wh eat may change over time. Previous legislation had
estimated this ratio at 1.41. 173 In conclusion, by basing the total amount of duties applicable to wheat
flour on the level of duties applicable to wheat, the amended PBS is transmitting to wheat flour the
same features of insulation from international price developments to the domestic market and of lack
of transparency and predictability that were obser ved above with respect to wheat. Furthermore,
these effects are compounded by having built this factor into the legislation and preventing any
adjustments to the ratio.
7.81 For the reasons indicated above, we find that the amended PBS continues to have the same
features which were found to make the original PBS similar to a "variable import levy".
Is the amended PBS still similar to a "minimum import price"?
7.82 We have already described the considerations th at led the Appellate Body to find that Chile's
original PBS, in its particular features, shared sufficient features with "minimum import prices" to
resemble, or be considered to be of the same nature or kind to those measures and, thus, prohibited by
Article 4.2 of the Agreement on Agriculture. We have also found that the amended PBS continues to
have features which make it similar to a "variabl e import levy". We will now address the issue of
whether the amended PBS also continues to have sufficient resemblance or likeness, to a "minimum
import price".
7.83 In the original proceedings, the Appellate Body noted that the term "minimum import price",
"refers generally to the lowest price at which imports of a certain product may enter a Member's
domestic market". It went on to note that the Panel had indicated that minimum import prices "are
generally not dissimilar from variable levies in ma ny respects, including in terms of their protective
and stabilization effects, but that their mode of operation is generally less complicated" and had
defined the term by indicating that:
"[M]inimum import price schemes generally operate in relation to the actual
transaction value of the imports. If the pri ce of an individual consignment is below a

169 Argentina's first written submission, paras. 224-235.
170 Chile's first written submission, paras. 58-63 and 197. Chile's rebuttal, paras. 182-195, 206 and 211.
Chile's response to question 17 (d).
171 Chile's rebuttal, para. 201. See also, Exhibits CHL-10 and CHL-11.
172 Ibid.
173 Chile's rebuttal, para. 187. See also, Argentina's response to question 32 and Exhibit ARG-29.

specified minimum import price, an additional charge is imposed corresponding to
the difference."
174
7.84 When asked by the Panel, Chile stated its vi ew that "[t]he defining characteristic of a
minimum import price is the impossibility for any co mmercial operation to be expressed in terms of a
price lower than the established price."175
7.85 In the original proceedings, the Panel noted that it could not:
"[B]e excluded that the lower threshold of the PBS, given the way in which it is
designed, particularly with the many adjustments made by the administering agencies
to the basic world market price quotations employed, including for inflation, operates
in practice as a 'proxy' for such internal prices".
176
7.86 As we have noted, the lower threshold of the band in the amended PBS was set by Chile by
resorting to the figures of the lowe r thresholds in the original PBS. 177 In other words, the lower
threshold of the band in the amended PBS was dete rmined by resorting to a methodology that had
already been found to make such a threshold operate like a substitute for domestic target prices.
7.87 Considering the available evidence, we note th at the lower threshold of the band in the
amended PBS appears to continue to operate in pr actice as a "proxy" or substitute for a minimum
import price. As a result of the combined application of the ad valorem tariff rates and the specific
duties or rebates resulting from the PBS, the Ch ilean domestic price has been disconnected from
international price developments.178
7.88 Similarly to what was noted in the origin al proceedings, the amended PBS goes beyond
simply ensuring "a reasonable margin of fluctuation of domestic prices". 179 In practice, when
international prices fall, and when the referenc e prices are determined to be below the lower
thresholds of the price band, the combined application of the ad valorem tariff rates and the specific
duties resulting from the PBS may result in an overall entry price of that shipment that rises rather
than falls. Therefore, the amended PBS does not ensu re that the entry price of imports to Chile falls
in tandem with falling world market prices, even albe it to a lesser extent than the decrease in those
prices. Instead, specific duties resulting from the amended PBS tend to "ove rcompensate" for price
declines and to elevate the entry price of wheat imports to Chile above the lower threshold of the price
band. In these circumstances, the entry price of such imports to Chile under the amended PBS is
higher than if Chile simply applied a minimum import price at the level of the lower threshold of the
price band.
7.89 According to the available evidence it seems improbable that, under the amended PBS,
imports of wheat or wheat flour will enter the Chil ean market at prices below the price band floor.
When asked by the Panel, Chile confirmed that "the likelihood of the entry price exceeding the floor
price is very high".
180 In Chile's words,
"[T]he unlikely but not impossible situation [that imports of wheat or wheat flour
may enter the Chilean market at prices lo wer than the lower threshold of the price

174 Appellate Body Report on Chile – Price Band System, para. 236. Panel Report on Chile – Price
Band System, para. 7.36(e).
175 Chile's response to question 19.
176 Panel Report on Chile – Price Band System, para. 7.45.
177 See para. 7.74 above.
178 See, e.g., Exhibits ARG-11 and ARG-12.
179 Appellate Body Report on Chile – Price Band System, para. 260.
180 Chile's response to question 58.

band] could arise whereby, once a specific duty has been established, international
prices fall substantially, which in turn is re flected in c.i.f. prices low enough to result
in entry prices of below US$128."181
7.90 As stated by Brazil in its response to a question from the Panel:
"[A]lthough imports can legally enter at prices below the price band floor, this will
occur only in a highly improbable factual scenario – namely, when world market
prices drop dramatically within a period of two months. Falls in the world market
price of this magnitude have not happened over the lifetime of the new PBS and, to
Brazil's knowledge, have not happened in recen t history. Even if such improbable
price decreases occurred, the new PBS would neutralize it after just two months
because, at the end of the period, the re ference price would be updated, thereby
pushing the entry price again above the price band floor."182
7.91 In other words, the amended PBS 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.
7.92 Therefore, we find no elements that suggest that the amended PBS has been modified with
respect to the features that were found to make the original PBS similar to a "minimum import price".
The issue of transparency and predictability under Chile's amended PBS
7.93 We have already noted Chile's contention that it was only "required to take action" on
"specific aspects of the PBS " that had been identified by the Appellate Body. 183 Chile has further
asserted that "the lack of transparency and predictabi lity of certain aspects of the [original] PBS were
called into question precisely because they le d to the insulation of domestic prices". 184 Chile has
contended that Argentina's claims are reduced to "[in sisting] that there is a lack of transparency and
predictability in irrelevant aspects of the scheme in force", but that Argentina "has been unable to
show that the current scheme based on Law 19.897 is preventing the transmission of international
prices to the Chilean market or restricting the volume of imports".185
7.94 We do not agree with Chile's view that "the lack of transparency and predictability of certain
aspects of the PBS were [only] called into question ... because they led to the insulation of domestic
prices".186 We have found that the amended PBS has the effect of impeding the transmission of
international price developments to the domestic market. We have also found that, with respect to
basic features of the system, the amended PBS is affected by a lack of transparency and predictability.
We note, however, that, in the course of the or iginal proceedings, the l ack of transparency and
predictability in the level of duties that resulte d from the PBS was not called into question by the
Appellate Body solely because it led to the insulation of domes tic prices. Rather the Appellate Body
explicitly stated that:
"This lack of transparency and this lack of predictability are liable to restrict the
volume of imports. As Argentina points out, an exporter is less likely to ship to a

181 Ibid.
182 Brazil's response to question 104, paras. 14-15.
183 Chile's first written submission, para. 88.
184 Chile's rebuttal, para. 207.
185 Ibid.
186 Chile's rebuttal, para. 207.

market if that exporter does not know and cannot reasonably predict what the amount
of duties will be."
187
7.95 In other words, even assuming, ad arguendo, that Argentina had only been able to prove that
the amended PBS is affected by a lack of transpar ency and predictability in the level of duties that
result from the system, such finding would not be irre levant. On the contrary, the configuration and
interaction of all these different el ements of intransparency and unpred ictability, as they refer to basic
features of the system, would rather demonstrate th at the amended measure continues to be a border
measure similar to a "variable import levy" and to a "minimum import price".
Conclusion
7.96 Having considered the configuration and inter action of the different features of Chile's
amended PBS, we find that the amendments introduced by Chile into its PBS have failed to convert it
into a measure which is no longer a border measur e similar to a "variable import levy" and to a
"minimum import price", in the terms of footnote 1 to Article 4.2 of the Agreement on Agriculture.
(d) Conditions of access to Chile's market under the amended PBS
7.97 In the course of the proceedings, Chile has stated that, under the amended PBS, the conditions
of access to its market are more favourable than they would have been if the original PBS was still in
force.188 Chile has argued, for example, that:
"Law No. 19.897 and its Regulations have improved conditions of access to the
Chilean market for wheat and wheat flour. This can be seen from the amount of time
for which the duties and rebates have b een applied since the Law entered into
force."189
7.98 To support this argument, Chile has stated th at, under the amended PBS, in the period from
16 December 2003 to 13 January 2006, specific duties have only been imposed in 17 weeks, whereas
if the original PBS had been in place they would ha ve been imposed in 27 weeks. Moreover, in the
same period, under the amended PBS, rebates were granted in 35 weeks, whereas under the original
PBS they would have only been granted in 27 weeks.190
7.99 Chile has further stated that the scheduled reduction of the thresholds of the band indicates
that, irrespective of international price levels, the amount of the specific duties under the PBS "will
increasingly diminish compared to those currently being established, just as the probability of duties
actually being assessed will increasingly diminish". 191 In other words, in Chile's view, under the
amended PBS, there is an "in-built process of gradual reduction of border protection of wheat".192
7.100 Chile has finally stated that an alternative to the amended PBS would be "to increase that
protection to an ad valorem duty of 31.5[per cent]… a scenario where Argentinean wheat producers
will be worse off".193

187 Appellate Body Report on Chile – Price Band System, para. 234.
188 Chile's rebuttal, para. 163.
189 Chile's first written submission, para. 183.
190 Ibid., paras. 183-185. See also, Argentina's rebuttal, paras. 206-216, and Chile's rebuttal,
paras. 63-174.
191 Chile's first written submission, para. 186. S ee also, Argentina's rebuttal, paras. 217-238, and
Chile's rebuttal, paras. 175-181.
192 Chile's first written submission, para. 192.

7.101 Having found that the amended PBS is a border measure similar to a "variable import levy"
and to a "minimum import price", the Panel cannot agree with Chile's arguments. The amended PBS
is not necessarily less trade-distorting, less insulati ng of Chile's domestic market, nor less inconsistent
with Chile's obligations under Article 4.2 of the Agreement on Agriculture, just because it may lead to
the imposition of specific duties in fewer occasions (or even to the granting of rebates in more
occasions) than would have been the case under the orig inal PBS. Nor does the fact that the amended
PBS incorporates an in-built process of gradual re duction of the thresholds of the band necessarily
make the amended PBS any less similar to a variable import levy or to a minimum import price.
None of these two factors eliminates the lack of transparency and predictability regarding the amount
of the duties that are ultimately to be imposed on imported wheat and wheat flour, under the amended
PBS, as a result of the combination of the ad valorem tariff and the applicable duties or rebates.
7.102 The Panel recalls in this regard the stat ement by the Appellate Body in the original
proceedings:
"[T]he amount of a duty is not the only c oncern of Chile's trading partners. As
Argentina argues, significant for traders, also , are the lack of transparency of certain
features of Chile's price band system; the unpredictability of the level of duties; and
the automaticity, the frequency, and the exte nt to which the duties fluctuate. These
specific characteristics of Chile's price ba nd system prevent enhanced market access
for imports of agricultural products, contrary to the object and purpose of
Article 4."
194
7.103 The findings of the Panel in the current pro ceedings do not affect Chile's right to impose
ordinary customs duties, based on the value or the volume of imported goods, up to its ad valorem
rates bound in the WTO, and in accordance with its obligations under the WTO agreements.
4. Conclusion
7.104 For the reasons indicated above, the Panel conc ludes that Chile's amended PBS is a border
measure similar to a variable import levy and a minimum import price within the meaning of
footnote 1 to Article 4.2 of the Agreement on Agricu lture. As such, it is not an ordinary customs
duty.
C. ARGENTINA'S CLAIM UNDER THE SECOND SENTENCE OF ARTICLE II:1(B) OF GATT 1994
1. Arguments of the parties
7.105 Argentina claims that the amended PBS is inconsiste nt with the second sentence of
Article II:1(b) of GATT 1994, because it constitutes "o ther duties or charges" not recorded in the
appropriate column of Chile's Schedules of Concessions.195
7.106 Chile responds that, since the entry into force of Law 19. 897, the amended PBS is consistent
with Article 4.2 of the Agreement on Agriculture an d is consequently not a measure that has to be
converted into an ordinary customs duty.196 Chile argues, nevertheless, that the Panel is prevented from
making findings on this claim, since the claim falls outside its terms of refere nce. In Chile's opinion,
this is a claim Argentina could have raised in the original proceedings but did not, when it claimed

194 Appellate Body Report on Chile – Price Band System, para. 258.
195 Argentina's first written submission, paras. 289-295. Argentina's re buttal, para. 287. Argentina's
oral statement, paras. 4 and 110-112 and 118. Argentina's response to question 25.
196 Chile's first written submission, para. 47.

instead that the PBS was in breach of both Arti cle 4.2 of the Agreement on Agriculture and the first
sentence of Article II:1(b) of the GATT 1994.
197
7.107 In its rebuttal, Argentina admits that its claim under the second sentence of Article II:1(b) of
GATT 1994 is a new claim that was not ra ised in the original proceedings. 198 Argentina argues,
however, that this claim could not have been pr esented before, because the modified PBS is a "new"
measure, different from the PBS which was at issue in the original proceedings. 199 Argentina also
argues that its claim relates to the modified PBS in it s entirety rather than to one aspect of this system
in particular, so that it is not challenging one par ticular aspect of the original measure which has not
changed.200 Finally, Argentina added that, irrespective of the violation of Article 4.2 of the Agreement
on Agriculture, its claim under Article II:1(b) of the GATT 1994 is one that stands on its own.201
2. Relevant provision
7.108 Argentina's claim in the current proceedings concerns only the second sentence of
Article II:1(b) of GATT 1994. To understand the contex t of this sentence, it is useful to note the full
text of subparagraphs (a) and (b) of Article II:1:
"(a) Each contracting party shall accord to the commerce of the other contracting
parties treatment no less favourable than that provided for in the appropriate Part of
the appropriate Schedule annexed to this Agreement.
(b) The products described in Part I of the Schedule relating to any contracting
party, which are the products of territories of other contracting parties, shall, on their
importation into the territory to which the Sc hedule relates, and subject to the terms,
conditions or qualifications set forth in that Schedule, be exempt from ordinary
customs duties in excess of those set forth and provided therein. Such products shall
also be exempt from all other duties or charges of any kind imposed on or in
connection with the importation in excess of those imposed on the date of this
Agreement or those directly and mandator ily required to be imposed thereafter by
legislation in force in the importing territory on that date."
7.109 The Panel has already noted that the challenge d measures are border measures "other than an
ordinary customs duty".
202 The Uruguay Round Understanding on the Interpretation of Article II:1(b)
of the GATT 1994 ("the Understanding on Article II:1(b) ") provides that such measures, other than
ordinary customs duties should have been recorded by Members at the end of the Uruguay Round in a
column entitled "other duties and charges" in thei r Schedules. Paragraph 1 of the Understanding on
Article II:1(b) reads:
"(…) [i]n order to ensure transparency of the legal rights and obligations deriving
from paragraph 1(b) of Article II, the nature and level of any 'other duties or charges'
levied on bound tariff items, as referred in th at provision, shall be recorded in the
Schedules and concessions annexed to GATT 1994 against the tariff item to which
they apply. It is understood that such recording does not change the legal character of
'other duties or charges'."

197 Chile's first written submission, paras. 47-48. Chile's rebuttal, paras. 202-206. Chile's oral
statement, para. 13. Chile's response to question 2.
198 Argentina's rebuttal, paras. 290 and 295. Argentina's oral statement, para. 113.
199 Argentina's rebuttal, paras. 291-292, 296, 303 and 306. Argentina's oral statement, paras. 114-116.
Argentina's response to questions 2 and 25.
200 Argentina's rebuttal, paras. 301-302. Argentina's response to question 25.
202 See para. 7.104 above.

3. Panel's analysis
(a) Issues for the Panel's consideration
7.110 In response to Argentina's claim under the second sentence of Article II:1(b) of GATT 1994,
Chile has put forward two defences.
7.111 First, Chile has argued that the amended PBS is no t a measure that has to be converted into an
ordinary customs duty. It has stated that as a result of the amendments introduced, the PBS is now
consistent with Article 4.2 of the Agreement on Agri culture and consequently is not in breach of the
second sentence of Article II:1(b) of GATT 1994.
7.112 Second, Chile has argued that in any event the Panel is precluded from making findings with
regard to this claim because it is a claim that Argentina s hould have raised in the original proceedings
but did not. In Chile's view, Argentina's claim under Article II:1(b) of GATT 1994 is therefore outside
the Panel's mandate.
(b) Findings in the original proceedings
7.113 We recall the particular set of circumstanc es surrounding this claim. In the original
proceedings, Argentina had claimed that the PB S was inconsistent with Article II of GATT 1994 203,
because it led to the imposition of duties in excess of Chile's tariff rate bindings. 204 The Panel found
that the PBS duties were a border measure "other than an ordinary customs duty", prohibited under
Article 4.2 of the Agreement on Agriculture. The Panel also stated that the expression "ordinary
customs duties" has the same meaning in Article 4.2 of the Agreement on Agriculture and in
Article II:1(b) of GATT 1994. The Panel went on to find that the consistency of the duties resulting
from Chile's PBS with Article II:1(b) of GATT 1994 could not be assessed under the first sentence of
that provision, which deals with ordinary custom s duties, but rather with the second sentence, which
deals with "other duties or charges of any kind" imposed on or in connection with importation.205
7.114 The Panel then stated that, if other duties or charges were not record ed but are nevertheless
levied, they are inconsistent with the second se ntence of Article II:1(b), in the light of the
Understanding on Article II:1(b). Noting that Chile did not record its PBS in the "other duties and
charges" column of its Schedule, the Panel th erefore found that the Chilean PBS duties were
inconsistent with Article II:1(b) of GATT 1994.206
7.115 The Appellate Body reversed th e Panel's findings regarding the breach of Article II:1(b) of
GATT 1994. The Appellate Body found that the Pane l had acted in a manner inconsistent with its
duties under Article 11 of the DSU, since the second sentence of Article II:1(b) was not part of the
matter before the Panel and, furthermore, Chile had been denied its fair right of response regarding
this claim. The Appellate Body determined that, while the Panel's terms of reference, as defined in
the request for the establishment of the panel, were broad enough to have included a claim under the
second sentence of Article II:1(b), Argentina had not articulated a claim under that sentence, nor had
it submitted any arguments on the consistency of Ch ile's PBS with the second sentence. Therefore,
the second sentence of Article II:1(b) was not the subject of a claim before the Panel.207

203 Chile – Price Band System, Request for the Establishment of a Panel by Argentina (WT/DS207/2),
19 January 2001, p. 1.
204 Panel Report on Chile – Price Band System, paras. 4.6-4.7.
205 Ibid., paras. 7.104-7.105.
206 Panel Report on Chile – Price Band System, para. 7.107-7.108.
207 Appellate Body Report on Chile – Price Band System, paras. 173-177.

7.116 The Appellate Body's statement does not n ecessarily invalidate the substantive reasoning
behind the Panel's findings on Article II:1(b). On the contrary, the Appellate Body confirmed the
possible parallelism between the obligations in Ar ticle 4.2 of the Agreement on Agriculture and
Article II:1(b) of the GATT 1994. Indeed, the Appe llate Body indicated that a finding of violation
under Article 4.2 of the Agreement on Agriculture would make it unnecessary to issue a separate
finding with regard to the second sentence of Article II:1(b) of GATT 1994. In the words of the
Appellate Body:
"[I]f we were to find first that Chile's price band system is inconsistent with
Article 4.2 of the Agreement on Agriculture , we would not need to make a separate
finding on whether the price band system also results in a violation of Article II:1(b)
of the GATT 1994 in order to resolve this dispute. This is because a finding that
Chile's price band system as such is a meas ure prohibited by Article 4.2 would mean
that the duties resulting from the application of that price band system could no
longer be levied —no matter what the level of those duties may be. Without a price
band system, there could be no price band duties."
208
(c) Need for separate findings under Article II:1(b) of GATT 1994
7.117 The Panel has already found that the amended PBS, challenged in the current Article 21.5
proceedings, is inconsistent with Article 4.2 of the Agreement on Agriculture. As noted, the
Appellate Body indicated in the original proceedings that a finding of violation under Article 4.2 of
the Agreement on Agriculture made it unnecessary to issue a separate finding with regard to the
second sentence of Article II:1(b) of GATT 1994. It is our view that the position of the Appellate
Body on that regard was not based solely on the par ticular characteristics of the original PBS, but
rather on the basis of the respective obligations contained in Article 4.2 of the Agreement on
Agriculture and in the second sentence of Article II:1(b) of GATT 1994. Consequently, we believe
that having found that the amended PB S is inconsistent with the form er, we do not need to make a
separate finding on whether it is also a violation of the latter.
7.118 When asked by the Panel, Argentina was not able to explain why, assuming that the Panel
were to make a determination that the amended PBS is in breach of Article 4.2 of the Agreement on
Agriculture, the Panel would then need to make a separate finding on whether the same measure also
results in a violation of Article II:1(b) of the GA TT 1994 in order to resolve the dispute. Argentina
only stated that, in the absence of such separate determination, Chile would try to maintain its
measure with "cosmetic amendments", and that a se parate determina tion would contribute to Chile
withdrawing the inconsistent measure and that it would avoid a "never-ending cycle of dispute
settlement proceedings".
209 The Panel is unconvinced by such arguments. Even leaving aside the
presumption that Members should act in good faith 210, it is not clear why Chile's compliance with the
determinations regarding Article 4.2 of the Agreement on Agriculture would not be enough to achieve
the objectives identified by Argentina and whether a separate determination on Article II:1(b) of the
GATT 1994 would have any additional effect.
7.119 The Panel notes in this regard that it does not need to examine all legal claims made by
Argentina. As was stated by the Appellate Body:

209 Argentina's response to question 28.
210 "We must assume that WTO Members will perform their treaty obligations in good faith, as they are
required to do by the WTO Agreement and by international law". Panel Report on Argentina – Textiles and
Apparel, para. 6.14.

"Given the explicit aim of dispute settlement that permeates the DSU, we do not
consider that Article 3.2 of the DSU is meant to encourage either panels or the
Appellate Body to 'make law' by clarifying existing provisions of the WTO
Agreement outside the context of resolving a particular dispute. A panel need only
address those claims which must be addressed in order to resolve the matter in issue
in the dispute."211
7.120 In consequence, once determined that the amende d PBS is inconsistent with Article 4.2 of the
Agreement on Agriculture, an additional finding on whethe r the same measure is also in breach of the
second sentence of Article II:1(b) of GATT 1994 is not necessary in order to resolve the dispute
between the parties.
(d) The issue of the Panel's mandate
7.121 In light of the consideration that a separate fi nding on whether the amended PBS is in breach
of the second sentence of Article II:1(b) of GATT 1994 is not necessary in order to resolve this
dispute between the parties, there would normally be no need to go any further. However, the Parties
have extensively discussed whether Argentina's clai m under Article II:1(b) has been properly brought
before this Panel. This question relates to the i ssue of the Panel's mandate and is therefore of great
systemic importance. Accordingly, and notwithstanding its decision not to make an additional finding
under Article II:1(b) of GATT 1994, the Panel finds it worthwhile, obiter dicta, to express its views
on some of the issues related to the question of the Panel's mandate under Article 21.5 of the DSU.
(i) Arguments of the parties
7.122 As described above, the parties are in agreement that Argentina did not raise a claim under the
second sentence of Article II:1(b) of GATT 1994 in the course of the original proceedings. In other
words, both Chile and Argentina agree that Ar gentina's claim in this respect constitutes a new claim
which had not been before the original Panel. E ach of the two parties, however, attaches different
significance to this fact and interprets the app licable WTO precedents, on whether new claims would
fall within this Panel's mandate, arriving at opposite conclusions.
7.123 Chile argues that Argentina's claim under the sec ond sentence of Article II:1(b) falls outside
the terms of reference of the Panel, because it shoul d have been raised and substantiated during the
original proceedings.212 Chile also stresses that, should this Panel consider that such new claim falls
properly within its mandate, its due process rights would be "significantly affected."213
7.124 Chile points primarily to the Appellate Body decision in EC – Bed Linen (Article 21.5 –
India) in support of its position that Argentina's clai m under Article II:1(b) is not within the Panel's
mandate. In that case, the Appellate Body upheld the compliance panel's finding that a claim
advanced by India was not properly before the panel, because it was not a new claim, but rather the
same claim that had been raised before the original panel, against an unchanged feature of EC law.
Chile argues that, as in EC – Bed Linen, Argentina's claim under the second sentence of Article II:1(b)
of GATT 1994 relates to an unchanged feature of the PBS, and therefore should not be within this
Panel's mandate. In this sense, Chile claims th at this particular claim by Argentina is the same claim
that Argentina could have brought, but did not, befo re the original panel proceedings, relating to the
same feature of the PBS system, i.e., the imposition of duties and charges no t recorded in Chile's
Schedules.

211 Appellate Body Report on US – Wool Shirts and Blouses, p. 19.
212 Chile's rebuttal, para. 204.
213 Ibid., para. 205.

7.125 Argentina disputes Chile's interpretation. It argues that its claim refers to the "measures taken
to comply", within the meaning of Article 21.5 of the DSU, which constitute a new and different
measure that did not exist before. In this sense, cl aims relating to its overall structure and operation
would be properly before this Panel. The measu res adopted by Chile to comply with the DSB's
recommendations and rulings, Law 19.897 and Supreme Decree 831, turned the PBS into a
completely new measure.
214
7.126 Argentina refers to the meaning attributed by the Appellate Body to the language of
Article 21.5 in Canada – Aircraft (Article 21.5 – Brazil) , which established that, in carrying out its
review under Article 21.5 of the DSU, a panel is no t confined to examining the "measures taken to
comply" from the perspective of the claims, arguments and factual circumstances that related to the
measure that was the subject of the original proceedings.
7.127 In light of the above, Argentina concludes that it could not have raised this claim during the
original proceedings. For the purposes of interpreting the mandate of panels under Article 21.5, this is
a new claim related to a new measure, i.e., the amended PBS.215
(ii) Relevant provision
7.128 Article 21.5 of the DSU states that:
"Where there is disagreement as to the existence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings such
dispute shall be decided through recourse to these dispute settlement procedures,
including wherever possible resort to the original panel ..."
(iii) Interpretation of the Panel's mandate under Article 21.5 of the DSU
7.129 The issue of whether the mandate of a Pane l established under Article 21.5 of the DSU may
include claims that had not been raised in the or iginal proceedings was addressed by the Appellate
Body in Canada – Aircraft (Article 21.5 – Brazil) . The compliance panel had declined to examine a
claim by Brazil regarding a new subsidy, on the gro unds that the new measure was not covered by the
DSB's original recommendation that Canada should withdraw a prohibited export subsidy. The DSB
recommendation did not cover the new subsidy, which did not exist at the time when such
recommendation was issued.
216 In its ruling, the Appellate Body clarified that Article 21.5
proceedings were not confined to claims, argument s and factual circumstances related to the measure
subject of the original proceedings, but indeed that they usually relate to a new and different measure
to that before the original panel. Thus, it would only be natural that Article 21.5 panels, in carrying
out their functions, would have to examine claims, arguments, and factual circumstances not
addressed during the original proceedings. In the words of the Appellate Body:
"[W]e disagree with the Article 21.5 Panel that the scope of these Article 21.5 dispute
settlement proceedings is limited to 't he issue of whether or not Canada has
implemented the DSB recommendation '. The recommendation of the DSB was that
the measure found to be a prohibited expor t subsidy must be withdrawn within 90
days of the adoption of the Appellate Body Report and the original panel report, as
modified – that is, by 18 November 1999. That recommendation to 'withdraw' the
prohibited export subsidy did not, of c ourse, cover the new measure – because the
new measure did not exist when the DSB made its recommendation. It follows then

214 Argentina's response to questions 3, 25 and 26.
215 Argentina's rebuttal, paras. 296 and 307. Argentina's response to question 26.
216 Appellate Body Report on Canada –Aircraft (Article 21.5 – Brazil), paras. 39-40.

that the task of the Article 21.5 Panel in this case is, in fact, to determine whether the
new measure – the revised TPC programme – is consistent with Article 3.1(a) of the
SCM Agreement.
Accordingly, in carrying out its review unde r Article 21.5 of the DSU, a panel is not
confined to examining the 'measures take n to comply' from the perspective of the
claims, arguments and factual circumstances that related to the measure that was the
subject of the original proceedings. Although these may have some relevance in
proceedings under Article 21.5 of the DSU, Article 21.5 proceedings involve, in
principle, not the original measure, but ra ther a new and different measure which was
not before the original panel. In add ition, the relevant facts bearing upon the
'measure taken to comply' may be different from the relevant facts relating to the
measure at issue in the original proceedings. It is natural, therefore, that the claims,
arguments and factual circumstances which are pertinent to the 'measure taken to
comply' will not, necessarily, be the same as those which were pertinent in the
original dispute. Indeed, the utility of th e review envisaged under Article 21.5 of the
DSU would be seriously undermined if a panel were restricted to examining the new
measure from the perspective of the claims, arguments and factual circumstances that
related to the original measure, because an Article 21.5 panel would then be unable to
examine fully the 'consistency with a cove red agreement of the measures taken to
comply', as required by Article 21.5 of the DSU."
217
7.130 Thereafter, panels and the Appellate Body have conducted a case-by-case analysis in deciding
whether it is proper to address claims that were not raised during the original proceedings. In US –
Shrimp (Article 21.5 – Malaysia) , even though the Appellate Body r ecognized that the mandate of an
Article 21.5 panel might require an analysis of new claims, it decided that the panel had acted
correctly when it declined to address a claim made by Malaysia because it had not been put forward in
its request for the establishment of a panel under Artic le 21.5 of the DSU. Malaysia argued that the
panel in that case had improperly limited its analys is to the DSB's recommendations and rulings and
had not addressed other possible inconsistencies that had not been raised by Malaysia in its request for
the establishment of the Article 21.5 panel. The Appellate Body ruled that the mandate of an
Article 21.5 panel is limited by its terms of refe rence, which are based on the claims put forward by
the complainant in the request fo r the establishment of the panel. 218 The Appellate Body added,
however, that not all claims in a request for the establishment of an Article 21.5 panel can
automatically be considered to have been properl y put before the panel and consequently to have
become the mandate for the panel. Malaysia ha d presented claims against an unchanged aspect of a
measure that had already been found to be WTO-consistent. The Appellate Body found that the panel
had not erred when it examined the measure, found that it had not changed since the original
proceedings and concluded that the earlier ruling still stood.
219 As stated by the Appellate Body:
"[A]s we have said, it is not part of a pane l's task to go beyond the particular claims
that have been made with respect to the consistency of a new measure with a covered
agreement when a matter is referred to it by the DSB for an Article 21.5 proceeding.
Thus, it would not have been appropriate in this case for the Panel to address a claim
that was not made by Malaysia when requesting th at this matter be referred by the
DSB for an Article 21.5 proceeding."220

217 Ibid., paras. 40-41.
218 Appellate Body Report on US –Shrimp (Article 21.5 – Malaysia), paras. 83-88.
219 Appellate Body Report on US –Shrimp (Article 21.5 – Malaysia), paras. 89-97.
220 Ibid., para. 88.

7.131 With respect to a claim that had been included in Malaysia's request for the establishment of a
panel under Article 21.5 of the DSU, but which related to an unchanged aspect in the new measure, in
the same case the Appellate Body stated:
"With respect to a claim that has been made when a matter is referred by the DSB for
an Article 21.5 proceeding, Malaysia seems to suggest as well that a panel must re-
examine, for WTO-consistency, even those aspects of a new measure that were part
of a previous measure that was the subject of a dispute, and were found by the
Appellate Body to be WTO – consistent in that dispute, and that remain unchanged as
part of the new measure.
It is not disputed that the wording of Section 609 has not been changed since the first
case. The Congress of the United States has not amended the statute. In addition, the
meaning of Section 609 has not been changed by the decision of the United States
Court of International Trade...
As we see it, then, the Panel properly examined Section 609 as part of its examination
of the totality of the new measure, correctly found that Section 609 had not been
changed since the original proceedings, a nd rightly concluded that our ruling in
United States – Shrimp with respect to the consistency of Section 609, therefore, still
stands."
221
7.132 In EC – Bed Linen (Article 21.5 – India) , the Appellate Body upheld the compliance panel's
finding that a claim advanced by India was not properly before the panel, because it was not a new
claim, but rather the same claim that had been raised before the original panel, against an unchanged
feature of EC law.
"[W]e agree with the Panel's statement distinguishing, in this respect, the Canada –
Aircraft (Article 21.5 – Brazil) dispute from these Article 21.5 proceedings:
In that case, Canada had implemented the recommendation of the
DSB by adopting a new and different measure. In the Article 21.5
proceeding, Brazil made claims regarding that measure that it had not
made in the original dispute. Ca nada objected to claims raised by
Brazil against the new measure on the grounds that no similar claims
had been raised against the original measure. Had Canada's objection
been upheld, Brazil would have been barred from making claims that
could not have been raised in the orig inal proceedings. The issue
before us is whether India should be allowed to raise, in this
Article 21.5 proceeding, claims with respect to Article 3.5 which it
could and did raise before the original panel, but which it did not
pursue, and which the Panel dismissed for failure to present a prima
facie case of violation.[Footnote omitted] (original boldface)
We agree with the Panel that the Canada – Aircraft (Article 21.5 – Brazil) dispute
involved a new claim challenging a new component of the measure taken to comply
which was not part of the original measure. The situation in Canada – Aircraft
(Article 21.5 – Brazil) was thus different from the situation in this appeal."
222

221 Ibid., paras. 89-96.
222 Appellate Body Report on EC –Bed Linen (Article 21.5 – India), para. 88.

7.133 In a report that was not appealed, the Article 21.5 compliance panel in the US –
Countervailing Measures on Certain EC Products dealt with the issue of a new claim related to an
aspect that was present in the original measures. The panel decided that it could not consider the new
claim because it had already concluded that the challenged measure was "not an aspect of the measure
taken to comply". The panel went on to indicate that , even if it were to consider that such challenged
measure was an aspect of the measures taken to comp ly, it would nevertheless still conclude that the
new claim was not within its mandate. The panel found that it was not legally empowered to consider
new claims on aspects of the original measure th at were unchanged and were not challenged in the
original proceedings, since this would provide th e complainant with a second chance to raise a claim
that it had failed to raise in the original case a nd it would jeopardize the principles of fundamental
fairness and due process. The panel framed the issue in these terms:
"Even if we were to consider that the likelihood-of-injury analysis were an aspect of
the measures taken to comply, we would nevertheless still conclude that the European
Communities' claim on failure to reconsider likeliho od of injury is not within our
mandate. The Appellate Body jurisprudence summarized in EC – Bed Linen
(Article 21.5 – India) seems to indicate that the European Communities is not
precluded from raising claims that it did not raise in the original proceedings,
provided that these claims concern the meas ures taken to comply and are included in
the Panel request. We recall that the Appe llate Body’s reasoning for the inclusion of
new claims in the scope of Article 21.5 proceedings was that "the 'measure taken to
comply' may be inconsistent with WTO obligations in ways different from the
original measure".
223 The question here is whether this conclusion should also apply
to new claims where the measure taken to comply is unchanged from the original
measure and thus allegedly inconsiste nt with WTO obligations in ways identical to
(not different from) the original measure.
In this dispute, this Panel confronts the i ssue of whether to consider new claims on
aspects of the original measure that are unchanged and were not challenged in the
original proceedings. The purpose of Artic le 21.5 is to provide an expeditious
procedure to establish whether a Member has properly implemented the DSB
recommendations and rulings. Admitting such a new claim would mean providing
the European Communities with a second chance to raise a claim that it failed to raise
in the original proceedings. The Appellate Body, however, has found that a party
cannot cure the failure to include a claim in the panel request by raising the claim in
subsequent submissions or statements.
224

223 (original footnote) Appellate Body Report on EC – Bed Linen (Article 21.5) , para. 79 (emphasis
added); see also Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , para. 41; Appellate Body
Report on US – Shrimp (Article 21.5 – Malaysia), paras. 86-87.
224 (original footnote) In EC – Bananas III, the Appellate Body explained that:
"Article 6.2 of the DS U requires that the claims, but not the arguments, must all be specified
sufficiently in the request for the establishment of a panel in order to allow the defending
party and any third parties to know the legal basis of the complaint. If a claim is not specified
in the request for the establishment of a panel, then a faulty request cannot be subsequently
'cured' by a complaining party's argumentation in its first written submission to the panel or in
any other submission or statement made later in the panel proceeding."
Appellate Body Report on EC – Bananas III , para. 143; see also Appellate Body Report on Brazil –
Desiccated Coconut, p. 22, DSR 1997:I, p. 167, at p. 186 (stating that a claim falls outside a panel's terms of
reference unless it is identified in the document specify ing the panel's terms of reference); Appellate Body
Report on India – Patents (US) , para. 88 (emphasizing the difference between the claims, which must be
included in the request for establishment as they estab lish the panel's terms of reference, and the arguments,
which are set out and clarified in the written submissions and oral statements throughout the panel proceedings).

Moreover, the Panel is concerned that allowing a new claim on the likelihood-of-
injury in the current proceedings may jeopardize the principles of fundamental
fairness and due process. In our view, it w ould be unfair to expose the United States
to the possibility of a finding of violation on an aspect of the original measure that the
United States was entitled to assume was c onsistent with its obligations under the
relevant agreement given the absence of a finding of violation in the original
report.
225
In sum, permitting the European Communiti es to introduce a new claim on an aspect
of the original measure that was never challenged and remained unchanged raises
serious issues regarding the United States' due process rights. On balance, the utility
of an Article 21.5 proceeding should not override the basic due process rights of the
parties to a dispute.226"227
(iv) Does Argentina's claim under Article II:1(b) of GATT 1994 fall within the Panel's mandate?
Object and purpose of Article 21.5 of the DSU
7.134 As noted above, in light of its decision not to make a separate finding under Article II:1(b) of
GATT 1994, the Panel would normally not need to go any further. However, because of the broad
systemic implications of the matter, the Pane l finds it worthwhile to present its views, obiter dicta, on
some of the issues related to whether Argentina's claim under Article II:1(b) could be considered to
fall within the Panel's mandate.
7.135 The Panel notes in this regard that the object and purpose of Article 21.5 of the DSU is to
provide for an expedited procedure through whic h Members can examine whether measures adopted
by a Member, allegedly to comply with the recommendations and rulings of the DSB, have indeed

225 ( original footnote ) The Panel notes that in EC – Bed Linen (Article 21.5 – India) , the panel
explained that, in such a situation, a defending Member would not have the opportunity to bring the measure
into conformity. Panel Report on EC – Bed Linen (Article 21.5 – India) , para. 6.40. Indeed, there is no
provision for a "reasonable period" to implement the ruling in an Article 21.5 dispute. Thus, an Article 21.5
panel ruling on such a new claim may immediately give rise to rights for compensation or suspension of
concessions under Article 22 DSU. Moreover, the parties do not have the same opportunity to present evidence
and arguments in Article 21.5 proceedings.
The circumstances of the present case illustrate the potential procedural unfairness. The European
Communities did not agree that the United States could submit consecutive rebuttals and required that the
rebuttals be simultaneous. Therefore, the United States could only rebut the arguments in the European
Communities' Second written submission during the sole m eeting with the parties. Consequently, important
facts and issues continued to surface qu ite late into the Article 21.5 pro ceedings, proceedings that are already
abbreviated. In addition, we note that the record of the original proceedings does not even include evidence
regarding the likelihood-of-injury determinations which, as noted above, were made by a different agency than
the likelihood-of-subsidization determinations at issue in the original dispute. Thus, were we to consider the
injury claim as within our mandate, we would have an extremely limited evidentiary basis on which to rule.
Finally, the shorter timeline significantly limits both the pa nel's opportunity to interact with the parties and the
panel's time to deliberate. The panel typically has onl y one opportunity to meet with the parties, unlike the
normal proceedings where two substantive meetings take place.
226 (original footnote) As indicated by the Panel in EC – Bed Linen (Article 21.5 – India):
"[s]uch an outcome would not seem to be consistent with the overall object and purpose of the
DSU to achieve satisfactory resolution of disputes, effective functioning of the WTO, to
maintain a proper balance between the rights and obligations of Members, and to ensure that
benefits accruing to any Member under covered agreements are not to nullified or impaired."
Panel Report on EC – Bed Linen (Article 21.5 – India), para. 6.40.
227 Panel Report on US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) ,
paras. 7.73-7.76.

brought the original offending measure into confor mity with that Member's obligations under the
WTO agreements. It is in light of this object and purpose that the text of Article 21.5 of the DSU
should be read.
A compliance panel's jurisdiction extends beyo nd the original DSB's recommendations and
rulings
7.136 The task of a compliance panel under Article 21. 5 of the DSU is not limited to the DSB's
original recommendations and rulings. If compliance panels were so limited, the objective of these
procedures could be easily rendered ineffective. As noted by the Appellate Body, the title of
Article 21 of the DSU makes clear that "the task of panels under Article 21.5 forms part of the
process of the ' Surveillance of Implementation of the Recommendations and Rulings ' of the DSB." 228
Ensuring implementation of the DSB's recommendations and rulings is an essential element of the
WTO dispute settlement mechanism. Collective surveillance is necessary to achieve the first
objective of this mechanism, as described in the DS U, "to secure the withdrawal of measures found to
be inconsistent with the provisions of any of the covered agreements". 229 Implementation is in turn
necessary to "preserve the rights and obligations of Members under the covered agreements",
"providing security and predictability to the multilateral trading system".
7.137 In its statement in Canada – Aircraft (Article 21.5 – Brazil), the Appellate Body made it clear
that the task of a compliance panel under Article 21.5 of the DSU is not limited to the DSB's original
recommendations and rulings. The Appellate Body reached its conclusion by noting that, in principle,
Article 21.5 panels are faced, not with the original measure, but rather with a new and different
measure which was not before the original panel. The Appellate Body also noted that the relevant
facts bearing upon the "measure taken to comply" may be different from the relevant facts relating to
the measure at issue in the original proceedings.
7.138 At the same time, in view of the object a nd purpose of Article 21.5, a compliance panel's
jurisdiction is subject to certain limitations. In US – Shrimp (Article 21.5 – Malaysia) , the Appellate
Body clarified the issue further, stating that Artic le 21.5 panels have no aut hority to re-examine the
WTO-consistency of unchanged aspects of a new measure that are part of a previous measure that was
the subject of a dispute, which were already found to be WTO-consistent in that dispute.
7.139 In its unappealed report, the Article 21.5 compliance panel in US – Countervailing Measures
on Certain EC Products (Article 21.5 – EC) found that panels are not le gally empowered to consider
new claims on aspects of a measure that are unchanged and were not challenged in the original
proceedings, since this would provide the complain ant with a second chance to raise a claim that it
had failed to raise in the original case and it would jeopardize the principles of fundamental fairness
and due process.
7.140 In conclusion, the interpretation of Article 21. 5 of the DSU makes it clear that a compliance
panel is not limited to examining th e consistency of the "measures taken to comply" with the original
DSB's rulings and recommendations. The task of a compliance panel is rather to examine the
consistency of the measures with "a covered agreemen t". That is, with the covered agreement that is
within the terms of reference of the respective compliance panel.

228 Appellate Body Report on US –Shrimp (Article 21.5 – Malaysia), para. 87.
229 DSU, Article 3.7.

Conditions under which a complianc e panel may consider new clai ms, not raised before the
original panel
7.141 An Article 21.5 compliance panel may accordi ngly consider new claims, which were not
raised before the original panel. However, it is our view that in order for new claims to be properly
put before an Article 21.5 compliance panel, the follo wing conditions must be present. First, that the
claim is identified by the complainant in its requ est for the establishment of the compliance panel.
Second, that the claim concerns a new measure, adopted by the respondent allegedly to comply with
the recommendations and rulings of the DSB. Third, that the claim does not relate to aspects of the
original measure that remain unchanged in the ne w measure and were not challenged in the original
proceedings or, if challenged, were addressed in those proceedings and not found to be WTO-
inconsistent.
7.142 The first two conditions flow from the decisions of the Appellate Body in previous
compliance proceedings under Article 21.5 that have already been commented.
230 The third condition
was addressed only partially (and mainly with resp ect to unchanged aspects of a new measure that
were already found to be WTO-consis tent) by the Appellate Body in US – Shrimp (Article 21.5 –
Malaysia) and in EC – Bed Linen (Article 21.5 – India) .231 In our opinion, this third requirement is
also related to the findings of the compliance panel in US – Countervailing Measures on Certain EC
Products (Article 21.5 – EC). In our view, while this third condition has not been fully addressed yet
by the Appellate Body, it is an essential requirement to prevent the misuse of the special expedited
procedures contemplated in Article 21.5 of the DSU.
7.143 Moreover, we consider that these three conditions are in line with two additional
considerations highlighted in past rulings by th e Appellate Body, namely that: (i) the task of
Article 21.5 panels is part of the process of "s urveillance of implementation of the recommendations
and rulings of the DSB" 232; and, (ii) the main test is whether or not the complaining Member could
have raised its claim during the original proceedings.233
7.144 The first condition is formal and in the current case is clearly met. Argentina raised a specific
claim under the second sentence of Article II:1(b) of GATT 1994 in its request for the establishment
of the compliance panel, dated 29 December 2005.234
7.145 The second condition is also met. Indeed, it is a general requirement for Article 21.5
compliance proceedings. In the words of the Appellate Body:
"Proceedings under Article 21.5 do not concern just any measure of a Member of the
WTO; rather, Article 21.5 proceedings are limited to those 'measures taken to
comply with the recommendations and rulings' of the DSB. In our view, the phrase
'measures taken to comply' refers to meas ures which have been , or which should be,
adopted by a Member to bring about compliance with the recommendations and rulings
of the DSB. In principle, a measure wh ich has been 'taken to comply with the

230 Appellate Body Report on US – Shrimp (Article 21.5 – Malaysia) , Appellate Body Report on
Canada –Aircraft (Article 21.5 – Brazil) and Appellate Body Report on EC –Bed Linen (Article 21.5 – India).
231 As noted above, in US – Shrimp (Article 21.5 – Malaysia) , the Appellate Body agreed with the
panel's rejection of a particular claim raised by Malaysia which related to unchanged aspects of the original
measure that had been addressed by the Appellate Body in the original proceedings and found to be WTO-
consistent.
232 Appellate Body Report on US – Shrimp (Article 21.5 – Malaysia), para. 87.
233 Appellate Body Report on EC –Bed Linen (Article 21.5 – India), para. 88.
234 Request for the Establishment of a Panel, (Recou rse to Article 21.5 of the DSU by Argentina) , 9 January 2006,

recommendations and rulings' of the DSB will not be the same measure as the measure
which was the subject of the original dispute, so that, in principle, there would be two
separate and distinct measures 235: the original measure which gave rise to the
recommendations and rulings of the DSB, and the "measures taken to comply" which
are – or should be – adopted to implement those recommendations and rulings...."236
7.146 Argentina's claim under the second sentence of Ar ticle II:1(b) concerns the amended PBS, as
regulated by Law 19.897 and Supreme Decree 831. This amended PBS is formally a new and
different measure from the one that was the object of the original proceedings. The amended PBS
was adopted by Chile, allegedly to comply with the recommendations and rulings of the DSB in the
original case. Indeed, Argentina emphasizes this fo rmal aspect, the fact that its claim under the
second sentence of Article II:1(b) concerns a new measure and that it relates to the amended PBS in
its entirety rather than to one aspect in particular.237
7.147 As proposed above 238, however, it is not enough that the claim concerns a measure that is
formally different from the one that was the object of the original proceedings. In our view, a third
condition needs to be fulfilled, i.e., that the claim does not relate to aspects of the original measure
that remain unchanged in the new measure and either were not challenged in the original proceedings
or, if challenged, were addressed in those proceed ings and not found to be WTO-inconsistent.
Argentina's claim under the second sentence of Article II:1(b) was not articulated in the original
proceedings.239 Accordingly, an issue for the Panel to determine, were it necessary, would be to
verify whether Argentina's claim relates to aspects of the original measure that remain unchanged in
the amended PBS. This determination goes beyond the verification of whether the amended PBS is
formally a new and different measure from the one that was the object of the original proceedings.
The Panel is cognizant of the practical difficulty of separating unchanged aspects from changed
aspects in a new measure. However, such efforts w ould have been called for, in order to discourage
the possibility of misuse of a compliance panel's process.
7.148 Some third parties expressed their systemic c oncern if the Panel were to decide that a
"Member is precluded from challenging, in Article 21.5 proceedings, any aspect of a new measure
that was present in the original measure but that was not challenged in the original proceedings".240 In
the words of one third party, this would add "a new and undue burden on the complaining party, since
it would force it to prosecute every conceivable violation in the original proceedings in order to
preserve its rights on implementation". 241 We agree that excluding claims against unchanged aspects
of a measure that were not challenged in the original proceedings places a burden on the complaining
party. However, we do not consider that this is a new or undue burden. The complaining party's
burden to frame the matter brought before the original panel, in terms of identifying both the
challenged measure and its legal claims, is clearly contained in Article 6.2 of the DSU:
"The request for the establishment of a pane l shall be made in writing. It shall
indicate whether consultations were held, identify the specific measures at issue and

235 (original footnote) We recognize that, where it is alleged that there exist no "measures taken to
comply", a panel may find that there is no new measure.
236 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 36.
237 Argentina's rebuttal, paras. 291-292, 296, 301-303, and 306. Argentina's response to questions 2, 25
and 26.
238 See paras. 7.141-7.143 above.
239 See para. 7.115 above. See also, Appellate Body Report on Chile – Price Band System , para. 173
and Argentina's oral statement, para. 113.
240 Brazil's oral statement, para. 15. See also, Canada's oral statement, para. 6-14, EC's oral statement,
paras. 15-20.

provide a brief summary of the legal basis of the complaint sufficient to present the
problem clearly."
7.149 As has been frequently indicated, the complaini ng party's burden to identify its claims against
the challenged measure in its initial request for the establishment of the panel serves two purposes. It
defines the terms of reference of the panel and it fulfils an important due process objective, giving
parties and third parties sufficient information concerning the claims at issue in the dispute, in order to
allow them an opportunity to respond to the complainant's case.
242 In the words of the Appellate Body:
"Identification of the treaty provisions claimed to have been violated by the
respondent is always necessary both for purposes of defining the terms of reference of
a panel and for informing the respondent and the third parties of the claims made by
the complainant; such identification is a mi nimum prerequisite if the legal basis of
the complaint is to be presented at all."
243
7.150 In original panel proceedings, the failure by the complaining party to identify its claims in the
request for the establishment of a panel cannot be cured subsequently:
"If a claim is not specified in the request for the establishment of a panel, then a
faulty request cannot be subsequently 'cur ed' by a complaining party's argumentation
in its first written submission to the panel or in any other submission or statement
made later in the panel proceeding."244
7.151 The burden placed on the complaining party to identify its claims in the request for the
establishment of a panel is related to the due pro cess rights of the respondent to be properly informed
of the nature of such claims, so that it can pr operly respond. As noted, it is our view that an
Article 21.5 compliance panel may cons ider a new claim, not raised befo re the original panel, as long
as: (a) that claim is identified by the compla inant in its request for the establishment of the
compliance panel; (b) the claim concerns a new measure, adopted by the respondent allegedly to
comply with the DSB's recommendations and rulings; and, (c) the claim relates to changed aspects of
the new measure.
7.152 The admission by a compliance panel of new clai ms, not raised before the original panel,
against unchanged aspects of the original measure, would create a situation of uncertainty for the
respondent. Even a respondent Member who had complied in good faith with the DSB's
recommendations and rulings in a particular case, by modifying the challenged measure, without
incurring any new violations, could still be subj ect to continuous challenges against unchanged
aspects of the original measure. Moreover, this co uld lead to "case-splitting", a tactical decision by a
complainant to advance some claims in the origin al proceedings, while savi ng some claims for the
compliance stage. 245 The admission of such new claims would jeopardize the security and
predictability that the WTO dispute settlement sy stem should provide to the multilateral trading
system. We recall in this regard the words of the panel in the EC –Bed Linen (Article 21.5 – India)
case:
"To rule on this aspect of India's claim under Article 3.5 in this proceeding would be
to allow India a second chance to prevail on a claim which it raised, but did not

242 Cfr., Appellate Body Report on Brazil – Desiccated Coconut, p. 22.
243 Appellate Body Report on Korea – Dairy, para. 124.
244 Appellate Body Report on EC – Bananas III, para. 143.
245 This risk was identified by a third party, who was nevertheless of the view that: "Where the
measure is appropriately before a panel, and the DSB has made no findings or recommendations in respect of
such measure or the claims made by the complaining party, a panel may not then reject such claims or
arguments on the sole basis that they could have been raised previously." Canada's oral statement, paras. 6-14.

pursue, in the original proceeding. We cannot conclude that such a result is required
by Article 21.5 of the DSU, or any other provision. The possibility for manipulative
or abusive litigation tactics that would be opened by allowing Members an
opportunity to obtain a ruling in an Article 21.5 that they could have sought and
obtained in the original dispute would, in our view, be inestimably harmful to the
effective operation of the dispute settlement system.
246 We hasten to emphasise that
we do not consider that India has engaged in any such harmful tactics, or has engaged
in this dispute settlement procedure in anyt hing other than entirely good faith in an
effort to resolve the dispute, as required by Article 3.10 of the DSU. We nonetheless
consider that a claim which, as a legal and practical matter, could have been raised
and pursued in the original dispute, but was not, cannot be raised on the same facts
and legal premises in an Article 21.5 pr oceeding to determine the existence or
consistency of measures taken to comply with the recommendation of the DSB in the
original dispute. In our view, this ruling furthers the object and purpose of the
DSU."
247
7.153 On the other hand, if a WTO Member should wish to bring a legal complaint against
unchanged aspects of an original measure that it di d not raise before an original panel, nothing
prevents that Member from bringing a new challe nge under the regular procedures, by requesting
consultations on the matter and then, if those consultations fail to resolve the issue, by requesting the
establishment of a regular panel. In our view, what that Member is prevented from doing is to use the
expedited procedures in Article 21.5 of the DSU to bring new claims that it neglected to make in the
original proceedings.
7.154 As regards the determination of whether a particular claim relates to aspects that remain
unchanged in a new measure, we have noted that this determination should go beyond a formal
verification of the existence of a new and different measure. In previous cases, and in the context of
other provisions, panels and the Appellate Body have favoured a non-formalistic approach to the issue
of whether changes incorporated into a measure are enough to make that measure a new measure, as
compared to an old measure. Notably, in the original Chile – Price Band System case, the Appellate
Body found that, after the enactment of Law 19.772 during the course of the proceedings, Chile's PBS
remained essentially the same, since the modifications made to the original measure had not "changed
its essence".248
7.155 The test under Article 21.5, however, is in our opinion not whether the measure is the same,
but rather whether the challenged aspects in the new measure are changed or unchanged when
compared to the old measure. Despite the fact that the t est is different, there is no reason why the
criterion should be any more formalistic.
7.156 The parties differ on whether Argentina's clai m concerns a changed or unchanged aspect of
the original measure and consequently whether Ar gentina could have raised it during the original
proceedings. Argentina argues that its claim "relates to the whole of the modified PBS, that is to say,
the modified PBS in its totality rather than to one aspect in particular" so that it is not "challenging an
aspect of the original measure which has not changed ".249 Chile contends that Argentina's challenge

246 ( original footnote ) As the Appellate Body has noted, "The procedural rules of WTO dispute
settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and
effective resolution of trade disputes". Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations" ("US – FSC
 "), WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619, at para. 166.
247 Panel Report on EC –Bed Linen (Article 21.5 – India), para. 6.43.
248 Appellate Body Report on Chile – Price Band System, paras. 138-139.
249 Argentina's rebuttal, paras. 301-302. Argentina's response to questions 25 and 26.

should have been raised and substa ntiated in the original proceedings, because it is applicable both to
the amended PBS as well as to the original measure.
250
7.157 Argentina's claim under Article II:1(b) is th at the duties from the amended PBS constitute
"other duties or charges" not recorded in the appr opriate column of Chile's Schedules of Concessions.
Argentina argues that, since the amended PBS is in consistent with Article 4.2 of the Agreement on
Agriculture, as a border measure similar to a variab le import levy and to a minimum import price,
which is not an ordinary customs duty, the resulti ng duties constitute "other duties or charges" that
have not been recorded in Chile's Schedule of con cessions. In Argentina's view, this would translate
into a violation of the second sentence of Article II:1(b) of GATT 1994.251
7.158 The amended PBS, as regulated in Law 19.897 and Supreme Decree 831, is formally a new
measure from the one that was the object of the or iginal proceedings in this case. The Panel has
already noted that, in a number of important aspect s, the amended PBS has changed when compared
to the original measure. Such aspects include, fo r example, the product coverage of the PBS (since
edible vegetable oils are now excluded from the system ); the fact that the lower and higher thresholds
of the price band (the floor and ceiling prices) ha ve been set until December 2014, instead of being
established yearly as was the case under the original PB S; and the fact that the amount of the duties
and rebates is determined bimonthly through a Supreme Decree of the Ministry of Finance, rather
than established for each transaction on the basis of a weekly reference price as was done previously.
7.159 Argentina has asserted that:
"[T]he essence of the PBS was unaffected by the changes introduced by Law 19.897
and Decree 831/2003. In other words, these changes did not convert the price band
system into a measure different from the pr ice band system that was in force before
the changes were introduced."252
7.160 When asked by the Panel, Argentina did not identify the new aspects of the amended PBS,
different from those in the original measure, that were the target of its claim. Nor did Argentina
explain which were the new features that the amended PBS contained that would, in its opinion,
violate the second sentence of Article II:1(b) in ways that the original PBS did not.253
7.161 Having identified the issues that in our view are related to the matter, however, the Panel
finds that there is no need to proceed further and make a specific finding on whether Argentina's claim
under the second sentence of Article II:1(b) of GATT 1994 has been properly put before this Panel.
We do not find that, under the particular circumstances of this case, such a finding would be necessary
to resolve the dispute between the parties.
4. Conclusion
7.162 In light of the discussion above, and having found that the amended PBS is inconsistent with
Article 4.2 of the Agreement of Agriculture, the Pa nel finds it unnecessary, for the resolution of this
dispute, to address Argentina's claim that the am ended PBS is also inconsistent with the second
sentence of Article II:1(b) of GATT 1994.

250 Chile's first written submission, paras. 48, 50, 56. Chile's rebuttal, para. 204. Chile's response to
question 2.
251 Argentina's first written submission, paras. 289-295.
253 Argentina's response to questions 25 and 26.

D. ARGENTINA'S CLAIM UNDER ARTICLE XVI:4 OF THE WTO AGREEMENT
1. Arguments of the parties
7.163 Argentina argues that, insofar as the amended PBS infringes both Article 4.2 of the
Agreement on Agriculture and the second sentence of Article II:1(b) of the GATT 1994, it must be in
breach of Article XVI:4 of the WTO Agreement, si nce Chile has not ensured the conformity of its
existing laws, regulations and administrative proce dures with its obligations under the WTO covered
agreements.
254
7.164 Chile responds that, since it has not maintained a measure inconsistent with Article 4.2 of the
Agreement on Agriculture, it is not in breach of Article XVI:4 of the WTO Agreement.255
2. Relevant provision
7.165 Article XVI:4 of the WTO Agreement provides:
"Each Member shall ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed Agreements."
3. Panel's analysis
7.166 As noted, in response to Argentina's claim, Ch ile has only responded that, since the amended
PBS is not inconsistent with Article 4.2 of th e Agreement on Agriculture, it is not in breach of
Article XVI:4 of the WTO Agreement. 256 In contrast with its respon se to Argentina's claim under the
second sentence of Article II:1(b) of GATT 1994, Chile has not argued that the claim under
Article XVI:4 of the WTO Agreement falls outside the terms of reference of the Panel.
7.167 The Panel has already found that the amended PBS, challenged in the current Article 21.5
proceedings, is inconsistent with Article 4.2 of the Agreement on Agriculture. Normally, the
determination of a breach of any provision of any WTO covered agreement gives automatically rise to
a violation of Article XVI:4 of the WTO Agreement. As stated by the Panel in US – 1916 Act
(Japan):
"[I]f a provision of an 'annexed Agreement' is breached, a violation of Article XVI:4
immediately occurs. GATT 1994 is one of the 'annexed Agreements' within the
meaning of Article XVI:4. Since we found that provisions of Article VI of the GATT
1994 has been breached, we conclude that, by violating this provision, the United
States violates Article XVI:4 of the WTO Agreement."
257
7.168 Similarly, the Panel in US – 1916 Act (EC) found that:
"If Article XVI:4 has any meaning, it is that when a law, regulation or administrative
procedure of a Member has been found in compatible with the WTO obligations of
that Member under any agreement annexed to the WTO Agreement, that Member is
also in breach of its obligations under Article XVI:4."258

254 Argentina's first written submission, paras. 296-304. Argentina's rebuttal, para. 320.
256 Ibid.
257 Panel Report on US – 1916 Act (Japan), para. 6.287.
258 Panel Report on US – 1916 Act (EC), para. 6.223.

7.169 Having made the determination th at the amended PBS is inconsis tent with Article 4.2 of the
Agreement on Agriculture, it follows that Chile has not ensured the conformity of its laws, regulations
and administrative procedures with the obligations established in the WTO agreements. It would flow
automatically that the measure is also in br each of Article XVI:4 of the WTO Agreement.
Notwithstanding the above, we do not feel that such additional finding is necessary in order to resolve
the dispute between the parties.
7.170 Indeed, once it is determined that the amended PBS is inconsistent with Article 4.2 of the
Agreement on Agriculture, an additional finding on wh ether the same measure is also in breach of
Article XVI:4 of the WTO Agreement would not be necessary in order to resolve the dispute between
the parties. It was already noted that a Panel does not n eed to examine all legal claims made by a
complaining party, but just those "which must be addressed in order to resolve the matter in issue in
the dispute."
 259
4. Conclusion
7.171 In light of the discussion above, and having found that the amended PBS is inconsistent with
Article 4.2 of the Agreement on Agriculture, the Pa nel finds it unnecessary, for the resolution of this
dispute, to address Argentina's claim that the amended PBS is also a violation by Chile of
Article XVI:4 of the WTO Agreement, because it do es not ensure the conformity of Chile's laws,
regulations and administrative procedures with its obligations under the WTO covered agreements.
VIII. CONCLUSIONS AND RECOMMENDATIONS
8.1 As a preliminary comment, we note that the parties in this dispute are both developing
country Members. However, as was the case in the original proceedings 260, there were no provisions
on special and differential treatment for developing country Members invoked by any of the parties.
In any event, we find that these provisions were not relevant for the resolution of the specific matter
that was brought before this Panel.
8.2 In light of the findings above, we conclude that:
(a) By maintaining a border measur e 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;
(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; and,
(c) It is unnecessary, for the resolution of this dispute, to make a separate finding on
Argentina's claim under Article XVI:4 of the WTO Agreement.
8.3 Under Article 3.8 of the DSU, in cases where there is infringement of obligations assumed
under a covered agreement, the action is considered prima facie to cons titute a case of nullification or
impairment of benefits under that agreement. Chile has failed to rebut this presumption.
Accordingly, we conclude that to the extent Chile has maintained a measure inconsistent with the
provisions of the Agreement on Agriculture, it con tinues to nullify or impair benefits accruing to
Argentina under that Agreement.

259 Appellate Body Report on US – Wool Shirts and Blouses, p. 19.
260 Appellate Body Report on Chile – Price Band System, paras. 196-199.

8.4 We recommend that the Dispute Settlement Body request Chile to bring its PBS into
conformity with its obligations under the Agreement on Agriculture.