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

PERU – ADDITIONAL DUTY ON IMPORTS OF CERTAIN AGRICULTURAL PRODUCTS
AB-2015-3
Report of the Appellate Body
Addendum
This Addendum contains Annexes A to C to the Report of the Appellate Body circulated as
document

The Notices of Appeal and the executive summar ies of written submissions contained in this
Addendum are attached as they were received from the participants and third participants. The
content has not been revised or edited by the Appellate Body, except that paragraph and footnote
numbers that did not start at one in the original may have been re-numbered to do so, and the
text may have been formatted in order to adhere to WTO style. The executive summaries do not
serve as substitutes for the submissions of the participants and third participants in the
Appellate Body's examination of the appeal.

LIST OF ANNEXES

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

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ANNEX A
NOTICES OF APPEAL
Contents Page
Annex A-1 Peru's Noti ce of Appeal A-2
Annex A-2 Guatemala's Notice of Other Appeal A-4

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ANNEX A-1
PERU'S NOTICE OF APPEAL*
1. Pursuant to Articles 16.4 and 17 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review
("Working Procedures"), Peru hereby notifies its de cision to appeal certain issues of law and legal
interpretation in the Report of the Panel in Peru – Additional Duty on Imports of Certain
Agricultural Products (WT/DS457) (the "Panel Report").
2. Peru appeals, and requests the Appellate Body to reverse, modify or declare moot and of no
legal effect the findings, conclusions and recommendations of the Panel with respect to the
following errors of law and legal interpretations contained in the Panel Report:
1
I. The Panel Erred in Law by Failing to Find that Guatemala Acted Inconsistently with
Its Good Faith Obligations under DSU Articles 3.7 and 3.10

3. Peru seeks review by the Appellate Body of th e Panel's findings and conclusions that there
was "no evidence that Guatemala brought these proceedings in a manner contrary to good faith"
within the meaning of DSU Articles 3.7 and 3.10, and its concomitant conclusion that "there is
therefore no reason for the Panel to refrain from assessing the claims put forward by Guatemala".
2
4. The Panel's errors of law and legal interpretation include its assumption that the legal status
of the Peru-Guatemala Free Trade Agreement ("FTA") was dispositive to its ruling on good faith.
The status of the FTA has no bearing on the issue of whether Guatemala acted contrary to its good
faith obligations under DSU Article 3.7 and 3.10. Th e Panel's interpretation of the requirements of
DSU Articles 3.7 and 3.10 was thus fundamentally flawed.
5. Accordingly, Peru requests the Appellate Body to declare moot and with no legal effect the
Panel's findings in paragraphs 7.75, 7.84, 7.88, 7.91-7.93, 7.96, 7.526-7.528, and to reverse the
Panel's conclusion in paragraphs 8.1(a), 8.1(f), and 8.8. Peru also respectfully requests the
Appellate Body to complete the analysis and find that Guatemala has acted inconsistently with its
obligations under DSU Articles 3.7 and 3.10.
II. The Panel Erred in Law by Finding that Pe ru Acted Inconsistently with Article 4.2 of
the Agreement on Agriculture

6. Peru seeks review of the Panel's findings and conclusions that the duties resulting from the
Price Range System ("PRS") constitute variable import levies or share sufficient characteristics
with variable import levies to be considered a border measure similar to a variable import levy,
within the meaning of footnote 1 to the Agreement on Agriculture
3, and that by maintaining such
measures Peru is acting inconsistently with its obligations under Article 4.2 of the Agreement on
Agriculture.4
7. The Panel's errors of law and legal interpretation include:
 The Panel erred in its interpretation of Article 4.2 of the Agreement on Agriculture by failing
to take into account the FTA as a relevant rule of international law within the meaning of
Article 31(3)(c) of the Vienna Convention on the Law of Treaties ("Vienna Convention")
5;

* This document, dated 25 March2015, was circulated to Members as document WT/DS457/7.
1 Pursuant to Rule 20(2)(d)(iii) of the Working Procedures for Appellate Review this Notice of Appeal
includes an indicative list of the paragraphs of the Panel Report containing the alleged errors, without prejudice
to the ability of Peru to refer to other paragraphs of the Panel Report in the context of its appeal.
2 See Panel Report, paras. 7.66-7.96 and 8.1(a).
3 Panel Report, para. 8.1(b).
4 Panel Report, para. 8.1(d).
5 See Panel Report, paras. 7.525-7.528 and 8.1(f).

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 The Panel erred in its interpretation of Article 4.2 of the Agreement on Agriculture by failing
to take into account Articles 20 and 45 of the International Law Commission (ILC) Draft
Articles on Responsibility of States for Internationally Wrongful Acts ("ILC Articles") as
relevant rules of international law within the meaning of Article 31(3)(c) of the Vienna
Convention;
 The Panel erred in its interpretation of Article 4.2 of the Agreement on Agriculture by failing
to take into account the FTA as a "subsequent agreement between the parties" within the
meaning of Article 31(3)(a) of the Vienna Convention; and
 The Panel erred in finding that the measure was a variable import levy or similar measure
and thus a violation of Article 4.2 of the Agreement on Agriculture.
6 In addition, the Panel
failed to make an objective assessment of the matter before it, as required by DSU
Article 11.
8. Accordingly, Peru requests the Appellate Body to declare moot and with no legal effect the
Panel's findings in paragraphs 7.316, 7.321, 7.324-7.325, 7.328, 7.334-7.340, 7.345-7.347,
7.349, 7.350-7.352, 7.371-7.374, and 7.526-7.528 and to reverse the Panel's conclusions in
paragraph 8.1(b) and 8.1(d), 8.1(f), and 8.8.
III. The Panel Erred in Law by Finding that Peru Acted Inconsistently with Article II:1(b)
of the GATT 1994

9. Peru seeks review of the Panel's findings and conclusions that the additional duties resulting
from the PRS constitute "other duties or charges … imposed on or in connection with the
importation", within the meaning of the second sentence of GATT Article II:1(b), and that in
applying measures, Peru acted inconsistently with its obligations under the second sentence of
Article II:1(b) of the GATT 1994.
7
10. The Panel's errors of law and legal interpretation include:
 The Panel erred in its interpretation of the second sentence of GATT Article II:1(b) by failing
to take into account the FTA as a relevant rule of international law within the meaning of
Article 31(3)(c) of the Vienna Convention8;
 The Panel erred in its interpretation of the second sentence of GATT Article II:1(b) by failing
to take into account Articles 20 and 45 of the ILC Articles as relevant rules of international
law within the meaning of Article 31(3)(c) of the Vienna Convention;
 The Panel erred in its interpretation of the second sentence of GATT Article II:1(b) by failing
to take into account the FTA as a "subsequent agreement between the parties" within the
meaning of Article 31(3)(a) of the Vienna Convention; and
 The Panel erred in finding that the additional du ties were other duties or charges and thus a
violation of the second sentence of GATT Article II:1(b). In addition, the Panel failed to
make an objective assessment of the matter before it, as required by DSU Article 11.
11. Accordingly, Peru requests the Appellate Body to declare the Panel's findings in
paragraphs 7.423, 7.425-7.426, 7.430-7.432, 7.526-7.528, 8.1(e), 8.1(f), and 8.8 to be moot and
of no legal effect.
12. The reasons for Peru's appeal are further elaborated in its submission to the Appellate Body.

6 See Panel Report, paras. 7.371-7.372 and 8.1(b)-(d).
7 Panel Report, para. 8.1(e).
8 Panel Report, paras. 7.525-7.528 and 8.1(e) and (f).

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ANNEX A-2
GUATEMALA'S NOTICE OF OTHER APPEAL*
Pursuant to Article 16.4 and 17 of the Understa nding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 23(1) of the Working Procedures for Appellate Review,
Guatemala hereby notifies its decision to appeal to the Appellate Body certain issues of law
covered in the Panel Report on Peru – Additional Duty on Imports of Certain Agricultural Products
(WT/DS457/R), which was circulated on 27 November 2014 (the "Panel Report"). Pursuant to
Rule 23(3) of the Working Procedures for Appellate Review, Guatemala is simultaneously filing this
Notice of Other Appeal and its Other Appellant's Submission with the Appellate Body Secretariat.

Guatemala appeals the Panel's finding on paragraphs 7.370, 7.371 and 8.1(c) of the Panel Report
that the duties resulting from Peru's Price Range System ("the measure at issue") does not fall
within the category of "minimum import prices … and similar border measures" prohibited under
Article 4.2 and footnote 1 of the Agreement on Agriculture.
1

Guatemala seeks review by the Appellate Body of the following errors of law by the Panel in the
Panel Report:

I. The Panel erred in applying an excessively narrow legal standard to define measures
that constitute a minimum import price within the meaning of Article 4.2 and footnote 1
of the Agreement on Agriculture

1. The Panel erred in law in concluding that the measure at issue was not a minimum import
price because it was not applied by reference to the actual transaction value of each shipment of
imports. In reaching this finding, the Panel applied an excessively narrow legal definition of
"minimum import prices" within the meaning of Article 4.2 and footnote 1 of the Agreement on
Agriculture.
2. Nothing in the definitions used by the panels and the Appellate Body in the Chile – Price
Band System disputes implies that the concept of minimum import price includes only measures
that are applied with respect to the actual transaction value of each shipment.
3. The reference price of Peru’s Price Range System ("PRS") is designed to operate as a
substitute or proxy for the typical transaction value of any given shipment. In this sense, the
reference price and the manner in which it is calculated, ensures that the floor price functions as a
true minimum import price, even if the PRS does not operate directly by reference to actual
transaction values of individual shipments.
4. The Panel improperly rejected Guatemala's argu ment that the measure at issue constitutes
a minimum import price even if it does not in ev ery instance equalize entry prices with the floor
price. The essential legal character of the measure does not change even if it does not achieve its
purpose in every instance.
II. The Panel erred in finding that the measure at issue is not a minimum import price
despite the existence of an implicit minimum threshold

5. The Panel’s finding that the measure at issue does not constitute a minimum import price
failed to consider that the measure's design, structure and operation gives rise to an implicit
minimum price threshold. This threshold consists of the sum of the lowest transaction price of the
previous fortnight and the duty resulting from the PRS.

* This document, dated 30 March 2015, was circulated to Members as document WT/DS457/8.
1 The Panel's errors in law are contained inter alia in paragraphs 7.360, 7.361, 7.366-7.371 and 8.1(c)
of the Panel Report. In accordance with Rule 23(2)(c)(ii)(C), the foregoing is an indicative list of the
paragraphs of the Panel report containing the alleged errors.

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6. Even though, in certain instances, the final entry value of an imported product may not
reach the floor price, it will always reach or exceed the alternative implicit threshold. It is highly
unlikely that a shipment will arrive in Peru at a price lower than the lowest price observed in the
international reference market designated by Peru's legislation.
7. The Panel also incorrectly equated the effects of the implicit threshold with those produced
by ordinary customs duties in the form of a specific tariff. The implicit threshold contained in the
measure at issue affords a specific type of protection not afforded by ordinary specific duties. As
acknowledged by the Panel, the PRS has the decl ared objective of being a "stabilization and
protection mechanism that serves to neutralize fluctuations in international prices and limit the
negative effects of falls in such prices".
2 Unlike the implicit threshold of Peru's measure, the
threshold generated by a specific duty does not re spond to changes in world prices of a particular
commodity. Additionally, while the implicit threshold is inherently linked to the lowest transaction
of the previous fortnight, any ordinary specific duty would lack any such characteristic.
III. The Panel erred in conflating the legal standard for minimum import prices with
the legal standard for measures "similar" to minimum import prices

8. The Panel conducted a legally incorrect analysis of whether the measure was "similar" to a
minimum import price within the meaning of foot note 1 of the Agreement on Agriculture. The
Panel's reasons for finding that the measure at issue is not similar to a minimum import price are
essentially the same as those for finding that the measure is not a minimum import price. The
Panel thus conflated two related but different legal concepts: a minimum import price and a
measure similar to a minimum import price.
9. Under the Panel's legal interpretation, a measure could only be "similar" to a minimum
import price if, in effect, it is a minimum import price.
10. By using a definition of "similar" that was the same as the definition used for minimum
import prices, the Panel failed to give effect to the concept of "similar" measures in the context of
footnote 1 to Article 4.2 of the Agreement on Agriculture.
IV. The Panel erred in finding that Peru's measure is not similar to a minimum import
price because it does not impede imports from entering Peru at a price below a certain
threshold

11. The Panel erred in finding that the measure at issue is not similar to a minimum import price
because it does not impede imports from entering the Peruvian market at prices below a certain
threshold.
12. Contrary to the Panel's conclusion, the design, structure and operation of the measure at
issue shows the existence of an explicit threshold, which is the floor price itself. The floor price
acts as a true threshold because it operates on the basis of a reference price, which is calculated in
a manner that mimics the value of actual transactions.
13. The measure at issue also contains an implicit threshold, which consists of the lowest
transaction of the previous fortnight plus the addi tional duties generated by the PRS. Even if, in
certain limited cases, the application of the additional duties fails to elevate the price to the level
of the floor price, those shipments will not enter the Peruvian market below the alternative implicit
threshold.

For the above reasons, the Panel erred in law in finding that the measure at issue is neither a
minimum import price nor a measure similar to an import price within the meaning of Article 4.2
and footnote 1 of the Agreement on Agriculture. Guatemala, therefore, requests the Appellate
Body to reverse the Panel’s finding contained in paragraphs 7.370, 7.371 and 8.1 (c) of the Panel
Report.

2 Panel Report, para. 7.317(a).

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Additionally, Guatemala requests that the Appellate Body complete the legal analysis and find that
the measure at issue is inconsistent with Article 4.2 of the Agreement on Agriculture because it is
either a minimum import price or a measure si milar to a minimum import price. The factual
findings contained in the Panel Report, as well as the undisputed facts on the record, constitute a
sufficient basis to conclude that the measure at issue is a minimum import price or a measure
similar to a minimum import price.

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ANNEX B
ARGUMENTS OF THE PARTICIPANTS
Contents Page
Annex B-1 Executive summary of Peru's appellant's submission B-2
Annex B-2 Executive summary of Guatemala's other appellant's submission B-7
Annex B-3 Executive summary of Pe ru's appellee's submission B-9
Annex B-4 Executive summary of Guatemala's appellee's submission B-10

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ANNEX B-1
EXECUTIVE SUMMARY OF PERU'S APPELLANT'S SUBMISSION
I. INTRODUCTION
1. This appeal will determine whether Peru may maintain its Price Range System ("PRS") for
certain designated goods in its bilateral trade with Guatemala. This is a surprising question to be
placed before the WTO dispute settlement system because Peru and Guatemala already addressed
this issue in their 2011 Free Trade Agreement ("FT A"). The FTA states expressly that "Peru may
maintain its Price Range System" for certain designated products from Guatemala. It also states
that, in the event of any inconsistency between the FTA and the WTO, the provisions of the FTA
would prevail.
2. After having expressly accepted in the FTA the right of Peru to maintain the PRS, Guatemala
has sought to neutralize this provision through the use of the WTO dispute settlement system.
Such an approach should be of grave concer n to the Appellate Body, and indeed to all
WTO Members.
3. Peru has signed the FTA but, in light of Guatemala's WTO challenge, has not ratified it. While
Peru wants the FTA to enter into force, it is unwilling to give Guatemala the benefits of the FTA in
light of Guatemala's attempt to use the WTO disput e settlement system to rewrite or delete a key
provision of the bilateral agreement. Peru canno t accept Guatemala's attempt to secure through
the WTO what it failed to achieve during the negotiating process for the FTA.
4. Unfortunately, the Panel in this dispute rewarded Guatemala for its two-track approach. It
ruled that Guatemala did not act inconsistently with its good faith obligations under
DSU Articles 3.7 and 3.10. It also ruled that, by maintaining the PRS, Peru violated its obligations
under Article 4.2 of the Agreement on Agriculture and under the second sentence of Article II:1(b)
of the GATT 1994. The Appellate Body should reverse these findings and declare them to be moot
and without legal effect. It should also complete the analysis and find that Guatemala acted
inconsistently with its good faith obligations under the DSU.
1 FACTUAL BACKGROUND
5. The measure in dispute is the additional duties resulting from the PRS. The Panel properly
found that Guatemala challenged the additional duties, rather than the calculation mechanism (the
PRS) as such.
6. The additional duties have been part of Peru's tariff policy since 1991, with modifications to
the underlying calculation methodology occurring over the years, but without changes in the
nature of the duties. They were part of Peru’s tariff policy when Peru scheduled its tariff
commitments at the end of the Uruguay Round. Of the subsequent modifications, the most
relevant occurred in 2001, when Supreme Decree No. 115-2001-EF refined the calculation
methodology, establishing for the first time an upper range that would allow for the rebate of
duties. When considered with the existing lower range, a "price range system" resulted.
7. The additional duties resulting from the PRS a pplied to specific agricultural imports from
Guatemala (and other countries) for many years. Because it was important to both Peru and
Guatemala, the two countries agreed to include the issue in the negotiation of their FTA.
8. In the resulting FTA, Peru and Guatemala agreed to eliminate custom tariffs on goods
originating in the other Party, "in accordance with Annex 2.3". Annex 2.3, in turn, expressly
provides that "Peru may maintain its Price Range System" with respect to certain designated
products. Such products are designated with an as terisk in Peru's FTA Tariff Schedule, and are the
same products Peru listed as having differentia l bound tariff treatment at the formation of the
WTO. Peru and Guatemala confirmed their "existing mutual rights and obligations under the
WTO Agreement", and this would include the WTO pr ovisions cited by Guatemala in this dispute.
The Parties agreed to a specific exception to such WTO rights and obligations by agreeing that, in
the event of any inconsistency between the FTA and the WTO Agreements, the FTA "shall prevail

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to the extent of the inconsistency". Thus, the provision through which the Parties agreed that
"Peru may maintain its Price Range System" was part of the balance of the rights and obligations
negotiated and agreed by the two countries.
9. After reaching a final agreement and concluding negotiations, the FTA was (a) signed by
both parties on 6 December 2011; (b) approved by the Guatemalan Congress; and (c) formally
ratified by the Guatemalan President. Guatemala notified Peru in 2014 that it had fulfilled the legal
requirements for the entry into force of the FTA. In parallel, Guatemala had by then initiated
proceedings in the WTO seeking a ruling that Peru must "dismantle" the PRS.
2 THE PANEL ERRED IN LAW BY FAILING TO FIND THAT GUATEMALA ACTED
INCONSISTENTLY WITH ITS GOOD FAITH OBLIGATIONS UNDER DSU ARTICLES 3.7
AND 3.10
10. Peru argued before the Panel that by using th e WTO dispute settlement system to challenge
Peru's specific duties, Guatemala violated the obligation to engage in WTO dispute settlement
procedures in good faith. The Panel erred in law by finding that Guatemala had not violated DSU
Articles 3.7 and 3.10, and by not dismissing Guatemala's claims on this basis.
11. Peru does not consider that Guatemala is procedurally barred from bringing a WTO claim
against the PRS. Rather, the Panel should have found that Guatemala's actions – using the
WTO dispute settlement system to nullify a provis ion of the FTA – were contrary to Guatemala's
good faith obligations under DSU Articles 3.7 and 3.10.
12. WTO panels have the authority to determine that WTO Members have brought a claim
contrary to the principles of good faith, as found by the Appellate Body in U S – Offset Act (Byrd
Amendment). Yet, in the present dispute, the Panel declined to rule that Guatemala acted contrary
to the principles of good faith. It reviewed a number of factors and then stated its conclusions as
follows: "On the basis of these considerations, the Panel finds no evidence that Guatemala has
engaged in the present procedure in a manner contra ry to the good faith obligations contained in
Articles 3.7 and 3.10 of the DSU." While the Panel purported to base its conclusion on "no
evidence", its rulings on this issue were founded on its own failure to apply the correct legal
principles. The Panel's findings on good faith are thus vitiated by errors of law.
13. The Panel erred in law by assuming that the legal status of the FTA was dispositive to its
ruling on good faith. The Panel considered that the legal status of the FTA – rather than the
actions of Guatemala in bringing this dispute – to be determinative to the issue of whether
Guatemala acted consistently with its obligations under DSU Articles 3.7 and 3.10. The Panel
stated that "[t]he mere signing of a treaty, befo re it enters into force, imposes only limited
obligations on the parties", and that it could not "attribute to the FTA a legal value that it does not
currently possess". But it is critical to stress that the task before the Panel was to determine
whether Guatemala's use of the WTO dispute settlement system to nullify a provision of the FTA
was consistent with DSU Articles 3.7 and 3.10 . That the FTA is not in force does not preclude
finding a good faith violation when a party waives a right, consents to conduct, or acts to nullify
the object and purpose of a treaty not yet in force.
14. The Panel failed to interpret and correctly apply Articles 3.7 and 3.10 of the DSU because it
limited its analysis only to the situation in which Guatemala "expressly waived the right to bring a
case with respect to the PRS or recognized the consistency of that measure with the
WTO agreements". Yet the Appellate Body made clear in EC – Bananas III (Article 21.5 – Ecuador
II)/ EC – Bananas III (Article 21.5 – US) , that WTO Members may waive rights either explicitly or
by necessary implication. Moreover, Members may waive substantive, in addition to procedural,
rights and may do so unilaterally.
15. The International Law Commission (ILC) Draft Articles on Responsibility of States for
Internationally Wrongful Acts ("ILC Articles") provide further support for the proposition that the
Panel erred in law by ruling that WTO Members can only waive their WTO rights "expressly", or
through treaties that are ratified and in force. ILC Articles 20 and 45 codify general principles of
law and are directly relevant in this context.

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16. Guatemala waived its right explicitly because it agreed explicitly that Peru may maintain the
PRS. In the alternative, the Panel should have concluded, on the basis of the uncontested facts
before it, that Guatemala waived its rights by necessary implication.
17. Whether the waiver by Guatemala is considered to be explicit or implied, the status of the
FTA has no bearing on the issue of whether Guatemala acted contrary to its good faith obligations
under DSU Article 3.7 and 3.10. If the Panel had focused on the conduct of Guatemala, rather than
whether the FTA was in force, it could only have concluded that Guatemala acted inconsistently
with DSU Articles 3.7 and 3.10.
18. A party's conduct in violation of Article 18 of the Vienna Convention on the Law of Treaties
("Vienna Convention") may also demonstrate a lack of good faith. An action by a state to defeat
the object and purpose of a treaty, particularly a treaty explicitly permitted by GATT Article XXIV
and GATS Article V, can indeed constitute evidence of a lack of good faith under DSU Articles 3.7
and 3.10, and it is an error of law to dismiss the possibility of examining such actions.
3 THE PANEL ERRED IN LAW BY FINDING THAT PERU ACTED INCONSISTENTLY WITH
ARTICLE 4.2 OF THE AGREEMENT ON AGRICULTURE
19. The Panel’s finding that Peru violated Article 4.2 of the Agreement on Agriculture is based on
legal error. The Panel improperly interpreted the provision in isolation of other relevant rules, and
it misapplied the Appellate Body’s clarifications of Article 4.2.
20. DSU Article 3.2 requires panels to interpret the existing provisions of the WTO Agreements
"in accordance with customary rules of interpretation of public international law". Among these
customary rules of interpretation of public international law is Article 31(3)(c) of the Vienna
Convention, which requires the treaty interpreter to take into account relevant rules of
international law applicable in the relations between the parties. The Panel erred in its
interpretation of Article 4.2 by failing to take into account the FTA as a relevant rule of
international law applicable in the relations between Peru and Guatemala within the meaning of
Article 31(3)(c) of the Vienna Convention.
21. The Panel refused to take the FTA into account because it is not in force. However, treaties
that are not in force, or have not been ratified by the disputing parties, can and have been used as
"relevant rules of international law" for the purpos es of Article 31(3)(c) of the Vienna Convention.
The FTA is a "rule of international law" that is "relevant" and "applicable" between Peru and
Guatemala, who are the relevant "parties".
22. If the Panel had properly interpreted Article 4. 2 of the Agreement on Agriculture in light of
the requirements of Article 31(3)(c) of the Vienna Convention, it should not have found Peru to
have violated its obligations under Article 4.2 of the Agreement on Agriculture.
23. Articles 20 and 45 of the ILC Articles are also "relevant rules of international law applicable
in the relation between the parties" within the meaning of Article 31(3)(c). Guatemala, by ratifying
the FTA, has validly consented to Peru's maintenance of the PRS within the meaning of
ILC Article 20, and has validly waived any claim it may have had against this measure within the
meaning of ILC Article 45. The Panel erred in law by failing to take into account ILC Articles 20 and
45 as relevant rules of international law applicable in the relations between the parties when
interpreting Article 4.2 of the Agreement on Agriculture.
24. The Panel also failed to take into account the FTA as a "subsequent agreement between the
parties regarding the interpretation of the treaty or the application of its provisions", as required
by Article 31(3)(a) of the Vienna Convention. Had the Panel done so, it should have found that
Peru did not violate Article 4.2 of the Agreemen t on Agriculture by maintaining the PRS. In US –
Clove Cigarettes , the Appellate Body found that a "subsequent agreement" in the sense of
Article 31(3)(a) of the Vienna Convention may take various forms. In Peru's view, it is not limited
to a decision adopted by all WTO Members. That is one form of subsequent agreement, but it is
not exhaustive of the forms that could validly apply under Article 31(3)(a). The Panel was required
by Article 3.2 of the DSU to take into account the FTA, which constitutes a "subsequent agreement
between the parties regarding the interpretation of the treaty or the application of its provisions".
The Panel’s failure to do so constitutes an error of law.

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25. The Panel also erred by misapplying the Appellate Body’s clarifications of the obligations of
Article 4.2 of the Agreement on Agriculture. The Panel's findings regarding Article 4.2 are
erroneous and its analysis is incomplete. A thorough analysis applying the proper legal standards
demonstrates that the additional duties do not violate Peru's obligations under Article 4.2 of the
Agreement on Agriculture.
26. First, the PRS does not share with variable import levies the characteristic of having a
threshold or minimum price. The existence of a th reshold price – a common characteristic of both
minimum import prices and variable import levies – was found to be absent in the Peruvian
system, unlike in Chile – Price Band System , and the Panel confirmed that the floor price used in
the PRS does not act as a threshold preventing entry of imports priced below it. The Panel then
found that the specific duties resulting from the PRS are no different than ordinary customs duties
in this regard. Although no one characteristic may be determinative, a specific finding that the
Peruvian measure contains no threshold or minimum price means that there is an important
difference between the Peruvian measure and a variable import levy. Imports subject to the
additional duties resulting from the PRS can enter Peru at any price; no imports are prohibited
from entering Peru by the PRS or any resulting duties.
27. The Panel also erred in assessing inherent variability, treating this characteristic as if it were
sufficient to qualify the measure as prohibited by Article 4.2 of the Agreement on Agriculture.
While the Panel correctly stated the test, it incorrectly applied that test. In the end, it relied too
heavily on the use of a "scheme or formula" in the calculation methodology, even though it
acknowledges that the formula itself may not produce any variability at all in the duty level. As a
result of this approach, the Panel reached the wr ong conclusion, and one that does not withstand
scrutiny.
28. As an initial matter, the Panel's analysis of variability confuses the measure at issue with the
methodology used to calculate the reference price and the potential duty. The distinction is clear,
and it is extremely relevant for the Panel's analys is of the measure – particularly the analysis of
the important characteristic of inherent variability. The measure at issue in the dispute – the
additional duties resulting from the PRS – cannot vary with any regularity, and are not inherently
variable. The only regularity is the fact that the calculation mechanism – the PRS – continuously
functions, but it does not always result in additional duties. There is no inherent variability in the
additional duties.
29. The Panel erred in its legal analysis regarding the predictability and transparency of the
measure at issue. The Panel committed three legal errors in assessing the measure's level of
transparency and predictability. First, the Panel conflated the opportunity to perform calculations
to predict the additional duties with a lack of transparency and predictability. Second, the Panel
applied the erroneous test proposed by Guatemala that a measure's variability could prevent it
from being transparent and predictable even after the Panel confirmed that variability is a separate
analysis from transparency and predictability. Th ird, the Panel erroneously concluded the measure
lacked transparency and predictability because it is based on an exogenous factor – international
prices – when the Appellate Body has held that ordinary customs duties may be calculated on the
basis of exogenous factors.
30. The Panel also erred in its legal analysis of the supposed inhibition of the transmission of
international prices to the domestic market. Its reliance solely on a theoretical analysis was legal
error. An empirical approach by the Panel would have shown that the specific duties resulting from
the PRS act like ordinary customs duties with respect to the transmission of international prices to
the domestic market. The PRS does not distort or impede the transmission of international prices
to the domestic market in a way that is different than other ordinary customs duties.
31. The Panel claimed that the additional duties were more like prohibited variable import levies
than they were like permissible ordinary customs duties. Its actual analysis does not comply with
the requirements of Article 11 of the DSU. Although the Panel said that it was doing a comparative
analysis, it did not compare variable import levies and ordinary customs duties with respect to any
characteristics. It merely asserted differences, and it often assumed that the ordinary customs
duty would necessarily remain unchanged. Thus, there is no real comparison underlying the
alleged "comparative" analysis on which the Panel relies.

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4 THE PANEL ERRED IN LAW BY FINDING THAT PERU ACTED INCONSISTENTLY WITH
ARTICLE II:1(B) OF THE GATT 1994
32. The Panel’s finding that Peru violated the second sentence of Article II:1(b) of the
GATT 1994 is based on legal error. Just as it did in its interpretation of Article 4.2 of the
Agreement on Agriculture, the Panel improperly interpreted Article II of the GATT 1994 in isolation
of other relevant rules.
33. The arguments presented above by Peru in the context of Article 4.2 of the Agreement on
Agriculture apply, mutatis mutandis , to the arguments under GATT Article II:1(b). That is, a
proper interpretation of Article II:1(b) of th e GATT 1994 would have required the Panel to take
into account: (1) the Peru-Guatemala FTA as a relevant rule of international law within the
meaning of Article 31(3)(c) of the Vienna Convention ; (2) Articles 20 and 45 of the ILC Articles as
relevant rules of international law within the meaning of Article 31(3)(c) of the Vienna Convention;
and (3) the FTA as a "subsequent agreement be tween the parties" within the meaning of
Article 31(3)(a) of the Vienna Convention. If the Panel had properly interpreted Article II:1(b) of
the GATT 1994 by taking these instruments into a ccount, it should have found that Peru did not
violate the second sentence of GATT Article II:1(b) by maintaining the PRS.
34. The Article II analysis also falls short of the Panel’s obligations under DSU Article 11. While
the Panel properly framed the important Article II i ssue in the case, it then decided not to engage
in an assessment of the relevant facts. Instead, the Panel found a violation of Article II:1(b) of the
GATT 1994 not because of its analysis of the re quirements of Article II:1(b) and the design,
structure and architecture of the Peruvian measure, but rather because of its conclusion that the
duties resulting from the PRS are "at least […] similar" to the class of measures referred to as
"variable import levies" in the Agreement on Agriculture. Having done so, the Panel explicitly did
"not deem it necessary to rule" on the aspects of the PRS that might, in fact, reveal that the PRS is
more appropriately considered to be an ordinary customs duty within the meaning of both
Article II of the GATT 1994 and Article 4.2 of the Agreement on Agriculture.
35. The Panel failed to comply with its obligations under DSU Article 11. Facts are necessary to
understand the measure, and a proper understanding of the measure is necessary to determine
whether it is an "ordinary customs duty" within the meaning of Article II of GATT 1994. Peru
submits that this is particularly true in a case such as this where the Member scheduled the duties
pursuant to the rules established for the negotiation and specifically differentiated in its scheduled
the agricultural products that would be subject to a different and higher tariff ceiling.
36. The Panel committed legal error, and the Appellate Body should declare as moot and with no
legal effect the Panel's conclusion that Peru violated the second sentence of Article II:1(b) of the
GATT 1994. Should the Appellate Body decide to complete the analysis, it has the necessary facts
and argument in the record of the Panel proceedings, as aptly summarized by the Panel before it
decided not to assess the facts.

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ANNEX B-2
EXECUTIVE SUMMARY OF GUATEMALA'S OTHER APPELLANT'S SUBMISSION
1. Guatemala seeks review by the Appellate Body of the Panel's findings that the measure at
issue is not a "minimum import price[] … and similar border measure" within the meaning of
Article 4.2 and footnote 1 of the Agreement on Agriculture.
A. THE MEASURE AT ISSUE
2. The measure at issue in this dispute is Peru 's Price Range System (PRS) and the "variable
additional duty" imposed thereunder. The Panel Re port contains a detailed description of the
design, structure and operation of the PRS 1, its objectives2, and the products to which it applies 3.
Paragraph 7.317 of the Panel Report also contains a summary of this description.
B. THE ISSUE BEFORE THE PANEL
3. Guatemala claimed that the measure at issue is a minimum import price or similar border
measure that is inconsistent with Article 4.2 of the Agreement on Agriculture. Peru argued that the
measure was not inconsistent with Article 4.2 it lacked a "target price" and, therefore, did not seek
to equalize the price of every import with the floor price.
C. THE PANEL'S ANALYSIS
4. The Panel found that the measure at issue does not constitute a minimum import price,
stating that "there is no evidence at all that the additional duties resulting from application of the
PRS directly ensure that imported products subject to the PRS will not enter the Peruvian market
at a price lower than a certain threshold".
4 The Panel stated that the measure at issue operated in
the same manner as a specific import tariff". 5 The Panel also found that Peru's measure is not a
measure "similar" to a minimum import price becaus e: (a) the PRS does not operate in relation to
the actual transaction value; (b) Peru demonstrated that some imports over the 13-year duration
of the PRS entered below the floor price; and (c), the measure did not impose an implicit or de
facto threshold, given that an ordinary customs duty in the form of a specific tariff would have the
same effect as the measure at issue.
D. THE PANEL ERRED IN CONCLUDING THAT THE MEASURE AT ISSUE IS NOT
COVERED BY ARTICLE 4.2 EITHER AS MINIMUM IMPORT PRICE OR AS A MEASURE
SIMILAR TO A MINIMUM IMPORT PRICE
The Panel made the following legal errors:

5. First, the Panel adopted an excessively narrow legal standard, requiring that, in order to
constitute a minimum import price, a measure must impose duties based on the transaction value
and has to prevent, in each and every instance, that a product enter below a given threshold.
6. In the original Chile – Price Band System dispute, the Appellate Body indicated that
"minimum import price schemes generally operate in relation to the actual transaction value of the
imports" (emphasis added), implying that a minimum import price may occasionally not operate in
relation to the actual transaction value.
6

1 Panel Report, paras. 7.126-7.167.
2 Panel Report, paras. 7.118-7.119.
3 Panel Report, paras. 7.118-7.119.
4 Panel Report, para. 7.360.
5 Ibid.
6 Appellate Body Report, Chile – Price Band System, para. 7.295 (quoting the Panel Report, Chile – Price
Band System, para. 7.36(e)).

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7. Similarly, the correct legal characterization of a measure is not affected by the fact that the
measure may not produce its intended effects with respect to 100 per cent of imports.7
8. Furthermore, the reference price of Peru's PRS is designed to operate as a substitute or
proxy for the typical transaction value of any given shipment, in any given fortnight.
9. Second, in its finding that Peru's measure is not a minimum import price, the Panel also
relied on the legally-incorrect proposition that, if Guatemala's claim were accepted, any ordinary
customs duty in the form of a specific tariff would constitute a minimum import price.
10. Even if Peru's measure does not, in every single instance, equalize entry prices with the floor
price, it nevertheless equalizes entry prices with another implicit (or de facto) threshold 8,
consisting of the sum of the lowest transaction price and the duty resulting from the PRS.
11. Third, in its finding that the measure at issue was not even similar to a minimum import
price, the Panel applied exactly same legal standard it used to determine whether the measure
was a minimum import price. This fails to give any meaning to the term "similar" in Article 4.2 and
footnote 1.
12. Fourth, the Panel incorrectly found that Peru's measure is not similar to a minimum import
price because it does not impede imports from entering Peru at a price below a certain threshold
and the PRS do not operate differently than ordinary customs duties. Even if it is accepted that the
floor price does not constitute a minimum threshold, the undisputed evidence makes clear that the
measure imposes an implicit de facto threshold. Moreover, this threshold operates very differently
than a specific tariff, in that it is based on the sum of the administratively chosen lowest
transaction value from the previous fortnight and a variable additional duty that was calculated on
data including that lowest transaction value. A specific ordinary customs duty simply does not
operate in this manner.
E. REQUEST FOR COMPLETION OF THE LEGAL ANALYSIS
13. The conditions articulated by the Appellate Body for it to complete the analysis are met in
this case. Using the correct legal standard for determining whether a measure is a minimum
import price, the Appellate Body should find that this measure is a minimum import price,
regardless of the fact that it is applied to a proxy reference price and that a few transactions may
enter below the threshold of the floor price. In addition, it is an undisputed fact that the measure
ensures that goods will not enter at a price below the implicit or de facto threshold value.
14. Even if the Appellate Body were to adopt a narrow reading of the term "minimum import
price", such that the above features of the PRS were to fall short of that standard; Guatemala
believes that the system must qualify, at the very least, as a measure similar to a minimum import
price.
15. The PRS and the variable additional duties have, at the very least, strong "likeness" or
"resemblance" to a minimum import price scheme. Such "likeness" or "resemblance" exists both
for the individual components of the regime, as well as for the system as a whole. The reference
price, the price range floor and the implicit thresh old bear strong "likeness" or "resemblance" to a
transaction value, a minimum threshold and a minimum import price. The declared goal of the PRS
is to "neutralize" and "stabilize" fluctuations in international prices.
9
F. CONCLUSION
16. Guatemala respectfully requests the Appellate Body to reverse the Panel's findings in
paragraphs 7.370, 7.371 and 8.1(c) of the Panel Report and complete the legal analysis
concerning Guatemala's claim that Peru's measure is a minimum import or a measure similar to a
minimum import price within the meaning of Article 4.2 of the AoA.

7 Appellate Body Report, US – FSC (21.5 I), para. 221.
8 Panel Report, para. 7.209.
9 Panel Report, para. 7.317, quoting the preambular language of Supreme Decree No. 115-2001-EF.

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ANNEX B-3
EXECUTIVE SUMMARY OF PERU'S APPELLEE'S SUBMISSION
1. The Panel correctly determined that the additional duties did not constitute a minimum
import price, were not similar to a minimum import price, and were like an ordinary customs duty.
The Appellate Body should reject Guatemala’s in vitation to re-weigh the evidence and reject
Guatemala’s requested findings.
2. An interpretation of Peru’s obligations under Article 4.2 of the Agreement on Agriculture
must consider the Peru-Guatemala Free Trade Agreement ("FTA") including the good faith
obligations of Guatemala under the DSU, and the understanding reached by the parties that Peru
may maintain the Peruvian Price Range System (" PRS"). Even if the Appellate Body reaches the
merits of Guatemala’s appeal, it should uphold the Panel’s conclusions that the measure at issue is
not – and is not similar to – a minimum import price.
3. The Panel correctly found that the additional duties do not have an explicit threshold. It
employed the correct legal standard to determine that the measure did not constitute a minimum
import price and properly evaluated the evidence proving that the measure’s "design, structure,
and effect" do not create a threshold price. Nowher e does the Panel suggest an inflexible standard
which would require that imports enter above the alleged threshold in "each and every instance",
nor a legal standard that would disqualify any system using a reference price "based on an
average of world prices" from being a minimum import price.
4. The evidence presented showed that adding the additional duties to the freely established
transaction price yielded landed, duty-paid prices that were both above and below the floor price in
the PRS. Guatemala mischaracterizes the data and the Panel's analysis regarding imports entering
below the floor price. Peru provided data in the aggregate and for individual fortnights showing up
to 100% of transactions for a product entering below the floor price in certain fortnights.
5. Nor is the reference price a proxy for transaction prices, which would be impossible because,
among other reasons, the PRS uses international prices (not transaction prices) for four "marker
products", not all forty-seven products to which the measure applies. Moreover, no pattern of
"self-correct[ion]" results from the fortnightly updating of the reference price. The data shows that
imports enter the Peruvian market at prices below the lower band of the PRS on a regular basis.
6. The Panel also correctly found that the additional duties do not have an implicit threshold.
The "lowest transaction recorded in the international reference market during the previous
fortnight" is a factor that is irrelevant to the PRS and any resulting duties and does not prevent
operators from transacting at any price.
7. The Panel applied the correct legal test for determining that the measure is not similar to a
minimum import price. The Panel's analysis showed that the Peruvian measure does not have
similar characteristics to a minimum import price, and in fact operates no differently than an
ordinary customs duty. The Appellate Body shou ld reject Guatemala's request to reverse the
Panel’s finding that the Peruvian measure is not, and is not similar to, a minimum import price.

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ANNEX B-4
EXECUTIVE SUMMARY OF GUATEMALA'S APPELLEE'S SUBMISSION
I. INTRODUCTION
1. Guatemala requests the Appellate Body to dismiss Peru's appeal in its entirety.
II. BACKGROUND TO THIS DISPUTE
A. The measure at issue
2. The Panel correctly defined the measure at issue as "the duties resulting from the PRS". 1
This is consistent with the content of Guatemala's request for the establishment of a panel.2 In this
context, Peru's arguments that the Panel shou ld have only examined the variable duties
themselves without looking at their underlying mechanism (i.e. the PRS) are without merit.
B. The FTA
3. Paragraph 9 of Annex 2.3 to the FTA cannot be read as a waiver – explicit or implicit – of the
right to bring a complaint under the DSU with regard to the PRS or the duties resulting from the
PRS. Article 1.3.1 of the FTA makes clear that Guatemala fully reserved its rights under the
WTO Agreements. Article 2.3.1 of the FTA, read in conjunction with paragraph 9 of Annex 2.3 to
the FTA does not in any way waive or reduce Peru's obligation t o c o m p l y w i t h t h e
WTO Agreements. Rather, it grants Peru the right to maintain the PRS for a limited number of
products
3, but only as long as it does so in a manner consistent with its obligations under the
WTO Agreements.
4. The phrase "may maintain the PRS" in paragr aph 9 of Annex 2.3 cannot be interpreted as
prejudging the consistency or inconsistency of the PRS with Article 4.2 of the Agreement on
Agriculture or Article II of the GATT of 1994. There is nothing to suggest that the Parties intended
to interpret the WTO Agreements through the FTA, let alone modify their WTO obligations.
III. PERU'S NEW ARGUMENTS UNDER ARTICLES 31.3(A) AND 31.3(C) OF THE VIENNA
CONVENTION ARE NOT PROPERLY WITHIN THE SCOPE OF THIS APPEAL
5. Guatemala raises a procedural objection to Peru's arguments relating to the FTA and the
Articles 20 and 45 of the ILC Articles in the context of Articles 31.3(a) and 31.3(c) of the Vienna
Convention.4 These arguments are entirely new, were never raised before the Panel, and are not
properly within the scope of this appeal.
6. The Appellate Body has previously found that new arguments must be excluded from the
scope of an appeal when their consideration would necessitate consideration of new facts. 5
Furthermore, the Appellate Body has also exclude new arguments when there were no relevant
legal findings or legal interpretations by a panel, in particular when the inability of the panel to
address the issues now being raised was "due to the failure of the respondent Member properly to
litigate the matter before the Panel".
6 Moreover, the Appellate Body has consistently stated that
due process rights of a party would be infringed if issues were raised and decided on appeal
without having been first examined by a panel.

1 Panel Report, para. 2.2.
2 Request for the establishment of a panel by Guatemala, document WT/DS457/2, 14 June 2013.
3 It should be noted that paragraph 9 of Annex 2.3 of the FTA limits the application of the PRS to the
47 products identified in Peru’s Schedule set out in the FTA.
4 Peru’s Appellant’s Submission, paras. 109 to 204, 205 to 216, 217 to 234, 302 to 303, 304 to 305,
and 217 to 234.
5 Appellate Body Report, Canada – Aircraft Subsidies, para. 211; Appellate Body Report, EC – Export
Subsidies on Sugar, para. 340.
6 Appellate Body Report, US – FSC, para. 103.

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7. Peru's new arguments should be excluded because:
 The Appellate Body might have to review and consider new facts;
 Peru's arguments do not address issues of law covered in the panel report or the Panel's
legal interpretations. As in US – FSC, the Panel did not address the issues now raised by
Peru because Peru failed to raise these issues during the panel proceedings. The lack of
relevant panel findings is "due to the failure of [Peru] properly to litigate the matter
before the Panel";
7 and
 Consideration of these new arguments would violate Guatemala's due process rights.
Peru had ample opportunity to raise these arguments before the Panel; however, Peru
chose to raise entirely different arguments. Guatemala's ability to properly respond and
argue this case before the Appellate Body, during the short deadlines applicable in
appellate proceedings, should not be affected by Peru's choice to drop its previous
arguments and explore new ones. Moreover, Peru relies on new materials of a length of
approximately 2,000 pages, none of which it has submitted with its appellant's
submission.
IV. THE APPELLATE BODY SHOULD UPHOLD THE PANEL'S FINDINGS UNDER
ARTICLE 4.2 OF THE AGREEMENT ON AGRICULTURE AND SHOULD REJECT PERU'S
NEW ARGUMENTS UNDER ARTICLE 31 OF THE VIENNA CONVENTION
A. The appellate Body should uphold the panel's findings that the measure at issue is
a variable import levy within the meaning of Article 4.2 of the agreement on
agriculture
8. Peru raises numerous objections to the Panel's finding that the PRS duties are a variable
import levy or a measure similar to a variable import levy. All of these arguments should be
dismissed.
(a) The Appellate Body should reject Peru's contention that the PRS duty "does not share with
variable import levies the characteristic of having a threshold or minimum import price"
9. Peru argues that the Panel could not find that the variable additional duty was a variable
import levy because it does not entail a threshold or minimum import price. According to Peru, the
Panel "inexplicably" did not apply its analysis from the minimum import price section to its
reasoning with respect to a variable import levy.
8
10. Peru's argument is incorrect because variable import levies and minimum import prices are
two distinct concepts; therefore, a variable import levy does not require for its existence a
minimum price component. Inherent variability has to do with periodic automatic changes in the
level of the duty without any particular prescrib ed minimum or maximum level for that duty. The
Appellate Body's definition of a variable import levy from Chile – Price Band System (21.5 –
Argentina) does not even refer to a threshold, much less to a threshold that would simultaneously
satisfy the definition of a minimum threshold for a minimum import price.
(b) The Appellate Body should reject Peru's claims that the Panel improperly treated the
measure's inherent variability as sufficient for a finding under Article 4.2
11. Peru is incorrect in arguing that the Panel's analysis confuses the measure at issue with the
methodology used to calculate the reference price and the potential duty". 9 The Panel could not
have drawn this distinction, because it is impossible to divorce the PRS duty from the way in which
they are calculated. Moreover, Guatemala explicitly challenged the PRS duties as calculated by the
PRS regime, in its panel request and its submissions. The Appellate Body has also held that the
form of a duty is not decisive for its legal characterization and that it is necessary to consider how
it has been calculated.

7 Appellate Body Report, US – FSC, para. 103.
8 Peru’s Appellant’s Submission, para. 243.
9 Peru’s Appellant’s Submission, para. 248.

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12. Guatemala also rejects Peru's arguments that the PRS duty is not variable because, since
2001, the PRS has not always given rise to a duty. However, that absence of duties during a
certain period is not relevant for the periods in which the PRS duty was in fact imposed. During
these periods, the duty varied, due to its inherent variability.
13. Finally, contrary to Peru's arguments, the vari ability of the PRS duties cannot be compared
to the normal variability of ordinary customs duties. Referring to an example put by Guatemala
before the Panel, the PRS has been updated over 400 times since 2001, whereas the ordinary
customs duty for boneless bovine meat was changed only seven times over the past 23 years. This
demonstrates that the PRS, and its variable import duties, operates very different from ordinary
customs duties.
(c) The Panel did not err when analyzing the lack of predictability and transparency of the
measure at issue
14. Peru incorrectly argues that the PRS duties are just as predictable and transparent as
ordinary customs duties. This is incorrect, beca use ordinary customs duties remain the same until
they are modified, whereas the PRS duties are guar anteed to change every fortnight. Contrary to
Peru's arguments, economic operators are not better off because they know the abstract
components on the basis of which the variable additional duty is calculated. Rather, the system
guarantees them uncertainty, due to an unpredictable, ever-changing duty. Peru cannot claim that
it publishes in advance all the actual data on which the duty will be calculated, which would be
impossible because the data do not exist at pr esent and are therefore unpredictable. Moreover,
Peru does not even publish all of the historical data on which the past duties were based. To
access certain data, economic operators require a fee-based subscription to internet websites.
15. Guatemala also demonstrated before the Panel that it is impossible to guess or estimate the
level of future duties, be it in the short or long run. The Panel therefore correctly concluded that,
even if operators may attempt to estimate future duties, this does not afford them a level of
transparency and predictability comparable to that afforded by an ordinary customs duty.
16. The duties are also unpredictable and intransparent because Peru publishes the reference
price on average on day eight of any given fortnight. Moreover, shipments from foreign ports may
leave their port of departure without knowing what the applicable duty will be on arrival, which
adds to the lack of predictability and transparency.
17. Finally, contrary to its arguments, Peru is not precluded by the Panel's finding from taking
into account international price fluctuations when setting the level of duties through discrete,
independent acts of its authorities. Rather, Peru may not take into account international prices by
embedding them into an automatic formula that generates a periodically-changing import duty.
(d) The Panel did not err in finding that the PRS and the PRS duties inhibi t the transmission of
international prices to the domestic market
18. The Panel correctly found that, in the short run, the variable additional duty isolates Peru's
internal market entirely from international price fluctuations. This is because the variable
additional duty fills the gap between internationa l prices and the price range floor price. In the
medium and long run, the system at least severe ly distorts the transmission of international
prices. The Panel correctly relied on these elements and did not conduct, as Peru argues, a merely
"theoretical" analysis.
19. Peru proposed a novel test to the Panel, never previously required by panels or the
Appellate Body, pursuant to which a duty is not a variable import levy under Article 4.2 unless an
econometric study demonstrates the absence of any correlation between international and
domestic prices. The Panel correctly rejected this novel test because factors other than an import
levy can impact the transmission of international prices. For instance, Peru exempts the majority
of its sugar imports from the PRS. Guatemala also pointed out numerous other methodological
problems and errors in Peru's analysis.

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20. Moreover, as Guatemala has previously pointed ou t, Peru's test has no basis in the treaty
text and case law. It would also introduce an "economic effects" test into Article 4.2, which test
has been consistently rejected by GATT and WTO panels and the Appellate Body.
21. In reality, Peru's appeal is directed at ho w the Panel weighed the evidence. However, the
fact that Peru disagrees with the Panel does not mean that the Panel erred.
22. Peru is incorrect in arguing that ordinary customs duties distort international prices in the
same manner as its PRS duties. To the contrary, as Guatemala's charts demonstrate, ordinary
customs duties merely track international price fluctuations and do not impede or distort their
transmission on the domestic market.
23. Peru is also incorrect in comparing its PRS to the price band system in Chile – Price Band
System; on those aspects mentioned by Peru, the Peruvian PRS is very similar to, or even more
distorting than, the Chilean PBS.
B. The Appellate Body should reject Peru's arguments under Article 31 of the Vienna
Convention
24. Should the Appellate Body decide to address the substance of Peru's new arguments,
Guatemala submits that these arguments should be rejected, for the following reasons.
25. First, that the Panel did not err in not engaging in the legal analysis proposed by Peru,
because it was not obliged to do so. The Appellate Body has consistently held that panels are not
required to address all arguments raised by the parties to the dispute.
10 Contrary to Peru's
arguments under Article 3.2 of the DSU, the Panel's faithful adherence to the Vienna Convention is
discernible throughout its report.
11 To the extent that Peru argues that the Panel erred by not
making arguments for Peru that Peru itself did not make, Guatemala requests the Appellate Body
to reject Peru's contentions.
26. Second, Guatemala argues that Peru's argument is fundamentally flawed, because Peru is
not asking the Appellate Body to interpret WTO provisions – that is, Article 4.2 of the Agreement
on Agriculture, Article II:1(b) of the GATT 199 4 and Articles 3.7 and 3.10 of the DSU – in a
particular manner, but rather to modify or amend them, apply them in a particular fashion or to
apply the provisions of the FTA or the ILC Articles . The Appellate Body has consistently drawn a
clear line between "interpretation" and "application" of law. 12 Peru's arguments would have the
Appellate Body do something that far exceeds the interpretative exercise envisaged in Article 3.2
and, therefore, is beyond the competence of the Appellate Body.
27. Third, Peru's reading of Article 31 of the Vienna Convention with respect to Article 4.2 of the
Agreement on Agriculture is wrong as a matter of substance. Specifically:
 The Appellate Body should reject Peru's argument that Article 31.3(c) requires that the
FTA be taken into consideration as a "rule of international law applicable in the relations
between the parties". The FTA is not "applicable" and is not a "rule of international law"
because it is not yet in force. It is also not "relevant" to Article 4.2, because it does not
purport to interpret Article 4.2. Moreover, the term "parties" in Article 31.3(c) refers to
the parties of the treaty being interpreted, no t the parties to the dispute. In any event,
Peru's argument would require that the Appellate Body resolve a dispute between
Guatemala and Peru concerning a non-WTO treaty;
 Second, Peru incorrectly asserts that Article 4.2 should be interpreted in the light of
Articles 20 and 45 of the ILC Articles on State Responsibility, by virtue of Article 31.3(c)
of the Vienna Convention. Peru does not demonstrate why these provisions of the
ILC Articles are "rules of international law". Additionally, Article 20 and 45 of the ILC

10 Appellate Body Report, US – OCTG (Mexico), para. 134. Appellate Body Report, Dominican Republic –
Import and Sale of Cigarettes, para. 12.
11 See for instance, Panel Report, paras. 7.283, 7.286, 7.289, 7.293, 7.305, 7.328, 7.329, 7. 409, and
7.497.
12 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 316. See also

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Articles are not "relevant" to Article 4.2 as both sets of provisions do not address the
same subject matter.
 Finally, the Appellate should reject Peru's argument that the FTA is a subsequent
agreement, within the meaning of Article 31. 3(a) of the Vienna Convention, and should
inform the interpretation of Article 4.2 of the Agreement on Agriculture. As noted, the
FTA is not in force and is therefore not an "agreement" within the meaning of
Article 31.3(a). The term "parties" refers to all WTO parties. Moreover, the FTA is not
"concerned with the interpretation" of Article 4.2 or its "application".
V. THE PANEL'S FINDINGS UNDER ARTICLE II:1(B) ARE CORRECT AND THE
APPELLATE BODY SHOULD REJECT PERU'S APPEAL FROM THESE FINDINGS
28. Peru's appeal arguments can be divided in two parts. First Peru incorporates its previous
arguments concerning Articles 31.3(a) and 31.3 (c) of the Vienna Convention. Second, Peru
submits that the Panel acted inconsistently with its obligation under Article 11 of the DSU by not
making an objective assessment of matter before it.
29. As to the first part of Peru's argumentation, Guatemala refers to its earlier rebuttal of Peru's
arguments relating to the FTA as well as Articles 20 and 45 of the ILC Articles in the context of
Articles 31.3(c) and 31.3(a) of the Vienna Convention.
30. With respect to Article 11 of the DSU, the A ppellate Body should dismiss Peru's arguments
that the Panel acted inconsistently with this obligation for the following reasons:
 Peru's primary concern appears to be that the Panel used an incorrect legal standard in
making a finding under Article II:1(b) that essentially depended on its finding under
Article 4.2. The Panel's approach, however, is correct as it reflects the principle that
measures falling within the scope of footnote 1 to Article 4.2 of the Agreement on
Agriculture are, by definition, not ordinary customs duties.
 Peru contends that the Panel's decision not to examine additional factual aspects of the
measure amounts to a failure to discharge its duties under Article 11 of the DSU.
However, the fact that Peru disagrees with the Panel's conclusion on the need to
examine additional facts does not mean that the Panel "deprived Peru of an objective
assessment".
13
31. In the event that the Appellate Body reverses the Panel's finding and proceeds to complete
the legal analysis, Guatemala requests that the Appellate Body take into account certain factual
assertions that Guatemala made before the Pane l and that Peru did not contest, including the
nature of Peru's measure under Peruvian law.14
VI. THE PANEL DID NOT ERR IN LAW BY FAILING TO FIND THAT GUATEMALA ACTED
INCONSISTENTLY WITH ITS GOOD FAITH OBLIGATIONS UNDER ARTICLES 3.7 AND
3.10 OF THE DSU
A. The Appellate Body should reject Peru's "claims" under Article 3 of the DSU
32. Peru requests the Appellate Body to "complete the analysis and find that Guatemala has
acted inconsistently with its obligations under DSU Articles 3.7 and 3.10". 15 However, Peru
explicitly admits that it no longer argues that Guatemala is procedurally barred from bringing the
present dispute. Thus, Peru's "claims" have no procedural connection with this dispute, which
signifies that Peru is advancing new and wholly different "claims" of its own. The Appellate Body
lacks jurisdiction to consider ab initio claims by a defending Member in dispute settlement
proceedings seeking a finding that the complaining Member has acted inconsistently with
provisions of the covered agreements.

13 Peru’s Appellant’s Submission, para. 323.
14 Panel Report, para. 7.380.
15 Peru’s Appellant’s Submission, para. 107.

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B. The Appellate Body should reject Peru's arguments with respect to Article 3.7 of
the DSU
33. Peru contends that "while a Member invoking WTO dispute settlement proceedings enjoys a
presumption of good faith, this presumption can be rebutted". 16 However, the Appellate Body
clarified that the first sentence of Article 3.7 "neither requires nor authorizes a panel to look
behind that Member's decision and to question the exercise of judgement". 17 The first sentence of
Article 3.7 simply calls on Members to reflect carefully on whether to proceed with dispute
settlement proceedings.
34. Peru also argues that the FTA is, in effect, a positive solution to the dispute within the
meaning of Article 3.7.18 However, the FTA does not make reference to this dispute; it was signed
before the dispute arose between the Parties; it provides for the possibility to resort to
WTO dispute settlement; and, even if it were cons idered as a mutually agreed solution, it would
require the valid consent of both parties to a dispute and Peru has not given yet its consent.
C. The Appellate Body should reject Peru's arguments with respect to Article 3.10 of
the DSU
35. Peru's arguments under Article 3.10 are without merit. First, contrary to Peru's allegations,
the Panel did not exclude that a waiver can be given implicitly. Rather, it repeatedly referred to,
and acknowledged, the Appellate Body findings in EC – Bananas III (Article 21.5 – Ecuador II) / EC
– Bananas III (Article 21.5 – US). The Panel was also right in concluding that the FTA provisions at
issue do not contain a waiver of anything by Gu atemala, "clear" or otherwise. Third, the Panel
correctly relied on the fact that the FTA had not yet entered into force. An alleged waiver in a
bilateral agreement cannot take effect unless that agreement is in force. Peru seeks to derive
benefits from the FTA even though it is deny ing Guatemala benefits under the same FTA by
refusing to ratify it.
36. Fourth, the Panel correctly found that, in order to reach the outcome desired by Peru, it
would have to resolve a dispute under an agreement that is not a WTO covered agreement. Doing
so would be beyond the Panel's jurisdiction. The Appellate Body has in the past also declined to
assume the role of an FTA dispute settlement body.
37. Fifth, an FTA is not a permissible vehicle for a waiver under Article 3.10. WTO Members can
waive their right to bring a dispute only in a multilateral context. Moreover, permitting
WTO Members to waive their WTO rights in FTAs would be a potentially dangerous precedent, as it
would create the risk for pressures in FTA negotiations to sign away WTO rights.
38. With respect to Peru's reliance on the ILC Articles, it is unclear what they add to Peru's case.
The ILC Articles would merely confirm the Appellate Body's previous reading of Article 3.10. In
reality, Peru's appeal is nothing but a disagreemen t with the Panel as to whether the facts of this
case demonstrate that Guatemala clearly waived its right to bring a WTO dispute.
39. In any event, Peru's arguments concerning ILC Articles are not properly within the scope of
this appeal and there is no panel finding that ILC Articles 20 and 45 are customary international
law or general principles of law, such that they can qualify as a "rule of international law" under
Article 31.3(c). The Appellate Body is not in a position to complete the analysis on this point.
40. Finally, Peru reads the Panel finding on Article 18 of the Vienna Convention as precluding the
possibility that "[a] party's conduct in violation of [that provision] may also demonstrate a lack of
good faith".
19 However, the Panel correctly found that, for an assessment under Article 3.10, it is
immaterial whether the relevant conduct at the same qualifies legally as an Article 18 violation or
not. What matters under Article 3.10 is whether the conduct at hand satisfies the legal standard of
a "clear" waiver of the right to bring a WTO dispute.

16 Peru’s Appellant’s Submission, para. 50.
17 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 74.
18 Peru’s Appellant’s Submission, para. 51.
19 Peru’s Appellant’s Submission, para. 97.

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VII. THE APPELLATE BODY SHOULD REJECT PERU'S APPEAL UNDER ARTICLE 11 OF THE
DSU
41. In its claim under Article 11 of the DSU regarding the Panel's Article 4.2 analysis, Peru
commits the common flaw in Article 11 claims of simply trying to re-argue the facts and asking the
Appellate Body to replace the Panel's assessment of the facts with an assessment more to Peru's
liking.
42. Peru argues that the Panel failed to identify the level of transparency and predictability of an
ordinary customs duty in determining that th e measure at issue lacked transparency and
predictability.20 Nevertheless, Peru ignores the Panel's statements that contain precisely the type
of comparative analysis Peru appears to be seeking. 21 This flaw is also seen in Peru's argument
that the Panel failed to consider properly how th e measure at issue distorted the transmission of
international prices to the domestic market differently than an ordinary customs duty.22
43. With respect to Peru's Article 11 claims under Article II:1(b) of the GATT 1994, Peru's
arguments seem to be based entirely on the legal standard used by the Panel. To the extent that
the Panel analyzed the measure at issue and found that it fell within the scope of Article 4.2 and
footnote 1, the Panel was not required as a matter of law to conduct the additional analysis sought
by Peru. Any error in the Panel's approach would be an error of law, not a violation of the Panel's
obligations under Article 11 of the DSU.
VIII. CONCLUSIONS AND REQUEST FOR FINDINGS
44. For the above reasons, Guatemala respectfully requests the Appellate Body to
 exclude from the scope of the appeal all of Peru's new arguments concerning the FTA
and Articles 20 and 45 of the ILC Articles in the context of Articles 31.3(a) and 31.3(c) of
the Vienna Convention;
 to refrain from making a finding that Guatemala acted inconsistently with its obligations
under Articles 3.7 and 3.10 of the DSU;
 to uphold the Panel's findings that the measure at issue is a variable import levy in
violation of Article 4.2 of the Agreement on Agriculture;
 to uphold the Panel's findings that the measure at issue is not an ordinary customs duty
in violation of Article II:1(b) of the GATT of 1994; and
 to uphold the Panel's findings that there was no evidence that Guatemala brought these
proceedings in a manner contrary to good faith under Articles 3.7 and 3.10 of the DSU.

20 Peru’s Appellant’s, para. 294, second bullet point.
21 Panel Report, paras. 7.335 and 7.337.
22 Peru’s Appellant’s Submission, para. 294, third bullet point.

- C-1 -

ANNEX C
ARGUMENTS OF THE THIRD PARTICIPANTS
Contents Page
Annex C-1 Executive summary of Brazil's third participant's submission C-2
Annex C-2 Executive summary of Colombia's third participant's submission C-3
Annex C-3 Executive summary of the European Union's third participant's submission C-4
Annex C-4 Executive summary of the United States' third participant's submission C-6

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ANNEX C-1
EXECUTIVE SUMMARY OF BRAZIL'S THIRD PARTICIPANT'S SUBMISSION
1. Brazil considers some of the statements made by the Panel of significant systemic interest,
in particular concerning the legal standard applied the existence of a minimum import price.
2. Brazil finds that the approach followed by the Panel in this topic is questionable. Neither the
text of the Agreement of Agriculture nor the pr evious guidance provided by Appellate Body
suggest that only measures that achieve absolute effectiveness in its objective of establishing a
floor for the price that a product may enter the domestic market are properly characterized as
minimum import prices (or measures similar to minimum import prices).
3. Brazil considers that the proper assessment of whether a measure is a minimum import
price does not require that the measure act directly to establish the lowest prices at which a
certain product may enter a Member's domestic market. In addition, Brazil does not believe that a
measure must ensure that imports will not enter the domestic market below such lowest price to
be properly considered a minimum import price. Brazil considers that measures that do not use
the actual transaction value as a benchmark may also be considered similar to minimum import
prices.

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ANNEX C-2
EXECUTIVE SUMMARY OF COLOMBIA'S THIRD PARTICIPANT'S SUBMISSION
1. Colombia will provide its views on: (a) The claim presented by Peru regarding the Panel's
interpretation of the good faith principle, and (b) the Panel's interpretation of the PRS as a variable
import levy, specifically in its analysis of the elements of predictability and transparency
of the PRS.
2. A way to violate the principle of good faith understood as pacta sunt servanda
is to undertake actions or inactions that frustrate the object and purpose of a treaty. In the case at
hand, apparently Guatemala accepted the PRS application by signing the FTA with Peru. However,
by bringing a claim to the WTO DSB in order to seek the elimination of the PRS, Guatemala,
eventually frustrated the object and purpose of the bilateral treaty. This could be construed as
contrary to the Good Faith Principle in relation to the "pacta sunt servanda" application.
3. According to the DSB doctrine, "Estoppel" as a principle might be applied to WTO cases.
The question seems to be whether there is estoppel when a party has notified a measure
or because of its statements, bearing in mind that the other party had legitimately relied on the
notification of that measure, and was now suffering the negative consequences resulting from
a change in the first party's position.
1 Apparently Peru relied on Guatemala's explicit manifestation
on the consistency of PRS under the covered agreements, when agreed upon the FTA between
these two WTO members. Then a Party's action could not be awarded if it represents a change on
a position that in itself involves a sacrifice of the Good Faith Principle.
4. Colombia considers that the AB should also bear for its analysis articles 3.7 and 3.10
of the DSU in deciding this case according to Good Faith Principle, taking into account for this
purpose all relevant facts in order to fulfill its obligation of Article 11 of the DSU. Even though
the FTA between Peru and Guatemala has not yet entered into force, it is still a relevant fact that
should be taken into account.
5. On the issue of the PRS as a variable import levy, the Appellate Body, has defined a variable
import levy as a duty assessed upon importation, which is liable to vary automatically
and continuously on the basis of an underlying scheme or formula that does not require any
discrete or independent legislative or administrative action and is in-transparent
and unpredictable, as to the level of resulting duties.
2 In Colombia's opinion, the elements
of transparency and predictability differ from the concept of inherent variability. Colombia suggests
that the Appellate Body should recognize that the standard set out for variable import levies does
not include a measure that is transparent and pr edictable enough, so that even if it varies,
it is not, ultimately, a variable import levy.

 1 Panel Report on EC – Asbestos, para 8.60.
 2 Appellate Body Report. Chile - Price Band System (Article 21.5 - Argentina). Para 155-158.

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ANNEX C-3
EXECUTIVE SUMMARY OF THE EUROPEAN UNION'S THIRD PARTICIPANT'S SUBMISSION
1. Under Article 3.7 of the DSU a Member has broad (although not unlimited) discretion in
deciding whether to bring a case against another Member. Article 3.10 of the DSU requires
WTO Members to engage in WTO dispute settlement procedures in good faith and all
WTO Members benefit from the presumption of good faith.
2. The European Union does not consider that, in light of the evidence adduced by Peru,
Guatemala had clearly waived its right to bring WTO dispute settlement procedures against the
PRS. The Panel properly observed that the FTA in question was not yet in force and, consequently,
its provisions should be regarded as having limited legal effects in the dispute at issue. The FTA
provisions seem to be contradictory. In addition, the parties did not make an early announcement
in accordance with the RTA Transparency Mechanism.
3. Article 18 of the Vienna Convention should not be read as requiring the provisional
application of the entirety of an international agreement before it formally enters into force. In
principle, the recognition of the right to use the PRS against Guatemala's products is not among
the object and purpose of the FTA.
4. With regard to Articles 20 and 45 of the ILC Articles it is important to distinguish between
the rules establishing when a "valid consent" by a State has been provided and the rules
determining when such consent produces legal effects.
5. Rules of public international law may be invoked to properly interpret a relevant provision of
the covered agreements that has been invoked by one of the parties in a WTO dispute.
6. Article 31(3)(a) of the Vienna Convention would capture subsequent agreements (i.e. post
1994) between the parties to the covered agreement (i.e. in principle all Members) regarding the
interpretation or application of a covered agreement (as opposed to its amendment or
modification). It would thus appear that a b ilateral agreement between two WTO Members which
amend or change any of its WTO commitments would not fall under the scope of Article 31(3)(a)
of the Vienna Convention.
7. The European Union agrees that Article 31(3 )(c) of the Vienna Convention should be
understood as reflecting the principle of "systemic integration". Thus, in principle, a bilateral
agreement between the parties to a dispute coul d be considered as part of the normative
environment reflecting the individual WTO Member's international obligations which should be
taken into account when giving coherence and me aningfulness when interpreting the scope of the
rights and obligations contained in the covered ag reements. Such an approach is possible only by
means of agreements that are "applicable", which means into force.
8. The European Union considers that one of the key characteristics of variable import duties
and minimum import prices is that they generally prevent price competition on all imports. They
can thus be distinguished from ordinary bound customs duties, which depending on the level of
binding, permit, at least potentially, price competition on all imports.
9. Nevertheless, the European Union disagrees that both variable import levies and minimum
import prices also share as a common feature that both prevent the importation of goods below a
threshold price. In essence, a minimum import price is a measure which ensures that certain
imported products will not enter a domestic market at a price lower than a certain threshold.
10. With respect to "similar border measures", it may happen that the measure at issue shares
some of the features of different measures enunciated in footnote 1 to the [Agreement on
Agriculture] AoA. In any event, those measures should be "sufficiently similar" (as opposed to just
similar) to the ones listed in footnote 1.

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11. "Ordinary customs duties" and the other measures listed in footnote 1 of the AoA share
several features, including their variability. For instance, an "ordinary customs duty" may be tied
to an exchange rate when expressed in a foreign currency, or may be subject to changes
depending on the seasonality of the product. In this respect, the Member's tariff Schedule may
shed light on whether a particular measure forms part of the "ordinary customs duties" of the
Member concerned. However, the main differences between the two categories lie in their
transparency, predictability and trade effects on imports.

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ANNEX C-4
EXECUTIVE SUMMARY OF THE UNITED STATES' THIRD PARTICIPANT'S SUBMISSION
I. ARTICLE 4.2 OF THE AGREEMENT ON AGRICULTURE
1. The defining characteristic of a variable import levy is inherent variability, according to a
formula or scheme. This formula may, but need not in every case, incorporate a threshold price
along the lines suggested by Peru. Here, the PRS imposes additional duties based on the difference
between a lower band and the applicable reference price. This is an inherently variable mechanism
based on a formula or scheme, and the Panel did not err in finding that the measure can fall within
the definition of a "variable import levy".
2. Peru incorrectly suggests that by providing a certain degree of transparency and
predictability and by only impeding the transmission of international prices into the domestic
market to a certain degree, a variable import le vy can somehow be rendered to be an ordinary
customs duty. A lack of transparency or predictability or impeding the transmission of international
prices may be further evidence that a measure is a variable import levy. However, the opposite is
not true. The fact that a measure provides some degree of transparency or predictability to traders
does not preclude a finding that the measure is a variable import levy. Finally, contrary to Peru's
assertion, it also is not necessary to engage in a detailed comparison between the features of a
measure and those of ordinary customs duties.
3. With respect to the Panel's finding that the PRS was not "similar" to a "minimum import
price", the United States notes that to be "similar," a measure must have "sufficient 'resemblance
o r l ike n e s s t o ,' o r b e ' o f t h e s a m e n at u r e o r kin d ' a s , at least one of the specific categories of
measures listed in footnote 1." The Panel appeared also to require consideration of whether the
challenged measure is "similar" to an ordinary customs duty. This requirement has no grounding in
the text of footnote 1 or the Appellate Body's guidance in the Chile – Price Band System disputes.
II. THE PERU-GUATEMALA FTA
4. Article XXIV of the GATT 1994 provides an exce ption from particular WTO disciplines for
certain measures related to an FTA. Under these exceptions, a Member may invoke an FTA as the
basis for a defense to a claim that a measure is inconsistent with the Member's obligations under
the GATT 1994. Peru argues that its FTA with Guatemala was "negotiated under Article XXIV", but
does not attempt to invoke Article XXIV in its defense; therefore, the Panel was not called on to
examine whether the FTA between Peru and Guatemala could justify a derogation from Peru's
WTO obligations. And of course, Article XXIV would not be available as an exception with respect
to an FTA that is not in force.
5. Peru appears to ask the Appellate Body to in terpret and apply the provisions of the FTA.
However, that is inconsistent with the text of the DSU, which applies only to disputes brought
under the covered agreements . Despite its claim to be offe ring the FTA as a tool for
"interpretation," Peru attempts to use the FTA to depart from its WTO obligations. Even were Peru
asking for the FTA to be used for interpretati ve purposes, an FTA cannot serve as a "relevant
rule[] of international law applicable in the relations between the parties" under Article 31(3)(c) of
the VCLT or a "subsequent agreement between the parties" under Article 31(3)(a) of the VCLT for
purposes of interpreting provisions of WTO Agreements. An FTA, if it were in force, would
constitute an agreement between the part ies to the FTA only – and not between the
WTO Members.
6. Peru's argument that Guatemala asserted its claims contrary to its obligations under
Articles 3.7 and 3.10 of the DSU because the FTA effected a "waiver" of Guatemala's substantive
rights should also be rejected. The WTO Agreement provides a mechanism for obtaining a waiver,
but that mechanism was not invoked here.

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7. Articles 3.7 and 3.10 also would not permit the Panel to refrain from adjudicating
Guatemala's claims. Regarding Article 3.7, there is no basis for a panel to opine on whether or not
a Member has exercised its judgment "before bringing a case." Nor did the Panel err in failing to
find that Guatemala's presumption of good faith had been rebutted. Peru's arguments in this
respect are at odds with the text of Article 3.7, as interpreted in Mexico – Corn Syrup (Article 21.5
– US). Likewise, the first sentence of Article 3.10 of the DSU is expressed as an "understanding"
by all Members rather than as imposing binding or enforceable obligations on a particular Member.
8. Peru appears to have augmented its arguments before the Panel by invoking Articles 20 and
45 of the International Law Commission's draft Arti cles on State Responsibility. But Peru's reliance
on these articles is premised on Peru's other arguments having already been accepted, and so
these articles do not help support Peru's interpretation. To the extent they are relevant, they do
not address the meaning of the term "good faith", or actions taken "to resolve [a] dispute" under
the covered agreements.