Document: WT/DS207/RW Page E-1 ANNEX E ORAL STATEMENTS OF THIRD PARTIES AT THE SUBSTANTIVE MEETING OF THE PANEL Contents Page Annex E-1 Oral Statement by Australia (2 August 2006) E-2 Annex E-2 Oral Statement by Brazil (2 August 2006) E-5 Annex E-3 Oral Statement by Canada (2 August 2006) E-8 Annex E-4 Oral Statement by Colombia (2 August 2006) E-11
Date: 2 August 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

ANNEX E

ORAL STATEMENTS OF THIRD PARTIES AT THE
SUBSTANTIVE MEETING OF THE PANEL

Contents Page
Annex E-1 Oral Statement by Australia (2 August 2006) E-2
Annex E-2 Oral Statement by Brazil (2 August 2006) E-5
Annex E-3 Oral Statement by Canada (2 August 2006) E-8
Annex E-4 Oral Statement by Colombia (2 August 2006) E-11
Annex E-5 Oral Statement by the European Communities (2 August 2006) E-13
Annex E-6 Oral Statement by Thailand (2 August 2006) E-17
Annex E-7 Oral Statement by the United States (2 August 2006) E-19

ANNEX E-1

ORAL STATEMENT BY AUSTRALIA
(2 AUGUST 2006)

Mr Chairman,

1. Australia has read with interest the submissi ons of the parties to this dispute and the points
raised by third parties.

2. Australia joined the original dispute as a third party in view of our systemic interests in the
questions under consideration. We retain a systemic interest in the issues being considered in the
current proceedings brought by Argentina under Article 21.5 of the DSU.

3. Our systemic interest in these proceedings concerns the consequences of the Price Band
System (PBS). In particular, Australia wishes to dr aw the Panel's attention to the continued potential
of the PBS to distort trade, and to the reasons why Australia agrees with Argentina that the new PBS
is inconsistent with Article 4.2 of the Agreement on Agriculture.

4. Australia makes this oral statement, howev er, in a constructive spirit bearing in mind our
excellent bilateral relations with Chile, especia lly as a fellow Cairns Group member, and Chile's
commendably low general tariff structure.

5. Australia notes that on 23 October 2002 the DSB adopted the Appellate Body Report on Chile
– Price Band System and Safe guard Measures Relating to C ertain Agricultural Products and the
Panel Report as modified by the Appellate Body Re port. The Appellate Body recommended that the
DSB request Chile to bring its price band syst em, as found to be inconsistent with the Agreement on
Agriculture, into conformity with its obligations under that Agreement (paragraph 289 AB report).

6. Chile claims to have complied with this recommendation by adopting Law number
19.897/2003 and Decree number 831/2003. Argentina st ates in its rebuttal submission that Chile's
modified PBS is still 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 Agriculture.

7. In Australia's view, the question before the Panel is whether the new amendments are
sufficient to convert the PBS into a measure th at does not have the restrictive features that
characterise border measures prohibited under footnote 1 of Article 4.2. Australia respectfully submits
that despite Chile's best efforts, they are not. A lthough we concede that the amendments do go some
way to ameliorate the more obviously inconsistent aspects of the meas ure, we are nevertheless of the
view that inherent inconsistencies remain unchanged.

8. The Panel will recall that the raison d'etre of Article 4.2 is improved market access for
agricultural imports by permitting only the application of ordinary customs duties. To this end, border
measures that are trade distorting, such as those listed in the footnote to Article 4.2, are prohibited. As
the Appellate Body noted, this is because they ha ve the objective and effect of "restricting the
volumes, and distorting the prices, of imports of agri cultural products in ways different from the ways
that ordinary customs duties do….[they]…disconnect domestic prices from international price
developments, and thus impede the transmission of world market prices to the domestic market"
(paragraph 227). Fundamentally therefore, any measu re that is consistent with Article 4.2 must
necessarily be shown to be absent of this trade rest rictive objective and effect. This is made clearer by
the Appellate Body's deliberations in paragraphs 26 0 and 261 where it explains that the effect of a
measure is relevant, that is whether a measure creates "intransparent and unpredictable market access"
and "prevent[s] enhanced market access for imports".

9. In Australia's opinion, the Chilean revised PBS for wheat and wheat flour remains a system
which distorts the price of imports of agricultura l products in a different way from ordinary customs
tariffs and continues to insulate the Chilean domestic market from international price fluctuations. As
such, we submit that it must be found to be akin to a "variable import levy " and inconsistent with
Article 4.2.

Variability

10. The meaning of the term "variable import levy " was considered by the Appellate Body and it
is instructive to recall its comments. It decided th at a "necessary condition" for a variable levy is the
presence of a formula causing automatic and continuous variability of duties. In contrast ordinary
customs duties are as set out in paragraph 233: "subj ect 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."

11. Chile in its first submission states that under Law 19.897, the duty (or rebate or neither) is
now fixed by legal directive in the form of a d ecree issued by the Ministry of Finance, and then
remains unchanged for two months until a subseque nt administrative act (paragraph 93). Chile's
submission claims that the effect of this change is that the new system is no longer "variable" as
decided by the Appellate Body.

12. With respect, Australia submits that this argu ment is misplaced. It is correct that the new
Chilean system has moved to require separate ex ecutive action to instigate each variation in
applicable duties. However this only partially meet s the conditions that the Appellate Body noted are
required to convert such a levy into an ordinary customs duty. The Appellate Body also noted that
ordinary customs duties cannot simply reflect chan ges mechanistically determined by an underlying
scheme or formula, which we consider remains the case with the Chilean Law.

Transparency and predictability

13. As Chile notes in its submission, the Appellate Body stated in paragraph 232 that "variability"
was a necessary but by no means "sufficient" condi tion for a particular measure to be a "variable
import levy". In addition, lack of transparency and predictability that flow from such measures are
also important.

14. Chile submits that the revised PBS is both mo re transparent and more predictable than its
predecessor. Under the old PBS, the reference pric e was changed every week. Under Law 19.897 it is
now changed every two months. In addition the pri ce bands were previously adjusted on a yearly
basis. Now they are in place for el even years. On this basis, Chile argues that these changes provide
stable conditions to afford better predictability to exporters.

15. That much is correct. The material question how ever is whether it is sufficient. Australia does
accept that these changes give greater transparency and stability. However, the underlying structure of
the measure remains the same. Even though this instability is partially offset by the introduction of
11 year periods of application for price bands, fluctu ations in the reference price cannot be predicted.
More broadly, this mechanism in itself has th e effect of insulating the Chilean market from
international price fluctuations as it is less flexible . Accordingly, it cannot be said that predictability
for exporters has improved. As such, the trade distorting aspects of the PBS have not been remedied.

16. In conclusion, Australia submits that desp ite the changes to the Chilean PBS, they are
insufficient to achieve consistency with Chile's rights and obligations under Article 4.2 of the
Agriculture Agreement. It continues to preser ve an underlying structure of variability and
unpredictability that is non-transparent and contra ry to the object and purpose of the Agreement on
Agriculture.

17. Australia would respectfully encourage the Panel to find the Chilean Price Bands System
continues to be inconsistent with Article 4.2 of the Agreement on Agriculture and that Chile has
therefore not complied with the recommendations and rulings of the Dispute Settlement Body in this
dispute.

ANNEX E-2

ORAL STATEMENT BY BRAZIL
(2 AUGUST 2006)

I. Introduction

1. Mr. Chairman, distinguished Panelists, and me mbers of the Secretariat, Brazil welcomes the
opportunity to present its views to you this morning. In our statement, we will address Article 4.2 of
the Agreement on Agriculture as well as the Panel's terms of reference.

II. Article 4.2 of the Agreement on Agriculture

2. The claim under Article 4.2 of the Agreement on Agriculture is that, by adopting the new
PBS, Chile has "resort[ed]" to another measure of the kind that had to be converted into ordinary
customs duties at the end of the Uruguay Round. Sp ecifically, the new PBS is a measure similar to a
"variable import levy" and to a "minimum import price" ("MIP").

3. In addressing these claims, the Panel is assisted by the findings of the original panel and the
Appellate Body. Both found that the old Chilean PBS was a measure similar to both a variable import
levy and a MIP. On implementation, the key pr ohibited elements of the old PBS have not been
touched, and are part and parcel of the new PBS. Thus, the essence of the PBS seems to remain the
same.

Variable Import Levies

4. Chile's new PBS meets all the characteristics of a variable import levy.

5. First, the amount of the duty is the difference between two parameters: (i) the floor of the
price band and (ii) a reference price fixed by the government based on world market prices. The
reference price changes every two months, ther eby purportedly ensuring that the duty varies
frequently to reflect the most recent developments in world market prices.

6. Second, under the new PBS, imports are very un likely to enter at prices below the price band
floor. Argentina has explained to the Panel in detail why this is so.
1 Although this can legally occur,
it will happen only in very unusual factual circumstances—namely, when world market prices drop by
20 to 30 per cent within a period of two months. And even if this improbable price decrease occurred,
the new PBS would neutralize it after just two months because the reference price would be updated.

7. Third, the Chilean measure stabilizes the price of imports by neutralizing decreases in world
market prices. The PBS is designed – and operates – such that the entry price is virtually always
above the lower threshold and also such that the entry price does not exceed the upper threshold of the
band system by much. Importantly, as world ma rket prices decrease, the duty increases, thereby
exercising a stabilizing effect on prices in Chile th at insulates its producers from the fluctuations in
the world prices.

8. On implementation, Chile has not altered the fundamental characteristics of a measure that
continues to meet the requirements of a variable impor t levy or a measure similar thereto. In short,
the changes made are more of form than substance.

1 Argentina's First Written Submission, paras. 100–114.

9. Contrary to Chile's arguments, variation in th e duty continues to be an integral and automatic
feature of the measure, and it occurs frequently. Also, as the world market price falls, protection
under the PBS rises, insulating Chile's market from the world market.

10. Chile suggests somewhat improbably that duties imposed under the new PBS are predictable
because traders can predict future world market pr ices. Thus, it believes, traders can foresee the
duties that will be imposed under th e PBS as market prices evolve.
2 Yet, even though traders often
speculate on the evolution of prices, they cannot pred ict changes with the certainty required to afford
predictability to trade. Variable impor t levies are prohibited precisely because the Agreement on
Agriculture requires that market access be based on pr edictable regulation that does not alter with
market prices.

11. Chile also asserts that there is greater tran sparency in the new PBS because: the price band
floors and ceilings have been fixed 11 years in advance
3; the "markets of concern" have been
identified4; and the amount of the special PBS duty is published every two months. 5 This misses the
point. The WTO consistency of the PBS does not change solely because the features making it a
variable import levy are now openly published. The measure continues to lack both predictability and
transparency because its level varies at an unpredictable rate, making the measure intransparent.

Minimum Import Prices

12. It is also claimed that the new PBS is a minimum import price This is because the floor of the
price band functions as a de facto MIP. Despite the minor changes Chile has made to the PBS, it
continues to guarantee that – in all but the most exceptional situations – the entry price of imports will
not fall below the price band floor.

III. The Panel's Terms of Reference

13. Brazil turns to address Chile's contention that Argentina cannot challenge certain features of
the new PBS, namely the wheat conversion factor , and also cannot challenge the new measure under
Article II:1(b) of the GATT 1994. Chile argues that, because Argentina did not make these claims in
the original proceedings, it is now barred from doing so in the current Article 21.5 proceedings.

14. First, in both the original proceedings a nd these Article 21.5 proceedings, Argentina made a
claim under Article 4.2 of the Agreement on Agriculture . In these proceedings, Argentina relies on
the wheat conversion factor as an argument to demonstrate that the new PBS is inconsistent with
Article 4.2. Invoking the wheat conversion factor does not, therefore, involve a new claim but rather
a new argument to substantiate an old claim. No thing precludes a WTO Member from making
arguments in Article 21.5 proceedings that it did not make in the original dispute.

15. Secondly, and more importantly, Brazil is concerned about the systemic implications of
Chile's argument. Chile is essen tially asking the panel to rule 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.

16. In Brazil's view, Chile's approach intends to 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.

2 Chile's First Written Submission, paras. 158 to 163.
3 Chile's First Written Submission, para. 108; Chile's Second Written Submission, para. 73.
4 Chile's First Written Submission, para. 115.
5Chile's First Written Submission, para. 93. Chile's Second Written Submission, paras. 89-90.

17. Chile's arguments also compel a complaining party to assess, as early as its initial request for
consultations, how its claims will fare in dispute settlement: which claims might be upheld, and which
might be subject to judicial economy. It also co mpels an assessment of the many ways in which a
respondent might choose to implement, while leav ing intact objectionable parts of a challenged
measure.

18. Not surprisingly, Chile does not cite to any tr eaty text in order to support its approach. In
fact, this is because there is nothing in the text of the DSU that precludes a complaining Member from
bringing a claim that was not brought in the origin al proceedings. According to the DSU, Article 21.5
proceedings may, in principle, involve claims made under any provision of any covered agreement.
6
Any limitations to the scope of an Article 21.5 dispute must be found in the treaty text. It was
precisely on the basis of treaty text that the Appellate Body found in US – Shrimp and EC – Bed Linen
(Article 21.5 – India) that there are certain limitations on the claims that can be made in Article 21.5
proceedings. The Appellate Body ruled that a comp lainant cannot pursue a claim against an aspect of
a measure when, in the original proceedings, that same claim was rejected, for example, because the
complainant failed to prove its case.
7 This limitation was based on treaty text in Articles 16.4, 17.14,
19.1, Article 21(1) and (3), and Article 22.1 of the DSU. The limitation corresponds to the well-
established legal principle, non bis in idem . In layman's terms, no person can be tried twice for the
same alleged offense.

19. No equivalent treaty text support Chile's pos ition that a Member cannot contest for the first
time an aspect of a new measure that also featured in an old measure.

IV. Conclusion

20. Mr. Chairman, distinguished members of the panel, Brazil thanks you for the opportunity of
presenting its views and looks forward to responding any questions you may have.

6 Appellate Body Report, EC – Bed Linen (Article 21.5 – India) , para. 79 and Appellate Body Report,
Canada – Aircraft (Article 21.5 – Brazil), paras. 40-41.
7 Appellate Body Report, EC – Bed Linen (Article21.5 – India), paras. 96-99.

ANNEX E-3

ORAL STATEMENT BY CANADA
(2 AUGUST 2006)

Introduction

1. Canada welcomes the opportunity to particip ate in this proceeding. Canada's submission
today is limited to the question of the jurisdiction of this Panel to consider arguments that had not
been put before the original panel.

2. Specifically, Argentina claims that the Chilean measures are a violation of GATT
Article II:1(b), second sentence. It considers that this Panel has the jurisdiction to hear such a claim.
Chile disagrees. It submits that this claim was not articulated before the original panel and that,
therefore, this Panel does not have the jurisdiction to consider the claim. In Canada's view, the Panel
has such jurisdiction.

Legal Analysis

3. What is the scope of a Member's right to raise new claims and arguments before an
Article 21.5 panel?

4. It is incontestable that a Member has the ri ght to bring new claims and arguments before a
panel relating to new measures, as the facts, claims, and arguments relevant to those measures may be
distinct from measures previously considered.
1 The Appellate Body determined in Canada – Aircraft
(Article 21.5 – Brazil) that:2

"… the utility of the 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 …"
5. Canada recognizes that such a right is not ab solute. As Chile correctly notes, where a Member
has challenged a measure but has failed to make out a prima facie case, it may not re-argue the same
claim before an Article 21.5 panel. This would permit one Member to enga ge others in endless
litigation, thereby undermining pred ictability and security in the dis pute settlement mechanism of the
WTO.

6. However, that is not the question before you. Rather, the question is whether a panel is
prohibited from considering arguments and claims on the sole basis that they could have been made
before the original panel but were not. Where the measure is appropriately before a panel, and the
DSB has made no findings or recommendations in resp ect 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. And this is so for at least three reasons.

7. First, the DSU makes no provision for such a rejection. The Panel is required by Article 11 of
the DSU to assess objectively the matter before it, that matter consisting of the measure and the claims

1 Canada – Aircraft (Article 21.5 – Brazil) , Appellate Body Report, paras. 40-42; See also US – FSC
(Article 21.5 – EC), Appellate Body Report para. 62, footnote 119.
2 Para. 41.

of violation. If the measure and th e claims are appropriately before the Panel under Articles 6.2, 7.1
and 21.5 of the DSU, the Panel should exercise caution in declining jurisdiction to hear a claim.

8. Second, the findings of the Appellate Body in respect of the jurisdiction of an Article 21.5
panel to consider claims already litigated were based on particular facts that do not apply here. Chile
does not suggest that Argentina's claim has already been considered and rejected; it argues merely that
Argentina could have articulated that claim earlier. Canada is not aware of any rule or precedent in the
jurisprudence of the WTO that would require a Member to make all of its arguments and bring all of
its claims at one time. Of course, in bringi ng a dispute Members should exercise good faith; a
Member ought not, in principle, engage in litiga tion techniques such as "case splitting". But neither
the DSU nor principles of due process enjoin an Article 21.5 panel from considering a claim on the
sole ground that it could have been brought earlier.

9. Finally, Canada questions the wisdom of such an approach from a systemic perspective. For
one thing, it would force a complaining Member to overburden its original submissions with any and
all arguments and claims, regardless of their merit, to avoid a procedural challenge later on. This,
despite the fact that the object of dispute settlement is to settle disputes, not to make claims based on a
fear of later procedural challenges. For another, if the Panel allows Chile's position to succeed, it
would invite highly contentious arguments before Ar ticle 21.5 panels concerning whether claims and
arguments could have been made before on previo us facts, and whether or not certain facts are
actually new. Such an approach would constrain an Article 21.5 panel from considering claims and
arguments which could not reasonably have been contemplated at the time of the original panel – and
notably those based upon subsequent rulings and recommendations of the DSB.

10. Let me now turn to this case. The right of a complaining Member to raise claims and
arguments based upon the rulings and recommendations of the DSB is particularly relevant here.
Before the original panel, Argentina based its argument upon its position that the duties imposed
through the price band system were "ordinary customs duties" within the meaning of both Article 4.2
of the Agreement on Agriculture , and GATT Article II:1(b). Argentina thus argued under the first
sentence of Article II:1(b), which relates to "ordin ary customs duties". The original panel found that
the duties were not "ordinary customs duties", and so Article II:1(b), first sentence could not apply.
Significantly, while the Appellate Body disagreed, it did not come to any conclusion as to whether the
Chilean duties are in fact "ordin ary customs duties". Nor did it consider it necessary to consider
Article II:1(b), first sentence, since it found a violation under Article 4.2 of the Agreement on
Agriculture.
3

11. Argentina considers that this presents a va lid ground to raise the relevance of the second
sentence of Article II:1(b). Chile has argued that "[t]o entertain that claim now would seriously affect
Chile's rights and would subject a case warranting a full hearing to summary and expedited
proceedings".
4

12. Canada disagrees with Chile's assessment. The application of GATT Article II:1(b), second
sentence is a legal issue of interpretation grounded in the facts as established. There is no prejudice to
Chile if the existing factual record – with consider ation given to new Chilean measures – is raised in
support of Argentina's claim. Further, accepting Chile's interpretation would suggest that new
arguments could never be entertained in "summa ry and expedited proceedings" – a position clearly
rejected by the Appellate Body. This is not a case involving a wholly new argument, such as United
States – Countervailing Measures Concerning Ce rtain Products from the European Communities

3 Chile – Price Band System , Panel Report, paras. 7.55-7.60 and 7.104-7.108; Report of the Appellate
Body, paras. 165, 278-287.
4 Chilean submissions, para. 50.

(Article 21.5 – EC), where a party is seeking, for all intents and purposes, a de novo review.
5 Canada
notes that the possibility that Article II:1(b), second sentence, could be applicable to this case was
raised by the original panel on its own initiative. Wh ile that consideration was found to be outside the
panel's jurisdiction by the Appellate Body, it is unr easonable now for Chile to suggest that they are
taken by surprise by Argentina's argument based upon that very same sentence.

13. In the instant case, the Appellate Body found that Argentina did not articulate a claim under
Article II:1(b), second sentence.6 With no claim, there could be no finding that Argentina failed to make a
prima facie case, much less a finding against them on this point. To now deprive Argentina of the right to
bring a claim which it never previously raised, and to make that claim in respect of Chile's new measures,
would greatly limit Members in their ability to present their strongest case, and would improperly curtail
the ability of Article 21.5 panels to review fully the compliance of Members with their WTO obligations.

14. For these reasons, Canada submits that this Panel should find that it has jurisdiction to
consider Argentina's claim concerning GATT Article II:1(b), second sentence. We thank the Panel,
and welcome any questions that you may have.

5 Report of the Panel (WT/DS212/RW), paras. 7.72-7.76.
6 Report of the Appellate Body, para. 168.

ANNEX E-4*

ORAL STATEMENT BY COLOMBIA
(2 AUGUST 2006)

1. Colombia has reserved its third party rights in the case brought by Argentina against the
measures taken by Chile to comply with the r ecommendations of the WTO Dispute Settlement Body
(DSB).
2. Argentina requested that the Panel find that the new price band system applied by Chile to
imports of wheat and wheat flour
1 is "inconsistent – in itself and in its application – " with Article 4.2
of the Agreement on Agriculture, with the second sen tence of paragraph 1(b) of Article II of the
GATT 1994, and with paragraph 4 of Article XVI of the Marrak esh Agreement Establishing the
World Trade Organization.
3. For Colombia, it is clear that the complainant may not put forward new facts. The dispute
comes under Article 21.5 of the Dispute Settle ment Understanding (DSU), and WTO case law
establishes that in such cases, the scope of DSB repor ts must be restricted to their express terms 2,
based on the interpretation of paragraph 14 of the DSU.
4. It is also clear to Colombia that Argentina, as the complainant, bears the burden of proof with
respect to Article 21.5 proceedings and that the Ar ticle 21.5 panel must rely on the relevant data
submitted to it, as established in WTO case law.3
5. Chile maintains that the new measures adopt ed represent a substantial change from the
previous price band system and that "as a practical consequence of changes to the system, there is no
variable import levy or minimum import price", nor any similar measure which operates in this way,
within the meaning of Article 4.2 of the Agreement on Agriculture.
6. The Panel's assessment must be limited exclus ively to an examination of the new Chilean
price band system, that is, to the measures taken by Chile to comply with the recommendations and
rulings of the DSB.
7. The Appellate Body has made it clear that an import levy may vary and that this fact alone
does not enable the measure to be qualified as a vari able levy within the meaning of footnote 1 to
Article 4.2 of the Agreement on Agriculture. This is borne out by the fact that WTO Members are
authorized to change their tariffs, at any time, provided that the changed tariff does not exceed bound
levels. The Appellate Body has also clearly poi nted out that 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.

* Annex E-4 contains the oral statement by Colombia. This text was originally submitted in Spanish by
Colombia.
1 Law 19.897 and Exempt Decree No. 831/2003.
2 "14. An Appellate Body report shall be ad opted by the DSB and unconditionally accepted by the
parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report within
30 days following its circulation to the Members. 8 This adoption procedure is without prejudice to the right of
Members to express their views on an Appellate Body report".
3 The Appellate Body in Canada – Aircraft (Article 21.5 – Brazil) determined that the examination of
"measures taken to comply" is based on the relevant facts proved, by the complainant, in the Article 21.5 panel
proceedings: "We add also that the examination of "measures taken to comply" is based on the relevant facts
proved, by the complainant, to the Article 21.5 panel, during the panel proceedings".

8. The Appellate Body has also pointed out that import levies have additional features which
include "a lack of transparency and a lack of predic tability" in the level of duties that result from such
measures. In the opinion of the Appellate Body, su ch features are liable to restrict the volume of
imports and distort the prices of imports by impedi ng the transmission of international prices to the
domestic market.
9. In this context, Chile's new system contained a number of changes, including: (i) the
abolition of the formula that discarded the highest and lowest 25 per cent of the prices observed,
(ii) the elimination of discretion in the determinati on of import costs, (iii) the use of f.o.b. values in
the different parameters of the system and (iv) express identification of relevant markets for the
purpose of determining the reference price. In Colombia's opinion, these changes help make the
Chilean price band system more transparent and predictable.
10. The Appellate Body also refers to the follo wing definition given by the Panel: "[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 minimu m import price, an additional charge is imposed
corresponding to the difference". In this conn ection, Chile's new mech anism uses the system's
parameters to calculate the customs duties that w ill be applied on the transaction value and not on a
minimum price.

ANNEX E-5

ORAL STATEMENT BY THE EUROPEAN COMMUNITIES
(2 AUGUST 2006)

I. INTRODUCTION
1. Mr. Chairman, Distinguished Members of th e Panel, the European Communities ("EC")
would like to thank the Panel for this opportunity to submit observations on the present dispute.
2. As is customary, the EC will refrain from analys ing in detail the facts of this case, and from
applying the law to those facts. The EC will present its views on a number of issues which raise
systemic concerns. It will first consider the appropriate interpretation of Article 4.2 of the Agreement
on Agriculture. Thereafter, it examines the extent to whic h a complainant may raise new claims in an
Article 21.5 proceeding.
II. INTERPRETATION OF ARTICLE 4.2 OF THE AGREEMENT ON AGRICULTURE
3. The task of the Panel is to determine whether the revised Price Band System (PBS) is
consistent with Article 4.2 of the Agreement on Agriculture . In order to prevail, Argentina must
convince you that the revised PBS is a measure whic h would have been required to be converted into
ordinary customs duties. The revised PBS will not be such a measure unless it can be shown to be "a
similar border measure" to "variable import levies" or "minimum import prices".
4. As you are well aware, the Appellate Body h as had occasion to examine these terms. The
Appellate Body concluded that a "variable import levy" had the following characteristics:
• Continuous variation;
• Automatic variation;
• A lack of transparency; and,
• A lack of predictability.
1
5. The Appellate Body emphasised that the first two of these conditions were necessary
characteristics but that they were not sufficient in themselves.2 This can only be taken as meaning that
at least all four conditions must be present for a va riable import levy to exist. Of course here, the
Panel is tasked with analysing whether a measure similar to a variable import levy is being
maintained by Chile. In the words of the Appellate Body, the measure being examined must "share
sufficient features" with a variable import levy before it can be considered "similar".3
6. The EC must express a certain amount of sympathy with the Panel and the main parties to this
dispute. Defining how "continuous" the variation must be, how "automatic" it should be, and whether
the measure is sufficiently "transparent" or "predi ctable" is no easy task. Once defined, deciding
whether there is sufficient sharing of features so as to make the measure "similar" is again far from
clear. Unfortunately, as currently fra med, there is little which is transp arent or predictable about this
test. Nevertheless, in the view of the EC, the high standards Argentina is asking you to set for this test

1 Appellate Body Report, Chile – Price Band System, paras. 233 and 234.
2 Ibid. para. 234.
3 Ibid. para. 239.

are not supported by the text of Article 4.2 Agreement on Agriculture. To give one concrete example,
the "transparency" obligation does not, in the view of the EC, require a WTO Member to explain why

it chose particular reference prices, provided it explains what those prices are.
7. Argentina's attempt to load obligations onto the back of Article 4.2 should be kept carefully in
context. It should be recalled that the Agreement on Agriculture is the start of a reform process in the
field of international agricultural trade, intended eventually to bring the obligations on agricultural
products in line with those applicable to industria l products. The scope of Article 4.2 should not be
expanded into a soul-searching transparency exerci se, or a blunt instrument intended to prohibit
alleged "disconnects" between international and domestic prices. This is particularly the case when no
such requirements exist under the law applicable to trade in industrial goods, and when such
requirements clearly go beyond those features distinctive to the types of measures brought under the
scope of Article 4.2.
8. The EC starts its analysis by recalling that the Appellate Body has determined that GATT
1994 does not regulate the type of duties which can be imposed. In Argentina – Footwear the
Appellate Body held that Argentina could apply a specific duty provided that the ad valorem
equivalent of that specific duty did not exceed the bound rate (which was expressed in ad valorem
form).4 That case concerned a specific duty calculated on the basis of a "representative international
price". Members are thus in a position to apply diff erent types of duties. They can calculate such
duties in a number of different manners without acting inconsistently with GATT 1994. A Member
may even decide a particular tariff on the basi s of no form of calculation – other than a non-
arithmetical political or economic one. Further, as th e Appellate Body recognised, varying a duty is a
common occurrence and a perfectly legal one at that. To provide a concrete example, it is perfectly
legal for a WTO Member to review, from time-to-time, an applied duty, and to adjust it in the light of
market developments (i.e. to increase the duty as international prices decrease), provided of course the
Member stays within its bound levels.
9. Given variations of tariffs, the transparency of the calculation of the tariff, the predictability
of the moment of the change of the tariff (provi ded there is appropriate publication) and frequent
variation of the tariff are not regulated by the GA TT the question arises as to when such elements are
such as to give rise to an inc onsistency with Article 4.2 of the Agreement on Agriculture. In the view
of the EC, it is only when the measures clearly ha ve sufficient similarity to measures coming under
the scope of Article 4.2 - that is features unique to the measures listed in the footnote to Article 4.2 are
also found in the measures challenged - that there is a possible violation of Article 4.2. The existence
of features which are not unique to the measures fou nd under Article 4.2 cannot be sufficient, on their
own, to render a measure inconsistent with Article 4.2.
10. The Appellate Body stressed that the varia tion in the amount of the duties had to be
"continuous". What amounts to a "continuous" varia tion is not clear. In the original case, neither
Argentina nor Chile disputed that the variation was c ontinuous. In the original PBS, the variation in
the amount of the duties occurred every week, i.e. 52 times a year. In the revised PBS, the variation
takes place every two months, i.e. six times a year. The EC has considerable difficulty in describing a
variation which takes place so infrequently as "continuous."
11. The criterion of automaticity is likewise far from clear. A variation in a duty could be
brought about automatically in the sense that no legi slative or executive action is required to vary the
duty. If the executive has no discretion, but yet still has to act in order to vary the duty, and the nature
of the variation in the duty is determined by a formul a, then it is hard to describe that variation of the
duty as anything other than automatic.

4 See, Appellate Body Report, Argentina – Footwear (EC), para. 55.

12. As already noted, the key features of a variable import levy are the continuous and automatic
variation, and a lack of transparency and predictabi lity. The EC considers that for a measure to be
"similar" to such a measure, it must display all of these features. If these first conditions are met, the
question then arises as to how untransparent and how unpredictable the measure must be, and whether
other criteria also have to be met. The EC subm its that provided all the elements of the calculation
are published, and if all of the data used is publicly available, then the system is both transparent and
predictable because an interested economic operator will be in a position to predict the nature of a
change in the amount of the duties – where that is necessary because a change is pending. In
particular, in the view of the EC, it is not necessa ry that transparency extend to why a particular
market has been chosen to calculate representative pr ices, provided it is clear what prices are to be
used.
13. Both Argentina and Brazil make a great deal of an alleged "disconnect" between domestic
Chilean and international prices. The Appellate Body never explicitly addressed the weight, if any, to
be given to this issue. In the view of the EC, the Panel should be very cau tious in approaching this
issue. It is a feature of tariffs to soften the im pact of, or disconnect international prices from domestic
markets. This is the effect of any tariff, whether specific or ad valorem. The extent of the softening
or disconnect varies from case to case. Further, the ex tent of the softening can be adjusted, either by
varying an applied tariff within the limits of bindings or even by undertaking Article XXVIII
negotiations. So, in the view of the EC, decisive weight cannot be given to the existence of any
disconnect or softening in assessing consistency with Article 4.2, since the extent of such a disconnect
or softening will always be a relative analysis. For these reasons, the EC suggests that extreme
caution be used in analysing this issue.
14. In terms of conclusion on Article 4.2, the EC would like to stress than in its view, for a
measure similar to a measure listed in the footnote of Article 4.2 to exist, the measure must exhibit all
of the features identified by the Appellate Body in the original dispute. That is, any duty must vary
continuously and automatically, but in additi on, the measure must lack transparency and
predictability. In the view of the EC it is not necessary that a measure e xplain why certain choices
have been made, provided those choices are clearly made public and are predictable. Finally, the EC
is far from convinced that the question of the alle ged disconnect between international and domestic
price should be given anywhere near the importance it appears to have been given by Argentina.
III. SCOPE OF ARTICLE 21.5 PROCEEDINGS
15. A first observation of the EC in relation to th e issues at stake under this section is that the
parties do not dispute the fact that the revised pri ce band system is a "new measure". The core of the
claims on the nature of this new measure is whethe r it is, as the previous PBS was determined to be, a
"similar border measure" inconsis tent with Article 4.2 of the Agreement on Agriculture . In this
respect, the revised PBS may also be seen as similar to the original one, but it is both formally and
substantially different, and this seems undisputed.
16. On this basis, the EC generally holds the view that the mere fact that the measure is a new one
globally entails the emergence of new factual circ umstances and thus a broad right to bring new
claims against the new measure in all its elements , irrespective of the fact that a new claim may
concern an aspect or element of the new measure which was taken over from the previous regulatory
framework without any formal change, provided, of cour se, that this element is part of "the measure
taken to comply".
17. What is important then is that the new factual a nd legal contexts will, as a matter of principle,
provoke a change in the factual circumstances – "t he relevant facts" - on the basis of which the
conformity or not of the new measure with an y provision of the covered agreements should be
analysed. Both parties have referred to the Appellate Body report in the EC-Bed Linen (Art 21.5

India) case, where indeed this right for a complainan t in Article 21.5 proceedings to raise new claims,
arguments and factual circumstances different from those raised in the original proceedings is
acknowledged
5.
18. Whether the invocation by Argentina of the 1.56 conversion factor is to be construed as a new
argument or as a new claim, the factual circumstances of its operation have changed with the adoption
of the revised PBS, and thus the examination of its effect on the conformity of the revised PBS with
Article 4.2 of the Agreement on Agriculture should fall within the terms of reference of this Panel.
19. As regard the claim made by Argentina relati ng to the second sentence of Article II:1(b) of
the GATT, and in the view of the EC, what counts in this context is again the fact that the new
measure (the revised PBS) has created a new set of regulatory and factual circumstances which imply
that the claim is new insofar that it is directed against a different set of measures under a different set
of "relevant facts". Therefore, the fact that a si milar claim may have been brought against a similar
measure in the original dispute should be held as irrelevant.
20. Further, the EC contends that in any case, it is not a claim from the original dispute where
Argentina would have "failed to establish a prima faci e case", pursuant to the standard retained by the
Appellate Body in the EC – Bed Linen (Article 21.5 India) 6 and therefore the right to bring such a
claim should not be excluded on the basis of such a precedent. Nevertheless, since the EC believes
that the PBS system should be considered an ordi nary customs duty, the EC has some difficulty in
identifying a substantive breach of the second sentence of Article II:1(b).
IV. CONCLUSION
21. Mr. Chairman, Distinguished Members of the Panel, the EC is grateful for this opportunity to
present its views and trusts they will be taken into account as you draw your own conclusions in this
dispute. The EC will, of course, be happy to answer any questions which you may have. Thank you.

5 See para. 79 of the Appellate Body's report.
6 Para. 96.

ANNEX E-6

ORAL STATEMENT BY THAILAND
(2 AUGUST 2006)

I. INTRODUCTION

Mr. Chairman and Members of the Panel,

1. Thailand appreciates the opportunity to particip ate in this proceeding and to present its views
on this matter to the Panel today.

II. COMMENTS

2. Thailand believes that the task before this Panel is simple and straightforward. As the
Appellate Body expressed in Canada – Measures Affecting the Ex port of Civilian Aircraft, Recourse
by Brazil to Article 21.5 of the DSU (DS70), the standard for an Article 21.5 panel is to examine
whether a revised measure is in conformity with WTO rules.
1 The Appellate Body subsequently
refined this standard in United States – Final Countervailing Duty Determination with respect to
Certain Softwood Lumber from Canada, Recourse by Canada to Article 21.5 of the DSU (DS257),
emphasizing the express link contained in Article 21. 5 between "measures taken to comply" and the
recommendations and rulings of the Dispute Settlement Body (DSB).2

3. Therefore, the task before you is to examin e the WTO-consistency of the revised price band
measures taken by Chile taking into account the DS B recommendations and rulings in the original
dispute.

4. In that dispute, both the Panel and the Appe llate Body found that Chile's price band system
was inconsistent with Article 4.2 of the Ag reement on Agriculture and made simple and
straightforward recommendations and rulings: Chile must bring its price band system into conformity
with Article 4.2 of the Agreement on Agriculture, which requires Members to not "maintain . . . any
measures of the kind which have been required to be converted into ordinary customs duties."
3 In this
regard, the Appellate Body found Ch ile's price band system to be a border measure of such kind, and
in particular, similar to, inter alia, a variable import levy.4 The Appellate Body further found that the
right of WTO Members to maintain such a measure, including that of Chile, ended from the date of
entry into force of the WTO Agreement.5

Mr. Chairman and Members of the Panel,

5. Chile claims to have ended its WTO-inconsis tent price band system through the instigation of
Law No. 19.897 of 2003. This new law introduces some changes to Chile's price band system. For
example, it narrows the scope of the system by excl uding edible vegetable oils, it establishes the price

1 Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, Recourse by
Brazil to Article 21.5 of the DSU, WT/DS70/AB/R, paras. 36 and 41.
2 Appellate Body Report, United States – Final Countervailing Duty Determination with respect to
Certain Softwood Lumber from Canada, Recourse by Canada to Article 21.5 of the DSU , WT/DS257/AB/R,
para. 68.
3 Appellate Body Report, Chile – Price Band System and Safeguard Measures Relating to Certain
Agricultural Products, WT/DS207/AB/R, paras. 288-289.
4 Ibid, paragraph 238.
5 Ibid, paragraph 212.

band's floor and ceiling prices for 11 years (albeit with annual adjustments) as opposed to on an
annual basis, and it determines the reference price on a bi-monthly basis instead of a weekly one.
6

6. However, Thailand is of the view that d espite these changes, the WTO-inconsistent price
band system is well and alive. As Argentina has clearly demonstrated, the fundamental elements of
the illegal system remain in place. Firstly, the to tal duties applicable still comprise ad valorem and
specific duties, like its predecessor. Secondly, the calculation of the specific duty still involves the
comparison of the floor and ceiling of the price band to a reference price, all of which are determined
in a non-transparent manner (albeit on a less freque nt basis). Thirdly, because duties under the new
system continue to vary depending on price fl uctuations, under Law No. 19.897 of 2003 Chile still
maintains a variable import levy prohibited by Article 4.2 of the Agreement on Agriculture. In effect,
Chile's maintenance of the price band system r esulting in a variable import levy undermines an
essential goal of the Agreement on Agriculture, namely, to ensure that market access commitments on
agricultural products are secure, transparent and predictable for traders.

7. Thailand will not examine in detail the precise elements or formula of Chile's new price band
system to demonstrate that it is a variable impor t levy. We consider that Argentina has already
undertaken a thorough and comprehensive analysis in this regard. We also take no view on other
issues subject to the review of this Panel. Su ffice it to say that Thailand fully supports Argentina's
assertion that Chile's implementing measures fail to bring it into compliance because they maintain a
price band system in violation of Chile's obligati ons under the Agreement on Agriculture in much the
same way as their predecessor did.

III. RECOMMENDATION

Mr. Chairman and Members of the Panel,

8. Article 11 of the DSU provides that one of the functions of panels is to make findings that
will assist the DSB in making recommendations. In addition, DSU Article 3.7 establishes that "the
aim of the dispute settlement mechanism is to secure a positive solution to a dispute". In light of these
provisions, and to avoid infinite compliance proce dures, Thailand strongly believes that this Panel
should find that any price band system resulting in the application of customs duties that vary
depending on the fluctuations of internationa l prices constitutes a mechanism leading to the
imposition of variable import levies, a border measur e that is prohibited under Article 4.2 of the
Agriculture Agreement. Thailand thus believes th at this Panel should recommend Chile to withdraw
its price band system in order to act consistently with the covered agreements, to implement the DSB
recommendations and rulings in the original dispute, and to provide a positive solution to this dispute.

IV. CONCLUSION

9. Thailand hopes that these views will assist th e Panel in considering the issues brought before
it. Again, we thank you for this opportunity to appear before you today.

6 First Written Submission of Argentina, 19 April 2006, paras. 8, 33, and 38.

ANNEX E-7

ORAL STATEMENT BY THE UNITED STATES
(2 AUGUST 2006)

1. Mr. Chairman and Members of the Panel, the United States is pleased to present its views as a
third party in this Article 21.5 proceeding.
2. As the Panel knows, the United States was not in a position to make written submissions prior
to this meeting. As a result, our statement toda y is effectively our only opportunity to present our
views to the Panel, and it is therefore longer than it might otherwise have been. We thank the Panel
and the other delegations present today, in advance, for their attention to these comments.
3. This proceeding concerns the modifications that Chile has made to its price band system, a
measure found to have been incons istent with Article 4.2 of the Agreement on Agriculture .
1
Argentina argues that the modified system is incons istent, as such and as applied to imports of wheat
and wheat flour, with three WTO provisions: (1) Article 4.2 of the Agreement on Agriculture; (2) the
second sentence of Article II:1(b) of the General Agreement on Tariffs and Trade 1994 ("GATT
1994"); (3) and Article XVI:4 of the Marrakesh Agreement Establishing the World Trade
Organization.2 The United States would like to offer some observations today on the first two of
these claims. As for the third claim, we note simply that it is a derivative claim dependent upon a
finding of inconsistency on the basis of one or both of the first two claims.
Article 4.2 of the Agreement on Agriculture

 1. The Proper Interpretive Approach

4. In this proceeding, as in the or iginal, the central question rai sed by Argentina's Article 4.2
claim is whether the measure at issue is "similar" to a "variable import levy" or "minimum import
price." Interpretation of the terms "variable impor t levy" and "minimum import price" is key to the
resolution of the question presented. Pursuant to Article 3.2 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes ("DSU"), and as the Appellate Body explained in
the original proceeding, these terms must be interpre ted using the customary rules of interpretation of
public international law, 3 in particular, according to their ordina ry meaning, in their context, and in
the light of the object and purpose of the WTO agreements.
5. The United States thus cannot support Chile's asser tion that, in the absence of any definition
for the terms "variable import levy and/or a minimum import price, the point of departure can only be
that indicated by the Panel and the Appellate Body with respect to the elements which make up such
measures."4 It is of course correct that the issue befo re this compliance Panel involves the findings of

1 See Panel Report, Chile – Price Band System and Safeguard Measures Relating to Certain
Agricultural Products , WT/DS207/R, adopted as modified 23 Octobe r 2002, para. 8.1(a) (hereinafter "Panel
Report"); Appellate Body Report, Chile – Price Band System and Safeguard Measures Relating to Certain
Agricultural Products, WT/DS207/AB/R, adopted as modified 23 Oc tober 2002, para. 288(c)(iii) (hereinafter
"Appellate Body Report").
2 Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products:
Recourse by Argentina to Article 21.5 , First Written Submission by Argentina, para. 2 (19 April 2006)
(hereinafter "Argentina First Written Submission")
3 Appellate Body Report, para. 231.
4 Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products:
Recourse by Argentina to Article 21.5 , Chile Rebuttal Submission, para. 4 (24 May 2006) (hereinafter "Chile
Rebuttal Submission") (emphasis added).

the Panel and Appellate Body in the original pro ceeding, because Article 21.5 of the DSU concerns
the existence or consistency w ith a covered agreement of measures taken to comply with the
recommendations and rulings of the Dispute Settlement Body. However, the Appellate Body has also
explained, in the Canada – Aircraft Article 21.5 proceeding, that "t he 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."
5
6. Chile's argument appears to be that: (a) in the original proceeding, the Appellate Body
identified only "specific (and thus limited) features" 6 of the price band system as being the
"fundamental and central aspects" that "made the [sys tem] a measure similar to a variable import levy
or minimum import price;" 7 and (b) "Chile dealt with those 'certa in features' identified, analysed and
questioned by the Appellate Body."8
7. The United States disagrees with Chile's premi se (a). To the contrary, the Appellate Body
expressly rejected any attempt to assess the WTO-consistency of the original price band system based
on whether it shared characteristics of a "fundame ntal" nature with variable import levies and
minimum import prices. 9 According to the Appellate Body: "[t]his merely complicates matters,
because it raises the question of how to distinguis h 'fundamental' characteristics with those of a less
than 'fundamental' nature."10
8. The Appellate Body endorsed, instead, a comp rehensive analysis, using as the point of
departure the ordinary meaning of the terms "variable import levies" and "minimum import prices" in
their context, and in light of the object and purpose of the WTO agreements.
11 The Appellate Body's
analysis resulted in a finding that though there we re "some dissimilarities between Chile's price band
system and the features of 'minimum im port prices' and 'variable import levies' ... the way Chile's
system is designed, and the way it operates in its overall nature , are sufficiently 'similar' to the
features of both those two categories of prohibited measures to make Chile's price band system – in its
particular features – a 'similar border measure' within the meaning of footnote 1 to Article 4.2."
12
9. An assessment of the modified measure in th is Article 21.5 proceeding requires the same
comparison of the price band system, as it is desi gned and as it operates in its overall nature, to
variable import levies and minimum import prices. It is not sufficient merely to compare the original
and modified price band systems to determine whet her Chile has addressed the "certain features" of
the former that allegedly are "fundamental."
 2. The Modified Price Band System Appe ars to be "Similar" To A Variable Import
Levy and a Minimum Import Price Within the Meaning of Article 4.2 of the
Agreement on Agriculture

10. Although Chile asserts that it has changed the pr ice band system in such a way as to render it
WTO-consistent, it appears that Chile's modified price band mechanism continues to vary the
applicable duty based on the difference between a floor price and a calculated reference price. Chile
appears just to have modified somewhat the way in which those parameters are determined. The price
band system with these modifications would therefore still appear to be a measure similar to variable

5 Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft: Recourse by
Brazil to Article 21.5 of the DSU, WT/DS70/AB/RW, adopted 4 August 2000, para. 41.
6 Chile Rebuttal Submission, para. 19.
7 Chile Rebuttal Submission, para. 28.
8 Chile Rebuttal Submission, para. 6.
9 Appellate Body Report, para. 226.
10 Appellate Body Report, para. 226 (emphasis in original).
11 Appellate Body Report, para. 232.
12 Appellate Body Report, para. 252 (emphasis added).

import levies and minimum import prices within the meaning of footnote 1 to Article 4.2 of the
Agreement on Agriculture.
 ( a) Variable Import Levy

11. Examining the ordinary meaning of the term "var iable import lev[y]" in light of its context,
and the object and purpose of the agreements, th e Appellate Body explained that a "variable import
levy" is a "duty, tax, charge or other exaction" "assessed upon importation" that is "liable to vary."
13
Further, given the context in which the term is used in footnote 1 of Article 4.2, the Appellate Body
clarified that the variability must be intrinsic to the measure itself, for example, because of the
incorporation into the measure of a "scheme or fo rmula that causes and ensures that levies change
automatically and continuously." 14 Apart from these elements, the Appellate Body noted that a
common feature of variable import levies is "a lack of transparency and lack of predictability in the
level of duties that will result from such measures." 15 The Appellate Body indicated that a measure
"similar" to variable import levies would also share that feature.16
12. Chile's modified price band system would appear to be a measure similar to variable import
levies under this reasoning. The price band duty under the modified system is a "duty, tax, charge or
other exaction" "assessed upon importation." Moreover, Chile's Law No. 19.897 sets out a formula
that must be applied by the Chilean Executive every two months to establish a new amount of duty
under the price band system. In the case of wheat, this duty is the (positive) difference between a
reference price and the floor price "multiplied by a factor of one (1), plus the general ad valorem duty
in force" for wheat.
17 In the case of wheat flour, it is the dut y determined using the formula for wheat
multiplied by a factor of 1.56. 18 The price band duty is, thus, "liable to vary" because of an intrinsic
"formula that causes and ensures that levies change automatically and continuously."
13. Chile has argued that the price band duty h as ceased varying "continuously" because it now
changes once every two months, rather than once ever y week as it did under the original price band
system. We cannot discern, nor has Chile identified, a basis for such a distinction to be drawn.
14. Similarly, the fact that Chile has added a ne w administrative requirement that the Chilean
Executive publish the amount of the price band duty in a Ministry of Finance Decree at the start of
every two-month period does not alter the conclusion that the price band duty varies "automatically"
because of the formula set out in Law No. 19.897 . Chile correctly notes the Appellate Body's
clarification that "[t]o vary the a pplied 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."19 However, it is not clear how simply interjecting a
layer of clerical tasks could break the link between the formula established as part of the price band
system and the level of the duties automatically calculated through its application.
15. As for the Appellate Body's observation that a common feature of variable import levies is "a
lack of transparency and lack of predictability in the level of duties that will result from such
measures,"
20 we note that it is not just any "lack of transparency" and "lack of predictability" that is of

13 Appellate Body Report, paras. 232-233.
14 Appellate Body Report, paras. 233.
15 Appellate Body Report, para. 234 (emphasis added).
16 Appellate Body Report, paras. 234 and 246-252.
17 Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products:
Recourse by Argentina to Article 21.5 , First Written Submission by Chile, para. 17 (3 May 2006) (hereinafter
"Chile First Written Submission")
20 Appellate Body Report, para. 234 (emphasis added).

concern. Rather, it is a "lack of transparency" or "l ack of predictability" regarding "the level of duties
that will result from such measures." It is not clear to us that this aspect of "transparency" is being
addressed in the debate between the parties on issues of transparency relating to other aspects of the
price band system.
16. When one looks at Chile's modified price band system and variable import levies from the
standpoint of an exporter, the measures do seem to be similar in the lack of transparency and
predictability in the level of the duties resulting fro m their application. In both cases, the lack of
transparency and predictability results from the complex nature of the mechanism applied to
determine the level of the duties and the fact that it may be difficult to ascertain – if not impossible to
know ahead of time – all of the elements necessary to determine the precise level of duties.
17. To illustrate, consider the fact that to determin e the level of the duty under Chile's modified
price band system, it is necessary to know the referen ce price that will be compared to the price band
threshold. The reference price consists of "the average of the daily international wheat prices
recorded in the markets most relevant to Chile over a period of 15 calendar days counted backwards
from the [bi-monthly] date set out in Regulati on No. 831 for each decree establishing specific
duties."
21 Unless an exporter sells, ships, and lands the shipment within the current two-month
window – which would be unusual, according to Argentina, as a " majority of sales are made under
forward contracts"22 – the exporter will simply not know the level of the duty that will apply to its
exports.23
18. Chile attempts to minimize this result by arguing that wheat traders could use futures
contracts prices and their "own skills in predictin g prices" to try to determine what the reference
prices might be in the future. 24 The same assertion, however, could be made about variable import
levies – and yet, all agree that those measures are within the ambit of Article 4.2 of the Agreement on
Agriculture. The United States submits that the question is not whether a trader can attempt to make
an educated guess as to what the level of the duty might be. Rather, the question is whether a trader
can "know and ... reasonably predict what the amount of duties will be" in much the same way as if an
ordinary customs duty were in place. 25 As the Appellate Body explai ned, in the absence of that kind
of transparency and predictability about the level of the duties, there is a danger that exporters will not
ship to the market in question, which will impede the transmission of international prices to the
domestic market.26
 ( b) Minimum Import Price

19. Turning next to the question of whether the modified price band system is similar to a
minimum import price, it would appear that there has been little change to the price band system that
would make it any less similar to a minimum import price now than it was before.
20. Chile asserts that "minimum import price schem es generally operate in relation to the actual
transaction value of ... imports."
27 However, neither the original price band system nor the modified
system calculates duties by reference to actual tran saction prices. Rather, both use as the reference
price the price for a certain quality of wheat in the foreign "markets of concern." Chile argues that
because "the reference price [in the modified price band system] has nothing to do with the

22 Argentina First Written Submission, para. 275 (emphasis in original).
24 Chile First Written Submission, paras. 158-163.
25 Appellate Body Report, para. 234 (emphasis added).
26 Appellate Body Report, para. 234.
27 Chile Rebuttal Submission, para. 139.

transaction value" the system is "neither a minimum import price nor similar to one." 28 However, this
distinction did not preclude a finding of "similarity" in the original proceeding, 29 and it is not clear
why it would do so now.
21. We also question whether the analysis of similarity to a minimum import price system is
affected by the fact that the price band threshol ds are expressed in Law No. 19.589 in "FOB terms,"
rather than as a "minimum import price," "a CIF price," or "an entry price." 30 If so, a Member could
avoid the obligations of Article 4.2 of the Agreement on Agriculture by maintaining a minimum
import price (or a measure similar to one) and simp ly labelling the threshold price as something other
than a "minimum import price," "a CIF price," or "an entry price."
(c) "Sustaining" an entry price, int ernal price, or an administratively
determined price above the domestic price

22. Finally, Chile makes a general argument rega rding the alleged "fundamental characteristics"
of variable import levies and minimum import prices that we would like to address. Specifically,
Chile argues that a "fundamental characteristic" of these measures is the intent "to sustain a price and
that that price is measured as an entry price, as an internal price, as a value linked to the internal price,
or as an administratively determined pri ce which is above the domestic price."
31 Chile cites, as the
basis for this assertion, a listing of "fundamental characteristics of variable import levies and
minimum import price" from the Panel Report in the original proceeding, which the Panel said it had
"distilled from the pre-Uruguay Round notificati ons and examination thereof by the GATT
Contracting Parties."
32
23. Chile argues that since the two prices compar ed to determine the price band duty – the
modified floor and reference price – are not the ex act same as the ones used in the case of variable
import levies and minimum import prices according to th e Panel's list, "the current parameters do not
possess any of the fundamental characteristics whic h the WTO itself has defined and discussed for"
those two categories of measures." 33 Chile concludes that, "[t]herefore, the Chilean system
established by Law 19.897 and its Regulations is not inconsistent with ... Article 4.2."34
24. We note that the Appellate Body agreed with the arguments that Chile advanced in the
original proceeding, that it is not useful to endor se certain characteristics "a s being of a 'fundamental'
nature."35 Instead of endorsing the kind of assessment that Chile is now urging of "fundamental
characteristics," the Appellate Body conducted an anal ysis involving an examination of the ordinary
meaning of the terms "variable import levy" and "minim um import price" in their context, and in light
of the object and purpose of the agreements. 36 There is no reason why the same approach should not
be used here.
Article II:1(b) of the GATT 1994

25. The Appellate Body has explained that, if the pr ice band system is found to be inconsistent
with Article 4.2 of the Agreement on Agriculture , it is not necessary to consider whether the price
band system also results in a breach of Article II:1(b) of the GATT 1994. "This is because a finding

28 Chile Rebuttal Submission, para. 160.
29 Appellate Body Report, para. 248, 252.
30 Chile Rebuttal Submission, para. 140.
31 Chile Rebuttal Submission, para. 117.
32 Panel Report, para. 7.37-7.37.
33 Chile Rebuttal Submission, para. 123.
34 Chile Rebuttal Submission, para. 123.
35 Appellate Body Report, para. 230.
36 Appellate Body Report, para. 231.

that Chile's price band system as such is a measure 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."
37 Applying this reasoning, we believe that th is Panel can properly end its analysis in this
proceeding with a finding under Article 4.2 of the Agreement on Agriculture.

26. This concludes the oral statement of the United States. Thank you for your attention.

37 Appellate Body Report, para. 190.