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WTO ANALYTICAL INDEX: AGREEMENT ON IMPORT LICENSING PROCEDURES Agreement on Import Licensing Procedures |
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> Preamble |
Members,
Having regard to the Multilateral Trade Negotiations;
Desiring to further the objectives of GATT 1994;
Taking into account the particular trade, development and financial needs of developing country Members;
Recognizing the usefulness of automatic import licensing for certain purposes and that such licensing should not be used to restrict trade;
Recognizing that import licensing may be employed to administer measures such as those adopted pursuant to the relevant provisions of GATT 1994;
Recognizing the provisions of GATT 1994 as they apply to import licensing procedures;
Desiring to ensure that import licensing procedures are not utilized in a manner contrary to the principles and obligations of GATT 1994;
Recognizing that the flow of international trade could be impeded by the inappropriate use of import licensing procedures;
Convinced that import licensing, particularly non-automatic import licensing, should be implemented in a transparent and predictable manner;
Recognizing that non-automatic licensing procedures should be no more administratively burdensome than absolutely necessary to administer the relevant measure;
Desiring to simplify, and bring transparency to, the administrative procedures and practices used in international trade, and to ensure the fair and equitable application and administration of such procedures and practices;
Desiring to provide for a consultative mechanism and the speedy, effective and equitable resolution of disputes arising under this Agreement;
Hereby agree as follows: 1. In EC - Poultry, Brazil argued before the Appellate Body that Articles 1.2 and 3.2 of the Licensing Agreement were not applicable to over-quota trade. In addressing these issues, the Appellate Body referred to the Preamble of the Licensing Agreement: "The preamble to the Licensing Agreement stresses that the Agreement aims at ensuring that import licensing procedures 'are not utilized in a manner contrary to the principles and obligations of GATT 1994' and are 'implemented in a transparent and predictable manner'."(1)
II. Article 1 back to top Article 1: General Provisions 1. For the purpose of this Agreement, import licensing is defined as administrative procedures(1) used for the operation of import licensing regimes requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing Member.
(footnote original) 1 Those procedures referred to as "licensing" as well as other similar administrative procedures.
2. Members shall ensure that the administrative procedures used to implement import licensing regimes are in conformity with the relevant provisions of GATT 1994 including its annexes and protocols, as interpreted by this Agreement, with a view to preventing trade distortions that may arise from an inappropriate operation of those procedures, taking into account the economic development purposes and financial and trade needs of developing country Members.(2)
(footnote original) 2 Nothing in this Agreement shall be taken as implying that the basis, scope or duration of a measure being implemented by a licensing procedure is subject to question under this Agreement.
3. The rules for import licensing procedures shall be neutral in application and administered in a fair and equitable manner.
4. (a) The rules and all information concerning procedures for the submission of applications, including the eligibility of persons, firms and institutions to make such applications, the administrative body(ies) to be approached, and the lists of products subject to the licensing requirement shall be published, in the sources notified to the Committee on Import Licensing provided for in Article 4 (referred to in this Agreement as "the Committee"), in such a manner as to enable governments(3) and traders to become acquainted with them. Such publication shall take place, whenever practicable, 21 days prior to the effective date of the requirement but in all events not later than such effective date. Any exception, derogations or changes in or from the rules concerning licensing procedures or the list of products subject to import licensing shall also be published in the same manner and within the same time periods as specified above. Copies of these publications shall also be made available to the Secretariat.
(footnote original) 3 For the purpose of this Agreement, the term "governments" is deemed to include the competent authorities of the European Communities.
(b) Members which wish to make comments in writing shall be provided the opportunity to discuss these comments upon request. The concerned Member shall give due consideration to these comments and results of discussion.
5. Application forms and, where applicable, renewal forms shall be as simple as possible. Such documents and information as are considered strictly necessary for the proper functioning of the licensing regime may be required on application.
6. Application procedures and, where applicable, renewal procedures shall be as simple as possible. Applicants shall be allowed a reasonable period for the submission of licence applications. Where there is a closing date, this period should be at least 21 days with provision for extension in circumstances where insufficient applications have been received within this period. Applicants shall have to approach only one administrative body in connection with an application. Where it is strictly indispensable to approach more than one administrative body, applicants shall not need to approach more than three administrative bodies.
7. No application shall be refused for minor documentation errors which do not alter basic data contained therein. No penalty greater than necessary to serve merely as a warning shall be imposed in respect of any omission or mistake in documentation or procedures which is obviously made without fraudulent intent or gross negligence.
8. Licensed imports shall not be refused for minor variations in value, quantity or weight from the amount designated on the licence due to differences occurring during shipment, differences incidental to bulk loading and other minor differences consistent with normal commercial practice.
9. The foreign exchange necessary to pay for licensed imports shall be made available to licence holders on the same basis as to importers of goods not requiring import licences.
10. With regard to security exceptions, the provisions of Article XXI of GATT 1994 apply.
11. The provisions of this Agreement shall not require any Member to disclose confidential information which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises, public or private. (a) Scope of the Licensing Agreement 2. In EC - Bananas III, the Appellate Body considered that the European Communities licensing procedures for tariff quotas were within the scope of the Licensing Agreement. After quoting the definition of "import licensing" set out in Article 1.1, the Appellate Body concluded that licensing procedures for tariff quotas fell under the provisions of the Licensing Agreement: "Although the precise terms of Article 1.1 do not say explicitly that licensing procedures for tariff quotas are within the scope of the Licensing Agreement, a careful reading of that provision leads inescapably to that conclusion. The EC import licensing procedures require 'the submission of an application' for import licences as 'a prior condition for importation' of a product at the lower, in-quota tariff rate. The fact that the importation of that product is possible at a high out-of-quota tariff rate without a licence does not alter the fact that a licence is required for importation at the lower in-quota tariff rate.
We note that Article 3.2 of the Licensing Agreement provides that:
'Non-automatic licensing shall not have trade-restrictive or -distortive effects on imports additional to those caused by the imposition of the restriction.' (emphasis added)
We note also that Article 3.3 of the Licensing Agreement reads:
'In the case of licensing requirements for purposes other than the implementation of quantitative restrictions, Members shall publish sufficient information for other Members and traders to know the basis for granting and/or allocating licences.' (emphasis added)
We see no reason to exclude import licensing procedures for the administration of tariff quotas from the scope of the Licensing Agreement on the basis of the use of the term 'restriction' in Article 3.2. We agree with the Panel that, in the light of the language of Article 3.3 of the Licensing Agreement and the introductory words of Article XI of the GATT 1994, the term 'restriction' as used in Article 3.2 should not be interpreted to encompass only quantitative restrictions, but should be read also to include tariff quotas.
For these reasons, we agree with the Panel that import licensing procedures for tariff quotas are within the scope of the Licensing Agreement."(2) (ii) Licensing procedures for over-quota trade 3. In EC - Poultry, the European Communities regulation at issue applied, by its terms, only to in-quota trade in frozen poultry meat. The Panel had found that "the Licensing Agreement, as applied to this particular case, only relates to in-quota trade."(3) Brazil claimed that nothing in the text or context of Articles 1.2 and 3.2 of the Licensing Agreement limits to in-quota trade the requirement in Article 1.2 that licensing systems be implemented "with a view to preventing trade distortions" or the prohibition in Article 3.2 of additional trade-restrictive or trade-distortive effects. The Appellate Body stated as follows: "The preamble to the Licensing Agreement stresses that the Agreement aims at ensuring that import licensing procedures 'are not utilized in a manner contrary to the principles and obligations of GATT 1994' and are 'implemented in a transparent and predictable manner'. Moreover, Articles 1.2 and 3.2 make it clear that the Licensing Agreement is also concerned, with, among other things, preventing trade distortions that may be caused by licensing procedures. It follows that wherever an import licensing regime is applied, these requirements must be observed. The requirement to prevent trade distortion found in Articles 1.2 and 3.2 of the Licensing Agreement refers to any trade distortion that may be caused by the introduction or operation of licensing procedures, and is not necessarily limited to that part of trade to which the licensing procedures themselves apply. There may be situations where the operation of licensing procedures, in fact, have restrictive or distortive effects on that part of trade that is not strictly subject to those procedures.
In the case before us, the licensing procedure established in Article 1 of Regulation 1431/94 applies, by its terms, only to in-quota trade in frozen poultry meat. No licensing is required by Regulation 1431/94 for out-of-quota trade in frozen poultry meat. To the extent that the Panel intended merely to reflect the fairly obvious fact that this licensing procedure applies only to in-quota trade, we uphold the finding of the Panel that '[t]he Licensing Agreement, as applied to this particular case, only relates to in-quota trade'."(4) 4. In EC - Bananas III, the Appellate Body reversed the Panel's finding that Article 1.3 of the Licensing Agreement "preclude[s] the imposition of one system of import licensing procedures in respect of a product originating in certain Members and a different system of import licensing procedures on the same product originating in other Members."(5) In doing so, the Appellate Body drew a distinction between licensing rules per se, on the one hand, and their application and administration, on the other: "By its very terms, Article 1.3 of the Licensing Agreement clearly applies to the application and administration of import licensing procedures, and requires that this application and administration be 'neutral ... fair and equitable'. Article 1.3 of the Licensing Agreement does not require the import licensing rules, as such, to be neutral, fair and equitable. Furthermore, the context of Article 1.3 - including the preamble, Article 1.1 and, in particular, Article 1.2 of the Licensing Agreement - supports the conclusion that Article 1.3 does not apply to import licensing rules. Article 1.2 provides, in relevant part, as follows:
'Members shall ensure that the administrative procedures used to implement import licensing régimes are in conformity with the relevant provisions of GATT 1994 ... as interpreted by this Agreement, ...'
As a matter of fact, none of the provisions of the Licensing Agreement concerns import licensing rules, per se. As is made clear by the title of the Licensing Agreement, it concerns import licensing procedures. The preamble of the Licensing Agreement indicates clearly that this agreement relates to import licensing procedures and their administration, not to import licensing rules. Article 1.1 of the Licensing Agreement defines its scope as the administrative procedures used for the operation of import licensing regimes.
We conclude, therefore, that the Panel erred in finding that Article 1.3 of the Licensing Agreement precludes the imposition of different import licensing systems on like products when imported from different Members."(6) 5. In Korea - Various Measures on Beef, the Panel followed the distinction between licensing rules per se and their administration, set out in the finding of the Appellate Body referenced in paragraph 4 above. The Panel examined the United States' claim that Korea's regulatory regime was inconsistent with Article 3.2 of the Licensing Agreement by granting exclusive authority to the LPMO and the SBS system to import beef, holding: "[T]he Panel notes that many of the US claims regarding alleged violations of the Licensing Agreement are concerned with the substantive provisions of Korea's import (and distribution) regime (by the LPMO or SBS super-groups). It has been said repeatedly that such substantive matters are of no relevance to the Licensing Agreement which is concerned with the administrative rules of import licensing systems.(7)
For these reasons, the Panel does not reach any general conclusion on the compatibility of Korea's import licensing system with the WTO Agreement."(8) 6. With respect to the distinction between licensing rules per se and their administration, see also paragraph 13 below. 7. The Panel on EC - Bananas III addressed the issue of whether Article 1.2 in itself creates obligations additional to those arising from GATT. The Panel considered the historical developments of the GATT/WTO rules on licensing and concluded that, except for a reference to developing Members, "Article 1.2 of the WTO Licensing Agreement has become largely duplicative of the obligations already provided for in GATT" and "Article 1.2 ... has lost most of its legal significance: "[Article 1.2] derives from the 1979 Tokyo Round Agreement on Import Licensing Procedures which was negotiated as a self-standing agreement without a formal legal link to GATT 1947. Accordingly, membership was open not only to GATT contracting parties and the European Communities, but also to any other government.(9) Therefore, provisions of GATT 1947 applied between the signatories of the 1979 Licensing Agreement, by virtue of that agreement, only to the extent that they had been explicitly referred to and incorporated into the 1979 Licensing Agreement. In this context, Articles 1.10 and 4.2 of the 1979 Licensing Agreement mention, inter alia, Articles XXI, XXII and XXIII of GATT 1947. Accordingly, the general rule that administrative procedures used to implement import licensing regimes had to conform with the relevant GATT provisions in fact added only to the obligations which any non-GATT contracting parties among the signatories of the 1979 Licensing Agreement would have been subject to.
The wording of Article 1.2 remained unchanged in the Uruguay Round. Given that the Agreement Establishing the WTO and all the agreements listed in Annexes 1 through 3 thereto constitute a single undertaking, however, Article 1.2 of the WTO Licensing Agreement has become largely duplicative of the obligations already provided for in GATT, except for the reference to developing country Members. Given this context, Article 1.2 of the WTO Licensing Agreement has lost most of its legal significance."(10) 8. Despite its finding that Article 1.2 of the Licensing Agreement merely duplicates already existing obligations, the Panel recalled the principle of effective treaty interpretation: "However, the Appellate Body has endorsed the principle of effective treaty interpretation by stating that 'an interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility'.(11) In light of this, we have to give effect and meaning to Article 1.2 of the Licensing Agreement.
For this reason, to the extent that we find that specific aspects of the EC licensing procedures are not in conformity with Articles I, III or X of GATT, we necessarily also find an inconsistency with the requirements of Article 1.2 of the Licensing Agreement."(12) 9. The Panel on EC - Bananas III also addressed the legal significance of the reference in Article 1.2 to developing country Members: "With respect to Article 1.2's requirement that account should be taken of 'economic development purposes and financial and trade needs of developing country Members', the Licensing Agreement does not give guidance as to how that obligation should be applied in specific cases. We believe that this provision could be interpreted as a recognition of the difficulties that might arise for developing country Members, in imposing licensing procedures, to comply fully with the provisions of GATT and the Licensing Agreement. In the alternative, Article 1.2 could also be read to authorize, but not to require, developed country Members to apply preferential licensing procedures to imports from developing country Members. In any event, even if we accept the latter interpretation, we have not been presented with evidence suggesting that, in its licensing procedures, there were factors that the EC should have but did not take into account under Article 1.2.
Therefore, we do not make a finding on whether the EC failed to take into account the needs of developing countries in a manner inconsistent with the requirements of Article 1.2 of the Licensing Agreement."(13) 10. In EC - Poultry, Brazil argued that the European Communities had violated the prohibition of trade distortion contained in Articles 1.2 and 3.2 of the Licensing Agreement. The Panel had rejected Brazil's claim. On appeal, Brazil argued that the Panel had failed to address or examine properly certain evidence, including evidence concerning Brazil's falling share of the poultry market in the European Communities, and had examined whether this falling market share was caused by the introduction of the European Communities licensing procedures for the tariff-rate quota for frozen poultry meat. The Appellate Body found that Brazil had failed to establish a causal link between the decline in market share and other indicators, on the one hand, and the licensing requirements at issue, on the other: "Under Regulation 1431/94, Brazil's share in the EC tariff-rate quota for frozen poultry meat is 7,100 tonnes out of the total tariff-rate quota of 15,500 tonnes. This share is equal to approximately 45 per cent of the tariff-rate quota. This is the same as Brazil's percentage share of the total exports of frozen poultry meat to the European Communities during the reference period of the preceding three years. In addition, the Panel noted, licences issued by the European Communities for imports of frozen poultry meat from Brazil have been fully utilized. This means that Brazil's percentage share in the tariff-rate quota has remained at the same level as Brazil's share in the total trade over the relevant period. Moreover, the absolute volume of exports of frozen poultry meat by Brazil in the total exports of this product to the European Communities has been rising since the imposition of the tariff-rate quota for frozen poultry meat.
Brazil has not, in our view, clearly explained, either before the Panel or before us, how the licensing procedure caused the decline in market share. Brazil has not offered any persuasive evidence that its falling market share could, in this particular case - with a constant percentage share of the tariff-rate quota, full utilization of the tariff-rate quota and a growing total volume of exports - be viewed as constituting trade distortion attributable to the licensing procedure. In other words, Brazil has not proven a violation of the prohibition of trade distortion in Articles 1.2 and 3.2 of the Licensing Agreement by the European Communities.
Brazil argues that the Panel did not consider a number of other arguments in its examination of the existence of trade distortion: that licences have been apportioned in non-economic quantities; that there have been frequent changes to the licensing rules; that licence entitlement has been based on export performance; and that there has been speculation in licences. These arguments, however, do not address the problem of establishing a causal relationship between imposition of the EC licensing procedure and the claimed trade distortion. Even if conceded arguendo, these arguments do not provide proof of the essential element of causation.
For these reasons, we uphold the finding of the Panel that Brazil has not established that the European Communities has acted inconsistently with either Article 1.2 or Article 3.2 of the Licensing Agreement."(14) 11. With respect to the legal implication of Article 1.2 for interpreting the scope of the Licensing Agreement, see also the excerpt referenced in paragraph 3 above. (b) Relationship with GATT provisions 12. With respect to the relationship between Article 1.2 and provisions of the GATT 1994, see paragraph 7 above. (a) Import licensing on the basis of export performance 13. In EC - Poultry, the Panel, in a finding not reviewed by the Appellate Body, examined Brazil's claim that the European Communities allocation of import licences on the basis of export performance was inconsistent with Articles 1.3 and 3.5(j) of the Licensing Agreement: "The requirement of export performance for the issuance of import licences on its face does seem unusual. However, Brazil has not elaborated on how the export performance requirement was administered and how it has affected the in-quota exports of poultry products from Brazil.
We also note that the Appellate Body in the Banana III case made the following observation:
'By its very terms, Article 1.3 of the Licensing Agreement clearly applies to the application and administration of import licensing procedures, and requires that this application and administration be 'neutral ... fair and equitable'. Article 1.3 of the Licensing Agreement does not require the import licensing rules, as such, to be neutral, fair and equitable. Furthermore, the context of Article 1.3 - including the preamble, Article 1.1 and, in particular, Article 1.2 of the Licensing Agreement - supports the conclusion that Article 1.3 does not apply to import licensing rules.'(15)
In our view, the issue of licence entitlement based on export performance is clearly that of rules, not that of application or administration of import licensing procedures. Thus, Article 1.3 is not applicable on this specific issue."(16) 14. With respect to the distinction between licensing rules per se and their application, see also paragraph 4 above. 15. In EC - Poultry, the Panel examined the claim that the European Communities had failed to notify the necessary information regarding the poultry tariff quotas to the Committee on Import Licensing under Article 1.4(a) of the Licensing Agreement. The European Communities responded that it had not made a notification because it was unclear, prior to the Appellate Body report in the Banana III case, whether the Licensing Agreement applied to tariff rate quotas ("TRQs"). The Panel rejected the European Communities defence: "While we note the EC's explanation for non-notification, we find this omission to be inconsistent with Article 1.4(a) of the Licensing Agreement. The fact that all the relevant information is published and that the administration of all agricultural TRQs in the EC has been notified to the WTO Committee on Agriculture does not in our view excuse the EC from notifying the sources of publication pursuant to this subparagraph."(17) 16. Further, the Panel on EC - Poultry, in a finding not addressed by the Appellate Body, rejected the claim by Brazil that frequent changes to the licensing rules and procedures regarding the poultry TRQ had made it difficult for governments and traders to become familiar with the rules, contrary to the provisions of Articles 1.4, 3.3, 3.5(b), 3.5(c) and 3.5(d): "We note that the transparency requirement under the cited provisions is limited to publication of rules and other relevant information. While we have sympathy for Brazil regarding the difficulties caused by frequent changes to the rules, we find that changes in rules per se do not constitute a violation of Article 1.4, 3.3, 3.5(b), 3.5(c) or 3.5(d)."(18) (b) Procedures for notification and review 17. At its meeting of 12 October 1995, the Committee on Import Licensing agreed on procedures for notification and review under the Licensing Agreement.(19)
III. Article 2 back to top Article 2: Automatic Import Licensing(4) (footnote original) 4 Those import licensing procedures requiring a security which have no restrictive effects on imports are to be considered as falling within the scope of paragraphs 1 and 2.
1. Automatic import licensing is defined as import licensing where approval of the application is granted in all cases, and which is in accordance with the requirements of paragraph 2(a).
2. The following provisions(5), in addition to those in paragraphs 1 through 11 of Article 1 and paragraph 1 of this Article, shall apply to automatic import licensing procedures:
(footnote original) 5 A developing country Member, other than a developing country Member which was a Party to the Agreement on Import Licensing Procedures done on 12 April 1979, which has specific difficulties with the requirements of subparagraphs (a)(ii) and (a)(iii) may, upon notification to the Committee, delay the application of these subparagraphs by not more than two years from the date of entry into force of the WTO Agreement for such Member.
(a) automatic licensing procedures shall not be administered in such a manner as to have restricting effects on imports subject to automatic licensing. Automatic licensing procedures shall be deemed to have trade-restricting effects unless, inter alia:
(i) any person, firm or institution which fulfils the legal requirements of the importing Member for engaging in import operations involving products subject to automatic licensing is equally eligible to apply for and to obtain import licences;
(ii) applications for licences may be submitted on any working day prior to the customs clearance of the goods;
(iii) applications for licences when submitted in appropriate and complete form are approved immediately on receipt, to the extent administratively feasible, but within a maximum of 10 working days;
(b) Members recognize that automatic import licensing may be necessary whenever other appropriate procedures are not available. Automatic import licensing may be maintained as long as the circumstances which gave rise to its introduction prevail and as long as its underlying administrative purposes cannot be achieved in a more appropriate way. (a) Application of Article 2 to developing country Members 18. The following developing country Members invoked the provisions for delayed application under footnote 5 to Article 2.2 of the Agreement on Import Licensing Procedures: Bangladesh (1 January 1995), Bolivia (13 September 1995), Brazil (1 January 1995), Burkina Faso (3 June 1995), Cameroon (13 December 1995), Colombia (30 April 1995), Costa Rica (1 January 1995), Côte d'Ivoire (1 January 1995), Dominican Republic (9 March 1995), El Salvador (7 May 1995), Gabon (1 January 1995), Guatemala (21 June 1995), Honduras (1 January 1995), Indonesia (1January 1995), Kenya (1 January 1995), Malaysia (1 January 1995), Myanmar (1 January 1995), Sri Lanka (1 January 1995), Thailand (1 January 1995), Tunisia (29 March 1995), Turkey (26 March 1995), United Arab Emirates (10 April 1996), Uruguay (1 January 1995) and Venezuela (1 January 1995).(20) 19. In its annual report for 1998, with reference to the delay in application, the Committee on Import Licensing stated the following: "It was noted that the two-year period of delay allowed under the Agreement had expired for all these Members, and accordingly the obligations of Article 2.2(a)(ii) and (a)(iii) apply to all current WTO Members. It was recalled that the invocation of the above provisions did not exempt the Members concerned from the obligation to notify under the Agreement. The mandatory notifications included publications and legislation relevant to import licensing, and replies to the Questionnaire on Import Licensing Procedures by 30 September each year. Those Members that had not yet made the necessary notifications under the Agreement were urged to do so at the earliest opportunity."(21)
IV. Article 3 back to top Article 3: Non-Automatic Import Licensing 1. The following provisions, in addition to those in paragraphs 1 through 11 of Article 1, shall apply to non-automatic import licensing procedures. Non-automatic import licensing procedures are defined as import licensing not falling within the definition contained in paragraph 1 of Article 2.
2. Non-automatic licensing shall not have trade-restrictive or -distortive effects on imports additional to those caused by the imposition of the restriction. Non-automatic licensing procedures shall correspond in scope and duration to the measure they are used to implement, and shall be no more administratively burdensome than absolutely necessary to administer the measure.
3. In the case of licensing requirements for purposes other than the implementation of quantitative restrictions, Members shall publish sufficient information for other Members and traders to know the basis for granting and/or allocating licences.
4. Where a Member provides the possibility for persons, firms or institutions to request exceptions or derogations from a licensing requirement, it shall include this fact in the information published under paragraph 4 of Article 1 as well as information on how to make such a request and, to the extent possible, an indication of the circumstances under which requests would be considered.
5. (a) Members shall provide, upon the request of any Member having an interest in the trade in the product concerned, all relevant information concerning:
(i) the administration of the restrictions;
(ii) the import licences granted over a recent period;
(iii) the distribution of such licences among supplying countries;
(iv) where practicable, import statistics (i.e. value and/or volume) with respect to the products subject to import licensing. Developing country Members would not be expected to take additional administrative or financial burdens on this account;
(b) Members administering quotas by means of licensing shall publish the overall amount of quotas to be applied by quantity and/or value, the opening and closing dates of quotas, and any change thereof, within the time periods specified in paragraph 4 of Article 1 and in such a manner as to enable governments and traders to become acquainted with them;
(c) in the case of quotas allocated among supplying countries, the Member applying the restrictions shall promptly inform all other Members having an interest in supplying the product concerned of the shares in the quota currently allocated, by quantity or value, to the various supplying countries and shall publish this information within the time periods specified in paragraph 4 of Article 1 and in such a manner as to enable governments and traders to become acquainted with them;
(d) where situations arise which make it necessary to provide for an early opening date of quotas, the information referred to in paragraph 4 of Article 1 should be published within the time-periods specified in paragraph 4 of Article 1 and in such a manner as to enable governments and traders to become acquainted with them;
(e) any person, firm or institution which fulfils the legal and administrative requirements of the importing Member shall be equally eligible to apply and to be considered for a licence. If the licence application is not approved, the applicant shall, on request, be given the reason therefor and shall have a right of appeal or review in accordance with the domestic legislation or procedures of the importing Member;
(f) the period for processing applications shall, except when not possible for reasons outside the control of the Member, not be longer than 30 days if applications are considered as and when received, i.e. on a first-come first-served basis, and no longer than 60 days if all applications are considered simultaneously. In the latter case, the period for processing applications shall be considered to begin on the day following the closing date of the announced application period;
(g) the period of licence validity shall be of reasonable duration and not be so short as to preclude imports. The period of licence validity shall not preclude imports from distant sources, except in special cases where imports are necessary to meet unforeseen short-term requirements;
(h) when administering quotas, Members shall not prevent importation from being effected in accordance with the issued licences, and shall not discourage the full utilization of quotas;
(i) when issuing licences, Members shall take into account the desirability of issuing licences for products in economic quantities;
(j) in allocating licences, the Member should consider the import performance of the applicant. In this regard, consideration should be given as to whether licences issued to applicants in the past have been fully utilized during a recent representative period. In cases where licences have not been fully utilized, the Member shall examine the reasons for this and take these reasons into consideration when allocating new licences. Consideration shall also be given to ensuring a reasonable distribution of licences to new importers, taking into account the desirability of issuing licences for products in economic quantities. In this regard, special consideration should be given to those importers importing products originating in developing country Members and, in particular, the least-developed country Members;
(k) in the case of quotas administered through licences which are not allocated among supplying countries, licence holders(6) shall be free to choose the sources of imports. In the case of quotas allocated among supplying countries, the licence shall clearly stipulate the country or countries;
(footnote original) 6 Sometimes referred to as "quota holders".
(l) in applying paragraph 8 of Article 1, compensating adjustments may be made in future licence allocations where imports exceeded a previous licence level. 20. With respect to the scope of Article 3, see paragraphs 2, 3 and 5 above. 21. Regarding the application of Article 3.2, see paragraph 10 above. 22. With respect to the legal implication of Article 3.2 for the scope of the Licensing Agreement, see paragraph 3 above. 23. Concerning the issue of whether frequent changes in licensing procedures are inconsistent with Article 3.3, see paragraph 16 above. 24. In EC - Poultry, Brazil argued on appeal that the Panel had erred in restricting Brazil's "comprehensive claim in relation to a violation of the general principle of transparency underlying the Licensing Agreement" to an analysis of Article 3.5(a) of the Licensing Agreement. The contention of Brazil was that "the administration of import licenses in such a way that the exporter does not know what trade rules apply is a breach of the fundamental objective of the Licensing Agreement." The Appellate Body, however, upheld the Panel's approach and the Panel's finding that the European Communities measure was not inconsistent with Article 3.5(a) of the Licensing Agreement: "Brazil's notice of appeal contained no reference to a general issue of transparency in relation to the Licensing Agreement. However, Brazil argued in its appellant's submission that the Panel erred in restricting Brazil's 'comprehensive claim in relation to a violation of the general principle of transparency underlying the Licensing Agreement' to an analysis of Article 3.5(a) of the Licensing Agreement. The contention of Brazil is that 'the administration of import licenses in such a way that the exporter does not know what trade rules apply is a breach of the fundamental objective of the Licensing Agreement'.
Brazil argued before the Panel that 'underlying the Licensing Agreement was the principle of transparency.' Brazil submitted, in particular, that the European Communities was obliged under either Article 3.5(a)(iii) or (iv) of the Licensing Agreement to provide complete and relevant information on the distribution of licences among supplying countries and statistics on volumes and values. According to Brazil, the European Communities failed to fulfil this obligation. The Panel found that Brazil had not demonstrated that the European Communities had violated either Article 3.5(a)(iii) or (iv) of the Licensing Agreement.(22) In the light of the existence of express provisions in Article 3.5(a) of the Licensing Agreement relating to transparency on which the Panel did in fact make findings, we do not believe that the Panel erred by refraining from examining Brazil's 'comprehensive' claim relating to a general principle of transparency purportedly underlying the Licensing Agreement."(23) 25. With respect to the issue of whether frequent changes in licensing procedures are consistent with Article 3.5(b), see paragraph 16 above. 26. Regarding the issue of whether frequent changes in licensing procedures are consistent with Article 3.5(c), see paragraph 16 above. 27. Concerning the issue of whether frequent changes in licensing procedures are consistent with Article 3.5(d), see paragraph 16 above. 28. In EC - Poultry, Brazil claimed that speculation in licences discouraged full utilization of the poultry TRQ in violation of Articles 3.5(h) and 3.5(j). The European Communities responded that licences awarded under the regulation at issue were non-transferable, so as to avoid such speculation. The Panel, in a finding not reviewed by the Appellate Body, rejected Brazil's claim: "While it may be true that Brazilian exporters have had additional difficulties in exporting to the EC market due to the speculation in licences, we note that the licences allocated to imports from Brazil have been fully utilized. In other words, the speculation in licences has not discouraged the full utilization of the TRQ. Thus, we do not find that the EC has acted inconsistently with Articles 3.5(h) or 3.5(j) of the Licensing Agreement in this regard."(24) 29. In EC - Poultry, Brazil claimed that the allocation of licences where each applicant received a licence allowing imports of about 5 tonnes was inconsistent with Article 3.5(i) regarding issuance of licences in economic quantities. As a related matter, Brazil claimed that the absence of a newcomer provision in the regulation regarding the operation of the poultry TRQ was inconsistent with Article 3.5(j) of the Licensing Agreement. The European Communities responded that licences for the quantity of about 5 tonnes were indeed being issued to newcomers and that the allocation of licences in small quantities was made in response to an ever increasing number of importers. The Panel, in a finding not reviewed by the Appellate Body, responded: "We note Brazil's argument that its exporters are facing difficulties in dealing with licences for small quantities, which is echoed in Thailand's third-party submission also. While the decline in the average quantity per licence may cause problems for traders, we note at the same time that the total TRQ has been fully utilized. The very fact that the licences have been fully utilized suggests to us that the quantities involved are still 'economic', particularly in combination with the significant amount of the over-quota trade."(25) 30. The Panel on EC - Poultry, examined Brazil's claim that the European Communities allocation of import licences on the basis of export performance was inconsistent with Articles 1.3 and 3.5(j) of the Licensing Agreement. While the Panel opined that "the requirement of export performance for the issuance of import licences on its face does seem unusual", it nevertheless held: "[T]he provision of Article 3.5(j) in this regard is hortatory and does not necessarily prohibit the consideration of other factors than import performance."(26) 31. Also, the Panel addressed Brazil's claim that the absence of a newcomer provision in the regulation was inconsistent with Article 3.5(j) of the Licensing Agreement. See the excerpt referenced in paragraph 29 above. 32. With respect to the issue of speculation in licences, see paragraph 28 above. 33. In Canada - Dairy, the Panel addressed the United States' claim that Canada was in violation of Article II of GATT 1994 and Article 3 of the Licensing Agreement because it restricted access to tariff quotas to certain cross-border imports by Canadians. Having found that the restriction was inconsistent with Article II:1(b) of GATT 1994, the Panel did not find it necessary to examine whether in so doing, Canada also violated Article 3 of the Licensing Agreement.(27)
V. Article 4 back to top Article 4: Institutions There is hereby established a Committee on Import Licensing composed of representatives from each of the Members. The Committee shall elect its own Chairman and Vice-Chairman and shall meet as necessary for the purpose of affording Members the opportunity of consulting on any matters relating to the operation of this Agreement or the furtherance of its objectives. 34. At its meeting of 1 December 1995, the Council for Trade in Goods approved the rules of procedure for meetings of the Committee on Import Licensing, where the Committee follows, mutatis mutandis, the rules of procedure for meetings of the General Council with certain exceptions.(28) 35. The Committee on Import Licensing held 16 meetings from 1 January 1995 to 31 December 2002.(29) The Committee reported to the Council for Trade in Goods on an annual basis.(30) 2. Procedures for the review of notifications 36. At its meeting on 23 October 1996, the Committee on Import Licensing adopted the Understanding on Procedures for the Review of Notifications Submitted under the Agreement on Import Licensing Procedures.(31)
VI. Article 5 back to top Article 5: Notification 1. Members which institute licensing procedures or changes in these procedures shall notify the Committee of such within 60 days of publication.
2. Notifications of the institution of import licensing procedures shall include the following information:
(a) list of products subject to licensing procedures;
(b) contact point for information on eligibility;
(c) administrative body(ies) for submission of applications;
(d) date and name of publication where licensing procedures are published;
(e) indication of whether the licensing procedure is automatic or non-automatic according to definitions contained in Articles 2 and 3;
(f) in the case of automatic import licensing procedures, their administrative purpose;
(g) in the case of non-automatic import licensing procedures, indication of the measure being implemented through the licensing procedure; and
(h) expected duration of the licensing procedure if this can be estimated with some probability, and if not, reason why this information cannot be provided.
3. Notifications of changes in import licensing procedures shall indicate the elements mentioned above, if changes in such occur.
4. Members shall notify the Committee of the publication(s) in which the information required in paragraph 4 of Article 1 will be published.
5. Any interested Member which considers that another Member has not notified the institution of a licensing procedure or changes therein in accordance with the provisions of paragraphs 1 through 3 may bring the matter to the attention of such other Member. If notification is not made promptly thereafter, such Member may itself notify the licensing procedure or changes therein, including all relevant and available information. 37. Since the entry into force of the WTO Agreement, the Committee on Import Licensing received, pursuant to Article 5 of the Agreement, 44 notifications.(32) 2. Duplication or overlapping of notifications 38. On the question of possible duplication or overlapping of notifications, i.e. whether import licensing aspects associated with the administration of tariff quotas resulting from 'tariffication' in agriculture should be notified to the Committee on Import Licensing or to the Committee on Agriculture, at its meeting of 12 October 1995, the Committee on Import Licensing agreed as follows: "[A]ll import licensing procedures, including those dealing with the administration of tariff quotas in agriculture, should be notified to the Committee on Import Licensing. Any problem that might arise relating to duplication or overlapping of notifications, as well as related questions of simplification, could be taken up as necessary, at the appropriate body, i.e. the Working Group on Notification Obligations and Procedures."(33) 39. In its report to the Council for Trade in Goods, dated 21 August 1996, the Working Group on Notification Obligations and Procedures concluded that efforts to remove the possible duplication were not warranted.(34) 40. At its meeting of 19 February 1998, the General Council adopted the following decision pursuant to the recommendation of the Council for Trade in Goods: "The notification obligations resulting from the Decision of the CONTRACTING PARTIES to the GATT 1947 taken at their twenty-eighth Session in November 1972 (SR.28/6, item 3) to adopt the report of the Committee on Trade in Industrial Products, including the Committee's proposal regarding notification obligations on licensing systems (L/3756, paragraph 76(35)), are hereby eliminated."(36) 41. With regards to Procedures for the Review of Notifications, see the excerpt referenced in paragraph 36 above. 42. With reference to Paragraph 5 of Article 5 of the Licensing Agreement addressing the issue of so-called counter-notifications, in its fourth biennial review, the Committee on Import Licensing noted that so far, the Committee has not received any notifications under this provision.(37)
VII. Article 6 back to top Article 6: Consultation and Dispute Settlement Consultations and the settlement of disputes with respect to any matter affecting the operation of this Agreement shall be subject to the provisions of Articles XXII and XXIII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding. 43. The following table lists the disputes in which panel and/or Appellate Body reports have been adopted where the provisions of the Licensing Agreement were invoked:
VIII. Article 7 back to top Article 7: Review 1. The Committee shall review as necessary, but at least once every two years, the implementation and operation of this Agreement, taking into account the objectives thereof, and the rights and obligations contained therein.
2. As a basis for the Committee review, the Secretariat shall prepare a factual report based on information provided under Article 5, responses to the annual questionnaire on import licensing procedures(39) and other relevant reliable information which is available to it. This report shall provide a synopsis of the aforementioned information, in particular indicating any changes or developments during the period under review, and including any other information as agreed by the Committee.
3. Members undertake to complete the annual questionnaire on import licensing procedures promptly and in full.
4. The Committee shall inform the Council for Trade in Goods of developments during the period covered by such reviews. 44. At its meeting on 12 October 1995, the Committee on Import Licensing agreed on procedures for review under Article 7.1 of the Licensing Agreement.(40) At its meeting on 23 October 1996, the Committee concluded its first biennial review under Article 7.1 of the Licensing Agreement.(41) At its meetings on 20 October 1998(42), 11 October 2000(43) and 24 September 2002(44), the Committee concluded its second, third and fourth biennial reviews. 45. At its meeting on 12 October 1995, the Committee on Import Licensing agreed on procedures for notification under Article 7.3 of the Licensing Agreement.(45) 46. At the same meeting, the Committee agreed on the standard form of the annual questionnaire which Members are required to complete under Article 7.3.(46)
IX. Article 8 back to top Article 8: Final Provisions Reservations
1. Reservations may not be entered in respect of any of the provisions of this Agreement without the consent of the other Members.
Domestic Legislation
2. (a) Each Member shall ensure, not later than the date of entry into force of the WTO Agreement for it, the conformity of its laws, regulations and administrative procedures with the provisions of this Agreement.
(b) Each Member shall inform the Committee of any changes in its laws and regulations relevant to this Agreement and in the administration of such laws and regulations. 1. Procedures for Notification and Review 47. At its meeting on 12 October 1995, the Committee on Import Licensing agreed on procedures for notification under Article 8.2(b) of the Licensing Agreement.(47) 48. With regard to Procedures for the Review of Notifications, see paragraph 36 above.
Footnotes: 1. Appellate Body
Report on EC - Poultry, para. 121. back to text |
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