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Complaint by the European Union. (See also DS444, DS445 and DS446,)
On 25 May 2012, the European Union requested consultations with Argentina concerning certain measures imposed by Argentina on the importation of goods.
The European Union challenges: (i) declarations required as a condition for the approval of imports; (ii) various types of licences required for the importation of certain goods; and (iii) the alleged systematic delay in granting import approval or failure to grant such approval, or the grant of import approval subject to importers undertaking to comply with certain allegedly trade restrictive commitments.
The European Union claims that the challenged measures appear to be inconsistent with:
- Articles III:4, VIII, X:1, X:3 and XI:1 of the GATT 1994;
- Articles 1.2, 1.3, 1.4, 1.5, 1.6, 1.7, 2.2, 3.2, 3.3, 3.4 and 3.5 of the Agreement on Import Licensing Procedures;
- Article 2 of the TRIMs Agreement;
- Article 4.2 of the Agreement on Agriculture; and
- Article 11 of the Safeguards Agreement.
On 31 May 2012, Turkey requested to join the consultations. On 7 June 2012, Ukraine and the United States requested to join the consultations. On 8 June 2012, Australia, Canada, Guatemala and Japan requested to join the consultations. On 3 July 2012, Mexico requested to join the consultations. Subsequently, Argentina informed the DSB that it had accepted the requests of Australia, Canada, Guatemala, Japan, Mexico, Turkey, Ukraine and the United States to join the consultations. On 6 December 2012, the European Union requested the establishment of a panel. At its meeting on 17 December 2012, the DSB deferred the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 28 January 2013, the DSB established a single panel pursuant to Article 9.1 of the DSU to examine this dispute, DS444 and DS445. Australia, Canada, China, Ecuador, Guatemala, India, Japan, Korea, Norway, Saudi Arabia, Switzerland, Chinese Taipei, Thailand, Turkey and the United States reserved their third party rights. On 15 May 2013, the European Union, the United States and Japan requested the Director-General to compose the panel. On 27 May 2013, the Director-General composed the panel. On 15 November 2013, the Chair of the panel informed the DSB that it expected to issue its final report to the parties by the end of May 2014, in accordance with the timetable adopted after consultations with the parties. On 5 May 2014, the Chair of the panel informed the DSB that it would not be possible to issue the final report to the parties by the end of May 2014 due to the complexity of the dispute and the large volume of evidence. The panel estimated that it will issue its final report to the parties by the end of June 2014, in accordance with the revised timetable adopted after consultation with the parties.
On 22 August 2014, the panel report was circulated to Members.
Summary of key findings
This dispute concerns two measures:
- The procedure connected to the Advance Sworn Import Declaration (Declaración Jurada Anticipada de Importación, DJAI), required by the Argentine Government since February 2012 for most imports of goods into Argentina; and,
- The imposition by Argentine authorities on economic operators of one or more of the following trade-related requirements (TRRs) as a condition to import into Argentina or to obtain certain benefits: (a) to offset the value of imports with, at least, an equivalent value of exports; (b) to limit imports, either in volume or in value; (c) to reach a certain level of local content in domestic production; (d) to make investments in Argentina; and, (e) to refrain from repatriating profits. The requirements are in some cases contained in agreements signed between economic operators and the Argentine Government or in letters addressed by economic operators to the Argentine Government.
With respect to the DJAI procedure, the complainants (European Union, United States and Japan) requested the Panel to find that: (a) the DJAI procedure is an import restriction inconsistent with Article XI:1 of the GATT 1994; (b) the DJAI procedure is administered in a manner inconsistent with Argentina’s obligations under Article X:3(a) of the GATT 1994; and, (c) Argentina failed to publish promptly information relating to the operation of the DJAI procedure in the manner required by Article X:1 of the GATT 1994.
The complainants presented a second line of arguments with respect to the DJAI procedure that were relevant only in the event that the DJAI procedure was found to be an import licence. In such case, the complainants argued that: (a) the DJAI procedure is an import restriction, made effective through an import licence, inconsistent with Article XI:1 of the GATT 1994; (b) the DJAI procedure is administered in a manner inconsistent with Argentina’s obligations under Articles 1.3, 1.6, 3.2, and 3.5(f) of the Import Licensing Agreement; (c) Argentina failed to publish promptly information relating to the operation of the DJAI procedure in the manner required by Articles 1.4(a) and 3.3 of the Import Licensing Agreement; and, (d) Argentina failed to notify the DJAI procedure in the manner required by Articles 1.4(a), 5.1, 5.2, 5.3, and 5.4 of the Import Licensing Agreement.
With respect to Argentina’s imposition of TRRs, the complainants requested the Panel to make the following factual findings: (a) that the measure consists of a combination of one or more of the five trade-related requirements identified by the complainants; (b) that it is an unwritten measure “not stipulated in any published law or regulation”; (c) that the measure is imposed on economic operators in Argentina as a condition to import or to obtain certain benefits; (d) that the measure is enforced, inter alia, through the DJAI; and, (e) that the measure is imposed by the Argentine Government with the objective of eliminating trade deficits and increasing import substitution.
The complainants advanced claims in respect of the TRRs under Articles XI:1 and X:1 of the GATT 1994. First, the complainants alleged that the TRRs imposed by Argentina have a limiting effect on the economic operators’ ability to import and, therefore, constitute a violation of Article XI:1 of the GATT 1994. Second, the complainants argued that the TRRs are inconsistent with Article X:1 of the GATT 1994 because Argentina failed to publish the measure promptly, thereby preventing governments and traders from becoming acquainted with it. Finally, the European Union and Japan further argued that the TRRs, in respect of the local content requirement, are inconsistent with Article III:4 of the GATT 1994, because they require economic operators to use domestic, instead of imported, products to achieve a specified level of local content.
In addition, Japan requested separate findings concerning Articles III:4, X:1 and XI:1 of the GATT 1994 in respect of the TRRs “as such” and “as applied”.
Argentina requested that the Panel reject the complainants’ claims. Argentina argued that the DJAI procedure is a customs or import formality subject to Article VIII of the GATT 1994 and therefore not subject to Article XI:1 of the GATT 1994 or the Import Licensing Agreement. Argentina also argued, with respect to the TRRs, that the complainants did not produce evidence of the existence of a single “overarching” measure with general and prospective application. In Argentina’s view, even if the Panel were to accept the complainants’ characterization of the evidence relating to the TRRs, at most this might indicate the existence of a series of individual one-off and isolated actions that concern a limited number of individual economic operators in a limited number of sectors, whose content varies considerably and lacks general and prospective application.
With regard to the DJAI procedure, the Panel found that:
- Irrespective of whether the DJAI procedure is considered to be a customs or import formality subject to the obligations contained in Article VIII of the GATT 1994, this fact per se would not exclude the applicability of Article XI:1 of the GATT 1994 to the measure.
- The DJAI procedure is inconsistent with Article XI:1 of the GATT 1994, since it has a limiting effect on imports, and thus constitutes an import restriction.
The Panel refrained from making any findings regarding the DJAI procedure with respect to the additional claims raised by the complainants under Article XI:1 of the GATT 1994, and Articles X:1 and X:3(a) of the GATT 1994, and several provisions of the Import Licensing Agreement (Articles 1.3, 1.4(a), 1.6, 3.2, 3.3, 3.5(f), 5.1, 5.2, 5.3, and 5.4). The Panel considered that additional findings were not necessary or useful in resolving the matter at issue.¨
With regard to the Trade-Related Requirements (TRRs), the Panel found that:
- The imposition on economic operators by the Argentine authorities of one or more of the five requirements identified by the complainants as a condition to import or to obtain certain benefits operates as a single measure (the TRRs measure) attributable to Argentina.
- The five trade-related requirements identified by the Panel as part of the TRRs measure are the following: (a) offsetting the value of imports with, at least, an equivalent value of exports (one-to-one requirement); (b) limiting imports, either in volume or in value (import reduction requirement); (c) reaching a certain level of local content in domestic production (local content requirement); (d) making investments in Argentina (investment requirement); and, (e) refraining from repatriating profits from Argentina (non-repatriation requirement).
- The TRRs measure is inconsistent with Article XI:1 because it has limiting effects on the importation of goods into Argentina.
- The TRRs measure, with respect to the requirement to incorporate local content, is inconsistent with Article III:4 of the GATT 1994 because it modifies the conditions of competition in the Argentine market to the detriment of imported products.
In addition, in response to Japan’s request, the Panel also found that the TRRs measure “as such” is inconsistent with Articles III:4 and XI:1 of the GATT 1994.
The Panel also considered that an additional finding regarding the same measure under Article X:1 of the GATT 1994 was not necessary or useful in resolving the matter at issue.
On 26 September 2014, Argentina notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretation in the panel report. On 1 October 2014, the European Union filed an other appeal in the same dispute.
On 15 January 2015, the Appellate Body issued its Reports in DS438, DS444 and DS445 in the form of a single document constituting three separate Appellate Body Reports. The appeal was completed in 112 days.
Summary of key findings
Terms of reference
Two preliminary rulings issued by the Panel were challenged on appeal.
- TRRs measure outside the Panel's terms of reference (Argentina's appeal): Argentina contended that the Panel erred in failing to find that the unwritten “overarching” TRRs measure was outside the Panel's terms of reference because it was not identified in the requests for consultations. The Appellate Body, however, agreed with the Panel that the panel requests enunciated the same measure in different terms and that this reformulation did not expand the scope or change the essence of the disputes from the consultation requests.
- 23 specific instances of application of the TRRs (European Union's cross appeal): The European Union contended that 23 measures were identified as specific instances of application in its panel request, thus falling within the scope of this dispute, and that the Panel erred in finding otherwise. The Appellate Body reversed the Panel's finding, and found that, given the list of press releases and news articles and the webpages where they could be accessed, and taking account of the content of those documents, the European Union's panel request was sufficiently precise to meet the standard in Article 6.2 of the DSU. The Appellate Body did not complete the analysis and rule on the GATT-consistency of these 23 measures because the conditions on which the European Union requested it to do so were not met.
- Existence of the single TRRs measure (Argentina's appeal): Argentina appealed the Panel's findings that the complainants had established the existence of the TRRs measure operating as a single measure. The Appellate Body ruled that, with respect to unwritten measures, a panel need not always apply the criteria for the evaluation of challenges against rules or norms of general and prospective application. Rather, the elements a panel needs to review depends on the specific measure challenged and how it is characterized by a complainant. After reviewing the complainants' characterization of the TRRs measure and the Panel's evaluation of their joint claims, the Appellate Body concluded that the TRRs measure is a single measure with systematic and continued application. Accordingly, the Appellate Body upheld the Panel's finding that the TRRs measure exists and, as a consequence, also upheld the Panel's findings that the TRRs measure is inconsistent with Articles III:4 and XI:1 of the GATT 1994.
- Article 11 of the DSU — Japan's “as such” claims (Argentina's appeal): The Appellate Body found that Argentina had not established that the Panel's findings lacked an evidentiary basis or were unsupported by adequate and coherent reasoning and consequently rejected Argentina's claim that the Panel acted inconsistently with Article 11 of the DSU. The Appellate Body clarified that this did not mean that it endorsed the findings made by the Panel on Japan's “as such” claims against the TRRs measure, which it in any event viewed as amounting in substance to no more than the findings the Panel had already made in respect of the TRRs measure as challenged under the joint claims.
- Panel's exercise of judicial economy under Article X:1 of the GATT 1994 (Japan's cross appeal): The Appellate Body was not persuaded by Japan's claim that the Panel erred, and provided only a partial resolution of the matter at issue, in declining to rule on Japan's claim against the TRRs measure under Article X:1. Thus, the Appellate Body found that Japan had not established that the Panel erred in exercising judicial economy in this regard.
- Interpretation of Article XI:1 of the GATT 1994 (Argentina's appeal): The Appellate Body disagreed with Argentina, and found that the Panel did not err in its interpretation of Article XI:1 by failing to apply a “proper analytical framework”. The Appellate Body concluded that Article VIII, on inter alia import formalities, does not excuse Members from their obligations under Article XI:1 prohibiting certain import restrictions. Although formalities and requirements connected to importation will often entail a certain burden on the importation of products, not every burden associated with them will entail inconsistency with Article XI:1. Rather, only those that have a limiting effect on the importation will do so.
- Panel's assessment of the scope of Article VIII of the GATT 1994 (Argentina's appeal): Argentina claimed that the Panel erred in its understanding of the scope of Article VIII. The Appellate Body disagreed with Argentina's understanding of the relevant paragraph of the Panel Reports, and rejected Argentina's claim accordingly.
- Application of Article XI:1 of the GATT 1994 (Argentina's appeal): Disagreeing with Argentina, the Appellate Body considered that the Panel finding did not refer to the definition of “automaticity” in the Import Licensing Agreement; but rather to the discretionary control exercised by Argentine agencies. Thus, the Appellate Body found that the Panel did not err in considering that the fact that the DJAI procedure does not automatically lead to a right to import supports its finding that the DJAI procedure constitutes an import restriction. Instead, the Appellate Body upheld the Panel's finding that the DJAI procedure is inconsistent with Article XI:1 of the GATT 1994.
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