DISPUTE SETTLEMENT: DISPUTE DS457

Peru — Additional Duty on Imports of Certain Agricultural Products


This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

See also:
The basics: how disputes are settled in WTO
Computer based training on dispute settlement
Text of the Dispute Settlement Understanding


Current status  back to top

 

Key facts  back to top

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 27 November 2014

  

Summary of the dispute to date  back to top

The summary below was up-to-date at

Consultations

Complaint by Guatemala.

On 12 April 2013, Guatemala requested consultations with Peru with respect to the imposition by Peru of an “additional duty” on imports of certain agricultural products, such as rice, sugar, maize, milk and certain dairy products.

Guatemala claims that the measure at issue is inconsistent with:

  • Article 4.2 and footnote 1 of the Agreement on Agriculture;
     
  • Articles II:1(a), II:1(b), X:1, X:3(a), XI and XI:1 of the GATT 1994; and
     
  • Articles 1, 2, 3, 5, 6 and 7 of the Customs Valuation Agreement.

On 13 June 2013, Guatemala requested the establishment of a panel.  At its meeting on 25 June 2013, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

At its meeting on 23 July 2013, the DSB established a panel. Argentina, China, El Salvador, the European Union, India and the United States reserved their third party rights.  Subsequently, Brazil, Ecuador, Honduras and Korea reserved their third party rights. Following the agreement of the parties, the panel was composed on 19 September 2013.

On 17 March 2014, the Chair of the panel informed the DSB that the panel expects to issue its final report to the parties by September 2014, in accordance with the timetable adopted after consultation with the parties. On 25 September 2014, the Chair of the panel informed the DSB that in light of modifications to the timetable that were requested by the parties, the panel expects to issue its final report to the parties in October 2014.

On 27 November 2014, the panel report was circulated to Members.

Summary of key findings

This dispute concerns the additional duties imposed by Peru on imports of certain agricultural products (dairy products, corn, rice and sugar). These duties are determined using a mechanism known as the Price Range System (PRS), which operates on the basis of: (i) a range constituted by a floor price and a ceiling price, which reflect international prices over the last 60 months; and (ii) a reference price published every two weeks, reflecting the average international market price for each product concerned. An additional duty is applied if the reference price of the affected product is lower than the floor price. Conversely, if the reference price exceeds the ceiling price, the applicable tariff is reduced.

Guatemala argued that Peru's additional duties are: (i) variable import levies, minimum import prices, or at least border measures similar to variable import levies or minimum import prices, and thus, should have been converted into ordinary customs duties under Article 4.2 of the Agreement on Agriculture; and (ii) “other duties or charges” different from ordinary customs duties, which had not been registered in Peru's Schedule of Concessions, and are therefore in breach of Article II:1(b) of the GATT 1994. Guatemala raised additional claims under Articles X:1 and X:3(a) of the GATT 1994, regarding the publication and administration of the measure. Guatemala also raised alternative claims under Articles 1, 2, 3, 5, 6 and 7 of the Customs Valuation Agreement.

Peru argued that the additional duties form part of its tariff and are, therefore, ordinary customs duties. Peru also argued that, under the Free Trade Agreement (FTA) signed between Guatemala and Peru in December 2011, Peru was allowed to maintain its PRS. Consequently, the good faith requirement contained in Articles 3.7 and 3.10 of the DSU prevents Guatemala from challenging the PRS in WTO dispute settlement proceedings. Moreover, Peru argued that, by means of the FTA, the parties had modified their reciprocal WTO rights and obligations; accordingly, the FTA, which allows the use of the PRS, should prevail.

The Panel found no evidence that Guatemala brought these proceedings in a manner contrary to its good faith obligations under Articles 3.7 and 3.10 of the DSU. Therefore, the Panel found no reason to refrain from assessing Guatemala's claims.

The Panel also found that, because the FTA has not entered into force, its provisions were not at the time of the panel report binding on the parties. Accordingly, it was not necessary for the Panel to express any opinion on whether the parties may, by means of an FTA, modify between themselves their rights and obligations under the WTO covered agreements.

The Panel found that Peru acted inconsistently with its obligation under Article 4.2 of the Agreement of Agriculture by maintaining measures of the kind that were required to be converted into ordinary customs duties. In particular, the Panel found that the additional duties resulting from the PRS constitute variable import levies or, at least, share sufficient characteristics with variable import levies to be considered border measures similar to variable import levies, within the meaning of footnote 1 to the Agreement on Agriculture.

The Panel also found that the additional duties resulting from the PRS do not constitute minimum import prices, and do not share sufficient characteristics with minimum import prices in order to be considered border measures similar to minimum import prices, within the meaning of footnote 1 to the Agreement on Agriculture.

The Panel found that the additional duties resulting from the PRS cannot be considered ordinary customs duties. In the Panel's view, those duties are “other duties or charges imposed on, or in connection with, importation”, within the meaning of the second sentence of Article II:1(b) of the GATT 1994. Peru had not registered any such “other duties or charges” in its Schedule of Concessions. Therefore, by imposing these duties, Peru is acting inconsistently with its obligations under the second sentence of Article II:1(b) of the GATT 1994.

Having decided that the additional duties resulting from the PRS are inconsistent with Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994, the Panel considered it unnecessary to make additional findings under Articles X:1 or X:3(a) of the GATT 1994.

Given that the Panel found that the additional duties resulting from the PRS were not ordinary customs duties, the Panel did not address Guatemala's alternative claims under the Customs Valuation Agreement.

Bearing in mind that Guatemala contested the additional duties resulting from the PRS but not the PRS itself, the Panel did not consider it appropriate to use its discretion under the second sentence of Article 19.1 of the DSU to suggest that the mechanism underlying the calculation of the additional duties be eliminated. Instead, the Panel recommended that Peru be requested to bring its measure into conformity with its WTO obligations.

 

 

image 160 pixels wide
  

Find all documents from this case
(Searches Documents Online, most recent documents appear on top)

quick help with downloading
> comprehensive help on Documents Online

all documents

  

Problems viewing this page?
Please contact webmaster@wto.org giving details of the operating system and web browser you are using.